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Poor Countries Borrowed Billions Using Their Oil As Collateral And Are Now Struggling To Pay

Poor Countries Borrowed Billions Using Their Oil As Collateral And Are Now Struggling To Pay thumbnail

Smaller countries that have taken out billions of dollars in loans that they have promised to pay back in oil are starting to fall behind on their payments.

The deals are structured so that countries are advanced money from trading houses that will be paid back in future oil shipments. These types of loans have become popular with smaller African and Middle Eastern nations as the only way to raise money. But when oil prices tank – as they did over the last several weeks – the loans become difficult to repay.

As the price of oil plunges, countries have to divert more oil to keep up with their payments. Now the Kurdistan region in Northern Iraq is having trouble repaying a $500 million loan from Glencore.

U.S. investors find themselves with exposure to $500 million in Kurdistan-based loans, as U.S. pension funds bought half a billion dollars worth of notes “known as Oilflow SPV 1 DAC linked to the loans”. Glencore has said it plans on formally restructuring the deal.

These notes have plunged in value due to the potential restructuring, falling to 80 cents on the dollar and a yield of more than 40% (the yield at par was 12%).

Glencore, along with Trafigura Group, are also together in talks to restructure a total of $1.5 billion in oil-for-cash loans from the Republic of Congo. It had been trying to restructure its loans for a year but the deal fell through when oil prices crashed in late 2019.

Additionally, Chad, one of the poorest countries in the world, is using a clause in its contract to reduce payments on the $1 billion it has borrowed, according to Bloomberg. It is allowed to reduce its payments when oil falls under $42 per barrel. Chad has already restructured the loans twice after they were first subscribed in 2013.

One non-governmental organization called Global Witness simply called the loans a “gamble on the future oil price” and warned countries they could become “an open ended liability for future government and generations”.

In many cases, commodity traders will syndicate the loans to banks and buy credit insurance, but they are still exposed to the plunge in commodity prices.

Oil’s plunge over the last couple months can be attributed to the deadly combination of the global economy shutting down due to the coronavirus and Saudi Arabia and Russia collectively flooding the market with supply.

zerohedge



22 Comments on "Poor Countries Borrowed Billions Using Their Oil As Collateral And Are Now Struggling To Pay"

  1. Richard Guenette on Sat, 23rd May 2020 1:09 pm 

    Venezuela should guard its oil reserves from the Amerikan barbarians.

  2. Richard Guenette on Sat, 23rd May 2020 1:09 pm 

    The US military are full of barbarians- their actions prove this.

  3. Richard Guenette on Sat, 23rd May 2020 1:17 pm 

    The only way to end the United Terrorist States of America (Home of the Barbaric and Land Of the Freaks) is to cut off all supplies (oil, gas, timber, coal, cars etc.), economic and trade sanctions, withdrawing all ambassadors and diplomats from the US.

  4. Richard Guenette on Sat, 23rd May 2020 1:21 pm 

    https://www.rt.com/news/489575-rouhani-venezuela-us-tankers-trouble/

  5. The_CIA on Sat, 23rd May 2020 5:54 pm 

    Look up at the sky Richard. See that US Reaper drone with the missiles circling ? It is looking for you.

  6. makati1 on Sat, 23rd May 2020 5:59 pm 

    “Poor Countries Borrowed Billions Using Their Oil As Collateral And Are Now Struggling To Pay”

    And millions will lose their homes for the same reason: Failure to plan intelligently.

    There will always be scum like Amerika to fleece the poor and less educated. Just look at the Stock Market Casino and remember that Trump is a con man casino owner. LOL

  7. IHate JuanP on Sat, 23rd May 2020 6:00 pm 

    The_CIA is an ignorant JuanP sock

    Deport the wet back

  8. makati1 on Sat, 23rd May 2020 6:01 pm 

    “Poor Countries Borrowed Billions Using Their Oil As Collateral And Are Now Struggling To Pay”

    And millions will lose their homes for the same reason: Failure to plan intelligently.

    There will always be scum like China to fleece the poor and less educated. Just look at the Stock Market Casino and remember that Xi is a con man casino owner. LOL

  9. makati1 on Sat, 23rd May 2020 6:07 pm 

    Davy, changing a few words does not change reality. You are a sick human. I guess you are human but there is no proof here.

    You are a Sinophobe and so fucking brainwashed that you have no original thoughts, if you ever did. Typical Amerikan red neck. Your country is going down big time and fast. I am cheering its demise from the cheap seats here in the Philippines as you well know. GO trump!

  10. makati1 on Sat, 23rd May 2020 6:10 pm 

    Juan, changing a few words does not change reality. You are a sick human. I guess you are human but there is no proof here.

    You are a homosexual and so fucking brainwashed that you have no original thoughts, if you ever did. Typical South Amerikan wet back. Your country is going down big time and fast. I am cheering its demise from the cheap seats here in the Philippines as you well know. GO Hillary!

  11. JuanP on Sat, 23rd May 2020 6:39 pm 

    Mak, stay close to me I will protect you

  12. More Lunatic Davy ID Fraud on Sat, 23rd May 2020 6:55 pm 

    The_CIA on Sat, 23rd May 2020 5:54 pm

    IHate JuanP on Sat, 23rd May 2020 6:00 pm

    makati1 on Sat, 23rd May 2020 6:10 pm

    JuanP on Sat, 23rd May 2020 6:39 pm

  13. IHate JuanP on Sat, 23rd May 2020 7:28 pm 

    JuanP shit:

    he_CIA on Sat, 23rd May 2020 5:54 pm

    IHate JuanP on Sat, 23rd May 2020 6:00 pm

    makati1 on Sat, 23rd May 2020 6:10 pm

    JuanP on Sat, 23rd May 2020 6:39 pm

  14. Deport JuanP on Sat, 23rd May 2020 7:29 pm 

    disgusting immigrants should be gotten rid of. Deport the bastard!

  15. makati1 on Sat, 23rd May 2020 7:30 pm 

    Juan, cum to the P’s and we can share a room

  16. Duncan Idaho on Sat, 23rd May 2020 7:48 pm 

    Iran Warns US Not to Interfere with Venezuelan Oil Flotilla
    https://www.commondreams.org/news/2020/05/23/iran-warns-us-not-interfere-venezuelan-oil-flotilla

    Is the Fat Boy this stupid?

  17. More Lunatic Davy ID Fraud on Sat, 23rd May 2020 7:59 pm 

    IHate JuanP on Sat, 23rd May 2020 7:28 pm

    Deport JuanP on Sat, 23rd May 2020 7:29 pm

    makati1 on Sat, 23rd May 2020 7:30 pm

  18. REAL Green on Sat, 23rd May 2020 8:14 pm 

    Davy asked you REAL Politely not to cum in are mouth juanpee. But you went ahead and did it anyway.

    That’s why We hates you so much

  19. Duncan Idaho on Sat, 23rd May 2020 8:19 pm 

    “From Goldwater boys and girls in the 60s to the Reagan Revolution in the 80s to Newt’s Republican Revolution in the 90s to the Flag-waving Bushies and the Tea Party in the aughts to the Trumpies now. They are all the same people, regularly reforming themselves into whatever freak show the leaders have concocted to take their money.”

  20. makati1 on Sat, 23rd May 2020 9:18 pm 

    Duncan, yes, he very well might be stupid enough to start a world war to cover his stinking sorry ass. He has little to lose being already close to death in so many ways. He only cares about reelection to his dictatorship, not the US or us.

  21. Cloggie on Sun, 24th May 2020 3:37 am 

    Italian home owners get solar PV-system for free!

    https://deepresource.wordpress.com/2020/05/24/italian-homeowners-get-solar-panels-for-free/

  22. Abraham van Helsing on Sun, 24th May 2020 3:11 pm 

    The new overlord of Libya: Erdogan.

    https://ahvalnews.com/turkey-libya/erdogan-winning-libya-war-turns-favour-tripoli-bloomberg

    “Erdoğan winning in Libya as war turns in favour of Tripoli – Bloomberg“

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