China advances $1 billion to Ecuador for two-year oil supply

China is making a forward payment of $1 billion to OPEC member Ecuador for a two-year oil supply deal and to provide the Andean nation with a $1-billion loan to overcome its liquidity crisis.

In order to secure long-term access to oil, China will make an advance payment of $1 billion to Ecuador for 69 million barrels of oil over the next two years.

This is over and above the two-year contract signed by Ecuador to supply nearly 3 million barrels of crude oil a month to China late last month.

The Ecuadorean daily paper Ecuadorean Hoy said that the country's foreign minister Fander Falconi said, "China will give a $1-billion loan, in addition to the $1 billion for the sale of oil."

China is advancing the loan at 7.25 per cent interest rate, which has been slammed by local critics as being too high since Ecuador will be paying $145 million as interest payment annually.

With international crude prices hovering at about $70 a barrel, China in reality would be paying between $14 to $16 a barrel, if the interest amount of $145 million on the $1-billion loan were also taken into account.