So-called “structured commodity finance” is a trade mechanism where payment is received upfront for future deliveries. It is often used strategically by countries to receive urgent financial support during times of difficulty from other friendly states. Iran has used this mechanism to great effect in the past, as has Hugo Chavez, who received some $20 billion in advance payment from China for discounted future oil deliveries several years ago. In May 2014, Russia provided $2 billion to the struggling Maduro regime in Venezuela for future deliveries of oil products by PDVSA to Rosneft. The unusual nature of this transaction and the lack of clear market rationale for Rosneft to engage in such a deal raises concern with regard to the underlying motivations at play.
Posted Thursday, May 1, 2014 at 12:00am