Index for May 2007

Volume 6, Issue 5

  • New OECD environmental standards for export credits still not public

    Following their approval on April 24, 2007, the OECD's new Common Approaches on the Environment and Official Export Credits have yet to be made public. Article 13 of the new Recommendation, not yet approved by the OECD Council, allows ECAs to decide to opt out of applying environmental standards to projects and report this after the fact to the secretive OECD Export Credit Working Group. Three European ECAs have apparently done just this, before the ink on the Recommendation was even dry, as can be seen in the reports on the Ilisu dam project below.
  • Export credits for Turkey's Ilisu dam generate official and citizen protests

    German, Austrian and Swiss ECAs approved support for the Ilisu dam project in March despite protests that environmental impact studies are inadequate, the project does not meet international standards and Turkey has not adequately consulted with Iraq and Syria about the adverse downstream impacts of the dam on the Tigris River, as required under international law. A consortium of Austrian, German and Swiss companies building the Ilisu dam project have recently obtained government backed export credit guarantees to reduce the high financial and political risks of the project from Austria’s ECA OeKB (€200 million), Germany’s EulerHermes (€93,5 million + some €100 million in reinsurance for OeKB) and Switzerland’s SERV (formerly ERG) (225 million CHF = €140 million).
      A. Iraq protests lack of consultation by Turkey over Ilisu dam
    (ECA Watch, 30 May 2007) ECA Watch member FERN has written to the European Commission requesting that it intervene to protect Iraqi water rights as requested by Iraq's Foreign Minister in a March 8, 2007 letter to the Commission. The implementation of the Ilisu Dam has begun without Iraq having been properly informed or consulted by Turkey, violating international law governing the use of international watercourses. This would involve stopping European ECAs, institutions and/or companies from contributing to or financing the project before an equitable agreement on water sharing has been reached between all concerned parties (Turkey, Iraq and Syria). As we reported last month, ECA Watch member The Corner House recently published a report highlighting the negative impacts of the Ilisu dam on downstream waters in Iraq. A PDF copy of this report is available at The Corner House web site.
      B. Are European ECAs violating international law?
    (ECA Watch, 30 May 2007) Swiss and UK legal experts have noted that it would be prudent for any financial institution considering support for the Ilisu dam project (including in the form of financial guarantees to those investing in the project) to satisfy itself that Turkey has complied with its obligations under the law governing nonnavigational uses of international watercourses. They note that "the possibility cannot be excluded that a State agency or instrumentality which provides financial support to a project that violates a rule of international law can itself give rise to the international responsibility of the State of which the public body forms a part. This principle is now set forth in Article 16 of the ILC Articles (Aid or assistance in the commission of an internationally wrongful act)."
      C. Protests mount over European ECA approval of Ilisu guarantees
    (ECA Watch, 30 May 2007) Numerous protests have escalated this month following European ECA approvals of financial support for Turkey's Ilisu dam. NGOs have written to major commercial banks, warning them of the massive stakeholder opposition to the dam, the failure to meet international standards and the extensive reputational risks they face if they become involved. On May 20th, thousands demonstrated against the project in Hasankeyf, which will be flooded by the dam. On May 29th protesters confronted the International Hydropower Association conference on advancing sustainable hydropower in Antalya Turkey. Current information on these campaigns can be found on the WEED Ilisu web site.
  • (The Independent, London, 25 May 2007) In the latter half of his column, the Independent`s Jeremy Warner notes that "for what it is and the public recognition it commands (virtually none outside a small elite of economists, politicians and opinion formers), [the OECD] remains an extraordinarily grandiose body of questionable modern day relevance... Nobody takes any notice of its strictures....and to the extent it has any authority at all, it lacks teeth... Like all international organisations, the OECD must modernise to survive."
  • (Pacific Environment, Berkeley, 9 May 2007) China's Export Import Bank has released it's environmental standards to ECA Watch member Pacific Environment. It is hoped this will lead to an advancement of public understanding and dialogue among parties interested in international environmental protection. The public disclosure of environmental information at all stages of project support, including pre-project approval, project examination and approval, and post approval monitoring, is an essential part of public engagement by all Export Credit Agencies, both in the OECD and outside.
  • (PRNewswire, Washington, 21 May 2007) The Export-Import Bank of China and the Export-Import Bank of the United States today signed agreements designed to expedite financing for transactions that will help support U.S. export jobs and promote China's sustainable development. With some 70% of China's exports originating from the assembly of imported materials and parts and 25% of Chinese industry foreign owned, the complex linkages between Western and Chinese ECAs go well beyond simple competition for jobs and natural resource access.
  • (Reuters, Washington, 22 May 2007) The World Bank and Chinese ECA the Export-Import Bank of China have signed a memorandum of understanding to improve cooperation, a major step in better grasping the Asian giant's interests in Africa. World Bank officials believe it is important, if China wants to be a major investor in Africa, that it become part of the global donor system. For the Chinese ExIm Bank, as the state bank that provides financing for exports, overseas construction and investment projects, and the only arm to issue low-interest loans, "this is a way to begin to work within that donor system.". Meanwhile, on 1 June 2007, the World Bank's private sector arm, the International Finance Corporation (IFC), also signed an agreement with the China ExIm Bank to make joint investments and provide project financing and credit guarantees, working together to offer advisory services in environmental protection, energy efficiency and sustainable finance.
  • Controversy continues over UK violation of OECD bribery convention

    Controversy continues over the ECGD supported sale of fighter aircraft to Saudi Arabia and related allegations of bribery. British Aerospace Enterprises (BAE) appears likely to be quizzed by US Congressional investigators as it seeks approval for its £2bn purchase of Armor Holdings, the company that makes armour for the Humvee military vehicle. Meanwhile, Swiss authorities have opened a criminal investigation into possible money laundering at BAE and the UK Serious Fraud Office continues its probes into deals with Tanzania, the Czech Republic, South Africa, Chile, Qatar and Romania. Updates on the export credit supported BAE deals can be found on the CAAT and Corner House web sites. .
  • The Bank of Brazil, a state-owned financial institution, ended April with an increase of 45% in export financing contracts, resulting in a business volume of over US$ 1.5 billion. The bank provides two kinds of export credit operations: Advance on Exchange Contracts (ACC) and Advance on Export Contracts (ACE).
  • European export credits to Iran continue to generate U.S. criticism

    A series of U.S. attacks on European ECA support for Iran highlight the importance given to export subsidies in U.S. foreign policy. The American Enterprise Institute on 21 May pushed for a divestment campaign, citing French, German and Japanese ECA support as well as that of major European commercial banks. On May 28, the National Council of Resistance of Iran in the UK, a body with links to the MEK, and led by Alireza Jafarzadeh, a self-described FOX News Channel foreign affairs analyst, noted that "continuing export guarantees to Iran mean that taxpayers in Europe are underwriting trade and investment that would otherwise be deterred by the risk of doing business with a rogue regime."