Index for March 2021

Volume 20, Issue 3

  • (Oil Change International, Washington, 18 MArch 2021) In a newly released letter, nearly 450 organizations called on the Biden Administration to immediately end all U.S. public financing for fossil fuels, including natural gas. Signatories to the letter span six continents and include major U.S. civil society organizations, international groups, and organizations in the Global South concerned about the impacts of U.S. support for overseas fossil fuel projects. U.S. public finance for overseas fossil fuel projects averaged more than $4 billion (USD) annually over the past decade, according to Oil Change International data, at times exceeding $10 billion USD in a single year. This finance was distributed primarily through the U.S. Export-Import Bank and the U.S. Development Finance Corporation, formerly the U.S. Overseas Private Investment Corporation. Dozens of groups from many countries where the U.S. has financed fossil fuel projects — including Brazil, Colombia, El Salvador, Georgia, Ghana, India, Nigeria, Papua New Guinea, South Africa, Turkey, Uruguay, and elsewhere — have signed onto the letter urging the Biden Administration to make good on it’s commitment to end high-carbon finance.

  • (Construction and Civil Engineering News, Nairobi, 2 March 2021) More than 260 organisations have urged banks not to finance the $3.5 billion project, saying the project could lead to the loss of community land and livelihoods, environmental destruction and surging carbon emissions. Nearly a third of the pipeline will run through the basin of Africa’s largest lake, Lake Victoria – which more than 40 million people depend on for water and food production. It will also cross more than 200 rivers, run through thousands of farms and cut through vital wildlife reserves. The pipeline is expected to cost around $3.5 billion. Of this, about $2.5 billion will be borrowed from banks and other financiers. It is not yet clear which banks intend to participate, although the three banks acting as financial advisors are likely to join and act as lead arrangers. The pipeline – proposed by French oil company Total and the China National Offshore Oil Corporation – will fuel climate change by transporting oil that will generate over 34 million tons of carbon emissions each year. The letter to the three banks acting as financial advisors for the project – Standard Bank, Sumitomo Mitsui Banking Corporation, and Industrial and Commercial Bank of China – and 22 banks that have recently provided finance to Total and CNOOC, comes as speculation mounts that a Final Investment Decision (FID), which would commit Total to mobilize capital for the project, is imminent. UKEF has apparently ruled out public subsidy for the pipeline Signatories to the open letter included Friends of the Earth International,, the Catholic Agency for Overseas Development, Reclaim Finance, Sierra Club, Global Witness, the IUCN National Committee of the Netherlands, BankTrack, Africa Institute for Energy Governance (AFIEGO) and Inclusive Development International (IDI).

  • (Global Trade Review, London, 3 March 2021) Overseas energy financing from Chinese policy banks plummeted last year in the wake of the Covid-19 pandemic, a new report says, as pressure builds on Beijing to drop its zest for coal projects in developing countries. According to data from Boston University’s Global Development Policy Center (GDPC), funding from the China Development Bank (CDB) and the Export-Import Bank of China (Cexim) plunged by roughly 43% in 2020. Having funded around US$8.1bn in loans for energy projects in developing countries in 2019, the pair’s outlay tightened to US$4.6bn last year. More than half of the two banks’ combined overseas energy funding went to a single project in Nigeria, with Cexim providing a US$2.5bn loan to the Ajaokuta, Kaduna, Kano (AKK) gas pipeline project in Nigeria. The total figure was comprised of eight loans to countries across Africa and Asia, as well as one deal for a coal-powered district heating system in Serbia. A host of countries which have previously received sizeable loans from the CDB and Cexim, including Pakistan and Zambia, were forced to apply for debt relief from China in the wake of the devastating effects of Covid-19. Pressure has been growing internationally for export credit agencies (ECAs) such as Cexim to withdraw support for coal-fired power plants, and there are suggestions that Beijing could seek to ban development financing for overseas coal projects. UK Export Finance (UKEF) announced in December that it would end support for fossil fuel projects, joining the likes of France and Sweden in ruling out backing for deals in the oil, gas and coal space. Last year, the Japanese government said it would tighten lending criteria for export credit support for coal-fired power plants. Critics have, however, condemned “loopholes” in Japan’s commitment, noting that the country is still open to funding overseas coal plants that use highly efficient technology, or any project it has already agreed to back. A report from US-based research organisation Oil Change International has previously shown that when it comes to providing export credits for fossil fuels, Japan is the main offender – with China in second place. one example of the steps being taken by the Chinese government, in December, the environment ministry backed a green guidance paper suggesting that the most polluting BRI projects should be put on a negative list. In 2020, the commodity was still very much on the agenda, with the pair providing a combined US$474mn to two coal projects in Pakistan and Serbia.

  • (Lexology, London, 15 March 2021) As demand for critical minerals and rare earths soars due to their importance to future facing technologies and 2050 net zero pledges, 2021 is poised to be a breakout year for critical mineral and rare earth projects in Australia, provided project proponents can source funding and navigate the key bankability issues. Unique to critical mineral projects are the sector’s geopolitical issues and an emerging focus on securing supply chain resilience as a matter of national sovereignty, particularly in the technology, healthcare and defence-related equipment manufacturing sectors. In Australia, the government has mandated Export Finance Australia (EFA), its export credit agency, to support critical mineral projects. For example, EFA’s support to a greenfield critical minerals project in New South Wales last year enabled the project proponents to escalate engagement with prospective strategic investors. Funding may also be available from foreign governments as demonstrated by Lynas Rare Earth Limited’s announcement on 22 January 2021 that it had entered into a co-funding agreement with the United States Department of Defense to build a commercial light rare earths separation plant in Texas, United States. The US funding is derived from the Department of Defense’s Title III, Defense Production Art program.

  • (Lexology, London, 8 March 2021) Hydrogen can be put to uses such as fuel cells for remote and emergency power or in the vehicle and transport sector, replacement feedstock for ammonia production, as reticulated natural gas replacement or to supply electricity markets. Global decarbonisation commitments are driving Australia's hydrogen industry together with bank mandates to move away from fossil fuels. Hydrogen offers the prospect of capitalising on Australia's renewable power resources of wind, solar and hydro to produce green hydrogen. The key inputs to a green hydrogen project are power and water. Ensuring a reliable and cost-effective power supply and access to water rights will be important. As will access rights to key infrastructure (ie gas pipelines, road, rail or ports). Early stage hydrogen projects are unlikely to be project financed without government and industry support. Establishing a new industry requires a long-term policy framework, innovation and collaboration of all industry participants – governments, regulators, industry, industry bodies, investors and financiers. Australia has the essential requirements for a reliable and efficient green hydrogen industry – reliable and affordable renewable power plus recent experience developing the LNG and solar energy markets. Following the lead of the large-scale LNG projects, funding from export credit agencies is also a likely option. ECAs such as The Japan Bank for International Co-operation, The Export-Import Bank of China, and Export Finance Australia are governmental agencies that provide finance for export related transactions. ECAs must fund in accordance with their government imposed mandate. Securing domestic energy supply or key commodities is often included in mandates and large, export oriented Asia Pacific LNG projects have benefited from ECA funding.

  • (Proactive Investors, London, 16 March 2021) Australia's Lake Resources NL has refreshed its Argentine Kachi Lithium Brine Project prefeasibility with a net present value now at US$1.58 billion and is also assessing the potential increase of lithium carbonate production at the project as demand continues to rise from battery makers for high purity lithium carbonate. The Kachi project remains highly scalable and the company is working towards an expansion, which would make it globally significant in terms of high purity lithium carbonate production, and well-positioned to supply the expected deficit in battery-grade product over the next few years. Lake Resources NL's Kachi project is a large lease holding of 70,000 hectares with an expandable resource of 4.4 million tonnes of lithium carbonate equivalent of which only 20% is used for 25 years of production at 25,500 tonnes per annum. Joint financial advisors have been appointed to structure and arrange project finance, with a focus on export credit agencies for the development of the Kachi Project. While the race is on to find a steady source of lithium, a key component in rechargeable electric car batteries. the Guardian has recently noted that the lithium 'white gold' rush threatens environmental damage on an industrial scale.

  • (Oil Change International, Washington, 24 March 2021) The United Kingdom announced a “North Sea deal to protect jobs in the green energy transition” that campaigners say fails to meet the UK’s responsibility to lead in a phase-out of domestic oil and gas extraction. In a positive step, the announcement includes further details on the earlier announced commitment to end public finance for fossil fuels, which will apply immediately. Yet, on the domestic oil and gas production side, the government’s plan falls far short of the immediate end to new licensing called for by climate groups. “Making future licensing rounds conditional on vaguely defined Climate Compatibility Checkpoints is a subterfuge aimed at concealing a simple fact: handing out new licenses for oil and gas is not compatible with limiting warming to 1.5°C. Wealthy oil and gas producing countries such as the UK have a responsibility to lead in phasing out extraction, a reality that the government ignored today. Other countries such as Denmark, New Zealand, and France have already ended oil and gas licensing rounds, and the UK is now a laggard in this respect."

  • (Reuters, London, 18 March 2021) Italy's official ECA SACE guaranteed an 86 million euros ($102 million) loan from Greensill Bank, part of the collapsing Greensill Capital group, to one of Indian-British steel magnate Sanjeev Gupta’s firms, according to accounts filed with the Italian corporate registry in recent weeks. Gupta's firm, Liberty Magona SRL, secured a guarantee from SACE for the loan under measures to help companies navigate the coronavirus crisis, according to Liberty Magona’s accounts for a period from Jan. 1, 2019 to June 30, 2020, which include information on material post-yearend events. German financial regulator BaFin has filed a criminal complaint against the Bremen-based Greensill Bank. Greensill Capital group filed for bankruptcy protection in Britain and Australia this month, citing a $5 billion exposure to Gupta’s GFG Alliance. It said Gupta’s firms had begun to default on its obligations. GFG Alliance employs 35,000 people across 30 countries, according to its website. In Britain, the opposition Labour Party has said the government should consider nationalising the company if it cannot secure the financial backing it is trying to attract. Italy is not the only country to have provided guarantees to Gupta’s firms. The Scottish government gave a 575 million pound guarantee to the group in 2016, Reuters reported in 2019. The Times reports that the Steel magnate and financier Greensill ‘broke borrowing rules’ as Gupta ploted to buy back assets on the cheap, exploiting a Covid-19 state guarantee scheme for struggling companies to extract £400 million of taxpayer-backed loans — eight times the limit. British ministers have rejected a request from mining magnate Sanjeev Gupta for a 170 million pound ($234.36 million) emergency loan to prevent his group, GFG Alliance, from collapsing.

  • (Intellinews, Berlin, 15 March 2021) International multinational firms including Swedish ECA EKN are coming under increased pressure to break business ties with Belarus as opposition leaders apply a "name and shame" campaign as part of their struggle to oust incumbent President Alexander Lukashenko. Belarus has been wracked by mass demonstrations since last year’s disputed August 9 presidential elections. German heavy engineering firm Siemens and Norwegian agricultural company Yara have found themselves in the firing line in recent months, as both have significant business with Belarus. The Eurasian Development Bank (EDB), which was set up as a joint venture between Russia, Kazakhstan and Belarus to invest into things like infrastructure, funded its credit line by raising financing from the German state-owned banks KfW IPEX Bank and Landesbank Hessen-Thüringen (Helaba), while the loan was insured by the state export credit agency of Sweden (EKN). Meanwhile, the Russian State Duma has ratified a protocol to amend the Belarusian-Russian intergovernmental agreement on state export credit to the Belarusian government to build a nuclear power plant.

  • (National Review, Washington, 9 March 2021) Veronique de Rugy of the conservative leaning National Review notes that "asking Ex-Im officials to identify steps through which the United States can promote ending international financing of carbon-intensive fossil fuel-based energy is like asking the fox to guard the henhouse." She adds: "Indeed, Ex-Im itself has long been, and continues to be, knee-deep in the business of extending financing in the international and domestic oil and gas sector... Some $12 billion of this exposure - 26% of the bank’s portfolio - subsidizes the oil and gas industry...For example the Mexican state-owned oil company Petróleos Mexicanos, which has been hammered for years by mismanagement, underinvestment and low oil prices. For at least 15 years until 2017, the bank [EXIM] had more loans outstanding to Pemex than to any other borrower..."  Continuing she wonders: "let’s see if they make progress during multilateral negotiations with other export-credit agencies to agree to end their subsidies together. I won’t hold my breath, of course, since Ex-Im and other export-credit agencies around the world are enslaved to the special interests they support and they will drag their feet as long as they can. In the end, I predict that all we are likely to get from this [Biden Executive Order] is bad climate policies such as subsidies to well-connected green companies (see the 1705 loan program) and measures to destroy the domestic oil and gas industries while Ex-Im will continue to subsidize corrupt PEMEX."

  • (Albawaba, Amman, 15 March 2021) Last Thursday, the UAE announced a $10 billion fund that is allocated for Emirati investments in Israel, the latest country with which the UAE has signed a normalization agreement last September. Last December, the Etihad Credit Insurance (ECI) and the UAE's Federal export credit company, and the Israel Foreign Trade Risks Insurance Corporation (ASHR’A) have agreed to jointly create a strategic partnership in supporting exports, trade, and investment.

  • (PR Newswire, Chicago, 15 March 2021) As a result of the efforts of the Office of Inspector General (OIG) for the Export-Import Bank of the United States (EXIM), in coordination with the Miami-Dade State Attorney's Office, a Florida business owner was sentenced to 36 months' probation and ordered to pay over $140,000 for his role in a scheme to defraud EXIM. EXIM paid $142,472 for the fraudulent claim to Romel Ramon Duran-Martinez (Duran), 59, owner of Miami-based Deoca Manufacturing Co. (Deoca), although Deoca had received full payment for the transaction. To conceal this fraud, Duran directed individuals to lie and otherwise deal with EXIM in bad faith, which delayed the discovery of the fraud.  Because Duran previously paid approximately $39,000.00 to EXIM in administrative repayments prior to the Court's ruling, the Court further ordered Duran to pay $110,970.66 in restitution to EXIM, $29,029.34 for investigative costs, as well as a $603 Special Assessment Fee.  

  • Hungary Today, Budapest, 17 March 2021) Norway is providing Hungary with 348.5 million euros of financing with a view to strengthening Hungary’s combat defence capabilities through Export Credit Norway (ECN) and the Norwegian Export Credit Guarantee Agency (GIEK), the Ministry of Finance said on Wednesday. The credit is tied to the 410 million euro NASAMS contract concluded by Hungary and Norwegian supplier Kongsberg Defense and Aerospace AS last November.

  • (Times Live, Johannesburg, 22 March 2021) In Southern Africa, environmental racism has put poor, black, indigenous, and people of colour communities in the path of polluters and the climate crisis. This past Wednesday, civil society organisations hosted a virtual event to brief parliamentarians about the link between climate change and our public finance institutions (PFIs), specifically the Development Bank of Southern Africa (DBSA), the Industrial Development Corporation (IDC) and the Export Credit Insurance Corporation (ECIC). One of the largest recipients of SA public financing is the Mozambique Liquid Natural Gas (LNG) Project, led by Total, in Cabo Delgado, Mozambique. The ECIC and DBSA are providing a total of $920m (R13.5bn) plus an undisclosed amount from the IDC. This financing is fuelling an industry that has displaced over 550 families from their homes, fishing areas and farmland, and left them without livelihoods and reliant on food aid. There is no evidence that the $50bn (R736bn) gas industry currently being developed will benefit Mozambicans: though the country has been a large fossil energy producer for years, only 30% of the population has electricity access. Regional violence is deeply interlinked with the gas industry, with human rights violations committed by insurgents, the Mozambican military and SA mercenaries. PFIs' attitude is seemingly ‘business as usual’. Worse, the ECIC refused to make their EIA available, and ignored a request for public participation in their decision to finance this devastating project.

  • (Global Trade Review, London, 17 March 2021) Amid broader turbulence in the aviation sector, Asian public sector institutions rolled out hundreds of millions of dollars’ worth of support to airlines in the region last week. In one deal, the Japan Bank for International Cooperation (JBIC) inked a ¥25.3bn (~US$232mn) guarantee agreement covering four private financial institutions for the principal and interest of their loans to Japan Airlines (JAL). In doing so, the Japanese ECA is helping JAL obtain financing from Mizuho, MUFG, SMBC and Chiba Bank for the import of two aircraft from Airbus in France.

  • Does China subsidize export credit to reinforce its geopolitical aspirations?

    (EXIM and Chatham House, 2019 and 2020) The U.S. 2019 approved reauthorization of EXIM included a goal of reserving not less than 20% of the agency’s total financing authority (i.e. $27 billion out of a total of $135 billion) "to support the extension of loans, guarantees, and insurance, at rates and on terms and other conditions, to the extent practicable, that are fully competitive with rates, terms, and other conditions established by the People’s Republic of China". The objective apparently being To directly neutralize export subsidies for competing goods and services financed by official export credit, tied aid, or blended financing provided by China or by other covered countries, i.e. to out-subsidize China's ECAs. In an October 2020 Chatham House conference speakers challenged the position that the Belt and Road Initiative (BRI) is a geopolitical strategy to ensnare countries in unsustainable debt and allow China undue influence. They noted that while the BRI is frequently portrayed as a geopolitical strategy that ensnares countries in unsustainable debt and allows China undue influence, the available evidence challenges this position, claiming that economic factors are the primary driver of current BRI projects. "China’s development financing system is too fragmented and poorly coordinated to pursue detailed strategic objectives; and developing-country governments and their associated political and economic interests determine the nature of BRI projects on their territory." Lee Jones of Queen Mary University of London added that "If 'debt-trap diplomacy' means that China is deliberately luring developing countries into unsustainable debt so that it can grab key loan-funded infrastructure like ports for geo-strategic purposes, then it is a total myth. There is simply no evidence that this has happened in any country." "Debunking the Myth of 'Debt-Trap Diplomacy': How Recipient Countries Shape China's Belt and Road Initiative" was released in August by Chatham House.

  • (Global Trade Review, London, 31 March 2021) French energy major Total has been forced to suspend operations at its liquified natural gas (LNG) project in northern Mozambique for the second time this year, after a fresh attack by insurgents which killed dozens of local and foreign citizens, with as many as 60 still missing. The Financial Times reports the ongoing risk of violence has led Total to reduce its workforce on the LNG project at the nearby Afungi site “to a strict minimum”. The suspension marks yet another setback for Total’s project, which had only recently started to resume operations following a decision to evacuate workers from the site in January due to heightened security risks. Such delays throw into doubt the slated 2024 production date of the project, and come less than a year after the company signed a bumper financing package worth nearly US$15bn with a cluster of commercial banks, export credit agencies (ECAs) and the African Development Bank (AfDB). ECA Watch member Friends of the Earth International reported in our June 2020 issue on how transnational corporate gas extraction in Mozambique was fuelling human rights abuses, poverty, corruption, violence and social injustice. In our June 2020 What's New we also noted UKEF's intent to commit some US$1 billion to the project. Bloomberg has reported on two additional LNG projects: the $4.7 billion Coral FLNG Project by ENI and ExxonMobil, and the $30 billion Rovuma LNG Project by ExxonMobil, ENI, and the China National Petroleum Corporation. A spokesperson for the Japanese ECA, the Japan Bank for International Cooperation, tells GTR that it is “closely monitoring” the security situation in Mozambique, in cooperation with the stakeholders of the project, including the operator, the sponsors and an external security consultant.