Index for July 2007

Volume 6, Issue 7

  • (ENAAT, Amsterdam, 10 July 2007) The European Network Against the Arms Trade has released its report "European Export Credit Agencies and the financing of arms trade". A compendium of data and case studies, the report explores the roles of 12 ECAs from 11 European countries in supporting military exports. An estimated 20-30% of taxpayer funded ECA support goes to military products, with often devastating consequences for human rights, corruption and debt in developing countries.
  • ECAs and corruption

    A. UK Government willing to break international law to squash BAE investigation
      A. UK Government willing to break international law to squash BAE investigation
    (ECA Watch, Paris, 31 July 2007) Although the OECD Convention on bribery is binding, the UK Government states that it was prepared to break the OECD Anti-Bribery Convention in order to terminate the Serious Fraud Office inquiry into BAE’s dealings in Saudi Arabia. In addition, the UK claims that Article 5 of the Convention is not justiciable in the UK, a statement that blatantly conflicts with assurances made by the Government to the OECD during its 2005 Phase 2 Review of the UK's application of the OECD Anti-Bribery Convention.
      B. ECA Watch requests action re bribery peer review by ECG
    (ECA Watch, Paris, 31 July 2007) ECA Watch has yet to receive a reply from the Export Credit Working Group to our 18 June 2007 letter asking about its plans to undertake a peer review of the ECGD's effort to increase due diligence in the wake of the BAE scandal, as required by the OECD Recommendation to deter bribery in officially supported export credits.
  • (Berrett-Koehler, San Francisco, February 2007) In Chapter 10 of this book, Bruce Rich looks at the secretive world of ECAs and the damage they cause around the world. Export credit agencies have quietly become the world's largest financial institutions, backing $788 billion in trade in 2004. Secretive and largely unregulated, they pursue a single mission: boost overseas sales of their countries' multinational corporations. In doing so, they've become some of the dirtiest players in the EHM game, financing nuclear power plants in countries that can't manage them and massive arms sales to strife-torn regions - all lubricated by billions of dollars in bribes.
  • (Bloomberg, New York, 2 July 2007) Private equity capital flows have become huge in international financial markets where ECAs compete. One PE firm alone, Kravis and Roberts, directs an industrial empire that dwarfs some of the world's largest corporations. As of 31 May 2007 KKR had a hand in 36 companies that together generated about $107 billion in revenue in 2006 - more than Coca-Cola, Microsoft and Walt Disney put together. KKR companies employed 560,000 people, more than either Citigroup or General Electric. Together with sovereign wealth funds, PEs have created huge pools of liquidity in financial markets, pushing private capital to accept greater risks in markets traditionally the realm of export credit agencies, forcing them to compete in a race to the bottom which reduces environmental and social standards.
  • (Reuters, London, 30 July 2007) - Fitch Ratings said on Monday it had withdrawn the rating on a $1 billion sale of bonds led by ABN AMRO and backed by loans made by guaranteed export credit agencies. The SovRisk BV offering uses securitisation techniques to provide importers and exporters with a more efficient source of funding. Traditionally, banks would fund ECA loans based on their balance sheets. However, their own credit ratings are significantly below the AAA-rating of the loan assets and SovRisc eliminates this discrepancy.
  • (Guardian, London, 2 July 2007) Royal Bank of Scotland, ABN Amro and the government's export credit agency have been told by green campaigners not to consider funding or underwriting Shell's Sakhalin-2 gas project in Russia because of continuing environmental concerns. NGOs note that violations of bank lending policies are continuing and urge them to protect the integrity of their bank's commitment to social and environmental responsibility by declining financing of Sakhalin-2. They note that development of the $20bn energy scheme is still being undertaken in an irresponsible way, undermining Kremlin arguments that past problems should all be laid at the feet of Shell and would end when Russian state-owned Gazprom took a controlling stake in the project last December.
  • (ECGD, London, 19 July 2007) ECGD, the UK’s official export credit agency, today published its Annual Review and Resource Accounts 2006-07, showing it provided £1.8 billion (US$3.66 billion) of support to UK exporters and UK investors undertaking business overseas. The report showed ECGD issued 91 guarantees and insurance policies to support British companies competing in overseas markets, compared to 151 in the previous financial year. ECGD’s support for Airbus remained a significant part of the Department’s business. In 2006-07, ECGD supported the sale of 58 Airbus aircraft by providing guarantees worth £483 million, compared to 86 aircraft worth £1 billion the year before.  The report does not appear to mention the BAE / Saudi arms scandal for which ECGD provided coverage.
  • (IPS, Beijing, 5 July 2007) After a series of failed administrative campaigns to enforce pollution controls, China is now hoping to use financial means to restrain its big polluters. A new green credit policy would evaluate the eligibility of companies for loans based on their environmental performance. About 460,000 Chinese die prematurely each year from breathing polluted air and drinking dirty water, says a preliminary version of new World Bank study. Two of China’s three policy banks under the direct jurisdiction of the State Council, have adopted environmental financing standards: the China Development Bank is responsible for raising funding for large infrastructure projects, while the China Exim Bank is China’s official export credit agency. China Exim Bank adopted an environmental policy in 2004 and made it public in April this year, following a spate of international criticism about its role in funding controversial projects in Africa and other countries. "The policy espouses strict principles, but does not elaborate them in much detail," Peter Bosshard, policy director of the U.S.-based NGO International Rivers Network, commented after the publication of the policy.
  • (OECD, Paris, 30 July 2007) Major civil aircraft exporting countries, including OECD countries and Brazil, have signed an agreement limiting government support for export deals in an effort to end trade disputes and to encourage manufacturers and airlines to focus on price and quality rather than on financial packages of government support. The agreement, covers all types of civil aircraft, from jumbo jets to small planes and helicopters, and concerns the interest rates, loan guarantees and other conditions applied to export credits for aircraft sales. Brazil, which is not an OECD member, has subscribed only to this new civil aircraft Annex, and not to the broader OECD facilitated Arrangement, which is also cited as a safe haven for export subsidies under the WTO Agreement on Subsidies , an arrangement that has been challenged by Brazil.