What's New October 2022

"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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  • Finland joins growing list of countries restricting international oil and gas finance
  • Friends of the Earth US asks Biden to RELEASE THE GUIDANCE
  • Italy pushes to weaken European fossil fuel financing pledge
  • German ECA supported defence system for Egypt diverted to Ukraine
  • Korean Eximbank holds OECD Environmental and Social Practitioners' Meeting
  • South Korean ECAs challenged during National Assembly session about Barossa Project
  • Trade unions call for a just net-zero aviation transition including ECA support for aviation finance
  • Cesce and Alstom sign a strategic agreement to promote green exports
  • Loss of ECA finance harms lower impact deep water oil and gas says offshore chief
  • Export finance in a post-pandemic world
  • Russia may start providing ECA finance to importers of its grain
  • Ukraine calls on banks to support exports through new ECA mechanisms
  • Brazilian ECA to fund Embraer aircraft exports to SkyWest
  • Saudi Electricity Company lands Swedish ECA backed finance for Egypt electricity interconnection

Finland joins growing list of countries restricting international oil & gas finance

(Oil Change International, Washington, 12 October 2022) Finland has joined a growing list of countries making good on a key pledge from the UN COP26 climate summit in Glasgow last year, by releasing a new policy ending almost all support for fossil fuels via Finnvera, the Finnish Government’s export credit agency, leaving Norway the only Nordic country not to do so. Finland joins the UK, France, Denmark, Sweden and Belgium in publishing policies restricting fossil fuel finance to deliver on the COP26 commitment, building momentum ahead of the COP27 UN climate summit in Egypt next month. Countries that have yet to deliver on their promise to end fossil fuel finance include the USA, Canada, Germany, Italy and the Netherlands. Analysis shows that if all Glasgow Statement signatories live up to their commitment this will directly shift USD 28 billion a year out of fossil fuels and into clean energy, which will help shift even larger sums of public and private finance. This would also help raise pressure on the countries that are lagging behind. Laggards include Japan ($10.9 bn/yr), Korea ($10.6 bn/yr), and China ($7.6 bn/yr), which are the largest providers of international public fossil fuel finance in the G20 and together account for 46% of G20 and MDB finance for fossil fuels. The European Bank for Reconstruction and Development (EBRD), one of the biggest EU fossil fuel financiers, is also missing. Export Credit Agencies (ECAs) are the worst public finance actors on fossil fuels, with G20 ECAs having supported 11 times more in fossil fuels (USD 40.1 billion) than in renewable energy (USD 3.5 billion) from 2018-2020, effective leadership in aligning ECAs with climate goals is desperately needed. The E3F Transparency report outlines that from 2015-2020, E3F members supported almost 175 billion Euros in fossil fuels compared to only 20 billion Euros in renewables.


Friends of the Earth US asks Biden to "RELEASE THE GUIDANCE!"

(Friends of the Earth US, Washington, 24 October 2022) Friends of the Earth US has produced a 16 page backgrounder on U.S. international energy finance ahead of the COP27 Deadline to Stop Funding Fossils. From 2010 to 2021, the United States’ major trade and development finance institutions, the U.S. Export Import Bank (EXIM) and U.S. International Development Finance Corporation (DFC), provided almost five times as much support to fossil fuels as to renewables – USD 51.6 billion compared to USD 10.9 billion. Since taking office, the Biden-Harris Administration have made a series of commitments, executive orders, and guidances towards ending this international public finance for fossil fuels. Unfortunately, the administration’s actions have yet not matched their promises on ending these influential financial flows that prolong the fossil fuel era. In this briefing, Friends of the Earth USA review what is known about the current U.S. policy guidance, unpack trends in recent energy finance from EXIM and DFC, identify specific fossil fuel projects and loopholes that appear to be under consideration, and make recommendations for how the U.S. can still implement their commitments with integrity and on time. Most critically, Biden’s interim guidance detailing how these promises will be implemented has not been made publicly available since it was put in place in December 2021, and it appears to leave substantial loopholes open for continued support for gas and oil. The Biden-Harris Administration can avoid undermining international progress on this issue by releasing a publicly available policy that fully ends international public finance for fossil fuels by COP27 in November.


Italy pushes to weaken European fossil fuel financing pledge

(Reuters, Brussels, 2 November 2022) Italy is attempting to weaken a pledge 10 European governments intend to make to stop export credit support for fossil fuel projects. The pressure from Italy comes as delegates from nearly 200 countries prepare for a United Nations climate change summit next week in Egypt, where world leaders will attempt to agree tougher action to tackle global warming. A group of ministers planned to make a joint statement on November 3rd committing to end public trade and export finance support for overseas fossil fuel projects by the end of 2022. The countries, which together make up the "Export Finance for Future" group, are Belgium, Denmark, Finland, France, Germany, Italy, the Netherlands, Spain, Sweden and Britain. [Delays in the statement's release point to controversial negotiations.] A draft of the governments' statement, seen by Reuters, said they would agree to end new direct official trade and export finance support for "exploration, production, transportation, storage, refining, distribution of coal, crude oil, natural gas, and unabated power generation". Three sources familiar with the discussions told Reuters Italy had asked to remove the list specifying which fossil fuel activities would lose such support. "Italy objects that there is no consistency between the objective of achieving strategic autonomy from Russia and the impossibility of financing the necessary infrastructure," an official briefed on Rome's position told Reuters. Italy's export credit agency SACE declined to comment. As countries attempt to balance fighting climate change with their short-term response to the energy crisis, some - including Germany - have suggested new investments in gas fields are needed. Countries are still negotiating the draft statement, which could change before it is published. Italy was the biggest backer of fossil fuels within the group, committing 8.4 billion euros in the period - with downstream oil and gas projects and gas-fuelled power plants among the projects. Italy is also moving to keep a Lukoil-owned refinery in business despite new sanctions against Russia kicking in next month.  On September 30 the European Commission approved, under EU State aid rules, a €2 billion Italian scheme for the reinsurance of natural gas and electricity trade credit risk in the context of Russia's war against Ukraine. A hard right coalition that includes pro-Russian voices just took power in Italy after running a campaign focused on energy costs and inflation.


German ECA supported defense system for Egypt diverted to Ukraine

(Military Africa, Nigeria, 13 October 2022) Germany has sent a consignment of IRIS-T surface-to-air defence system initially meant for Egypt to Ukraine to protect critical assets following the Russian invasion of the country. Egypt paid for the IRIS-T air defence system in 2019 after Germany’s Bundestag’s Budget Committee gave its approval for an export credit guarantee for six A-200 vessels, thereby clearing a path for the frigate deal to go ahead. The export credit provides guarantees of up to 2.3 billion euros for the transaction.


Korean Eximbank holds OECD Environmental and Social Practitioners' Meeting

(Korea Times, Soeul, 24 October 2022) The Export-Import Bank of Korea (Eximbank) is holding a meeting of environmental and social practitioners October 24-25 to help address environmental and social issues when providing officially supported export credits. Eximbank is co-hosting the 46th OECD Environmental and Social Practitioners' Meeting in Seoul jointly with the Korea Trade Insurance Corporation. The meetings have been held at the OECD headquarters in Paris in the first half of each year, while the meetings for the second half are held in one of the member countries. Around 50 experts from 25 OECD member countries are participating, sharing ideas to evaluate the environmental and social impact of projects and policies and practices related to due diligence where official export credit support is requested, as well as minimizing such impact. A Korean Eximbank employee was appointed in 2018 as chair of the OECD Working Party on Export Credits and Credit Guarantees, an entity established in 1963 under the Trade Committee of the OECD


South Korean ECAs challenged during National Assembly session about Barossa Project

(Friends of the Earch US, Washington, 24 October 2022) During the annual National Assembly audit this month, Korea Export-Import Bank (KEXIM) and Korea Trade Insurance Corporation (K-SURE) were questioned by assembly members on their decision to finance the Barossa gas project in Australia. The Barossa project, spearheaded by Australia’s Santos and Korea’s SK E&S, was recently ordered to halt drilling after the Australian Federal Court decided Traditional Owners had not been properly consulted. While both KEXIM and K-SURE have approved a total of USD 660 million (KRW 800 billion) of additional financing for the project, the financial deal has not been closed yet. During this year’s National Assembly audit session, K-SURE was reprimanded for violating international environmental regulations and was questioned on the Ministry of Environment’s greenwashing ruling around SK E&S’ advertisements about Barossa gas. K-SURE stated that it screened the project in accordance with international guidelines and Australian law. It also claimed that if Santos loses its Barossa drilling appeal heard at the Australian Federal Court, it will likely decide whether to proceed with its financing. A hearing from a National Assembly member revealed that K-SURE was aware of the lack of Indigenous consultation but relied on the words of project owners and commercial banks supporting the gas project, showing a passive review process in deciding to provide billions of wons' worth of taxpayer money. With continued criticism from assembly members, the Chairman of K-SURE stated that the agency will comprehensively review various risks associated with the project before deciding whether to extend the expiration date of its financing approval, which is January 2023.  Environmental activists have continued to demand the cancellation of public financing toward the Barossa gas project.

Trade unions call for a just net-zero aviation transition including ECA support for aviation finance

(IndustriALL, Geneva, 14 October 2022) International and European trade unions welcome a new global agreement for net-zero carbon aviation emissions by 2050, but call for stronger commitments at country level, including on social criteria. No worker or region should be left behind, we need a Just Transition for all! In the run up to the September 2022 41st General Assembly of ICAO, unions worked together to draft joint trade union demands. The working paper submitted to ICAO by trade unions called for a Just Transition for a zero-carbon future which emphasised the need for the decarbonisation of the aviation industry to be managed in a socially responsible way. It called for quality social dialogue, investment into training and the creation of sectoral action plans by social partners with the relevant authorities. In March 2021, unions pointed out that airline passenger demand fell 65% in 2020 compared to the previous year and the demand for commercial aerospace products had also fallen dramatically, resulting in hundreds of thousands of workers in the sectors beening laid off and noting that export credit agency support was critical for restoring employment levels.


Cesce and Alstom sign a strategic agreement to promote green exports

(WebWire, Atlanta, 12 October 2022) Cesce, the Spanish Export Credit Agency, will support France's Alstom Group’s export activities focused on green projects with a dedicated amount of €500 million. -The agreement seeks to strengthen and consolidate the Spanish railway industrial footprint, in which Alstom is a key player with more than 3,000 employees in Spain and a volume of local purchases close to 700 million euros in the last year. The agreement provides for an overall annual maximum of €500 million and will be reviewed on a yearly basis, depending on the evolution of employment levels, investment and exports of Alstom Group companies in Spain. The agreement's scope focuses on green operations, in line with Cesce’s climate change policy, the importance of promoting sustainable mobility initiatives and the need to boost digitalisation and sector transformation for a decarbonised future.


Loss of ECA finance harms lower impact deep water oil and gas says offshore chief

(UpStream Online, Oslo, 3 October 2022) The world needs to put the right emphasis onto the security aspect of energy policy, with deep-water oil and gas developments playing a key role in this reset, Bruno Chabas, head of Dutch floating production giant SBM Offshore told an audience at the Rio Oil & Gas event on Tuesday. Deep-water developments are one of the segments that can best respond to the global demand for hydrocarbons with lower break-even, lower environmental impact and lower carbon intensity, he argued. Investment levels for oil and gas are recovering somewhat after declining drastically, Chabas said, but he warned that financing will continue to face constraints such as the decision by the European Union and other key countries to end any access to export credit agency (ECA) financing for fossil fuels. “If ECAs are unable to finance oil and gas projects, this just leaves the commercial banks, but they too want to be on the side of decarbonisation,” Chabas said. Deep-water oil production currently runs at about 8.3 million barrels per day, representing 8% of global output, with Brazil representing about 36% of that. [The relative dangers and advantages of offshore vs onshore drilling is a controversial subject.]


GTR: Export finance in a post-pandemic world

(Global Trade Review, London, 26 October 2022) After a period of unprecedented disruption, the export finance market is now firmly focused on recovery, growth and innovation. The latest edition of GTR’s annual export finance roundtable gathered a group of regional and global industry heads to discuss the evolving role of export credit agencies (ECAs), changing patterns around claims, and the ever-growing importance of environmental, social and governance (ESG) reforms. This piece provides a twelve page GTR report/summary of a 7 person roundtable. In another GTR review, they note that in the wake of the pandemic, export credit agencies shifted their offerings and increased their exposure to domestic transactions. Some are now looking to regear these programmes to support wider government policies, such as bolstering manufacturing or tackling the climate crisis. As they do so, concerns are growing about over-concentration in certain sectors and the neglect of developing markets.


Russia may start providing ECA finance to importers of its grain

(Reuters, Moscow, 3 October 2022) Russia may start providing trade finance to importers of its grain as sanctions imposed on Moscow since it sent troops to Ukraine affect this financial instrument, Agriculture Minister Dmitry Patrushev said. Russia, the world's largest wheat exporter, is working with Russia's Eximbank and the Russian agency for export credit and investment insurance "to provide financing to foreign companies for the purchase of our products", Patrushev told the RBC business daily. Speaking about farmers being among those drafted into the military in Russia's partial mobilisation at a busy time in the sowing season, Patrushev said his ministry would make efforts to ensure the smooth running of the farming industry.


Ukraine calls on banks to support exports through new ECA mechanisms

(GMK Center, 30 September 2022) The Ministry of Economy calls on banks to support Ukrainian exports of goods, works and services during the war, using the products of the Export Credit Agency (ECA). The Ministry, together with the National Bank, developed a mechanism that allows issuing affordable loans for the implementation of export contracts without collateral under ECA insurance coverage. The agency launched the portfolio insurance mechanism for loans issued for the export contracts execution in June 2022. Today, financial support for export-oriented businesses is provided by Oschadbank, Ukrgasbank and Ukreximbank. As the first deputy prime minister – Minister of Economy Yulia Sviridenko noted, they have already financed the insurance of 24 loan contracts for UAH 70 million (US$1.9 m), which made it possible to export UAH 323.5 million (US$8.76 m). As GMK Center reported earlier, Ukraine expects to receive an additional $12.3 billion in financial support from the United States.


Brazilian ECA to fund Embraer aircraft exports to SkyWest

Brazilian state development bank BNDES and planemaker Embraer SA (EMBR3.SA) have entered a deal for the lender to fund exports of six E-175 jets to U.S.-based carrier SkyWest Inc (SKYW.O), the bank's managing director told Reuters. Bruno Aranha said in an interview that the loan was modeled as a post-shipment export credit, through which BNDES will fund the exports and SkyWest assume the debt. Aranha said the bank could also help funding exports of Embraer's KC-390 military aircraft ahead, though noting that such deals could take longer to be completed as they would involve foreign nations and their public sectors.


Saudi Electricity Company lands Swedish ECA backed finance for Egypt electricity interconnection

(Global Trade Review, London, 28 September 2022) Saudi Electricity Company has signed a US$566.4mn export ECA backed facility agreement with Standard Chartered Bank and Sumitomo Mitsui Banking Corporation to support a Saudi Arabia-Egypt electricity interconnection project. The 14-year financing is guaranteed by the Swedish Export Credit Agency (EKN) and funded by the Swedish Export Credit Corporation (SEK). The landmark facility is structured on the concept of commodity murabaha – a cost-plus-profit arrangement which complies with Islamic finance standards. Coming after the two countries signed US$1.8bn worth of contracts in Cairo last year to build transmission plants and connect power grids, the electricity interconnection project is the first large-scale, high-voltage direct current interconnection between the Middle East and North Africa. Once completed, the project will allow Saudi Arabia and Egypt to exchange up to 3,000 MW of power.