Index for January 2018

(Guardian, Sydney, 30 January 2018) The financial aspects of the Turnbull government’s plan to turn Australia into an arms exporting powerhouse are baffling, a leading defence expert says, but the decision to promote defence products overseas is welcome. Andrew Davies, the Australian Strategic Policy Institute’s director of defence strategy, said the Coalition’s plan to use a $3.8bn fund administered by Australia’s export credit agency to underwrite an expansion of arms exports made little economic sense because manufacturers had no trouble securing funding from private sources. Davies said it was highly unlikely Australia could ever join the ranks of the top 10 arms exporters because the things it was good at producing – component parts for foreign assembly lines; niche sales of intellectual property, and services (training, consultancy, and acquisition)... And it’s unlikely that Australia will be able to produce warships and submarines at less cost than well established shipyards overseas. Peter Whish-Wilson, the Greens defence spokesman, said the plan was designed to shore up a handful of defence industry-centric seats “at the cost of Australia’s soul”.

(Bloomberg, London, 9 January 2018) Saudi Arabian Oil Co. is seeking a $2 billion loan from Japan’s export-credit agency, three people with knowledge of the matter said, as competition for a role in potentially the world’s largest initial share offering heats up. A deal would make the Japanese export-credit agency the second state institution to extend financing to Aramco ahead of its planned initial public offering -- which the Saudi government has said may value the company at $2 trillion. The U.K. government agreed to a $2 billion loan guarantee for Aramco in November as it competed with the U.S. to host the IPO. The unusually large export-credit guarantee was designed to finance the purchase of British goods but opened the U.K. up to the suggestion that it was trying to influence the decision on where the company should be listed. Aramco also signed an agreement with a group of regional and international lenders for $10 billion of standby revolving-credit facilities in 2015. Mandates on the oil company’s IPO may be finalized as early as this week, with Goldman Sachs Group Inc., Citigroup Inc., JPMorgan Chase & Co., HSBC Holdings Plc and Morgan Stanley said to be among lenders vying for a place on the deal. According to Reuters, Saudi Aramco is working to secure billions of dollars in cheap ECA backed loans from banks before its stock listing and disclosure of its assets raises loan rates. Meanwhile, Abu Dhabi National Oil Co (ADNOC) plans to raise a $3 billion syndicated loan from JIBC, according to a source close to the matter. Such loans aim to help Japanese companies secure oil supplies from Abu Dhabi, as the proceeds are generally used as a form of advance payment to ADNOC for crude oil sales to Japanese oil firms.

(New York Times, LONG PHU, Vietnam, 26 January 2018) With help from a Kremlin-connected Russian bank, Vietnam is building a coal-fired power plant called Long Phu 1 that will produce an estimated 5.4 million tons of carbon dioxide a year, generating enough electricity to power millions of homes. But the project needs something else first: help from the United States government and the plant’s state-controlled owner has applied for assistance with the project from the Export-Import Bank of the United States. The bank has not yet decided whether it will back the project. If it did, it would show that the Trump administration’s commitment to using more coal at home also extended overseas. Critics say it would also challenge a growing global consensus that developed nations and groups like the World Bank should stop funding high-polluting energy projects in developing countries. Britain’s equivalent of the Export-Import Bank has already declined to participate in the project. In addition, it would provide American backing for a project partly funded by a Russian bank that has endured sanctions by the United States government since 2014 because of Moscow’s military intervention in Ukraine. Several advocacy groups say that PetroVietnam’s environmental due diligence underestimated the project’s likely carbon footprint. They also say the project is not clean enough to meet new guidelines from the OECD which has tried to curb lending by government-owned export credit agencies to certain types of coal projects. By approving the project, the United States would be “thumbing our nose to all the other countries that have striven so hard to reach this agreement,” said Doug Norlen, the director of economic policy at Friends of the Earth USA.

(Hill Times, Ottawa, 15 January 2018) When allegations emerged last fall that the Mexican president’s 2012 election campaign was funded in part by a subsidiary of the Brazilian construction giant Odebrecht, the news barely made headlines in Canada. But this recent development in the far-reaching Odebrecht corruption scandal should give us pause, because it raises crucial questions about the anti-corruption and disclosure policies of our export credit agency, Export Development Canada (EDC). In December 2012, EDC loaned $300 million USD to Braskem, an Odebrecht subsidiary, for construction of a petrochemical complex in Veracruz, Mexico. Earlier that year, Braskem allegedly paid over $3 million USD in bribes towards President Peña Nieto’s election campaign. In its review this year of the Export Development Act, the government must turn a critical eye to this issue. The review, conducted by the trade minister every ten years, provides a crucial opportunity to enhance the transparency of EDC’s due diligence practices.

(Yonhap, Seoul, 9 January 22018) The British government has withdrawn its plan to cancel a North Korean debt that has been unpaid for more than four decades, in consideration of the possibility that North Korea could pay it back after the two Koreas are unified, U.S. broadcaster Voice of America reported Tuesday. UK Export Finance (UKEF) decided in May 2013 to stop efforts to recover the debt, Voice of America said, citing data from the export credit agency.