China Set to Bail Out Iraq with Multibillion-Dollar Oil Deal
[You must be registered and logged in to see this image.]
A petrochemical oil refinery. Photographer: Toru Hanai/Bloomberg , Bloomberg
(Bloomberg) -- Iraq is poised to sign a multibillion-dollar contract with China ZhenHua Oil Co., a bailout from Beijing for the cash-strapped government which will receive money upfront in exchange for long-term oil supplies.
The deal is the latest example of China, via state-controlled trading companies and banks, lending to struggling oil producers such as Angola, Venezuela and Ecuador, with repayment in the form of oil barrels rather than cash. The crash in oil demand and prices has hammered Iraq’s budget, and the government has been struggling to pay salaries.
The Iraqi agency in charge of petroleum exports, SOMO, picked ZhenHua, according to people familiar with the matter. Iraq’s cabinet must still approve the deal, according to one of the people. Cabinet spokesman Hassan Nadhim said on Tuesday the offers were being studied and would go to the prime minister for approval.
Under the terms of a letter SOMO sent to oil traders last month, the winning bidder will buy 4 million barrels a month, or about 130,000 a day. They will pay upfront for one year of supply, which at current prices would bring in more than $2 billion, according to Bloomberg calculations. The deal runs for five years in total -- but the upfront payment is only for one year.
The deal attracted widespread interest among the top names of the oil-trading industry, according to the people. The deadline for the tender was extended from late November to allow market participants more time to bid.
ZhenHua Oil didn’t reply to an email seeking comment that was sent to its headquarters in Beijing after normal business hours.
All major producers have taken a hit from this year’s coronavirus-triggered crash in oil. But Iraq, where crude accounts for almost all government revenue, is in a worse position than most. Its gross domestic product will contract 12% this year, more that of any other OPEC member under a production quota, according to International Monetary Fund forecasts.
The government is struggling to pay teachers and civil servants, many of who have taken to the streets in recent months to protest.
Rare Deal
Energy-rich nations short on revenue have often relied on pre-payment deals to raise money, but Baghdad hasn’t done so until now. The semi-autonomous Kurdistan Regional Government in northern Iraq has used similar contracts in the past, as have Chad and the Republic of Congo.
In a pre-payment deal, the oil buyer effectively becomes a lender to the country. The barrels are security for the loan.
The pre-payment part of Iraq’s contract is among the largest in recent history, although less than the record $10 billion that Russian state-run Rosneft raised in 2013 from trading houses Vitol Group and Glencore Plc.
Besides its size, the deal is rare because it allows the winner to ship Iraqi crude to whatever destination it wishes for a year. Normally, Middle Eastern crude is sold with strict clauses preventing traders and refiners from re-selling the barrels to different regions.
That condition was probably seen as advantageous enough to compensate for the fact the pre-payment money is effectively interest-free for Iraq. Normally, a country pays a yield for the cash it receives upfront.
Revitalize China
ZhenHua deals in oil production and trading. Although relatively little-known outside China, the company played a large role in Beijing’s so-called “going global” policy for energy.
ZhenHua has invested in oil concessions in the United Arab Emirates, Kazakhstan and Myanmar, and trades crude originating from the likes of Kuwait, Brazil and the Republic of Congo.
The company was founded in 2003 as a subsidiary of the largest Chinese state-owned defense contractor. According to its website, ZhenHua trades about 1.3 million barrels a day of oil and finished products.
Other major Chinese traders include Unipec, Chinaoil and Sinochem. Shrouded in relative secrecy in the past, those state-owned firms are gaining prominence as China’s oil consumption rises. It’s set to soon overtake the U.S. as the world’s largest crude importer.
ZhenHua, meaning “Revitalize China” in Mandarin, started a joint-venture with SOMO to market barrels into China in 2018, though it was later scrapped.
[You must be registered and logged in to see this link.]
[You must be registered and logged in to see this image.]
A petrochemical oil refinery. Photographer: Toru Hanai/Bloomberg , Bloomberg
(Bloomberg) -- Iraq is poised to sign a multibillion-dollar contract with China ZhenHua Oil Co., a bailout from Beijing for the cash-strapped government which will receive money upfront in exchange for long-term oil supplies.
The deal is the latest example of China, via state-controlled trading companies and banks, lending to struggling oil producers such as Angola, Venezuela and Ecuador, with repayment in the form of oil barrels rather than cash. The crash in oil demand and prices has hammered Iraq’s budget, and the government has been struggling to pay salaries.
The Iraqi agency in charge of petroleum exports, SOMO, picked ZhenHua, according to people familiar with the matter. Iraq’s cabinet must still approve the deal, according to one of the people. Cabinet spokesman Hassan Nadhim said on Tuesday the offers were being studied and would go to the prime minister for approval.
Under the terms of a letter SOMO sent to oil traders last month, the winning bidder will buy 4 million barrels a month, or about 130,000 a day. They will pay upfront for one year of supply, which at current prices would bring in more than $2 billion, according to Bloomberg calculations. The deal runs for five years in total -- but the upfront payment is only for one year.
The deal attracted widespread interest among the top names of the oil-trading industry, according to the people. The deadline for the tender was extended from late November to allow market participants more time to bid.
ZhenHua Oil didn’t reply to an email seeking comment that was sent to its headquarters in Beijing after normal business hours.
All major producers have taken a hit from this year’s coronavirus-triggered crash in oil. But Iraq, where crude accounts for almost all government revenue, is in a worse position than most. Its gross domestic product will contract 12% this year, more that of any other OPEC member under a production quota, according to International Monetary Fund forecasts.
The government is struggling to pay teachers and civil servants, many of who have taken to the streets in recent months to protest.
Rare Deal
Energy-rich nations short on revenue have often relied on pre-payment deals to raise money, but Baghdad hasn’t done so until now. The semi-autonomous Kurdistan Regional Government in northern Iraq has used similar contracts in the past, as have Chad and the Republic of Congo.
In a pre-payment deal, the oil buyer effectively becomes a lender to the country. The barrels are security for the loan.
The pre-payment part of Iraq’s contract is among the largest in recent history, although less than the record $10 billion that Russian state-run Rosneft raised in 2013 from trading houses Vitol Group and Glencore Plc.
Besides its size, the deal is rare because it allows the winner to ship Iraqi crude to whatever destination it wishes for a year. Normally, Middle Eastern crude is sold with strict clauses preventing traders and refiners from re-selling the barrels to different regions.
That condition was probably seen as advantageous enough to compensate for the fact the pre-payment money is effectively interest-free for Iraq. Normally, a country pays a yield for the cash it receives upfront.
Revitalize China
ZhenHua deals in oil production and trading. Although relatively little-known outside China, the company played a large role in Beijing’s so-called “going global” policy for energy.
ZhenHua has invested in oil concessions in the United Arab Emirates, Kazakhstan and Myanmar, and trades crude originating from the likes of Kuwait, Brazil and the Republic of Congo.
The company was founded in 2003 as a subsidiary of the largest Chinese state-owned defense contractor. According to its website, ZhenHua trades about 1.3 million barrels a day of oil and finished products.
Other major Chinese traders include Unipec, Chinaoil and Sinochem. Shrouded in relative secrecy in the past, those state-owned firms are gaining prominence as China’s oil consumption rises. It’s set to soon overtake the U.S. as the world’s largest crude importer.
ZhenHua, meaning “Revitalize China” in Mandarin, started a joint-venture with SOMO to market barrels into China in 2018, though it was later scrapped.
[You must be registered and logged in to see this link.]
Today at 1:50 pm by Rocky
» utube 11/2/24 MM&C Report-Iraq 3 Presidents-National-Constitutional Entitlements-Open Market Operati
Today at 7:16 am by Rocky
» utube 10/31/24 MM&C Central Bank Governor of Iraq-Monetary Stability Directly Stimulating the Econom
Today at 7:15 am by Rocky
» utube 10/31/24 MM&C MM&C News Reporting-Security & Stability-Sinjar Allocations-Unprecedented Develo
Today at 7:15 am by Rocky
» Rafidain and Rashid deny the suspension of electronic payment devices: The service continues
Today at 7:10 am by Rocky
» Iraq meets a third of housing needs, two directions identified to solve the crisis completely
Today at 7:06 am by Rocky
» Activating the General Amnesty Law, a summary of the meeting between Al-Mashhadani and Al-Dhari
Today at 7:03 am by Rocky
» Parliamentary recommendations to change "five" ministers in Al-Sudani's government.. Get to know the
Today at 7:00 am by Rocky
» The controversy over the “controversial laws” continues.. and Al-Mashhadani confirms: They will not
Today at 6:58 am by Rocky
» Sunday's currency auction.. 99% of the Central Bank of Iraq's sales went abroad
Today at 6:56 am by Rocky
» Higher fines and powers.. the most prominent amendments to the expected Civil Defense Law
Today at 6:53 am by Rocky
» Transport announces completion of initial design phase of development road with its land and rail ro
Today at 6:51 am by Rocky
» Parliamentary Security: The Intelligence Law is ready.. 3 important paragraphs
Today at 5:12 am by Rocky
» Central Bank dollar sales rise in today's auction
Today at 5:10 am by Rocky
» Divided into three... Al-Fatlawi criticizes the Arab and Islamic position towards the aggression on
Today at 5:09 am by Rocky
» Parliamentary Transport Committee reveals upcoming quadripartite meeting on development path
Today at 5:07 am by Rocky
» Parliamentary Planning: The ministerial amendment is based on 4 directions
Today at 5:06 am by Rocky
» "Until the case is settled"... the judiciary suspends the decision to dismiss Al-Karwi from the pres
Today at 5:05 am by Rocky
» Increasing for a year and a half.. Announcing the results of the investigation into Baghdad's pollut
Today at 5:03 am by Rocky
» Banking Association: Reducing inflation helped stabilize commodity prices
Today at 5:00 am by Rocky
» Parliamentary Investment and Development Committee calls for commitment to the “Investment Law”
Today at 4:58 am by Rocky
» Parliamentary Finance settles the controversy: This is the fate of the appointments file in the 2025
Today at 4:57 am by Rocky
» Trade Bank of Iraq explains procedures for money transfers and combating money laundering
Today at 4:56 am by Rocky
» Within three days, Iraq indicates an increase in the number of aircraft landing and crossing the air
Today at 4:54 am by Rocky
» Public services reveal the reality of the capital.. This is what it needs
Today at 4:53 am by Rocky
» Population growth and ongoing suffering.. A briefing on the "deteriorating" situation in Baghdad
Today at 4:53 am by Rocky
» Parliamentary Committee Proposes Attracting Real Estate Developers
Today at 4:51 am by Rocky
» Direction to transfer beneficiaries of the protection network to the Social Security Law
Today at 4:50 am by Rocky
» Speaker of Parliament
Today at 4:49 am by Rocky
» I learned {morning}
Today at 4:48 am by Rocky
» Al-Sudani directs to establish the concept of (Made in Iraq)
Today at 4:47 am by Rocky
» Al-Mashhadani to {Al-Sabah}: Controversial laws will be presented unanimously
Today at 4:46 am by Rocky
» Establishment of Al-Ghadeer Residential City in Muthanna
Today at 4:44 am by Rocky
» Work: Transferring beneficiaries of the safety net to the Social Security Law
Today at 4:43 am by Rocky
» Parliamentary Immigration Committee demands increasing the amount of the return grant
Today at 4:42 am by Rocky
» The most prominent achievements of the Sudanese government in the education sector
Today at 4:41 am by Rocky
» Welcome to the trends of establishing an administrative capital
Today at 4:40 am by Rocky
» Securities trade more than 88 billion shares
Today at 4:39 am by Rocky
» Focus on the banking sector
Today at 4:38 am by Rocky
» Imports and dependence on oil are obstacles to Iraq’s accession to the World Trade Organization
Today at 4:35 am by Rocky
» Preparatory meetings for the 40th session of the Standing Committee for Economic and Commercial Coop
Today at 4:33 am by Rocky
» Minister of Industry: Our visit program to Basra will include following up on the progress of work a
Today at 4:32 am by Rocky
» Al-Mashhadani and the Secretary-General of the Iraqi National Project stress the importance of activ
Today at 4:29 am by Rocky
» Minister of Industry discusses action plan to complete steel plant in Basra and operate it on schedu
Today at 4:28 am by Rocky
» Al-Sayhoud: Accelerating the implementation of the strategic development road project will advance t
Today at 4:26 am by Rocky
» Amnesty International issues a “warning” to the Iraqi government over “violations” inside Al-Jadaa c
Today at 4:24 am by Rocky
» Retirement releases civilian and military salaries for November gradually
Today at 4:21 am by Rocky
» The regional government between consensus and complexity.. Will the Democratic Party have the final
Today at 4:19 am by Rocky
» "Industrial Investment" is ready for voting.. MP: Attract more real estate developers to establish d
Today at 4:17 am by Rocky
» Rafidain denies stopping its electronic payment cards at fuel stations
Today at 4:16 am by Rocky
» Iraqi Interior Ministry: Corruption rate in electronic passports since its implementation has reache
Today at 4:13 am by Rocky
» Parliamentary Defense: Removing US Forces from Iraq is Urgent
Today at 4:12 am by Rocky
» MP: Parliament will pass controversial laws and question two ministers
Today at 4:11 am by Rocky
» A veteran returned with a rare agreement between Al-Maliki and Al-Halbousi.. Who is the new Speaker
Today at 4:10 am by Rocky
» US report recommends informing “Iraqi leaders” of consequences of Iran’s use of “Iraqi arena” agains
Today at 4:09 am by Rocky
» Iraqi parliament recommends changing five ministers in Al-Sudani's government
Today at 4:07 am by Rocky
» Parliamentarian calls for investigation into the largest corruption files in Diyala
Today at 4:06 am by Rocky
» Al-Yekti: Forming the new government in the region will be very complicated
Today at 4:05 am by Rocky
» Movement warns of an agenda to target Iraq
Today at 4:04 am by Rocky
» The Ministry of Construction confirms that the government is proceeding with the service of resident
Today at 4:03 am by Rocky
» More than a billion dollars in sales from the Central Bank of Iraq during the week
Today at 4:02 am by Rocky
» Providing entrepreneurship initiative loans to more than 5,000 people
Today at 4:01 am by Rocky
» Parliamentary Committee announces seeking to amend the Oil Ministry Law
Today at 4:00 am by Rocky
» Directive from Al-Sudani to the Crisis and Disaster Management Center
Today at 3:59 am by Rocky
» The drug scourge is worsening and Iraq launches a community campaign to confront it
Today at 3:58 am by Rocky
» Suspended laws await Al-Mashhadani’s “hammer”… Parliament Speaker faces “complex” files and short ti
Today at 3:57 am by Rocky
» Retirement Authority: Completing procedures for disbursing retirees’ salaries for the current month
Today at 3:55 am by Rocky
» The regional finance department hands over the payroll lists to the federal finance department
Today at 3:52 am by Rocky
» Morning list of dollar exchange rates in Iraq
Today at 3:50 am by Rocky
» Al-Sudani receives invitation to participate in Arab-Islamic summit on Gaza and Lebanon
Today at 3:49 am by Rocky
» Al-Maliki receives Al-Mashhadani and they stress the importance of activating the parliament's work
Today at 3:48 am by Rocky
» Governmental move to transfer beneficiaries of the protection network to the Social Security Law
Today at 3:47 am by Rocky
» Türkiye and Iraq.. Coordination against the Kurdistan
Yesterday at 4:43 am by Rocky
» Qatar affirms its aspiration to participate effectively in the path of development
Yesterday at 4:42 am by Rocky
» Amidst air alert, US forces resume training activity at Harir base
Yesterday at 4:40 am by Rocky
» Al-Sudani's advisor reveals the positives of the Central Bank's interest rate cut
Yesterday at 4:39 am by Rocky
» Leader in the framework: Ankara has 75 illegal military sites inside Iraq
Yesterday at 4:38 am by Rocky
» Parliamentary Committee Reveals New Details on Oil Smuggling
Yesterday at 4:36 am by Rocky
» Al-Sahaf: America relies on deception regarding the withdrawal of its forces from Iraq
Yesterday at 4:35 am by Rocky
» "It failed in its work".. Al-Salihi calls on Al-Sudani to include the defense in the ministerial cha
Yesterday at 4:34 am by Rocky
» With more than a billion dollars, Iraq is the fourth country that imports the most from Türkiye duri
Yesterday at 4:32 am by Rocky
» Parliamentary Committee announces seeking to amend the Oil Ministry Law
Yesterday at 4:29 am by Rocky
» Türkiye: Development Road Designs 90% Complete
Yesterday at 4:28 am by Rocky
» Al-Azzawi on the “Baghdadna” platform: It supports digital transformation files and provides service
Yesterday at 4:27 am by Rocky
» What are the positives of the Central Bank reducing interest rates? Al-Sudani’s advisor explains
Yesterday at 4:25 am by Rocky
» Foreign Report: A major Chinese company is exploring an oil field in central Iraq
Yesterday at 4:23 am by Rocky
» Governmental move to establish an administrative capital in Baghdad
Yesterday at 4:22 am by Rocky
» Al-Mandlawi and Al-Hakim agree to proceed with the legislation of important laws and activate the su
Yesterday at 4:19 am by Rocky
» Parliamentary Education Committee acquits the “education sector” of the spread of poverty and unempl
Yesterday at 4:17 am by Rocky
» The Ministry of Electricity denies the increase in tariffs and confirms the continuation of support
Yesterday at 4:14 am by Rocky
» MP calls for not passing the partnership contract between Iraq and the International Finance Corpora
Yesterday at 4:13 am by Rocky
» “A fraudulent maze” reveals “thorny” files that swallow the pockets of Iraqis
Yesterday at 4:10 am by Rocky
» "Sudanese Meter" .. Failure to achieve 57% of promises, and full and partial implementation reaches
Yesterday at 4:09 am by Rocky
» Al-Maliki's coalition denies that Halbousi supports Al-Mashhadani in reaching the parliament preside
Yesterday at 4:08 am by Rocky
» State of Law: Ministerial change is currently ruled out
Yesterday at 4:07 am by Rocky
» Independent candidates in Sulaymaniyah and Halabja reject the results of the Kurdistan Parliament el
Yesterday at 4:05 am by Rocky
» Al-Sudani and Erdogan discuss unifying positions on regional developments
Yesterday at 4:04 am by Rocky
» Iraq reduces oil exports and domestic consumption
Yesterday at 4:03 am by Rocky
» Parliament is unaware of the details of the 2025 budget and fears of a “shock” in oil prices
Yesterday at 4:02 am by Rocky