Kuwait Scraps Deal With Dow Chemical

By Diana Elias

KUWAIT CITY -- Kuwait's government on Sunday scrapped a $17.4 billion joint venture with U.S. petrochemical giant Dow Chemical(DOW Quote) after criticism from lawmakers that could have led to a political crisis in this small oil-rich state.

The Cabinet, in a statement carried by the state-owned Kuwait News Agency, said the venture, known as K-Dow Petrochemicals, was "very risky" in light of the global financial crisis and low oil prices. The move came just days before the Jan. 1 startup date for the joint venture.

In its statement, the Cabinet said the "limits of the effects" of the meltdown on international companies cannot be forecast. KUNA said the contract was canceled by the Supreme Petroleum Council, the country's highest oil authority.

Dow Chemical said it was "extremely disappointed" with the Kuwaiti government's decision and was evaluating its options under the joint-venture agreement.

"While disappointed in this outcome, Dow remains committed to its Middle East strategy," the Midland, Mich.-based company said in a brief statement.

The project, in which Kuwait was to hold a $7.5 billion stake, had been criticized in the country as a waste of public funds, and lawmakers threatened to question the prime minister in parliament if it was launched.

Such a move could have led to Sheik Nasser Al Mohammed Al Sabah's impeachment, sparking a new political row in the country just weeks after the Cabinet resigned in protest after an effort by a group of Islamist lawmakers to question the premier over corruption allegations within the government.