Iraq’s decision to tie up 4pc of its crude exports in a fve-year pre-payment deal lays bare the dire state of its economy. The deal involves selling forward 130,000 b/d of Basrah crude to Chinese trading-refning company Zhenhua, with an upfront payment of at least $2bn. But Iraq’s state-owned marketing company Somo has had to break with current policy and allow Zhenhua to resell the crude for a year. Producers have less leverage in an oversupplied market and there are advantages in securing a long-term outlet for crude. But a yawning budget gap and the speed with which it pushed through the deal testify to Iraq’s struggles.
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