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Japan Offers $ 2 Billion Soft Loan for Iraq Refinery

Source: KUNA 2/24/2012, Location: Middle East

The Japanese government will provide a roughly JPY 160 billion (USD 2 billion) soft loan for a refinery project in Iraq on the condition that the core contract goes to a Japanese firm, a top-selling business daily here reported.

The oil refinery will be part of a larger refining complex already in operation in the southern city of Basra, the Nikkei Shimbun said, adding that the aid would amount to the single largest yen loan ever extended for an Iraqi project. While the loan will cover the project's full cost, it will be extended only if the primary contract for overseeing construction is awarded to a Japanese company, the newspaper said.

The terms of the aid also require JPY 50 billion (USD 624 million) of the products going into the refinery to be built in Japan. With contractor bids solicited next year, a final selection is to be made in 2014. Plant-engineering firms JGC Corp., Chiyoda Corp. and Toyo Engineering Corp. are expected to vie for the core contract, according to the report. The Organization for Economic Cooperation and Development (OECD) restricts such tied aid under its rules for development assistance, but in the case of Iraq, building the refinery through private-sector financing would have been difficult in light of the cost of ensuring adequate security.

The proposed Japanese loan was cleared by OECD members. Iraq's refineries have been ravaged by war, contributing to gasoline shortages.

Despite having some of the world's largest oil reserves, Iraq spends USD 5 billion a year to import petroleum products.

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