Index for March 2023

Volume 22, Issue 3

  • (Global Trade Review, London, 15 March 2023) A meeting of the OECD Arrangement on export credits ended last week without an announcement of a breakthrough on any key planks in its modernisation agenda. The arrangement was created to avoid like-minded countries from undercutting each other on pricing but has been undermined by the fact that major export credit providers such as China and India are not members. Commercial banks, export credit agencies (ECAs), the European Union and governments who host export credit-supported projects have called for changes to minimum pricing, tenors and clear rules on sustainable financing to ensure that OECD ECAs remain competitive and can support a broad range of projects. Oil Change International, an NGO that campaigns for an end to public finance for fossil fuels, says it is disappointed that there was no apparent agreement on the Climate Change Sector Understanding (CCSU) aspect of the arrangement in order to boost incentives for green projects. OCI further notes that "OECD countries failed to conclude negotiations on climate friendly incentives to align Export Credit Agencies, the world’s largest international financiers of fossil fuels, with international climate goals", adding "the world cannot afford another wasted minute" and reminding them that 175 civil society institutions have called on the arrangement members to end support for fossil fuel projects by their ECAs.

  • (Oil Change International, Washington, 15 March 2023) Promise Breakers, a report released today by Oil Change International, reveals that the Glasgow Statement, a joint commitment forged at the 2021 UN climate summit (COP26), is already shifting an estimated USD 5.7 billion per year out of fossil fuels and into clean energy, with the potential of a further 13.7 billion per year if all Glasgow Statement signatories fulfill their commitments. At COP26 in Glasgow, 39 countries and institutions pledged to end international public finance for fossil fuels by the end of 2022 and shift this money to clean energy. This report is the first international assessment of signatories’ implementation of the commitment since the passing of the end of 2022 deadline. The report reveals that while some high-income countries have kept their Glasgow commitment, a group of major providers of international public finance have broken their promise, including Germany, Italy, and the United States. The report contains a detailed report card on each signatories’ policies, with recommendations for improvement.

  •  (Earth Org, Hong Kong, 28 March 2023) ) The new policy will allow Italy’s export credit agency SACE to support various fossil fuel projects, including exploration, production, storage, and distribution. Climate experts have strongly criticised the move, saying it would breach international commitments and slow down the country’s green transition. The new rules, presented by Premier Giorgia Meloni last week, will allow Italy’s state-owned export credit agency SACE to finance gas exploration and production projects until January 2026. Existing exemptions, which include projects deemed “strategic” for the nation’s energy and economic security, could postpone the date even further. Support for oil transport, storage, and refining projects will be allowed until 2024, and oil distribution until 2028. A deadline for gas transport and storage has yet to be defined.

  • (European Commisson, Brussels, 6 March 2023) The European Commission has approved, under EU State aid rules, an  amendment to an existing Italian guarantee scheme, including an up to €3 billion budget increase, for the reinsurance of natural gas and electricity trade credit risk in the context of Russia's war against Ukraine. The amendment was approved based on Article 107(3)(b) of the Treaty on the Functioning of the European Union (‘TFEU'), recognising that the EU economy is experiencing a serious disturbance. Under the administration of SACE, the Italian Export Credit Agency, the scheme  ensures that trade credit insurance continues to be available to companies, avoiding the need for them to pay their energy bills in advance or within a few weeks, thus reducing their immediate liquidity needs. This measure will also make it easier for these customers to obtain a postponement of payment of their energy bills by up to 24 months, based on an agreement with their energy supplier. At the same time, it will ensure that trade credit insurance continues to be available to companies, avoiding the need for them to pay their energy bills in advance or within a few weeks, thus reducing their immediate liquidity needs. The reinsurance of natural gas and electricity trade credit risk was deemed necessary in the context of Russia's war against Ukraine.

  • (ReCommon, Rome, 29 March 2023) The decision by the government of Italy and SACE to break their climate promise made during COP26 in Glasgow has aroused strong indignation. SACE, Italy’s export credit agency, will continue to finance fossil fuel projects abroad until at least 2028, thus reinforcing its position as the leading supporter of the fossil fuel industry in Europe and sixth globally. This is an indignation so strong that it prompted the group Alleanza Verdi e Sinistra in the Chamber of Deputies to present an oral parliamentary question, aimed at clarifying three aspects:

    • whether the actions of the Government and SACE disregard the commitments made during COP26
    • whether the right steps will be taken to stop public investment and SACE’s guarantees for fossil fuel projects abroad linked to the extraction and transport of fossil fuels
    • whether there is a potential conflict of interest where the Chairman of the Board of Directors of SACE is also a member of the Board of Directors of Eni

    ENI is an Italian global energy company, active at every stage of the value chain: from natural gas and oil to co-generated electricity and renewables, including both traditional and bio refining and chemicals

  • (Global Trade review, London, 22 March 2023) Italy has walked away from a pledge to end support for international fossil fuel projects by the end of last year, indicating it will continue to provide export credit cover for parts of the oil industry in the short term and delaying a decision to put an end date on its backing for the gas sector. Sace, the Italian export credit agency (ECA), yesterday published its long-anticipated plan for complying with its commitment alongside other nations at the 2021 Cop26 summit to “end new direct public support for the international unabated fossil fuel energy sector… except in limited and clearly defined circumstances that are consistent with a 1.5°C warming limit and the goals of the Paris Agreement”. Signatories were supposed to have nixed backing for the sector by the end of last year, but the Sace policy shows that the agency did not end support for all exports involving the oil or gas sectors by that deadline. The policy shows that Sace ended support for unabated gas-fired power generation in January this year, but gas exploration and production facilities will still qualify for support until 2026.

  • (Price of Oil, Washington, 23 March 2023) The Netherlands just contradicted its COP26 pledge to end public finance for fossil fuels by the end of 2022 and shift this money to clean energy by issuing a commitment to insure the Brazil Santos Basin Pre-Salt Pole oil and gas production project for around USD 321 million. The Netherlands published a policy implementing the commitment in November 2022, but it has major loopholes that allow continued fossil support by the Dutch Export Credit Agency (ECA) Atradius DSB. This includes a “transition period” in breach of the agreed end of 2022 deadline, allowing projects that have requested financial support in 2022 to still be approved in 2023.

  • (TXF, London, 1 March 2023) The volume of ECA business and the number of deals is down in the Middle East, but at the same time we are seeing higher volume and more deals in North Africa. Industrial diversification is driving the changes of a region in transition. There is a significant evolution taking place in the Middle East and North African (MENA) region in terms of export credit agency (ECA)-backed export and project financing - which over the last few years has largely mirrored the changing industrial outlook and direction of much of the region. Oil/gas revenues in those countries have increasingly become used in sectors such as oil/gas downstream activities, healthcare, social projects, renewable energy, high-tech and productive industries. At the same time, many of the ECAs and banks have now stopped financing new upstream oil & gas projects and are focused on supporting exports and viable projects in other sectors throughout MENA.

  • (IMF, Luxembourg, 1 February 2023) IMF Deputy Managing Director Bo Li at the EIB Group Forum 2023 spoke to the importance of the green transition - "away from fossil fuels that are subject to supply disruptions and volatility, and towards renewables such as wind and solar energy.  The growing impact of global warming reminds us of the urgency. From heatwaves in Europe and wildfires in North America, to droughts in Africa and floods in Asia: last year saw climate disasters on all five continents." He noted that without decisive action, things are set to get worse because "we are clearly not on the right trajectory for cutting global emissions and need to cut global emissions by 25‑50 percent by 2030 compared to pre-2019 levels to contain temperature rises to between 1.5 and 2 degrees celsius. Financing needed to meet adaptation and mitigation goals are estimated at trillions of US dollars annually until 2050 but so far, we are seeing only around 630 billion dollars a year in climate finance across the whole world—with only a fraction going to developing countries. This is particularly concerning—because emerging and developing economies have vast needs for climate finance. And it underlines why it’s so important for advanced economies to meet or exceed the pledge of providing $100 billion per year in climate finance for developing countries. This is not just the right thing to do, it is the smart thing to do."

  • (Trade Finance Global, London, 8 March 2023) President and Chair of the Export-Import Bank of the United States (EXIM) Reta Jo Lewis gave a keynote address to the Trade Finance Global’s Women in Trade, Treasury & Payments roundtable, urging multilateral organisations to take strides towards improving on the economic welfare of societies, saying leaders must do their part to recognise that advancing gender equity must be a top priority as they work to achieve the sustainable development goals set by the United Nations. She noted that "Multilateral organisations also have the ability to establish norms and, most importantly, use their financing and programming to create incentives for nations to adhere or inch closer to these norms", and that EXIM recognises its responsibility to promote gender equity in trade finance. In the U.S., there are approximately 13 million women-owned businesses, and they are growing at more than double the rate of all other businesses. More than nine million Americans are employed by women-owned businesses, which are generating an estimated $1.9 trillion in revenue adding that although female entrepreneurship is growing exponentially in the U.S. and globally, one of the largest obstacles for women-owned firms is a lack of access to capital and/or funding.

  • (Global Echo, Washington, 8 March 2023) In November 2021 the U.S. provided $600 million in an export credit agreement to help Lithuania withstand pressure from China and joined the EU's WTO lawsuit in support of Vilnius. Days after the establishment in 2021 of the “Taipei Representative Office in Lithuania,” Taiwan’s de facto embassy, Beijing downgraded diplomatic relations and blocked most trade with Vilnius over what it calls a violation of the One China policy. The action prompted the European Union to sue China at the World Trade Organization over “discriminatory trade practices” against Lithuania that it said threatened the integrity of the EU single market. Beijing denies instructing Chinese companies to stop doing business with Lithuanian partners. In March 1990, Lithuania became the first republic to break away from the Soviet Union by declaring itself an independent state, a decision the White House applauded.

  • (Microcapital Monitor, Boston, 10 March 2023) Asociación de Cooperativas Argentinas (ACA), a network of 143 agricultural cooperatives in Argentina, recently borrowed USD 80 million from three institutions, led by the Dutch development bank Financierings-Maatschappij voor Ontwikkelingslanden (FMO). FMO is lending ACA half of the total, and the Canadian government’s FinDev Canada and the Dutch cooperative Rabobank are each providing USD 20 million. ACA plans to use the cash as working capital in support of its exports of grains and seeds that it buys from cooperatives that represent 50,000 farmers. FinDev Canada is Canada's development finance institution (DFI), supporting the private sector in developing markets to promote sustainable development.

  • (ARGS, London, 9 March 2023) Embraer has closed a US$ 200 million credit facility to finance purchases from direct suppliers in the United States. This financing is being provided by Citibank and guaranteed by the Export-Import Bank of the United States (EXIM), the country’s official export credit agency. This credit facility with EXIM and Citibank will support Embraer’s efforts to diversify its credit operations in the aviation market worldwide, providing the company with additional financing options and improving its loan profile.

  • (Construction Index, London, 30 March 2023) The project will extend the university and improve access to higher education. The project is being developed by a joint venture led by Quenda Business, a Polish project management, international business advisory and consulting company that operates across sub-Saharan Africa, particularly in Angola and the Democratic Republic of Congo. Quenda’s partner is Polish contractor Torhamer, a specialist in rail and infrastructure. Standard Chartered bank is acting as the social loan coordinator, bookrunner and coordinating bank, supported by the Polish export credit agency Korporacja Ubezpieczeń Kredytów Eksportowych (KUKE).