Ecuador Lost Nearly $5 Billion in China Oil Deal

Chinese Foreign Minister Wang Yi meets Ecuador's Foreign Minister Jose Valencia (L) at the

The oversight committee of the Congress of Ecuador revealed in a 200-page report published on Wednesday the country lost about $3,60 per barrel of oil in a deal with China, resulting in total losses of nearly $5 billion.

Then-President Rafael Correa signed a series of agreements with the Chinese Communist Party between 2009 and 2016 giving China below-market prices on the country’s petroleum in exchange for loans. Correa’s tenure was marked by the country aligning itself with the world’s far-left authoritarian forces, primarily Venezuela and Cuba but also including close partnerships with Russia and China.

The Argentine news outlet Infobae, citing the congressional oversight report, said that the current government found that Ecuador had borrowed over $18 billion in loans from China at interest rates far higher than what the country could have gotten from agreements with banking institutions such as the International Monetary Fund (IMF). The interest rates Correa agreed to were upwards of seven percent “without including financial costs,” according to the news organization.

“To pay for those loans, the country committed, through 2024, to hand over 1.325 billion barrels of crude to the Asian corporations Petrochina International Company Limited, Unipec Asia Co Limited y PTT International Trading Pte. Ltd.,” Infobae noted.

Ecuador agreed to a fixed price for the barrels unrelated to the actual market value of the crude oil significantly below what it could have sold the oil for to other buyers. The report found that, even today, Ecuador is selling 87 percent of its crude to the Chinese corporations at the previously agreed-to rates lower than the actual price of the oil, an especially egregious loss for the country given currently skyrocketing prices. Ecuador has sold China 1.174 billion barrels so far as part of the deal.

The head of the congressional oversight committee, Fernando Villavicencio, lamented the findings as “the greatest corruption scandal in the country’s oil history” on Wednesday, according to Ecuador’s El Comercio newspaper. The lawmaker noted that Correa sold the deal to the Ecuadorian people when he signed it as a way to do away with expensive middlemen brokering oil deals and create strategic alliances with economic powerhouses like China.

“This was completely the opposite,” Villavicencio said of the results. “The Petrochina case reveals that the Correa government was the middleman government. It took out debts with interest rates at over seven percent and that debt was paid with oil at discounted prices.”

File/China’s President Xi Jinping (L) and Ecuador’s President Rafael Correa arrive at the facilities of the Integrated National Center of Security Ecu 911 in Quito, to monitor the inauguration of the Coca Codo Sinclair hydroelectric plant, built by the Chinese state-owned engineering and construction company Sinohydro, on November 18, 2016. (JUAN CEVALLOS/AFP via Getty Images)

Villavicencio said that evidence suggested some of the funds lost went to kickbacks to various former Correa officials – that is to say, that oil company officials bribed Correa executives in exchange for discounts on the oil itself. Among the evidence is the declaration in U.S. court by a former official at the European oil trading corporation Gunvor, Raymond Kohut, that he “willfully and corruptly agreed to offer and pay bribes on behalf of Trading Company [Gunvor] to, and for the benefit of, Ecuadorian officials, in order to obtain and retain business for [Gunvor].” The bribes allegedly totaled $70 million.

The oversight committee announced it would send the report to Ecuador’s Attorney General and the New York court system to investigate the alleged bribery.

Wednesday’s reports follow years of investigations following the end of Correa’s presidency on the Chinese oil deals. In 2018, Ecuador’s prosecutor general estimated that the country had lost as much as $2 billion in the discounts Correa promised the Chinese companies. Ecuadorian courts attempted to get Correa to testify on the agreements that year, but Correa had since moved to Belgium, where he claimed that the government of successor Lenin Moreno was persecuting him for his socialist beliefs. Moreno belongs to the same political party as Correa, though he ordered extensive investigations into corruption during his predecessor’s tenure.

Ecuador attempted to order Correa to testify in February 2018; by July, courts had issued an arrest warrant over an entirely different scandal: the accusation that Correa had paid Colombian thugs to abduct an opposition leader.

Correa’s presidency featured extensive dealings with China. In addition to the financial deal, revelations surfacing after he vacated the office exposed the creation of a totalitarian national surveillance system known as “ECU-911,” featuring 4,300 cameras hidden throughout the country to monitor citizens. The Chinese telecommunications giant Huawei reportedly helped build the system, which became public after Moreno gave the New York Times an inside look at the program before shutting down the agency administering it.

Lenin Moreno’s presidency ended in 2021. Voters chose Guillermo Lasso, the conservative candidate who lost to Moreno following Correa’s departure, to replace him. President Lasso has since further supported investigations into Correa’s dealings as president.

Follow Frances Martel on Facebook and Twitter.


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