A relatively unknown Dubai-based company is currently eyeing a $12.9 billion oil-for-cash deal with South Sudan. The company seeks to lend the country $12.9 billion in exchange for oil in a deal that may last for 20 years.
This deal marks one of the largest oil-for-cash deals ever brokered and has garnered significant attention from the United Nations, considering the terms of the deal.
According to Bloomberg, the information was revealed in a report by a panel of investigators appointed by the United Nations Security Council. In the report, it was noted that Dubai-headquartered Hamad Bin Khalifa Department of Projects (HBK DOP) and South Sudan’s former finance minister Bak Barnaba Chol reached a consensus on the loan conditions.
The understanding was purportedly formalized through documentation signed between December 2023 and February 2024.
Based on the UN report, there is significant controversy around the nature of the deal, because the agreement is valued at nearly twice the GDP of South Sudan.
It is noted that 70% of the funds will be allocated to infrastructure development, even as the country grapples with famine and conflict.
The UN report also highlights concerns regarding the implications of such a substantial loan, which is roughly five times the country’s existing external debt. The report also suggests that servicing a loan of this magnitude would likely absorb a significant portion of South Sudan’s oil revenues for an extended period.
As per the terms, South Sudan would receive $10 less per barrel of oil than the international benchmark price and this arrangement is purported to last for up to twenty years.
HBK DOP was established by Sheikh Hamad Bin Khalifa Al Nahyan, a distant relative of Abu Dhabi’s royal Al-Nahyan family. Based on the agreement, South Sudan was due to receive an initial instalment of $5 billion, however, it is unknown whether they have received the first instalment.
From 2022 to 2023, UAE pledged over $97.3 billion in investments to Africa, as the country is tending towards becoming the largest investor in the African continent ahead of China and the US.
In February 2024, ADQ, one of the sovereign wealth funds in Abu Dhabi also pledged $35 billion to develop the Ras El Hikma peninsula in Egypt.
For oil-rich nations, oil-backed loans present an appealing avenue who are frequently challenged in accessing significant conventional financing options.
In Nigeria, the most recent oil-for-cash loan was a $3.3 billion loan from Afreximbank, which was backed by oil revenue. The agreement was reached between NNPCL and Afreximbank in August 2023.