Oil field Thar Jath in Unity State, South Sudan. (Photo: Courtesy).

The government of South Sudan has agreed with a UAE company to lend the country about 12.9 billion US dollars in exchange for millions of barrels in crude oil payment in the next 20 years, according to a leaked report from a United Nations panel of experts.

The document was first published by Bloomberg news agency, but the UN Security Council’s panel of investigators on South Sudan has yet to make it public.

The deal, negotiated on the sidelines of the COP28 climate change summit in Dubai, amounts to almost double the GDP of South Sudan, and about five times the country’s current external debt of 2.5 billion US dollars.

According to the agreement, the government has earmarked 70% of the loan for infrastructure and 30 percent for the country’s working capital against the approved budget.

The UN panel of experts said in the unpublished report, that the loan deal will trap most of South Sudan’s oil revenues for many years.

Former Finance Minister Dr Bak Barnaba Chol seemingly agreed to the loan terms in documents signed between December 2023 and February 2024 with the Dubai-based lender Hamad Bin Khalifa Department of Petroleum (HBK DOP).

In March 2024, Dr Bak disclosed that the government secured loans from financial institutions across the globe.

He made the remarks at the reception ceremony of Finance Minister Awow Daniel Chuang.

These institutions include the Sheikh Hamad Bin Khalifa Department of Petroleum, China-Africa Cooperation, Green Bank, Marina in Canada and so many others.

“In our quest to diversify our revenue stream and reduce our dependency on oil revenues, we need to make significant strive in increasing non-oil and also go for external loans,” Dr Bak said.

“We have successfully negotiated our way with several companies and financial institutions all over the globe. We did complete negotiation with Sheik Hamad Bin Khalif – HBK Department of Petroleum for a long-term facility,” he said.

“We also negotiated with China and Africa cooperation. We negotiated with Green Bank. We negotiated with Marina in Canada and so many other institutions just to have long-term facilities that will enable us to pay salaries and pay government operations.

“I am so hopeful that some of the transactions will reach our country very soon.”

Dr Bak said he acknowledged government support in securing financial assistance from various global institutions.

“These achievements alongside ongoing investment opportunities also with the Bahrain companies in livestock and fisheries, gold mining and medical services that I wish you continue with my colleagues we have started this journey together with.”

“The journey we have embarked upon comrade Daniel Awow, but the unwavering support of our leadership and the dedication of our team at the ministry we managed to reach here, and I want you to sustain it.”

When contacted on Monday, 29th April 2024, to respond to the leaked document, Government Spokesperson Michael Makuei denied the validity of the $13 billion UAE loan agreement.

However, the Minister of Information referred Eye Radio to the Ministry of Finance for further clarification.

“Why don’t you ask the Ministry of Finance who is said to have signed the document? For me it’s not true, there is nothing as such, but, you check on the finance and find out from them because they are said to be the signatories,” Makuei said.

The agreement obliges the South Sudan government to pump 3,000,000 barrels of oil per month to the Abu Dhabi firm with an unspecified increase in over 6 months.

In the first phase of the deal, the company will pay over 5 billion US dollars to South Sudan government after which it will receive two cargoes of Nile and Dar Mix crude oil at 600,000 barrels per month.

In Phase II, South Sudan will receive more than 3 billion dollars in exchange for two additional cargoes of Dar Mix amounting to 600,000 barrels per month within four months.

HBK DOP will further send over $3 billion to Juba for reimbursement of one cargo of Nile at 600,000 barrels per month within six months.

It is further stipulated that if oil prices drop, South Sudan will provide additional barrels to meet the loan, whereas when oil prices rise, the number of barrels can be reduced or the difference can be paid back to suit the market.

The loan will give the UAE discounted oil for up to two decades, and under the agreement, South Sudan will receive $10 less per barrel of oil in comparison with the international benchmark, Bloomberg reported.

The UAE company further offered to provide additional funding for building the pipeline, refinery, and petrochemical complex and 1,000 megawatts of power for the project.

According to the terms and conditions, the government shall direct the Bank of South Sudan to open a lender bank account and deposit of sovereign guarantee backed “by crude oil only” to receive funds from the company’s designated bank coordinates.

The deal is based on English laws, where disputes will be resolved in accordance with the London Court of International Arbitration.

South Sudan is heavily dependent on oil, with the commodity being responsible for 90% of the country’s revenue and nearly all of its exports, according to the World Bank.

Former finance minister, Agak Acuil said in May 2022, that the government had been struggling to pay civil servants because the country’s oil proceeds have been sold in advance up to 2027.

Mr Acuil later went public to clarify that he was “taken out of context” in the statement regarding the pre-sell of oil.