Government of Iraq secures oil-backed loan for 100 bed hospitals project (Linked to Record ID#95982)

Government of Iraq secures oil-backed loan for 100 bed hospitals project On May 11, 2018, China Export & Credit Insurance Corporation (Sinosure) and the Ministry of Finance of the Republic of Iraq signed an export credit insurance cooperation framework agreement (contract ID# FA-IRAQ-001).

Under the terms of the 20-year agreement, the Ministry of Finance of the Republic of Iraq is authorized to borrow up to $10 billion (or an equivalent amount in other currencies such as RMB) via subsidiary buyer’s credit facility agreements with PRC banks and/or commercial contracts with deferred payment clauses (i.e. supplier’s credits) with Chinese companies (exporters) for projects in the ‘oil, gas, energy, infrastructure, communications, education, healthcare or electricity sectors’ that are ‘located in the areas in Iraq deemed safe by the Embassy of China and the Government of Iraq.’ All borrowings under the framework agreement, which is captured via Record ID#95982, must carry maturity lengths that do not exceed 15-years and they must be backed by an approved credit insurance policy from Sinosure.

The framework agreement also specifies that the Government of Iraq is responsible for making advance payments worth no less than 15% of the total cost of the underlying commercial contracts supported by the subsidiary buyer’s credits and supplier’s credits.

To repay and secure these borrowings, the framework agreement specified that a Crude Oil Sales Agreement would be put in place between Iraq's state-owned oil marketing company (SOMO or شركة تسويق النفط) and one or more Chinese state-owned oil importers, wherein SOMO would agree to sell no fewer than 100,000 barrels of crude oil per day to one or more Chinese state-owned oil importers.

Ultimately, SOMO agreed to sell no fewer than 100,000 barrels of crude oil per day to ZhenHua Oil Company and Sinochem (split equally between the two Chinese state-owned oil importers).

Per the terms of the framework agreement, ZhenHua Oil Company and Sinochem agreed to make payments to SOMO due under the Crude Oil Sales Agreement by depositing U.S. dollars (or another foreign currency) in a Sinosure-designated and lender-controlled bank (escrow) account (that was opened on behalf of the Ministry of Finance of the Republic of Iraq to facilitate debt service payments).

ZhenHua Oil Company and Sinochem can resell the oil, but they must transfer 65% of the resale profits to SOMO. They can retain 35% of the resale profits. If resale results in a loss, the Chinese state-owned oil importer bears 100% of that loss.

Under the terms of the framework agreement, the Ministry of Finance of the Republic of Iraq is required to maintain a minimum cash balance of $100 million in a Debt Service Reserve Account (DSRA) and pledge the DSRA in favor of Sinosure.

Apart from the DSRA, the framework agreement refers to two additional escrow accounts: an Oil Settlement Account and a Repayment Account.

All oil sale proceeds first flow to the Oil Settlement Account, which is a Central Bank of Iraq (CBI) account at the Federal Reserve Bank of New York (FRB NY). [Note: The Oil Settlement Account is also known as the Development Fund for Iraq (DFI) Account, the Oil Proceeds Receipt Account (OPRA), the Iraq 2 Account, the Oil and Gas Revenues Account (OGRA), and the DFI Successor Account.] Then, after deductions are made from the Oil Settlement Account by the United Nations Compensation Commission for compensation due to Kuwait, the remaining revenue flows to the Repayment Account (so long as there is still a $100 million minimum cash balance in the DSRA) and principal and interest payments to lenders are made from the Repayment Account.

The Government of Iraq has disclosed via EITI that that the DSRA and the Repayment Account are sources of collateral. On September 23, 2019, account agreement and oil agreement annexes to the framework agreement were finalized. Then, on September 23, 2019, the framework agreement officially went into effect.

Approximately 15 months later, in December 2020, a Financial Advisor to Iraq’s Prime Minister, Dr.

Mudhar Muhammad Salih, told the Iraqi News Agency (INA), that Iraq’s House of Representatives would need to identify the specific projects to be funded under the framework agreement and allocate funds for these projects in the Federal Budget Law. Then, on April 8, 2021, the Government of Iraq issued the 2021 Fiscal Year Federal Budget Law.

Included in the budget was a pronouncement that $1.803 billion from the $10 billion oil-backed loan framework agreement between the Ministry of Finance and Sinosure would be used to fund infrastructure projects.

Five months later, in November 2021, Salih told a local newspaper that several Chinese companies had deposited $1.8 billion in an account and the funds would be used to support these projects.

This announcement implies that the Government of Iraq ultimately decided to borrowed via commercial contracts with deferred payment clauses (i.e. supplier’s credits) with Chinese companies rather than buyer’s credit facilities with PRC banks. On June 30, 2022, Dr.

Mudhar Muhammad Salih said that ‘[t]he operations of depositing money and withdrawing from the [escrow] account are continuing for the benefit of the projects concluded within the [export credit insurance cooperation framework agreement with Sinosure].’ He also noted that ‘the [escrow] account is managed very carefully by the Central Bank of Iraq, and the financial operations are audited by the major international financial auditing companies.’ In 2022, SOMO also agreed to increase its sale of crude oil to ZhenHua Oil Company and Sinochem from 100,000 to 150,0000 barrels per day.

It did so ‘to meet the estimated annual revenue based on the Official Selling Price (OSP) applied to all buyers (without discounts or installment payments).’ One of the projects financed under the export credit insurance cooperation framework agreement with Sinosure is the 100 bed hospitals project.

In its 2021 Budget Law, the Government of Iraq indicated that it would borrow $100 million through the export credit insurance cooperation framework agreement with Sinosure for the 100 bed hospitals project (as captured via Record ID#107443). The purpose of this project was to build a total of sixteen 100 bed hospitals across Iraq.

All hospitals were initially expected to be completed by 2028. The planned hospital locations include: 1. Basra / Al-Imam Al-Sadiq District 2. Al-Miqdadiya District / Diyala 3. Al-Khalidiya District / Anbar 4. Tel Kaif / Nineveh 5. Baiji District / Salah Al-Din 6. Al-Hindiya Barrage / Babylon 7. Al-Jadwal Al-Gharbi / Holy Karbala 8.

Al-Khidhir District / Al-Muthanna (This hospital is planned to have an area of ​​​​25,000 square meters with 5 floors.

The hospital will include an outpatient clinic, emergency department, laboratories, operating rooms, newborn intensive care unit, and a waste treatment unit.) 9. Al-Haidariya District / Najaf Al-Ashraf 10. Souq Al-Shuyukh / Dhi Qar 11. Al-Majar Al-Kabir / Maysan 12. Al-Abbasi District / Kirkuk 13. Al-Aziziya District / Wasit 14.

Al-Badir / Al-Diwaniyah 15. Al-Zaafaraniya / Baghdad (Rusafa side) 16.

Al-Sha’la / Baghdad (Karkh side) In early February 2025, CAMCE and Iraq's Ministry of Health signed an RMB 589,378,400 commercial contract for the a 100-bed hospital project in Al-Khidhir District within Al-Muthanna (Muthanna) Province (伊拉克穆萨纳省医院建设项目).

Then, on February 27, 2025, Iraq's Prime Minister launched the implementation of the 100-bed hospital project in Al-Khidhir District within Al-Muthanna (Muthanna) Province.

Several days later, on March 4, 2025, Iraq's Ministry of Health announced that it had contracted with a Chinese company to build a 100-bed hospital in the Al-Aziziya district of Wasit Governorate.

In September 2024, Majid Shingali, Iraq's Chairman of the Parliamentary Health and Environment Committee, alleged a lack of transparency in the selection process of the contractors for the hospitals.

He then further proceeded to note that many of the contracts awarded to foreign firms were then sub -contracted to Iraqi companies.