The deals are structured so that countries are advanced money from trading houses that will be paid back in future oil shipments. These types of loans have become popular with smaller African and Middle Eastern nations as the only way to raise money. But when oil prices tank - as they did over the last several weeks - the loans become difficult to repay.
As the price of oil plunges, countries have to divert more oil to keep up with their payments. Now the Kurdistan region in Northern Iraq is having trouble repaying a $500 million loan from Glencore.
U.S. investors find themselves with exposure to $500 million in Kurdistan-based loans, as U.S. pension funds bought half a billion dollars worth of notes "known as Oilflow SPV 1 DAC linked to the loans". Glencore has said it plans on formally restructuring the deal.