Dubai: Kuwait has cancelled a $17.4 billion deal to create a petrochemical joint venture with the US-based Dow Chemical, citing global economic crisis and its impact on the country.
The decision to scrap the deal, which faced stiff opposition from members of Kuwait’s parliament, was taken at a cabinet meeting, Kuwait’s news agency KUNA said on Monday.
The deal was among the biggest in the global petrochemicals industry in recent years.
A statement on the Dow Chemical website confirmed Kuwait’s decision.
“Today, The Dow Chemical Company has been verbally informed by our partners at the Kuwait Petroleum Corporation and Petrochemicals Industries Company about a decision made by the Kuwait Supreme Petroleum Council, to reverse its prior approval of the agreement between Dow and PIC to enter into K-Dow Petrochemicals, a planned 50-50 joint venture company.
“Dow is extremely disappointed with the decision by the Kuwait Government, and is in the process of evaluating its options pursuant to the Joint Venture Formation Agreement. While disappointed in this outcome, Dow remains committed to its Middle East Strategy,” the US company said.
Under an agreement signed last month and approved by SPC, Kuwaiti state-owned Petrochemicals Industries was to pay Dow Chemical $7.5 billion for a 50% stake in a joint venture company to be called K-Dow Petrochemicals.
The deal was to take effect next Thursday. The transaction was especially significant for Dow as it planned to use the proceeds to repay a large part of the $13 billion debt it stands to shoulder once its acquisition of the US specialty chemicals maker, Rohm and Haas, closes early next year.
The agreement had angered deputies of Kuwait’s liberal Popular Action Bloc, who had threatened to question the country’s prime minister Sheikh Nasser al Mohammed al Sabah unless the deal was scrapped before 1 January.
The Kuwaiti partner would have been liable to pay a penalty of up to $2.5 billion if it decided to walk away from the project after that date.