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China’s New Strategy: Loan for Oil

China National Radio reported that China and Russia signed an intergovernmental agreement on oil cooperation in Beijing on Tuesday. Under the intergovernmental agreement, China will provide a $25 billion loan to Russia, Russia will use oil as collateral. Russia will sell China 15 million metric tons of oil from 2011 to 2030, using the East Siberia-Pacific Ocean (ESPO) pipeline.

Energy Resources are currently the number one target of China’s overseas investment. Since the beginning of 2009 China has signed several "loan for oil" cooperation agreements with other countries, including a $10 billion loan to Brazil on February 18, a $4 billion loan with Venezuela on February 21, and a $1 billion loan with Angola on March 13. On April 5, President Correa of Ecuador announced a possible deal of exchanging crude oil for a $1 billion loan from China.

On April 16, China National Petroleum Corporation signed a contract to provide a $5 billion loan to Kazakhstan’s KazMunaiGaz National Co. to jointly buy AO Mangistaumunaigas, an oil and gas company in Kazakhstan.

Source: China National Radio, April 21, 2009