Crisis-hit Iraq mortgages oil to China
Iraq has won an up-front $2 billion infusion from a state-owned Chinese oil company, as it continues to struggle amid the pandemic-triggered collapse in energy prices. After numerous bids to Iraq's State Organization for Marketing of Oil (SOMO), the deal was clinched by ZhenHua Oil Co, a subsidiary of state-owned China North Industries Group Corp (Norinco). The deal marks the first in which Iraq has sought a pre-payment for crude, with oil effectively used as security for a loan. According to Bloomberg, SOMO is to supply some 130,000 barrels a day of crude for five years. Norinco is primarily a defense company, with investments in oil and minerals in several countries.
Hydrocarbons account for some 90% of Iraq's government revenues. Last month, Baghdad devalued its currency, the dinar, for the first time in decades, immediately raising prices on almost everything in a country that relies heavily on imports. And last week, Iran cut Iraq's supply of electricity and natural gas, citing an arrears in payment, leaving large parts of the country without power for hours a day. (MEE, WorldOil, NYT)