Financing the Oil and Gas Industry: The Re-emerging of Countertrade

Abstract

Despite the significant increase in the use of this particular type of trading system, there seems to be no universal consensus agreed upon the terms and definitions of countertrade. Nevertheless, it could be argued that the common understanding regarding the operation of countertrade is that it involves the practice of swapping products or services among parties for mutual benefits, in other words, the practice of reciprocity. Countertrade entails a number of specific characteristics. It is often established that countertrade is formed upon the concept of bilateralism where two main parties are involved in the transaction. Although there are various forms of countertrade, with regard to oil and gas industries nowadays, two main forms of countertrade are commonly used between trading parties. Throughout this essay, the author will discuss the following issues. Firstly, (i) the introductory information regarding countertrade practices in oil and gas industry, secondly, (ii) a number of legal financing instruments commonly used in this business. Also, (iii) the legal principles involved in the financing of international countertrade will be critically discussed and last but not least, the author will perform an overall evaluation as to whether the law and regulations relating to international countertrade can be considered sufficient to support business in such industry.