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Kuwait Cancels Multi-Billion Deal with Dow Chemicals

The Supreme Petroleum Council (SPC) of Kuwait, under the chairmanship of Prime Minister Sheikh Na’sir Muhammad Al-Ahmad A-‘Sabah, on Sunday decided to cancel a deal estimated at several billion dollars with the American chemical giant Dow Chemicals, the Kuwait Times reported.
The deal was signed only a month ago when the state-owned Petrochemicals Industries Could. (PIC) was given the green light from the SPC. Under the deal PIC and Dow were to set up a 50-50 joint venture; Kuwait was to pay $7.7 billion and Dow’s contribution would be in the form of plants and research centers.  
“Dow is extremely disappointed with the decision, 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 company said in a press statement.
If the deal had been canceled in January the Kuwaitis would have liable to pay damages worth $2.5 billion. Dow had planned to use the money to pay off parts of its 1$3 billion debt after its acquisition rival, Rohm & Haas, closes in January 2009.    
The deal came under scrutiny by opposition members of the Kuwaiti parliament who claimed that the deal was overpriced since Dow’s value had fallen from $51 billion to $17 billion due to the financial slowdown.
The cancellation of the deal marks the end of a year of heavy political turmoil amidst a power struggle between the government and MPs who oppose the country’s close ties with the West. 
The ruling emir of Kuwait, ‘Sabah Al-Ahmad Al-Jaber A-‘Sabah, dissolved the parliament in March and called for new elections.

Since his appointment as prime minister in February 2006, Muhammad A-‘Sabah has formed four governments, resigned four times and conducted two major reshuffles.