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The Oil Diagnostic in Angola: An Update
Human Rights Watch, March 2001
(Download PDF Version - 17 Pages)

First Page

Further Details on the Oil Diagnostic

The Cooperation of Corporations

Arms, Oil, and a Lack of Government Transparency and Accountability

Signature Bonus Payments and Arms Procurement after the Collapse of the Lusaka Peace Accords in 1998

Arrests over Arms-for-Oil Deals in 1993-1994

Recent Arms Flows to the Angolan Government

Oil Mortgaging

Government Attempts to Limit Public Criticism Over the Use of Oil Revenues


Oil Mortgaging

The practice of obtaining oil-backed loans heightened concern over the lack of transparency in the government's use of oil revenues. The Angolan government used future oil production as collateral for loans due to its lack of foreign exchange reserves and arrears on debt service payments. The IMF estimated that oil-backed loans comprised 33 percent of the country's U.S. $8.78 billion total debt by the end of 1999.73 These oil-backed loans were obtained in a manner that was not necessarily transparent and sometimes bypassed the central bank. In some cases, the government did not adequately disclose how the money was spent. Both Jean-Christophe Mitterrand and Pierre Falcone said that they were not engaged in arms sales to the government, but were involved in facilitating oil-backed loans.74

These high-interest loans took many shapes and forms, including four Union Bank of Switzerland (UBS) facilities and others arranged by Paribas, Banque Nationale de Paris (BNP), and the Bankers' Trust, for advances of around U.S. $300 million with repayment terms of three years or less.75

In early 1998, the Angolan government reached a deal with the Swiss oil trader, Glencore, to mortgage virtually the last barrel of the government's own oil production in exchange for up-front payments of approximately U.S. $900 million. The deal did not meet the basic standards of transparency that the IMF prefers since it was routed through Sonangol and the Angolan Presidency rather than the Ministry of Finance or central bank. Its terms guaranteed Glencore some 75,000 barrels per day of the government's allocation. The remainder was tied up in pre-financing deals with Lloyds Bank, BP, Chevron, and Elf Aquitaine (now TotalFina-Elf).76 Sonangol announced the signing of a U.S. $575 million loan agreement in London underwritten through the Union Bank of Switzerland (UBS) on May 18, 1999. A substantial portion of this loan was designated for re-financing of previous loans.77 Only some U.S. $35 million was new cash.78 The latest loan effectively stretched out the repayment terms for Angola over a longer period, easing its short-term repayment obligations. The Angolan government repaid U.S. $1 billion of the UBS (the U.S. $575 million loan) and BNP-Paribas (U.S. $1.02 billion) loans by February 2001, according to the Economist Intelligence Unit.79

Standard Chartered Bank finalized a U.S. $455 million oil mortgaging agreement with Sonangol on March 8, 2001. An undisclosed amount of these funds will be used for the early repayment of existing debt from a previous oil mortgaging agreement that is due at the end of 2001. The balance is designated for unspecified reconstruction projects in Angola.80