Kuwait's government on Sunday scrapped a $17.4-billion joint venture with U.S. petrochemical giant Dow Chemical 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 start-up date for the joint venture.
Kuwait's decision to scrap the deal to buy a 50% stake in Dow's plastics-making unit deprives Dow of $9 billion it planned to put toward the acquisition of Rohm & Haas Co. K-Dow was a key part of Chief Executive Andrew Liveris' plan to reduce Dow's reliance on commodity products and gain access to lower-cost petroleum, used to make chemicals.
Dow now might face a cash shortfall to complete its purchase of Rohm & Haas, said Sean Egan, managing director of Egan-Jones Ratings Co. "It is doubtful that Dow will be able to easily raise the funds," Egan said in a report, adding that Dow has been "skewered."