Index for December 2017

Volume 16, Issue 12

  • (The Walrus, Toronto, 19 December 2017) Export Development Canada lends foreign buyers billions of taxpayer dollars. Critics say it's knowingly banking some of the world's worst regimes.  EDC has perfected the art of lending billions of taxpayer dollars to scandal-ridden foreign buyers. In May 2017, a trove of hundreds of thousands of emails was leaked to the press from an organization belonging to the Gupta family of South Africa. In a lengthy email thread strung out over the course of 2014, it was revealed that Bombardier had negotiated a C$52 million sale of a luxury jet to a Gupta subsidiary, with US$41 million of the jet’s financing provided directly to the Guptas by Export Development Canada, a Canadian Crown corporation. The Guptas are not EDC’s only controversial clients. The agency’s client list is studded with some of the most ­scandal-ridden multinationals on the planet including Kinross Gold whose West ­African mining operations were, as of 2016, under investigation by the United States Securities and Exchange Commission for bribery and corruption. [ECA-Watch member Above Ground has questioned EDC financing for controversial projects such as Omai Gold Mines in Guyana and Petrobas in Brazil, with EDC refusing to comment on the possible illegal or inappropriate use of Canadian tax dollars. Above Ground's 11 December 2017 report on Kinross Gold shows that, among other harms, Kinross’ dramatic expansion of the mine displaced the residents of traditional communities formed over a century ago by former African slaves who have land rights under Brazilian law. The legal process to formalize their collective title was well underway when Kinross announced its expansion plan and Export Development Canada provided financing, forcing them off their land. The report also raises concern about environmental oversight of the mine, which is located within 500 metres of neighbourhoods where hundreds of families live, as well as safety measures to keep people from entering the mine site.]  EDC activities are protected by disclosure protocols that are entirely opaque, with the result that few in ­Canada - including the Minister presiding over it - seem to know the full details about what the agency does, who it finances, and why. With EDC’s mandate up for review in 2018, it seems like a good time to examine the considerable reputational risks the agency often takes. [As well as its compliance with its own international, WTO and OECD agreed due diligence requirements on human rights, environmental standards and corruption.] On December 21, 2017, 2 days after this article was published online, EDC announced that it was suddenly terminating its $41 million loan to the Guptas for the purchase of a luxury Bombardier jet.

  • Banks criticised for funding coal deals despite Paris agreement

    (ECA Watch, Ottawa, 31 December 2017) At the One Planet Summit in Paris in December 2017 a number of NGO, environmental and social movement organizations released briefings and research reports highlighting fossil fuel projects that are being funded by multilateral and national development banks and export credit agencies. The Big Shift global campaign released a briefing titled Dirty Dozen (pdf); complementary reports, ‘Banks vs. the Paris Agreement’ and ‘Investors vs. the Paris Agreement’ (pdf) were launched by Rainforest Action Network, BankTrack, Urgewald, Friends of the Earth France, and Re:Common at the Climate Finance Day in Paris; and the Natural Resource Defense Council released Power Shift: International Coal vs. Renewable Energy Finance.

  • (Kallanish Energy News, Greensburg, 18 December 2017) Dakota Access Pipeline developer Energy Transfer Partners (ETP) and Florida-based environmental publication Earth First Journal are arguing in federal court whether something called a “social movement” can be sued. ETP in August filed a lawsuit against enviro-groups Earth First, Greenpeace and BankTrack, alleging they issued false and misleading information about the $3.8 billion pipeline, to move North Dakota crude to Patoka, Ill., interfered with construction, and damaged the company's reputation and finances through illegal acts. The company's lawsuit, filed in federal court in North Dakota, seeks damages that could approach $1 billion, The Associated Press reported.

  • (The Guardian, London, 20 December 2017) As the spectre of Brexit emerges, so do the first meaningful signs of the Tory vision of “building a global Britain”. The Department for International Trade, set up by Theresa May to put some flesh on the bones of her slogan, has prioritised arms sales for Britain’s post-Brexit industrial policy. The DIT, which licences Britain’s exports guns, planes and bombs, has overseen a sharp spike in sales to repressive regimes, many of which it has identified as “priority markets”. The biggest of these is Saudi Arabia, which is using our arms to bomb into famine its political enemies in Yemen. Our arms export control regime clearly states that it is illegal for the government to licence weapons to nations that oppress their own people or violate international humanitarian law. When buyers cannot afford our weapons, the government subsidises loans for them through export credit guarantees; UK Export Finance, which is supposed to support all British exports, says 50% of the support it provides (in the form of loans or guarantees) was given to defence exports.

  • (Prensa Latina, Moscow, 28 December 2017) Turkey will acquire, for 2.5 billion dollars, four divisions of the modern Russian S-400 surface-to-air missile divisions, which will be delivered in 2020. The finance ministries of Turkey and Russia have concluded negotiations for the granting of an export credit to Ankara, Chemezov head of the Russian state conglomerate Rostec said. Turkey will pay an advance equivalent to 45% of the total and the Russian side will grant an export credit that will cover the other 55% of the contract. Ankara [a NATO member] received strong criticism and even threats from the United States for its decision to acquire the Russian arms. In other Russian ECA news, four Iranian banks have signed an "unlimited finance deal" with the Eximbank of Russia for public and private sector approved projects using Russian technical and engineering services.

  • (Australian Financial Review, Sydney, 5 December 2017) Key project debt lenders have been giving their passports and travel insurers a workout as they troop up to Papua New Guinea to get to grips with what could be the region's biggest financing since the record US$20 billion deal for Ichthys LNG. While the final configuration of the next stage of LNG expansion in PNG is yet to be settled, those behind the circa US$17 billion project - primarily ExxonMobil, Total and Oil Search - are already well advanced. In considering funding export credit agencies are again expected to be well in evidence, while the backing of two oil majors and the sheer size of the project count in favour of commercial lender interest.

  • (LNG Worldshipping News, London, 4 December 2017)) Floating LNG (FLNG) is opening new offshore gas basins for LNG development in Africa. The ownership structure of Africa’s new LNG production and the willingness of international oil companies to deploy new technologies will drive the commoditisation of LNG and cement its growing role as such in the global trading of energy. Uniquely, FLNG vessels will provide the first liquefaction plants in Mozambique and Cameroon and the technology is also expected to lead an expansion of capacity in Equatorial Guinea, Senegal and Mauritania. Italy’s Eni and its partners took a final investment decision on the 3.4M tonnes a year (mta) Coral FLNG scheme off Mozambique in June 2017. The project will be the first of this type to have as much as 60% of its cost funded on a project-finance basis, backed by 15 international banks and guaranteed by five export credit agencies. The financing was provided in the form of covered loans from five export credit agencies (Italy's Sace, China's Sinosure, Japan's Ksure, South Korea's Kexim, and Portugal's BPI) and two direct loans (one provided by Kexim, the other by an unnamed 'commercial bank').

  • (New York Times, Washington, 19 December 2017) Two Republican senators broke with their party to block President Trump’s nominee to lead the Export-Import Bank, a setback for the White House that reflects deep divisions in the Republican Party over the role that the government should play in steering the United States economy toward prosperity. The nominee, Scott Garrett, a former representative and a Republican from New Jersey who had wanted to see the government’s export credit agency shuttered, was rejected by the Senate Banking Committee in a 13-to-10 vote. Since 2015, the agency has been hobbled by a lack of personnel necessary to approve projects over $10 million, formerly the bulk of the agency’s work. An estimated $42.2 billion worth of deals are stuck in the pipeline waiting for approval, which could support an estimated 250,000 American jobs, a spokeswoman for the Export-Import Bank said. Some of the biggest Ex-Im customers are General Electric, Boeing and Caterpillar, Some senators and the Trump administration have threatened to pull the other board nominees, leaving the bank without a quorum and barred from financing deals over $10 million and Boeing to fend for itself. However, in 2017 the Aircraft Finance Insurance Consortium has supported more than $1 billion of new airplane deliveries and Boeing has 661 firm orders for 2018, in addition to 6,600 backorders. Meanwhile it has been said that Boeing is upset that Garrett was getting help throughout the nomination process from Dan Murphy, a lobbyist for a high-powered Washington firm that counts Airbus among its clients.

  • (Newsweek, Washington, 20 June 2017) Federal investigators probing the lobbying work of ousted national security adviser Michael Flynn are focused in part on the role of Bijan Kian, Flynn’s former business partner, according to a person interviewed by the FBI. In private conversations with potential clients, Kian portrayed himself as a rainmaker for Flynn, tapping into connections cultivated during a five-year tenure as a director at the U.S. Export-Import Bank, according to one person who worked with the firm. Inovo, a Netherlands-based company controlled by Turkish businessman Ekim Alptekin, hired Flynn Intel Group to research Fethullah Gulen’s activities in the United States, which he suspected were “poisoning” relations between the United States and Turkey. Like Turkey's President Tayyip Erdogan, Alptekin blamed the coup on followers of Gulen. Kian played a central role in securing and overseeing the Inovo contract, two people with knowledge of that project said. The FBI has been investigating whether Flynn’s consulting firm lobbied on behalf of Turkey - after being paid $530,000 by Inovo - without making the proper disclosure under the Foreign Agents Registration Act.

  • (The Nation, Bangkok, 30 December 2017) Already the world’s fifth-biggest greenhouse gas emitter,  Indonesia is leading Southeast Asia’s boom in coal-fired power. Already one of the world’s biggest carbon polluters because of deforestation, Indonesia has back-pedalled on a pledge to cap coal production. The government initially planned to reduce its coal production to 413 million tonnes this year, from 419 million tonnes in 2016. The figure was expected to fall to 406 million tonnes next year, before hovering at only 400 million from 2019. However, this year’s coal production has already reached 477 million tonnes, far outstripping last year’s 434 million tonnes. The boom is being bankrolled by foreign governments and banks, the Guardian reports. Activist group Market Forces examined 22 deals involving 13.1 gigawatts of coal-fired power in Indonesia and found that 91 per cent of the projects had the backing of foreign governments through export credit agencies or development banks. The majority of the money was coming from Japan and China, with the Japan Bank for International Cooperation involved in five deals and the Export-Import Bank of China involved in seven deals.

  • (African Law & Business, London, 7 December 2017) London's Linklaters & US firm White & Case, together with local law firms, have shared the plaudits in agreeing financing of the US$4 billion Nacala Corridor rail and port project, which spans Mozambique & Malawi. It involves Brazil's Vale & Japan's Mitsui and will enable the construction, refurbishment and operation of nearly 1000 kilometres of railway line, as well as the construction and operation of a coal terminal in the port of Nacala, linking Vale’s coal project in Tete Province, in western Mozambique home to some of the world’s richest remaining coal deposits, with a deep sea port to be constructed in Nacala – the so-called Nacala Corridor, in eastern Mozambique. Banks involved in the deal, who were advised by Linklaters, included the African Development Bank (AfDB), Export Credit Insurance Corporation of South Africa (ECIC), Japan Bank for International Cooperation (JBIC) and Nippon Export and Investment Insurance (NEXI) together with ECIC and NEXI covered commercial banks.

  • (Financial Tribune, Tehran, 30 December 2017) China's Sinopec Engineering Company has signed a deal worth $1 billion to develop Abadan Oil Refinery, Iran's oldest crude processing facility in the southern oil-rich Khuzestan Province, the Chinese oil and gas group announced. According to Iranian officials, the venture will be financed by China Export and Credit Insurance Corporation, or Sinosure. The funding is reportedly part of a deal worth $3 billion to overhaul and expand the facility. Sinosure is China's major state-owned export credit insurance company. Its financing since its establishment in 2001 has totaled $290 billion for exports and investments. Commissioned in 1912, Abadan refinery is the longest-running Iranian crude refinery and once the largest oil refinery in the world.

  • (Bonds & Loans, London, 5 December 2017) Kuwait National Petroleum Company’s (KNPC) US$6.245bn ECA-backed loan was a triumph for the company’s Clean Fuel Project and the region’s credit markets, setting a new record for the largest ECA-backed corporate loan to date. The Project involves modernisation of the Mina Al Ahmadi and Mina Abdullah oil refineries of KNPC located in Al Ahmadi Governorate, south of the country, to make their products meet stringent environmental requirements. Total debt financing for the Project is estimated to be around US$10bn. The financing package is supported by 7 ECAs: Atradius Dutch State Business N.V., Export-Import Bank of Korea (KEXIM), the Japan Bank for International Cooperation (JBIC), Korea Trade Insurance Corporation (K-Sure), Nippon Export and Investment Insurance, SACE, and UK Export Finance. JBIC and KEXIM extended direct financing to KNPC while the other agencies provided cover to commercial bank lenders involved in the transaction.