The Saudis refuse to borrow (spring 1986)
In April 1986 the Saudis said they did not want to borrow money to finance the deal. As the MoD were now so committed, officials scrambled to make an alternative arrangement. Lloyds would lend BAe the money it required prior to Saudi payments. The plan was for the Saudis to adjust the amount of barrels of oil given to Shell/BP as necessary and, should the oil proceeds not fully cover the costs, pay cash to the MoD for any shortfall. The MoD would then pay Lloyds back. If the barrels per day and Saudi cash did not make up the shortfall ECGD would pick up the bill.
The DTI knew “the contractural arrangements with the KSA [Kingdom of Saudi Arabia] are much more tenuous” and that the deal would mean the Saudis would have to pump much more oil (up to 600,000 barrels per day). Effectively world oil prices would to some extent be driven by BAe’s cash flow needs
