Angola pioneered the concept of oil-backed loans as an easy way to access Chinese funding for infrastructure development projects, but every time the price of the fuel slumps, the southern African nation suffers. The continent’s second-largest oil exporter owes billions of dollars of debt to Beijing, some of which it repays in the form of shipments to China’s state-owned oil firms. Angola has been badly hit by the coronavirus -driven oil rout, which saw Brent crude prices drop to their lowest level since the Gulf War in 1991, and US oil futures fall into negative territory for the first time in history. The crash has severely cut Luanda’s oil revenue and raised concerns over its ability to repay its loans. As the loan payments are believed to be linked to the price of oil at the time they were negotiated, the country has to ship larger amounts of crude when its value falls. Angola’s finance ministry said on Tuesday that the country had sought Beijing’s help to restructure its loans from Chinese banks and commodity traders after it became clear that the recent oil price drop would push it into debt distress. “The ministry of finance is currently in an advanced stage of negotiations with some of its oil-importing partners to reschedule financing facilities and better reflect the current market environment and Opec's production quotas,” it said. Angola has also cut the number of oil cargoes it will ship to China from July as part of its repayment obligations. That came after an agreement with the oil-producers’ cartel Opec, of which Angola is a member, forced countries to cut oil production to boost prices. According to Reuters, Angola slashed its shipments to China’s state-owned Sinochem and Unipec, a trading arm of Chinese giant Sinopec. David Mihalyi, a London-based senior economic analyst at the Natural Resource Governance Institute, and co-author of a recent report that looked at the Chinese resource-backed loans in Africa and other emerging markets, said the move to cut shipments could be a tactic to force a negotiation. “They need revenues urgently,” he said. “Such oil-backed loans can be easier to renegotiate than traditional loans, because of the strong mutual interdependence they create.” On Wednesday, China’s foreign ministry confirmed that Angola had requested debt relief and that “as an important strategic partner of Angola, China takes Angola's needs seriously”. “Relevant departments and financial institutions are in touch with the Angolan side,” a spokesman said. Luanda said it had also sought debt relief from the Group of 20 (G20) countries to ease its financial burden as it tries to deal with the fallout from Covid-19. William Jackson, chief emerging markets economist at consultancy Capital Economics in London, said it looked like the International Monetary Fund had pushed Angola to seek a bailout from China. “The fund has probably determined that public debt is unsustainable and Angola can only receive more support if it restructures its debt,” he said, adding that the restructuring of debts owed to oil importers was a bigger deal than the G20 relief. Angola’s oil-for-loan debt to China was about 15 per cent of its GDP, according to IMF estimates, Jackson said. “Talks with oil importers are reportedly at an advanced stage, but history suggests that such talks with Beijing can be long and complex, and the cut in July oil shipments to China may be part of the negotiation tactics,” he said. Oil accounts for two-thirds of Angola’s tax revenue and 95 per cent of its exports, according to the IMF. In 2017, the country sold 67 per cent of its crude petroleum to China – worth US$18 billion – according to data compiled by the Massachusetts Institute of Technology. New York-based NGO Natural Resource Governance Institute (NRGI) said in a recent report that between 2000 and 2016, Angola took out more than US$24 billion in oil-backed loans and credit lines from Chinese commodity traders and lenders, including China Exim Bank, to pay for post-conflict infrastructure reconstruction after a devastating civil war. Angola is the biggest recipient of Chinese loans in Africa, receiving about 30 per cent of the US$143 billion it loaned to the continent between 2000 and 2017, according to figures from the China Africa Research Initiative at the Johns Hopkins School of Advanced International Studies in Washington. The country’s official external debt stood at US$58 billion last year and is expected to jump to US$85.4 billion this year, according to the IMF. Angola secured a US$3.7 billion loan from the IMF last year, while its state oil company Sonangol borrowed US$2.5 billion from banks. Capital Economics said the country’s debt problem was one of the most acute in the region. “The government debt ratio was expected to breach 100 per cent of GDP this year, even before the crisis … Low oil prices have hit government revenues hard,” it said in a note on Friday. More significant restructuring would probably be required to put the debt ratio on a sustainable path, it said.