What's New for February 2024

"What's New!" is a periodic update to keep you informed of the latest on the ECA Watch website. What's New! features a wide range of materials related to the reform of Export Credit Agencies (ECAs) including NGO publications and releases, news articles, commentaries and announcements about the policies and practices of ECAs and ECA-financed projects world-wide.

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  • Joe Biden should end EXIM support for overseas oil and gas projects
  • EXIM Climate Advisors Quit Over Fossil Fuel Plans
  • African Rail Projects Become Battleground For US-China Competition In Strategic Mineral Supply Chains
  • Italian and Japanese ECAs allocate billions for Ukraine
  • ECAs pile in on European battery gigafactories facility
  • Africa’s debt dilemma: The role of ECAs and new strategies
  • SACE plans to back $1.6 billion in debt to Saudi Arabia
  • The real effects of trade financing by ECAs
  • Financing uncertainty clouds South Korean ECA push for massive arms deals
  • Tanzania's Precision Air Faces Legal Action Over $26 Million ATR 42 Debt to EDC
  • India directs ECGC to maintain moratorium on insurance rates for exporters


Joe Biden should end EXIM support for overseas oil and gas projects

(Guardian, London, 14 February 2024) Oil Change International and Friends of the Earth US say the US president must follow his move to restrain fossil fuel expansion at home with similar measures to curb it around the world. We back Bill McKibben’s call for more of the sort of leadership recently shown by President Joe Biden in pausing new liquified natural gas export terminals. Biden has another opportunity to curb the fossil fuel industry’s relentless expansionist agenda and affirm his climate credentials in this election year at an upcoming meeting of the Organisation for Economic Co-operation and Development (OECD). At Cop26, the UN climate conference in Glasgow in 2021, 34 governments, including the US, pledged to end international public finance for fossil fuels by the end of 2022. Despite this, in the last year alone, the US has provided more than $2.2bn to oil and gas projects around the world via its export credit agency, the US Export-Import Bank, and its development finance institution.


EXIM Climate Advisors Quit Over Fossil Fuel Plans

(New York Times, New York, 5 February 2024) A federal bank that finances projects overseas is set to vote on Thursday on whether to use taxpayer dollars to help drill oil and gas wells in Bahrain, a contentious decision that prompted two of the bank’s climate advisers to resign, according to people with knowledge of their decisions. The two advisers, who sit on an 18-person board that President Biden created to help the bank take climate change into account when making investments, resigned last week after a meeting about the Bahrain project, according to five current and former bank officials. They described mounting frustration among climate advisory board members, who say they are being kept in the dark about upcoming fossil fuel loans and blocked from making recommendations about whether to approve or even modify a particular project. Climatewire also notes that Biden embedded climate advisers into America’s export credit agency to increase scrutiny over its investments, but their work has mostly been stymied by the agency’s continued pursuit of fossil fuel projects. Five people with firsthand knowledge of the climate council’s work at EXIM described a sense of frustration over investments into projects such as oil and gas development in Bahrain and an Indonesian oil refinery that received a $100 million loan.


African Rail Projects Become Battleground For US-China Competition In Strategic Mineral Supply Chains

(Benzinga, DEtroit, 12 February 2024) A U.S. delegation to a major mining conference in South Africa last week included officials from the Treasury and State departments and the chair of EXIM. Mining and building infrastructure on the continent hasn't traditionally been a U.S. government priority but that is changing now that decarbonization of the economy has taken a front seat and Washington has grown worried about China's dominance of supply chains for strategic materials, including cobalt and copper, used in electric vehicles and renewable energy systems powered by wind turbines and solar panels. The Democratic Republic of Congo (DRC) and Zambia hold more than a 10th of the known copper deposits in the earth's crust. The DRC produces around 70% of the world's cobalt, which is generally a byproduct of copper mining. Most of that cobalt is exported to China, which is by far the world's biggest importer of copper ores and concentrates. So it's no surprise that China has been investing heavily in the African mining and transportation sector. Chinese entities own all or part of most of the producing mines in the DRC. China provided interest-free financing for a railway built in the 1970s linking Zambia's Copperbelt to a port in Tanzania on Africa's east coast. China this week announced a plan to revitalize that railway, providing direct competition to a U.S.-backed rail corridor from the mineral-rich area to Angola on the Atlantic side of the continent. The United States is ramping up its efforts to secure critical metals and in May said it was performing due diligence for a potential financing package to fund and upgrade a rail line from the DRC border to the Lobito Port in Angola on Africa's west coast, expected to greatly reduce the time and cost of trucking copper and cobalt to ports. Canadian company Ivanhoe Mines Ltd is the first mining customer for this Lobito corridor, having this week signed an agreement for the right to transport 120,000-240,000 metric tons a year along the line for five years starting in 2025


Italian and Japanese ECAs allocate billions for Ukraine

(Interfax & UKRANEWS, Kiev, 19 February 2024) The Italian export credit agency SACE will allocate 1.5 billion euros to support trade and financial operations, in particular, in the field of healthcare and infrastructure. Japan's NEXI will allocate EUR 1.3 billion to support Japanese investors in Ukraine consisting of two parts: guarantees for Japanese investors, as well as a credit line for the export of Japanese goods for the implementation of Ukraine's reconstruction projects. The Ukrainian News Agency earlier reported that Ukraine's reconstruction needs already amount to almost USD 486 billion.

ECAs pile in on European battery gigafactories facility

(Global Trade Review, London, 14 February 2024) Three export credit agencies have thrown their support behind a €4.4bn debt raising for a company building lithium battery gigafactories across Europe, the latest in a string of deals intended to beef up the continent’s renewable energy supply chains. France-based Automotive Cells Company (ACC) says Italian export credit agency (ECA) Sace, Germany’s Euler Hermes and France’s bpifrance have all agreed to support financing provided by a pool of commercial lenders.


Africa’s debt dilemma: The role of ECAs and new strategies

(Trade Finance Global, London, 15 February 2024) The African economy has suffered three major shocks in quick succession, namely, the COVID-19 pandemic, spillovers from geopolitical tensions and supply chain disruptions. This, coupled with widening fiscal deficits, exchange rate volatility and natural disasters have eroded the fiscal space of African economies and increased debt levels. The rising debt in Africa and the high risk of sovereign default hampers the activities of export credit agencies (ECAs) on the continent. However, this challenge has also presented opportunities for flexibility, for example, cover for down payments, higher percentages of cover for both political and commercial risks, as well as longer tenors. The continent facing debt issues, continues to be a major playing field for Export Credit Insurance Corporation of South Africa (ECIC SA), with Ghana accounting for 51.4% of total exposure, followed by Zimbabwe and Ethiopia at 23.0% and 7.7%, respectively. From an industry viewpoint, the ECIC portfolio has shifted away from its traditional mining focus. Currently, power generation leads as the top sector, accounting for 45.8% of total exposure, with construction following closely at 40%.


SACE plans to back $1.6 billion in debt to Saudi Arabia

(Reuters, Dubai, 12 February 2024)  Italy’s export credit agency SACE plans to back $1.6 billion in loans to Saudi Arabia over the next 12 to 18 months, the agency’s chief told Reuters, potentially boosting the country's search for outside investment at a time of weak oil prices. Saudi Arabia last month sent requests for proposals to banks for the refinancing of a $10 billion syndicated loan, new bond issuance, and for ECA-backed funding. Saudi Arabia’s national oil giant, Aramco, has also been tapping this form of financing. The company is looking to raise billions of dollars in ECA-backed loans involving agencies across the globe ahead of its planned stock market listing, sources told Reuters last month. SACE, which is meeting prospective clients in the United Arab Emirates and Saudi Arabia this week, is evaluating projects in the Middle East and North Africa worth about $15 billion, $5 billion of which in the United Arab Emirates.


The real effects of trade financing by ECAs

(Centre for Econonic Policy Research, London, 9 February 2024) Trade finance subsidies, usually provided by export credit agencies, are the predominant tool of industrial policy. This column discusses the effect of the effective shutdown of the US EXIM from 2015—2019 on firm outcomes. It finds that firms which previously relied on EXIM support saw a 18% drop in sales after the agency closed, driven by a reduction in exports. Firms affected by the shutdown also laid off employees and curtailed investment. Overall, export credit subsidies can boost exports even in countries with well-developed financial markets, without necessarily leading to a misallocation of resources. Exports are often seen as boosting economic growth. But exporting internationally requires upfront financing. Recognising this, around one hundred countries around the world have set up export credit agencies to provide subsidised trade financing to support their country’s exporters. Today, such subsidies are the predominant tool of industrial policy around the world, especially in advanced economies. In absolute terms, China, Germany, Korea, and the US spend the most on these programmes. The Scandinavian countries, as well as China and Korea, are among the heaviest users of export credit agency support relative to their exports as we show in panel B of Figure 1. To better understand the role of export credit agencies, we study the temporary shutdown of the Export-Import Bank of the United States (EXIM) between 2015 and 2019, prompted by a lapse in its charter—a first since the agency's inception in 1945 – and lack of quorum on its board of directors. The shutdown resulted in an 80% drop in the volume of EXIM-supported transactions in 2016 compared to 2014. The volume of export credit support provided by EXIM only returned to pre-shutdown levels after the resumption of full operations in December 2019.


Financing uncertainty clouds South Korean ECA push for massive arms deals

(Reuters, London, 8 February 2024) Legislation aimed at increasing South Korea's import-export lending to support huge new defence sales has stalled amid partisan deadlock ahead of a divisive parliamentary election, officials and analysts said. South Korea's ruling and opposition parties have both introduced bills to boost the state bank's equity capital to 25 trillion-35 trillion won ($19 billion-$26 billion), raising the lending limit to 10 trillion-14 trillion won, as the country seeks to expedite Poland's $22 billion weapons purchase. The sale is a key part of South Korea's plan to become the world's fourth-largest defence exporter by 2027. But under current law, the Export-Import Bank of Korea cannot lend more than 40% of its roughly 15 trillion won of equity capital, or about 6 trillion won, to a single borrower. The state bank already provided about 6 trillion won in credit during the first phase of the deal with Poland, South Korea's biggest-ever weapons sale. If there is no credit line to finance procurement from South Korea it could put the unsigned procurement of 308 K9 howitzers and 820 K2 Black Panther tanks in jeopardy,


Tanzania's Precision Air Faces Legal Action Over $26 Million ATR 42 Debt to EDC

(Simple Flying, London, 10 February) Tanzania-based regional carrier Precision Air is in a legal battle with Canadia's Export Development Canada (EDC) for an aircraft financing agreement involving two ATR 42-600s acquired over ten years ago. EDC is claiming about $26 million in unpaid rentals and termination fees. The financial agreement between the two parties dates back to 2012, when EDC provided financial assistance to Precision Air to acquire two ATR 42-600s as part of its fleet expansion plan. The agreement involved Irish aircraft leasing firm Antelope Leasing Finance, which acted as the debtor and held the turboprops as collateral on EDC's behalf.


India directs ECGC to maintain moratorium on insurance rates for exporters

(India Times, Gurugram Haryana, 7 February 2024) The Indian government on Wednesday said it has directed the Export Credit Guarantee Corporation (ECGC) to maintain a moratorium on insurance rates for Indian exporters in the wake of the Red Sea crisis. State-owned ECGC is an export promotion organisation, seeking to improve the competitiveness of Indian exports by providing them with credit insurance covers. Minister of State for Commerce and Industry Anupriya Patel said that the ECGC continues to provide insurance coverage to exporters. She said that the corporation has not refused cover for export shipments routed through the Red Sea and the credit risk cover is being provided based on the risk assessment and creditworthiness of overseas buyers and terms of payment.