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US ExIm Bank caught in environment vs job subsidy contradictions

(ECA Watch, Ottawa, 27 August 2009)

Preliminary approval of a US$2 billion letter of commitment for loans or loan guarantees to Brazil's Petrobas for the purchase of US offshore oil drilling equipment has caused quite a stir in Washington.

Beginning with a Wall Street Journal opinion article wondering "why Mr. Obama is underwriting in Brazil what he won't allow at home.", i.e. offshore oil drilling, the controversy was further stirred up by former Alaska Governor Sarah Palin, a vocal proponent of offshore drilling, who wrote in her Facebook page "So why is it that during these tough times, when we have great needs at home, the Obama White House is prepared to send more than $2 billion of your hard-earned tax dollars to Brazil so that the nation's state-owned oil company, Petrobas, can drill off shore and create jobs developing its own resources?"

A further complication arose when a conservative blogger asked if there was a connection with the purchase and sale of millions of Petrobras shares by the New York-based hedge fund firm controlled by billionaire philanthropist and backer of Democratic causes and campaigns prior to public disclosure of the Export-Import bank's offer of new credit guarantees to the Brazilian energy giant. No one has accused Soros of wrongdoing, but some have said the transactions do not pass the "smell test."

The Export Import Bank has defended it's decision, noting that the commitment is for exports which will create US jobs, that no taxpayer dollars are involved and that the decision was made before Obama administration appointments were made to the bi-partisan ExIm Board. ExIm Chair Fred P. Hochberg noted that "Ex-Im Bank does not make U.S. policy. In fact, our charter prohibits us from turning down financing for either nonfinancial or noncommercial reasons, except in rare circumstances including failure to meet our environmental standards."

The offshore drilling debate in the US pits environmental concerns resulting from past oil spill disasters against US energy independence. The Obama administration overturned a Bush-era energy policy in February 2009, setting aside a draft plan to allow drilling off the Atlantic and Pacific coasts to allow time for more debate. "Environmentalists and some tourism-dependent coastal states oppose the drilling, citing the potential for spills and urging an emphasis on renewable energy instead."