Trafigura to Take $1.1B Hit in Mongolian Oil Debacle

Oil Trader to Write Off $577 Million, Pay $540 Million to End Legal Disputes Stemming From 2009 Deal

Trafigura Group, one of the world’s largest oil traders, will take a $1.1 billion hit to resolve a legal dispute stemming from a 2009 oil deal in Mongolia, the company said on Wednesday.

The Geneva-based company will write off $577 million and pay $540 million to settle legal claims related to the deal, which involved the purchase of oil from the Mongolian government.

Background of the Deal

In 2009, Trafigura entered into a deal to buy 600,000 tons of oil from Mongolia's state-owned oil company, Petro Matad. The deal was part of a larger $1 billion loan that Trafigura provided to the Mongolian government.

However, the deal quickly turned sour. Petro Matad failed to deliver the oil, and Trafigura accused the Mongolian government of fraud and corruption.

Legal Disputes

Trafigura filed a lawsuit against the Mongolian government in 2012. The Mongolian government countersued, accusing Trafigura of defamation and breach of contract.

The legal disputes have dragged on for years, with both sides incurring significant legal costs.

Settlement

The settlement announced on Wednesday brings an end to the legal disputes. Trafigura will write off $577 million, which represents the value of the oil that it never received.

The company will also pay $540 million to the Mongolian government to settle the legal claims.

The settlement is a significant financial blow to Trafigura, but it also removes a major legal uncertainty for the company.