Iraq reaches prepaid oil export agreement with Chinese firm: state media

A general view of al-Zubair oil field near Basra, Iraq July 15, 2018. (Photo Credit: Essam al-Sudani /File Photo)

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SULAIMANI — Iraq has reached an agreement with a Chinese energy company to export oil using a prepayment scheme, according to the government's State Oil Marketing Organization (SOMO).

“China is one of the most important buyers of crude oil in the world and it is a great competitor to all oil-producing countries,” head of SOMO Alaa al-Yasiri said during an interview announcing the deal with the state-run Iraqi News Agency (INA).

“There was intense competition between two European and Chinese companies and the Chinese company won,” he said, without identifying them by name.

The term of the deal is for five years, but the Chinese company has promised to pay up-front for one years' supply, which will bring in an estimated $2 billion. In return, Iraq has offered flexible loading dates to the company.

This is the first of a kind deal for Iraq's federal government and will inject some much needed cash into its beleaguered public finances. The Kurdistan Regional Government (KRG) has used prepayment deals in the past.

With its state budget almost entirely dependent on oil income, Iraq’s finances have been hit hard by this year’s decline in oil prices. OPEC, of which Iraq is a member, and its allies have cut production since the spring in a bid to shore up prices, which has added to the country's financial woes.

(NRT Digital Media)