Kuwait on Sunday scrapped a multibillion dollar deal to form a joint venture with US giant Dow Chemical following stiff opposition from MPs, an official statement said.
The decision to scrap the controversial deal was taken at a meeting of the Supreme Petroleum Council (SPC), the highest oil body in the Gulf state, the statement said, carried by the official news agency KUNA.
“The SPC discussed the deal with Dow Chemical and decided to cancel the deal and asked all authorities concerned to take all necessary measures to implement the decision,” the statement said.
The SPC, which is headed by Kuwaiti Prime Minister Sheikh Nasser Mohammad al-Ahmad al-Sabah, was the body that gave the green light to sign the agreement with Dow Chemical last week.
Under the deal signed last month, state-owned Petrochemicals Industries Co was to pay US$7.5 billion to form a petrochemicals firm known as K-Dow.
Several opposition MPs had threatened to quiz the prime minister in parliament if the deal was not scrapped before Thursday, when it was due to become effective.
The cancelation of the agreement after the start of the New Year would have made Kuwait liable to pay a penalty of up to US$2.5 billion.
Kuwaiti Oil Minister Mohammad al-Olaim last week defended the deal, saying it had passed through all proper channels and that Kuwait would greatly benefit from a partnership with Dow Chemical, one of the world’s biggest chemical companies.
But under pressure from MPs, the Cabinet held a series of meetings last week to review the legal, economic, technical and financial aspects of the deal.
The controversy snowballed after the opposition Popular Action Bloc threatened to quiz the prime minister. Many members of the 50-seat parliament supported the threat.
A request to grill the prime minister on another topic last month resulted in a major political crisis in the Gulf state, eventually leading to the government’s resignation.
Sheikh Nasser has been asked to form a new Cabinet.
A number of MPs were quick to welcome the government’s decision.
Independent MP Roudhan al-Roudhan described the decision as a “positive step,” while MP Saad al-Khanfour called on the government for more reforms.
Similar opposition by MPs has put the fate of a US$15 billion project to build a new refinery on the line, with many now expecting the government to scrap the venture after the Audit Bureau said it was not feasible.
Opposition by MPs has also obstructed the passage of a multi-billion-dollar project to seek the assistance of foreign oil majors to develop the emirate’s northern oilfields.
The investment, known as Project Kuwait, has been stalled in parliament since it was first proposed in the mid-1990s.
A number of senior officials in the oil sector, which provides 95 percent of public revenues, complained in a statement earlier this month of external interference and politicizing of the vital industry.