A corporation managed by a distant relative of the Abu Dhabi royal family agreed to lend South Sudan €12 billion ($12.9 billion) in exchange for payback in oil.
This pact is one of the largest oil-for-cash transactions and is the most recent involvement in a troubled African country.
According to an unpublished report reviewed by Bloomberg, a United Nations Security Council-appointed panel of investigators found that the Dubai-based Hamad Bin Khalifa Department of Projects (HBK DOP) and South Sudan’s then-finance minister, Bak Barnaba Chol, appeared to have agreed on loan terms in documents signed between December and February.
The transaction is massive, almost doubling South Sudan’s GDP. According to the document, 70% of the funds are allocated to infrastructure. However, a loan this large—five times their existing external debt—could keep South Sudan’s oil revenues locked up for years.
It might force the East African country to continue producing oil until at least 2043, years beyond the life of the country’s current oil wells.
According to James Cust, a former senior World Bank economist, “This would be a very significant bet on this particular partnership that would have repercussions through multiple administrations.”
HBK DOP, created by Sheikh Hamad Bin Khalifa Al Nahyan, could use the loan to guarantee discounted oil access for up to two decades. The agreement stipulates that South Sudan will receive $10 less per barrel of oil than the international benchmark price.
The financing comes amid a strong drive by Gulf countries and regional businesses into new markets. In February, the UAE handed a $35 billion lifeline to Egypt, and it has invested more in African countries than any other area.
Oil-backed loans are an attractive alternative for resource-rich emerging countries. However, they are not without risk. South Sudan has a difficult history with such agreements, and it has faced legal problems for failing to pay.