Iraq has agreed a multi-million-dollar oil supply deal with a Chinese company, according to an official Arab news agency.
SOMO, which is in charge of Iraq’s petrol exports, selected a Chinese company after receiving applications from several traders, INA said, citing an interview with SOMO General Manager Alaa Al-Yasiri. Although INA did not sign the company or specify whether Prime Minister Mustafa al-Kadhimi had signed the deal, Bloomberg reported last month that ZhenHua Oil Co., Ltd. -group of China’s largest state defense contractor, winner.
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SOMO has offered to supply about 130,000 barrels per day raw for five years, according to a letter it sent to traders in November. He was seeking advance payment for one year of supply, which at normal prices would bring in more than $ 2 billion, according to Bloomberg calculations.
“Iraq received $ 2 billion at zero interest with a base price above the price,” INA told Al-Yasiri. “There was strong competition between two European companies and a Chinese company, and the Chinese company won. ”
The prepayment agreement, the first for Baghdad, is the latest example of China lending to oil producers struggling through trading companies and state-controlled banks.
While all major oil exports have been hit by the coronavirus-induced crunch in prices since March, Iraq is in one of the weakest areas. OPEC’s largest representative after Saudi Arabia, the economy was forecast by the International Monetary Fund to contract 11% last year. The government weakened the dinar by nearly 20% against the dollar in December – the first decline since the U.S.-led attack in 2003 – when its foreign exchange reserves plummeted.
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The oil supply contract attracted widespread interest among major traders, according to people familiar with the matter. The contract will be one of the largest of its kind in recent history and will allow the winner to be sent raw to anywhere he wants for a year. Middle Eastern raw is usually sold with strict clauses prohibiting traders and refiners from reselling the barrels to different regions.
“The flexibility Iraq has given companies is the freedom to guarantee the day of loading, export destination, resale capacity and a set of marketing benefits as a reward,” Al-Yasiri said.