In November 2025, Mauritius Commercial Bank closed a $400 million financing facility to expand floating power plant operations across Africa. Four months later, in response to attacks by the United States and Israel, Iran closed the Strait of Hormuz, drastically curtailing oil supply and spiking oil prices globally.The countries now absorbing the worst of that price shock did not become vulnerable when the first missile struck. Their economic vulnerability was written into contracts signed years earlier.
Growing energy demands, immediate need, and planning for the future are often framed as in-tension for countries plotting out their energy futures. Unfortunately, thanks to current structuring of debt and financing for energy infrastructure projects, these tensions are often manifest in contracts, when they don’t have to be. Clearer up-front information on vulnerability to oil shocks, as well as a better rebalancing towards renewable infrastructure that takes into account their resilience to price shocks, would go a long way towards lessening the acute financial strain placed on infrastructure by an energy crisis.
Floating Power Prices
The standard floating power plant contract is a take-or-pay agreement: governments pay whether they use the electricity or not, at a fuel cost tied directly to global oil prices. There is no price ceiling. Contract terms run ten to twenty years. Every design feature transfers risk downward, from the company onto the government, and from the government onto the population least able to absorb it.
Ghana signed one of these agreements in 2014 with Karpowership, a Turkish floating power plant operator, in response to a genuine electricity crisis. By 2024, Ghana had accumulated $3 billion in total energy sector debt, with $379 million owed to Karpowership alone. In 2025 — before Hormuz closed, before oil reached $100 per barrel — Ghana required a $1.47 billion emergency bailout just to stabilize its energy finances. The war did not create Ghana’s crisis. It arrived on top of one already in progress.
Sierra Leone paid $90 million to Karpowership in 2025 alone and still faces daily blackouts. Across the Caribbean, over 90 percent of electricity generation runs on imported fossil fuels. Fossil fuel imports in the Eastern Caribbean averaged $444 million per year between 2016 and 2021 — more than 17 percent of the entire trade balance. Guyana is paying $0.32 per kilowatt-hour for powership electricity. Solar costs $0.09. That gap, compounded across every hour of every day, is the fiscal cost of the emergency decision. It is being paid right now, on top of an oil shock that nobody modeled into the original contract.
The institutions responsible for overseeing these countries’ fiscal health are not ignorant of the risk. Demetrios Papathanasiou,Global Director of Energy and Extractives at the World Bank, stated in May 2023 that “poorer countries are stuck in a vicious cycle where they pay more for electricity, cannot afford the high upfront cost of clean energy, and are locked into fossil fuel projects.” The World Bank coined the term “fuel trap.” Its Caribbean research identified fossil fuel dependency as a “major fiscal vulnerability” years before Hormuz closed.
Mixing In Renewables
At the January 2025 Mission 300 Africa Energy Summit — ten months before the war started — the World Bank committed $40 billion and the African Development Bank committed $18 billion to African electrification, with half of the funding aimed at renewable energy projects. Several country plans embedded in that commitment include natural gas investments as part of a more traditional mix of energy infrastructure. Some of that power capacity is being floated, literally, through offshore ship-based power generation. Karpowership’s chief commercial officer stated in October 2025 that “almost every day a new country approaches us.” These floating power plants can rapidly offer energy generation, reacting capacity within two weeks of a deployment, but they run on liquid fuel initially, before transitioning to natural gas in months. While immediate, their reliance on fossil fuels makes that expanded capacity particularly vulnerable to price shock. Funds meant to steer countries towards energy independence and renewables can end up committing governments to the vulnerable and volatile fossil fuel markets.
The mechanism connecting these failures is the IMF-World Bank Debt Sustainability Framework for low-income countries. The framework governs how much countries can borrow before lenders flag fiscal distress. In practice, it treats a solar infrastructure loan and a powership contract as equivalent — assessing both against the same debt ceiling without distinguishing between debt that creates long-term fiscal fragility and debt that eliminates it. A solar farm carries high upfront cost and near-zero operating cost. A powership contract carries low upfront cost and permanently variable operating cost tied to global oil prices. Under the current framework, the solar loan looks riskier. The Iran war has demonstrated which one actually is.
Economists and the Carnegie Endowment have proposed a specific reform: create a carve-out for renewable infrastructure investment, assessed on long-term fiscal impact rather than upfront cost. Build oil price shock scenarios into every debt assessment for fuel-dependent countries as a primary scenario, not a footnote.The UK government made exactly this call at the 2025 IMF-World Bank Annual Meetings, urging “full integration of climate and nature risks and the benefits of adaptation investments.” The Iran war has now provided the empirical data that makes that argument unanswerable.
Solutions, Distilled
The IMF should act on it. Specifically:
- Create a renewable infrastructure carve-out in the LIC Debt Sustainability Framework, assessing clean energy loans on long-term fiscal impact rather than upfront cost.
- Build oil price shock scenarios into every debt sustainability assessment for fuel-dependent countries as a primary scenario, not a footnote.
- Distinguish between debt that creates price-exposure risk and debt that eliminates it, treating them differently in debt ceiling calculations.
- Introduce a climate shock carve-out allowing temporary suspension of debt ceiling rules when fiscal distress stems from an externally generated energy price spike.
- Require disclosure of contingent fiscal liabilities in long-term energy contracts as a condition of debt sustainability assessments.
If those reforms had been in place in 2014 when Ghana signed its Karpowership contract, the official debt assessment would have modeled what that contract costs when oil hits $100 per barrel. It would have assessed the renewable alternative on its long-term fiscal benefit rather than penalizing it as debt. Ghana might still have signed, the emergency was real. But the decision would have been made with accurate information, visible to every creditor and development partner at the table.
The $400 million Karpowership expansion facility is live. The company is in active negotiations with new countries. The next Ghana is being contracted now, by governments with no better options, assessed by a framework that cannot see the risk it is underwriting. The Iran war did not reveal a hidden vulnerability. It confirmed a prediction that the institutions’ own researchers had already published. The question is whether the people writing the next round of checks have read what their analysts wrote, and whether, this time, they will act on it.
Amber Dembnicki is an independent policy analyst and writer covering geopolitics and international policy.
