(The Diplomat, Arlington, 5 December) The U.S. Treasury Department’s decision to slap sanctions on Gazprombank poses a potential major headache for Uzbekistan’s burgeoning mining industry, which until now has relied on the Russian lender to finance a $4.8 billion mine expansion set to nearly double the country’s copper production. The U.S. designation of Gazprombank could also result in a major financial hit for European mining and engineering firms, banks, and state-backed export credit agencies active in Uzbekistan, which have thus far continued to transact with entities financed by Gazprombank. Gazprombank has established partnerships with major world financial institutions and leading national import-export agencies. Access to international capital markets helps Gazprombank’s customers attract considerable amounts of funding on convenient terms. UKEF has guaranteed a €12.6m loan to Uzbekistan’s Almalyk Mining and Metallurgical Complex to refinance its purchase of fully automated machinery from the Scottish multinational Weir.
Russia
Sinosure reportedly begins refusing to insure exports to Russia
(Kyive Independent, Kyiv, 6 November 2024) Chinese state-owned company Sinosure that insures export supplies against the risk of non-payment has begun to refuse to cooperate with Russian entrepreneurs, Russian newspaper Vedomosti reported on Nov. 5, citing four unnamed sources from importing companies. Trade between Russia and China has reportedly surged by 121% since 2021, underscoring Beijing’s role as Moscow’s economic lifeline. One Chinese supplier told a Russian importer that the company refused to insure their deal because of the nature of the exported goods. Since July, China has tightened export controls on military and dual-use products, the Moscow Times reported. Beijing has positioned itself as neutral in the ongoing war but has deepened economic ties with Russia and become Moscow’s leading source of dual-use goods, feeding the Russian defense industry.
Russian ECA decries fake news re Bangladesh nuclear power plant embezzlement
(Business Post, Dhaka, 11 September 2024) Russia has said those who produce and spread “fake news” about alleged embezzlement at Bangladesh’s Rooppur Nuclear Power Plant deliberately attempt to “discredit” this ambitious project and to “undermine” beneficial relations between Moscow and Dhaka. As of September 3, 2024, approximately US$7.8 billion out of US$11.9 billion provided by Russia to Bangladesh under state export credits for the implementation of the Rooppur NPP project, has been utilised. This amount includes transactions under two separate agreements: US$491.3 million under the first agreement dated January 15, 2013 (this credit amounted up to US$500 million, and its utilization period expired in 2017), and US$7.3 billion under the second agreement dated July 26, 2016. The full amount of the second export credit is US$11.38 billion out of which 64% has been used, and its utilisation period expires on December 31, 2024. [According to an 18 August 2024 BanglaNews article, ousted Bangladesh Prime Minister Sheikh Hasina, her son Sajeeb Wazed Joy and niece Tulip Siddiq embezzled US$5 billion from the overpriced US$12.65 billion Rooppur nuclear power plant through Malaysian banks, according to a report by Global Defense Corporation.
EU adopts sanctions against Russia including billions of ECA support for Ukraine
(EU-Neighbours-East, Brussels, 24 June 2024) The Council of the European Union today adopted a 14th package of economic and individual restrictive measures against Russia, “dealing a further blow to Putin’s regime and those who perpetuate his illegal, unprovoked and unjustified war of aggression against Ukraine”. These measures are designed to target high-value sectors of the Russian economy, like energy, finance and trade, and make it ever more difficult to circumvent EU sanctions. Since the Russian aggression started, the EU and its financial institutions have mobilised €50 billion to support Ukraine’s overall economic, social and financial resilience in the form of macro-financial assistance, budget support, emergency assistance, crisis response and humanitarian aid. the Executive Vice President of the European Commission Valdis Dombrovskis announced the Ukraine Facility budget which will be 33 billion euros in loans and 17 billion euros in grants. Of the total amount, 38.27 billion euros will support the budget, 6.97 billion euros will go to the investment fund and 4.76 billion euros will be for technical and administrative support. [ECA Watch note: This month’s news review for What’s New turned up many articles announcing a €300 million export credit guarantee facility under the EU flagship investment programme InvestEU.]
Russian export credit claims soar
(Global Trade Review, London, 7 September 2023) The export credit insurance market saw claims jump by more than 700% in Russia last year, as the industry grappled with the fallout of the Ukraine crisis and western sanctions, Berne Union research shows. Short-term export credit claims involving obligors in Russia and the Commonwealth of Independent States (CIS) region increased by US$229mn from a year earlier, the union’s State of the Industry report for 2022 finds. Payouts in Europe also rose by US$118mn year-on-year as businesses felt the indirect impact of Russia’s full-scale invasion, which disrupted supply chains for critical inputs and drove up commodities prices. The data reveals how export credit agencies (ECAs) and trade credit insurers were stung by the Ukraine war, despite efforts to swiftly cut cover for Russian firms in the early weeks of the crisis due to financial and reputational risks. The analysis by the Berne Union, a global association representing ECAs and private insurers, shows new short-term export credit business in Russia and CIS fell from US$34bn to US$16bn – by more than 70% – as insurers pulled back. Arrears – or overdue payments by borrowers in the medium to long-term segment – rose by 11% or nearly US$8bn. On a brighter note for the industry, overall claims paid out by ECAs and insurers on their policies fell to US$7.7bn – a decline of about US$1bn – following a 33% drop in claims in the transportation sector, the data shows.
Spillover effects of the Ukraine crisis: political risk insurance in times of brinkmanship
(Berne Union, London, 7 September 2023) A Berne Union report investigates how political risk insurance can be approached amid the ongoing effects of the pandemic, geopolitics and the evolving Russia/Ukraine crisis. The search for new, diversified suppliers of strategic materials to support the energy and technological transition may result in fresh investment flows for countries with both limited stability and little capacity in order to handle the amount of investment and operations required. Apart from China and Russia, several of the sovereigns that are likely to emerge as incremental suppliers were rated B or lower, even before the current crisis, and/or possess a country risk category that could make the cost of financing excessive or further complicate their fiscal position in the short- to medium-term.
The BRICS come of age [But what role for ECAs?]
(Project Syndicate, Cairo, 18 August 2023) by Hippolyte Fofack, Chief Economist and Director of Research at the African Export-Import Bank (Afreximbank). Given the BRICS’ economic success, more than 40 countries have shown an interest in joining the group and 22 have formally applied for membership. Expansion, trade and investment facilitation will be high on the agenda of the group’s summit scheduled for August 22-24 in Johannesburg. They include many issues on which the bloc’s views diverge from those of the G7, such as sustainable development, global governance reform (especially reform of the IMF), and de-dollarization. An enlarged grouping could deepen trade and settlement in local currencies, accelerate de-dollarization, and lead the transition to a more multipolar world. The economic potential of Brazil, Russia, India, and China, the group – called the BRICS since the addition of South Africa – contributes more to global GDP (in purchasing-power-parity terms) than the G7. Since 2014, Russia’s trade with G7 countries has fallen by more than 36%, owing to unprecedented Western sanctions, while its trade with the other BRICS has increased by more than 121%. The International Monetary Fund forecasts that China and India alone will generate about half of global growth this year. With geopolitical tensions running high, and the weaponization of the dollar for national-security purposes continuing to escalate, the BRICS have taken on new significance, offering trade diversion and other relief to weaken the effectiveness of sanctions and fast-tracking the transition to a multipolar world. Read the Summit Declaration here.
Russian ECA plans special loans for African companies
(Punch Nigeria, Lagos, 29 July 2023) President Vladimir Putin of Russia says his country will offer preferential loans to enable African companies to buy industrial goods from the European country and enjoy after-sales services. He said his government was devising a leasing mechanism tailored for Africa, and that the Russian Agency for Export Credit and Investment Insurance would provide insurance for the planned preferential loans. The Russian leader made the disclosure during the ongoing Russia-Africa Summit and Russia-Africa Economic and Humanitarian Forum holding in St. Petersburg, Russia. According to him, the Russia government is also about to establish a dedicated investment fund for co-financing infrastructure projects in the African continent.
Russians urging greater EXIAR engagement with Africa
(Weekly Blitz, Dhaka, 29 April 2023) Russia’s weak economic presence in Africa has become a significant question of concern for some experts as they wonder why the nation is not aggressive with this like its ally, China. Smaller countries, such as Turkey, are visibly broadening their economic influence, strengthening business investments and so are a number of Gulf States. “It is important for us to expand and improve competitive government support instruments for business. Senator Igor Morozov, a member of the Federation Council Committee on Economic Policy and Chairman of the Coordinating Committee on Economic Cooperation with Africa stressed: “It is obvious that over the thirty years when Russia left Africa, a number of countries such as China, India, the United States and the European Union have significantly increased their investment opportunities there in the region”. The meeting collectively acknowledged Africa as a huge continent that still requires economic development. Its active demographic growth and abundance of natural resources offer conditions to become the world’s biggest market in the next few decades. Nikita Gusakov, Head of the Russian Export Credit and Investment Insurance Agency (EXIAR), reiterated that Africa was a priority for the agency, outlining a number of deals that EXIAR has been involved in on the continent. He reiterated at the meeting, one of the roadblocks is the lack of adequate knowledge among Russian companies about the opportunities available in Africa. It is partly due to limited interaction with the private sector actors and civil society. During the Ministerial Conference of the Forum on China-Africa Cooperation (FOCAC), Chinese President Xi Jinping said: “China will expand cooperation in investment and financing to support sustainable development in Africa. China provided $60 billion of credit line to African countries to assist them in developing infrastructure, agriculture, manufacturing and small and medium-sized enterprises.” Russia could consider the Chinese model of financing various infrastructure and construction projects in Africa. Secretariat of the Russia-Africa Partnership Forum (RAPF) agreed during a recent meeting that lack of financial support was the major reason for Russia’s weak economic footprints across Africa. The representatives leading Russian companies and banks, in attendance, discussed an effective system of financing projects and supporting investment in Africa.
SACE to insure up to $3 billion in corporate energy bill payments disrupted by Russia’s war against Ukraine
(European Commisson, Brussels, 6 March 2023) The European Commission has approved, under EU State aid rules, an amendment to an existing Italian guarantee scheme, including an up to €3 billion budget increase, for the reinsurance of natural gas and electricity trade credit risk in the context of Russia’s war against Ukraine. The amendment was approved based on Article 107(3)(b) of the Treaty on the Functioning of the European Union (‘TFEU’), recognising that the EU economy is experiencing a serious disturbance. Under the administration of SACE, the Italian Export Credit Agency, the scheme ensures that trade credit insurance continues to be available to companies, avoiding the need for them to pay their energy bills in advance or within a few weeks, thus reducing their immediate liquidity needs. This measure will also make it easier for these customers to obtain a postponement of payment of their energy bills by up to 24 months, based on an agreement with their energy supplier. At the same time, it will ensure that trade credit insurance continues to be available to companies, avoiding the need for them to pay their energy bills in advance or within a few weeks, thus reducing their immediate liquidity needs. The reinsurance of natural gas and electricity trade credit risk was deemed necessary in the context of Russia’s war against Ukraine.
