Sinochem reschedules $196 million debt of Serbian state-owned oil and gas company

Project narrative

In 2003, Sinochem International Oil Company — a Chinese state-owned oil trading company that operates under the supervision of the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) — sued Serbia’s state-owned oil and gas company, Naftna Industrija Srbije (NIS), after it failed to settle an approximately $268 million bill for crude oil deliveries. The debt resulted from an agreement during the 1990s in which Sinochem delivered 14.6 million barrels of crude oil to NIS between 1991 and 1998. Sinochem halted its oil exports in 1998 when its NIS could no longer fulfill its payment obligations. NIS claimed that it did not have the funds to repay its debts, which it had inherited from the former Milosevic government. Then, on November 7, 2003, Sinochem and NIS signed a debt relief protocol agreement. Under the terms of this agreement, Sinochem reportedly exempted NIS from $70 million worth of repayment obligations. Then, under the terms of a deal (‘deed of agreement’) that was finalized on October 11, 2004, the parties agreed that remaining repayment obligations of NIS (worth approximately $196 million as of 2004) would be repayable in sixteen, semi-annual installments of approximately $14.2 million over an eight year period (from June 30, 2004 to December 31, 2011). The interest rate on these outstanding obligations were reduced from 4.4% to LIBOR plus a 0.7% margin. The 6 month average LIBOR rate in October 2004 was 2.227%, so AidData codes the all-in interest rate as 2.227% + 0.7% = 2.927%. This debt rescheduling agreement was signed during the an official visit of Serbia’s prime minister Zoran Zivkovic to China. NIS made its first repayment of $14.2 million on June 30, 2004. Record ID#42320 captures the debt forgiveness that was granted to NIS and Record ID#67011 captures the rescheduling of the outstanding obligations of NIS.