Tishwash: China bails out Iraq with long-term, upfront cash deal for oil
LONDON (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 n recent months to protest.
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.
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. link
Tishwash: Despite its deep problems” .. American magazine: Iraq possesses amazing potential for growth and is leading the region
An American magazine, Wednesday, saw that Iraq has amazing growth potential that makes it one of the most developed countries in the region, while highlighting the escalating Chinese role in Iraq .
“Analysts have long recognized that the primary goal of the Chinese economic project, Belt and Road, is ultimately geopolitical – China seeks to position itself as a global superpower, and the Middle East is a crucial strategic arena,” the National Interest magazine said in a report translated by “Al-Maaloumah”. For Beijing’s plans, it is clear that Beijing is increasingly looking to establish a major position in Iraq not only for the country’s vast oil reserves, but perhaps more importantly, its strategic position, which is crucial to establishing a dominant position linking European and Asian trade routes.
He added, “With the Sino-Iranian partnership, Beijing also needs Iraq and for this purpose, Beijing has quietly strengthened its presence in the country in recent years. China has emerged as the largest trading partner of Iraq, ahead of even the European Union and the United States, and Iraq is also the third largest supplier. For crude oil to China, after Saudi Arabia and Russia, while Chinese companies operate in Iraq , including oil fields in the south, and engage in services such as maintenance of power stations, as Iraqis notice that some Chinese businessmen speak Arabic and Kurdish fluently, down to local dialects, which It highlights their commitment. ”
The magazine explained, “Russia and China are cooperating much more than they are competing; Both are also partners with Iran , while Iraqis, for their part, continue to view Russia as a country that understands the danger of Sunni terrorism and that both China and Russia are more willing to take risks than the West when it comes to working in dangerous and unstable environments, even if they prefer to see more. “American and Western intervention on a larger scale.”
He pointed out that “ Iraq’s problems are deep, yet the country has amazing potential to grow to become one of the most developed countries in the region, and therefore Iraq may not seem to be a top foreign policy priority, but investing in Iraq’s security , unity and democracy will show real political acumen. As the wave of authoritarianism in the region continues to grow, engagement will also help ensure US security and key geopolitical interests that will reverberate far beyond Iraq . link
Tishwash: 37 MPs stage an ‘open sit-in’ inside the Kurdistan Parliament to demand ‘real reforms’
A number of deputies in the Parliament of the Kurdistan region began, on Wednesday, the implementation of an “open sit-in” inside the parliament’s dome, pending “real reforms.”
The “Nass Kurd” correspondent (December 9, 2020) stated, “37 MPs belonging to the blocs (Al-Change, the Islamic Group, the Islamic Union and the New Generation), along with other representatives, decided to carry out an open sit-in inside the parliament until real reforms are carried out and the parliament sessions are back.
Earlier, the deputies called for a session in the presence of the government to discuss the current situation and delaying salaries, but the presidency of Parliament requested time to address the government and the sessions were postponed.
On Wednesday, the Prime Minister of the Kurdistan Region, Masrour Barzani, called on citizens in the region to “understand the seriousness of this situation,” while affirming his support for the demands of the demonstrators.
“I agree with the demands of the people of the Kurdistan region and support the peaceful demonstrations, but what we have seen these days is the deviation of the demonstration of change to other directions, especially by some citizens,” Barzani said in a press conference, followed by “People.”
He added, “All our efforts are to correct the current situation,” calling on “the people of the Kurdistan region to understand the seriousness of this situation.”
Barzani added that “there is misleading about the oil agreement with Turkey, as the agreement does not include selling oil to Ankara, but rather stipulating that it be exported through Turkey’s territory for a period of 50 years,” explaining that “the regional government resorted to this solution in the previous cabins to secure the citizens’ sustenance after cutting its share of Budget by the federal government. ”
Barzani revealed that “there are victims of the protests with pomegranates and bullets, and this is not the work of the protesters,” pointing out, “Among the protesters were displaced Syrians.”
And that “some took advantage of the demonstrations to robbery and violence, and there are infiltrators among the demonstrators who were sent to burn institutions,” adding that “the problem of the region is greater than the issue of salaries.”
He stressed that “his government will make all efforts to reach an agreement with Baghdad and solve all outstanding problems.”
On Wednesday, the Council of Ministers of the Kurdistan Region held its regular session chaired by Prime Minister Masrour Barzani and in the presence of Deputy Prime Minister Qubad Talabani.
A statement issued by the regional government, and “people” received a copy, stated (December 9, 2020), that “at the beginning of the meeting, the Council of Ministers offered its sincere condolences to the families and families of the victims who lost their lives after the events that occurred in recent days.”
The statement added, “The Council of Ministers renewed its support for the right of citizens and employees to demonstrate peacefully and express their views in a civilized manner, and demanded that the legitimate rights of the demonstrators not be exploited by irresponsible persons and entities, with the aim of destabilizing the security situation and creating chaos and unrest in the region.”
According to the statement, the Cabinet affirmed that “the Kurdistan Regional Government is making every effort to secure the legitimate and constitutional rights of the Kurdistan region, and on this basis the negotiating delegation of the regional government will head to Baghdad this evening, Wednesday, under the supervision of the Deputy Prime Minister, with full powers, in order to reach an agreement with the federal government.” Regarding financial and economic issues. ”
The statement continued, “The Council of Ministers reassured citizens, especially those who receive salaries, that all efforts have been mobilized to reach an agreement with Baghdad, focus local efforts in addition to administrative and financial reform steps and enhance transparency, to address the current financial situation and secure salaries and financial entitlements for employees.” link
Tishwash: The 2021 budget is moaning” … Parliamentary Finance submits 70 proposals to reform the economic system
Majida Abdul Latif Al-Tamimi, a member of the Finance Committee in the House of Representatives, announced, Wednesday, (December 9, 2020) that it had submitted 70 proposals aimed at reforming the financial and economic systems in the country, while describing the 2021 budget as “groaning“.
In a statement to Al-Sabah newspaper, followed by IQ NEWS , Al-Tamimi said that she had “submitted 70 proposals to be attached to the reform paper submitted by the Finance Committee, and the government accepted it with its white paper.”
She added that “the proposals focused on issues that bring money into the state budget through quick collection,” noting that “the proposals were divided into four time paths (urgent, short, medium, and long-term), and start them immediately, as they are aimed at one goal.”
And she added, “These proposals require the force of law, its proper implementation, and firmness away from corruption.”
Al-Tamimi described next year’s budget as “groaning and it is not possible to make improvised decisions that add other burdens to it,” noting that “everyone knows that Parliament voted on three borrowing laws, the last of which was to provide salaries for the past months, in addition to the election financing law.”
Al-Tamimi called for “heading towards other revenues to supplement the budget, and forgetting the rentier economy that relied on oil for 17 years,” explaining that “the country cannot be put in the wind because of news that could make oil prices plummet to their lowest levels.”
The three presidencies and leaders of political blocs announced, on Tuesday (December 8, 2020), support for economic reform measures, in the draft federal budget law for 2021 link