Kenya stands on the brink of losing substantial revenue in the oil trade as landlocked East African nations express hesitance towards importing fuel through Kenyan channels.
The implications of a controversial government-to-government deal between Kenya and Gulf countries, resulting in a significant surge in fuel prices, have triggered a cascade effect on regional alliances.
Uganda has already taken a decisive step, opting to cease importing fuel through Kenya due to the contentious agreement.
The ramifications extend beyond Uganda, as a prominent Kenyan oil firm CEO disclosed that Rwanda, Burundi, the Democratic Republic of Congo, and South Sudan are contemplating revising their oil business ties with Kenya.
These nations, lacking seaports, heavily rely on Kenya for their petroleum imports.
A core grievance of these nations lies in the Kenyan government's oil deal and the burden of increased taxes on fuel.
The recently enacted Finance Act of 2023, laden with elevated taxes and levies, has rendered fuel exorbitant for East African Community (EAC) countries dependent on Kenya as their primary source.
"The region is not asleep and has aligned infrastructure projects to manage our dominance. It has options and in the long run, Kenya shall lose big time," cautioned the CEO, highlighting the strategic foresight of neighbouring nations.
The shifting dynamics offer opportunities for Tanzania and Sudan to emerge as beneficiaries, potentially supplanting the Port of Mombasa as the preferred entry point for petroleum products.
Uganda's decision to explore Tanzania as an alternative to its reserve fuel stocks exemplifies this redirection.
Despite Sudan grappling with internal conflicts impacting regional trade, the country possesses five major ports capable of serving as viable alternatives to the Port of Mombasa.
Uganda's historical reliance on Kenya for 90 per cent of its fuel imports underscores the magnitude of Kenya's potential losses due to the contentious oil deal and an increasingly unfavourable business environment.
Furthermore, Kenya, a conduit for 40 per cent of fuel imports destined for the Democratic Republic of Congo and South Sudan, primarily through Uganda, faces a potential minimum revenue loss of Sh15 billion if Uganda concludes a deal with Tanzania from where it has been getting 10 per cent of its supply for fuel imports.
The looming realignment in oil trade alliances signals a critical juncture for Kenya, urging a reevaluation of its governmental agreements and tax policies to salvage its standing in the lucrative East African fuel market.