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Angola is reducing oil shipments to China with which it pays part of its debt to its biggest creditor as the African OPEC member looks for debt relief from its international partners, Reuters reported on Friday, quoting sources with knowledge of the plans.
The world’s top oil importer, China, is Angola’s primary creditor and the African country is repaying part of its debt to China with oil cargoes to its major state-owned oil firms.
However, the oil price crash and the COVID-19 pandemic has severely constrained Angola’s income, and the country now seeks to cut cargoes to China for which it doesn’t receive hard currency.
Angola is one of the worst hit oil producers in the oil price crash, because it lacks large sovereign wealth buffers as some Middle Eastern oil exporters do. In addition, the oil sector is crucial to Angola’s economy. Oil production and supporting activities account for half of the nation’s gross domestic product (GDP) and around 89 percent of its exports, OPEC data shows.
According to Reuters’ sources, China’s Sinochem will get five oil cargoes from Angola next month, compared to the usual seven or eight cargoes, while Unipec, the trading arm of Sinopec, will not get any Angolan oil in July, compared to the typical two-three cargoes a month for repaying Angola’s debt.
Earlier this week, Angola’s finance ministry said that it was in an advanced stage of talks with some of the importers of its oil to reschedule financing facilities and better reflect the current market environment and OPEC’s production quotas. Angola said it hoped to finalize the talks “in the very near future” and guarantee mutually favorable conditions for all parties involved.
Separately, Angola has asked the G20 group for negotiations for suspension of servicing its bilateral debt under the G20 Debt Service Suspension Initiative (DSSI), which could ease the pressure on Angola’s finances.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.