Index for January 2023

(Global Finance, New York, 3 January 2023) According to the World Bank, Ukraine’s GDP over 2022 will have contracted by some 35%. Further decline is expected for 2023, as the full economic implications of Russia’s war become clear. The huge drop-off in trade has of course severely impacted trade finance. Many of the correspondent banks that used to do regular business pulled away, while long-term financing projects have been pretty much shelved across the board. ECA coverage is scarce in the extreme. In many cross-border transactions, cash is king. The international media has rightly focused on the huge disruptions to supply lines, including shipments of Ukrainian grain from Black Sea ports, and Russian targeting of Ukraine’s energy infrastructure has cast much of the population into freezing darkness and has massively disrupted business. With foreign banks and customers understandably jittery, the role of international financial institutions like the International Finance Corporation in guaranteeing transactions has been key. The European Bank for Reconstruction and Development (EBRD) has firmly committed to supporting Ukraine. Ukrexim’s Shchur echoes this, “At such a fateful time, we really want to encourage prominent foreign banks and ECAs to become more actively involved in trade finance operations here.

(Offshore Energy, Schiedam, 13 January 2023) A London court has ruled that the UK government’s funding of up to $1.15 billion of financing for the Mozambique LNG project led by French energy major TotalEnergies is lawful. According to reports by Reuters, the decision by London’s Court of Appeal dismissed an appeal by the environmental group Friends of the Earth. The group argued that financing for the project was permitted after it was incorrectly judged to be compatible with the Paris Agreement and its goal to limit global warming to 1.5 degrees. The total emissions for the new gas field, which research by the environmental group finds would total some 4.5 billion tonnes of greenhouse gases (GHG) over its lifetime – more than the combined annual emissions of all 27 EU countries, were not calculated as part of the government’s approval process or evaluated against global climate goals, the environmentalists warned. At the time of filing the legal challenge, Leigh Day solicitor Rowan Smith, who represented Friends of the Earth, noted that the Court of Appeal’s answer is likely to be a “defining moment in climate change litigation”.

(ECA Watch, Ottawa, 30 January 2023) A series of articles appearing in our Google Alert searches for "export Credit" point to a number of interesting pieces on ECAs and hydrogen. The IEA has forecasted the global green hydrogen market to grow from almost zero in 2021 to 9-14 metric tons per annum (mtpa) in 2030 and 125-300 mtpa by 2050. Exports are expected to account for 12 mtpa of low-carbon hydrogen by 2030, of which approximately 90% is expected to be "green" hydrogen. Today, less than one percent of current hydrogen production is low-carbon. This means most of the hydrogen we make comes from fossil fuel plants that release carbon into the atmosphere. Development of the green hydrogen industry will require substantial capital and the financing for such projects will have to borrow more from the precedents of offshore wind and LNG undertakings, an Oxford Institute for Energy Studies said in its latest study. That study is based on the project financing cost of what it called an ‘archetype’ project wherein 1 GW of solar power is used to make green hydrogen, which is converted to 250,000 tons per annum  green ammonia for export with a capital cost of $2 billion. Last month’s second Green Hydrogen Summit in Muscat brought together leaders in every aspect of the hydrogen value chain from production and transportation to applications and storage.  Spearheaded by the Omani government, the Summit demonstrated the Sultanate’s ambition to be a global leader in green hydrogen.

(Arabian Business, Abu Dhabi, 27 January 2023) The agreement envisages establishing a framework for mutual reinsurance to enhance the presence of Saudi exports in Italian markets. Saudi Export-Import Bank CEO Saad bin Abdul Aziz Alkhalb hailed the agreement as a step forward in the bank’s efforts to improve and diversify Saudi non-oil exports and enhance their competitiveness, in addition to providing funding for Saudi exports and insurance services and export credit insurance with competitive advantages in line with the targets of the Kingdom’s Vision 2030 to increase the value of non-oil exports from 16 percent to 50 percent of the non-oil GDP.

(Xinhua, Beijing, 14 January 2023) SINOSURE stepped up efforts to boost the country's foreign trade in 2022, data from the company showed on Saturday. The insurer handled underwriting totaling 899.58 billion U.S. dollars for insured businesses throughout the year, serving over 170,000 clients, it said.  Of the total, 745.16 billion dollars was short-term export credit insurance, up 10.2 percent year on year. The underwriting for small and medium-sized enterprises amounted to 226.78 billion dollars, a 15.7 percent increase from a year earlier...  The company added that it also increased insurance support to stabilize industrial and supply chains, nurture new business models, and boost services exports. SINOSURE is a state-funded and policy-oriented insurance company that promotes China's foreign economic and trade development and cooperation. It was officially launched and put into operation in 2001, and its service network now covers the whole country.

(Asia News Initiative, New Delhi, 14 January 2023) India's EXIM bank and State bank of India extended export credit facilities worth USD 1,500 million to Sri Lanka for the import of essential commodities. India has extended aid worth USD 3.9 billion to help Sri Lanka sustain itself in face of the acute economic and financial crisis and meet its immediate needs such as medicines, cooking gas, oil and food items, Sri Lanka based news publication News 19 reported. In February 2022, India signed an agreement for the supply of petroleum products worth USD 500 million from the Indian Oil Company through a credit line in order to help Sri Lanka overcome its fuel shortage. This was expanded by an additional USD 200 million worth of petroleum products in April 2022.

(The East African, Nairobi, 12 January 2023) After eight years of non-execution, the Uganda government has terminated the contract of China Harbour Engineering Company (CHEC) to build the country’s first phase of standard gauge railway (SGR), a 273km line from Malaba to Kampala. Kampala says the financing model for the project will also change, with Yapi Merkezi, which is building Tanzania’s SGR, expected to tap into its network to bring Export Credit Agencies (ECAs) on board that will finance and breathe life into the moribund project. The line, starting from the Malaba border post between Uganda and Kenya, was expected to cost $2.2 billion, but the Chinese financiers did not fund the project after casting doubt on Kenya’s SGR reaching the border to link with Uganda’s and making the project viable.