Iraq’s Kurdistan negotiates $3 billion oil pre-payment deals from trading houses

LONDON: Iraq’s Kurdistan has agreed new deals to borrow $3 billion from trading houses and Russian state oil firm Rosneft that will be guaranteed by future oil sales to strengthen its fiscal position as the semi-autonomous region fights IS.

Kurdistan’s Natural Sources Minister Ashti Hawrami said the new deals had been concluded in recent weeks. The region also negotiated grace periods of between 3 and 5 years for repaying the debt.

Trading houses have been pre-financing Kurdish oil exports for the past two years after the government in Erbil decided to start independent oil exports via Turkey’s Mediterranean terminals. Rosneft said last week it would join them.

Kurdistan says it needs to export oil independently. “This helps our economic independence although it is important to understand that this cannot be achieved just by oil revenues and higher oil prices. We also need to press on with our economic reforms,” Hawrami said in an interview in London.

“We have learnt a lot from the oil price shock, the costs of fighting IS, and the burden of some 1.8 million refugees coming to our territory. Reform is a must — we have a lot of debts to deal with.”

He declined to name the trading houses but market sources have previously identified Vitol, Petraco, Glencore and Trafigura as buyers of Kurdish barrels. Last week, Glencore confirmed it had concluded deals for Kurdish oil. The other trading houses do not comment on their dealings with Kurdistan and Rosneft did not give any details on the size of the deal. Hawrami said the deals would serve as a hedge against an oil price slide for several years. Previous deals with trading houses have usually lasted 6-12 months. — Reuters