Drivers wait in a long line to fill their cars with fuel in Beirut, Lebanon, on August 28, 2021 (Photo: Hassan Ammar, AP)

Iraq will renew a one-year agreement to supply Lebanon with fuel for its power plants in return for in-kind services, Lebanon's Prime Minister Najib Mikati said in a statement Thursday.

Iraq signed a deal in July 2021 to give Lebanon one million tonnes of fuel oil to help keep the lights on in a country grappling with power cuts for up to 23 hours a day amid an unprecedented economic crisis.

"The Iraqi government, headed by Mr. Mustafa al-Kadhemi, approved in a meeting today... to extend the supply of fuel to Lebanon... for a period of one year, under the same conditions as before," Mikati's office said in a statement.

Lebanon's power plants have depended over the past year on the Iraqi deal to produce one to two hours of electricity per day, and the residents of the poverty-stricken country largely relied for the remaining hours on expensive private generators.

Lebanon's power stations cannot use the Iraqi oil directly, so Beirut will keep buying compatible fuel from other providers which will receive the Iraqi oil in exchange.

Last year's deal was worth $300-$400 million, according to Energy minister Raymond Ghajar, but with fuel prices skyrocketing, the deal's value is estimated now at $570 million, Lebanon's Energy Minister Walid Fayad told AFP last month.

Fayad revealed that an Iraqi ministerial delegation should be visiting Beirut to agree on the in-kind services that Iraq wants in exchange.

While Iraq is an Organization of the Petroleum Exporting Countries (OPEC) member, it battles with its own electricity shortages.

As for Lebanon, it is battling one of the planet's worst economic crises since the 1850s. World Bank warned earlier in June that the country is enduring an economic depression that might rank among the top 10 worst economic crises in the world since the mid-nineteenth century, in the absence of any solution on the horizon that would get it out of a reluctance reality exacerbated by political paralysis.

Banque du Liban Governor Riad Salameh said that the central bank would not continue subsidizing medical supplies whose cost amounts to $1.3 billion, as it cannot continue importing them without compromising the mandatory reserves of banks. He also announced that he would not be able to continue subsidizing fuel, food commodities, and medicines after May because cash reserves have reached the mandatory amount.