Briefings & reports from ECA watch members

ECA Watch letter to European Commission re ECAs and corpoate social governance

The European Commission is working on a proposal for a directive on corporate social governance, which will include a regulation of the human rights and environmental due diligence (HREDD) obligations of corporations. We urge the proposed new regulation to become legally binding on the due diligence obligations of ECAs of member states, to make ECAs liable for its implementation and to implement export credit insurance as an enforcement mechanism for the legislation., This directive should oblige ECAs to monitor and follow HREDD policies and would ban companies, that have violated their duties under the directive, from ECA support.

New report reveals: German government sabotages international energy transition through guarantees for oil and gas industry

Berlin 15.09.2021

A new report by the environmental organisations urgewald and Deutsche Umwelt-Hilfe (DUH) shows that the German government is supporting climate-damaging oil and gas projects with guarantees worth billions of euros.

  • German government provides support for oil and gas projects through foreign trade promotion
  • 144 export guarantees in the oil and gas sector from 2015 to May 2021 worth over 11.75 billion euros
  • Majority of projects supported are located in countries where significant human rights violations take place

In the report, the organisations examine climate-damaging oil and gas-related export credit guarantees as well as untied loan guarantees (UFK guarantees) for the period 2015 to May 2021. During this time, the German government approved 144 export guarantees in the oil and gas sector with a total volume of more than 11.75 billion euros via Euler Hermes AG. Of the 28 countries in which oil and gas guarantees were granted, 15 are considered “not free”, according to Freedom House. The report is based on data made available to the two organisations by the German government through a Freedom of Information Act request.

Export guarantees, also known as “Hermes guarantees” because they are processed by Euler Hermes AG, are granted to companies and banks based in Germany to secure their export transactions, often aimed at developing and emerging countries, against payment default. Untied loan guarantees (UFK guarantees) are granted to banks when they are involved in transactions that serve the supply of raw materials to Germany. During the period under review, no UFK guarantees were granted – not because the German government opposed them, but because applications were withdrawn or not submitted after preliminary enquiries.

Gas expert Andy Gheorghiu, author of the report, says: “It is appalling how much the German government is sabotaging the international energy transition with these guarantees by helping to lock-in the continued use of oil and gas internationally. In particular, it is outrageous that the German government continues to classify natural gas as a support-worthy resource in its raw materials strategy, even though its climate-damaging effect has been scientifically proven.”

Sascha Müller-Kraenner, DUH’s national director: “By promoting oil and gas projects abroad, the German government is further fuelling the climate crisis. This does not serve German interests, but puts the future of young people at risk. In order to comply with the Paris climate limits, natural gas and oil production must be stopped as soon as possible. The British government is showing the way: it will no longer give money or support to fossil fuels abroad – an example that the new German government must follow.”

The report by DUH and urgewald lays out a number of problematic projects that were supported with guarantees in the period under review:

  • – the Amur petrochemical plant/ Eastern Russia,
  • – the Nord Stream 1 and 2 pipelines,
  • – the Yamal LNG complex in Russia and
  • – the Gas Natural Acu liquefied natural gas terminal and power plant in Brazil.

The report also highlights the Arctic LNG 2 project, another liquefied natural gas project in the Arctic, for which a guarantee application is pending. The procedure is still ongoing. Guarantees for this project have also been applied for in Italy and France. Although the French company Total is one of the main sponsors of the project, President Macron indicated at the World Congress of the IUCN (International Union for Conservation of Nature) in Marseille at the beginning of September2021 that his government will not support the project for climate and biodiversity reasons.

Regine Richter, energy expert at urgewald, says: “The German government shouldn’t support this project either if it wants to retain a shred of climate credibility. Euler Hermes itself lists the project as having potentially significant environmental, social or human rights impacts. The Arctic LNG 2 production licences for the gas run until 2100, well beyond the time when the world must be climate neutral.”

DUH and urgewald make five key demands on the German government in the report:

  1. The German government’s raw materials strategy and the criteria for UFK guarantees must be changed so that the supply of fossil fuels (including natural gas) is no longer eligible for support.
  2. The German government must define clear exclusion criteria for Hermes guarantees for all fossil fuels and the associated value chains.
  3. Human rights violations and environmental damage – including destruction and pollution of water resources, loss of biodiversity or negative climate impacts – must be examined intensively and comprehensively in the project appraisal. Projects with a negative rating in any of these categories may not be supported.
  4. Projects affecting the rights of indigenous peoples must be excluded if the latter have not given their free, prior and informed consent.
  5. Transparency about guarantees and the projects they support must be increased.

 

ECA Watch applaudes European Ombudsman demand for greater EU ECA transparency on human rights and environmental impacts

PRESS RELEASE

ECA-watch applauds the European Ombudsman’s ruling on maladministration of the European Commission in checking compliance of European Export Credit Agencies with EU law

In a landmark ruling1, the European Ombudsman has found that the European Commission failed to fulfil its legal obligation to assess the compliance of EU-based official Export Credit Agencies (ECAs) with EU laws and human rights obligations.

The Ombudsman has recommended that changes be introduced to the EC’s reporting procedures. If implemented, the ruling could mean that EU-based ECAs – national bodies that give financial support to companies doing business overseas, including in ‘risky’ markets – are to be named and shamed where their activities fail to meet EU human rights and environmental obligations.

The Ombudsman’s decision, which has now been made public, responds to a complaint2 filed by the NGO coalition ECA-Watch in early 2016.

Under Regulation (EU) No 1233/2011, the European Commission (EC) is required to provide the EU parliament with an annual evaluation regarding the compliance of ECAs with Union objectives and obligations”.3 Such obligations include “consolidating democracy, respect for human rights and policy coherence for development, and the fight against climate change”.

ECA-Watch complained that the EC’s annual report to Parliament was wholly inadequate and constituted maladministration.4 No assessment of compliance by EU member state ECAs was included in the report.

In her decision, the Ombudsman acknowledges the blatant maladministration of the Directorate General for Trade of the European Commission in its reporting on ECAs.

“We applaud this decision which vindicates all our concerns and the long unheard demand for public accountability for European export credit agencies”, stated Antonio Tricarico (Re:Common/ECA-Watch, Italy). “The time has come that secretive bodies such as export credit agencies and their oversight institutions prove that they respect EU law and objectives when they support European exports and the generation of private profits in developing countries”.

The Berne Union5 is a global association of ECAs – standing for its 83 members from 73 countries around the world – that collectively underwrote around USD 2.3 trillion6 of new business in 2017. This sum amounts to over 14 percent of world trade. Of the Medium and Long-Term transactions that usually are covered by government backed ECAs, European ECAs are estimated to cover about 15 percent, which comes down to an amount of USD 80 billion for the year 20167. These numbers illustrate the enormous but typically hidden influence of ECAs on the world today.

In her initial assessment of the complaint, the Ombudsman found that the Commission’s methodology and procedures could be improved. She suggested that the Commission should engage in a dialogue with Member States and other stakeholders with a view to improving the template used by Member States in compiling the reports on export credit agencies which they are required to submit to the Commission each year. The Ombudsman also proposed that the Commission, for its part, should enhance the analysis and evaluation content of the annual reviews of export credit agencies which it submits to the European Parliament.

However, the Commission rejected the Ombudsman’s proposals on the grounds that their implementation would require an amendment to existing legislation.

The Ombudsman disagreed with the Commission’s position and has now made recommendations to the Commission in the same terms as those of her earlier proposals. In particular, the Ombudsman believes that the Commission’s annual review, which it sends to Parliament, should amount to more than a compilation of the content of the annual reports received from the Member States and that it should contain an informed and detailed evaluation of the performance of the export credit agencies, particularly, as regards respect for human rights and the environment.

The European Commission has three months to address the Ombudsman’s recommendations.

“ECA-watch is determined to ensure that DG Trade and European ECAs comply with EU law. It is a matter of accountability towards the European Parliament and European citizens. We will finally see whether DG Trade has the honesty to admit the failures of EU export credit agencies and their role in undermining development, human rights and the environment, in particular in developing countries”.

Contact: Antonio Tricarico,

Re:Common, Italy

+39.328.84 85 448

 

1 https://www.ombudsman.europa.eu/cases/recommendation.faces/en/95605/html.bookmark

2 Complaint number 212/2016/JN

4 Under Regulation 1233/2011, EU Member States must submit annual reports on their export credit programmes to the European Commission. Based on these activity reports, the Commission submits an annual review of the activities of export credit agencies to the European Parliament. This review includes an evaluation of export credit agencies’ compliance with the EU’s objectives and obligations including respect for human rights and the protection of the environment.

5The Berne Union is an international not-for-profit trade association, representing the global export credit and investment insurance industry.countries.

6 Berne Union 2017 Statistics: https://www.berneunion.org/DataReports

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Export credit agencies lurk in the shadows of responsible financing

The full publication of this new 136 page report is available here.

Between 2015 and 2017, Finance & Trade Watch and Bankwatch, together with their national partners, researched export credit agencies (ECAs) in seven countries of the European Union (Austria, Czech Republic, Croatia, Hungary, Poland, Romania and Slovakia). The aim of this research was to assess how the procedures and performance of these institutions comply with the relevant national, European and international regulatory frameworks. This first-of-its-kind research examines ECAs in the ‘new’ EU Member States and compares these with an example from the EU 15 – the Austrian ECA OeKB – as well as examples from other EU 15 countries. It shows regulatory gaps and offers a range of policy recommendations.

Export credits are big business. Globally, members of the industry’s Berne Union, both state and private ECAs, insured approximately USD 1.9 trillion per year between 2012 and 2016. That amount far exceeds the total investments of multilateral lenders such as the World Bank and the regional development banks

Key points

  • We  investigated export credit agencies in Poland, Czech Republic, Slovakia, Hungary, Croatia and Romania. We found that these institutions finance various projects around the world that cannot otherwise access financing.
  • Austria’s Oesterreichische Kontrollbank was also included in the study in order to benchmark ECAs from central and eastern Europe with an ECA that has already made several positive steps in the areas of public participation and transparency.
  • The main problem with the ECAs examined in this study is a lack of transparency around their operations, preventing the public from questioning their dubious investments, particularly in fossil fuels.
  • ECAs often operate outside the reach of national legislation, for example by not following targets for greenhouse gases reduction established by the ratification of Paris Agreement.
  • While ECAs are supposed to adhere to the so-called OECD Common Approaches for environmental and social protections, this normative framework is voluntary and unable to guarantee that harmful investments are prohibited.
  • Standards for ECA reporting to European Commission are too general. There have been complaint submitted by colleges from ECA-Watch to Ombudsman two years ago. There is chance Ombudsman will make press on EC to make the reporting more detailed and stricker.

Background facts and figures

  • None of the ECAs covered by the study publish all information about the projects they support after the fact.
  • The Dutch ECA Atradius DSB publishes a list of cases including projects with credit terms under two years on monthly basis, which is the exception, rather than the rule, for ECA disclosure requirements.
  • Collectively the ECAs featured in this report command nearly EUR 30 billion
  • The volume of ECA support accounts for 11 per cent of world trade.
  • In almost all countries included in the study, court cases have been filed because ECAs have not provided information on request.
  • The Czech Republic has a long history of failed projects in the coal sector, but seems determined to keep this dying industry alive

Resources

Media contacts

Thomas Wenidoppler
Finance & Trade Watch
tomas.wenidoppler@ftwatch.at

Dan Heuer
Centre for Transport and Energy
CEE Bankwatch Network
dan.heuer@ecn.cz

 

OECD Agreement on export credits and coal plants: WWF raises key implimentation issues

(WWF, Brussels, 8 March 2016) A WWF short brief to the OECD’s Export Credit Working Group (ECG) highlights scientific research showing that new coal plants are not compatible with 1.5/2°C climate change scenarios, and what this should mean in terms of implementation of the OECD sector understanding on export credits for coal-fired electricity generation adopted on 17 November 2015. A full briefing with detailed NGO views/recommendations will be presented at the next OECD ECG meeting planned for the 6th to 10th of June 2016. In order to contribute to the fight against climate change, the OECD Export Credit Group on the 17th of November 2015 adopted a ‘Sector Understanding on export credits for coal-fired electricity generation projects’. This Sector Understanding has been added as Annex VI to the Arrangement on Officially Supported Export Credits.
 

Suez canal expansion contract signed

Both ENDS, 23 October 2014

On 18 October it was reported that the Egyptian authorities signed a contract with an international consortium of dredging companies to expand the Suez canal[1]. The consortium includes the two main Dutch dredging companies: Royal Boskalis Westminster and Van Oord, as well as the Jan de Nul Group from Belgium and the National Marine Dredging Company (NMDC) of Abu Dhabi. The total contract values an amount of US$ 1.5 billion. Each of the two Dutch parties involved are reportedly entitled to an equal share of US$ 375 million[2]. Apparently the consortium defeated a Chinese consortium that competed for this deal.

The expansion works include the dredging of a 75 km long new parallel canal as well as the widening and deepening of existing stretches. Thus the capacity of the canal is supposed to be doubled, allowing for an increase of revenues from the waterway of US$ 5 billion to US$ 13.5 billion. However some economists express serious doubts about these optimistic figures, as they largely depend on the cost of capital required for this investment, as well as developments in global trade. The project is a flagship project of the new Egyptian President Abdel Fattah al Sisi, who came to power last year following a military coup he led as army general. He ordered the project to be finished by August 2015, which means that all the work has to be completed in a record breaking short period. Due to this the dredging consortium is currently rushing to bring at least 17 cutting dredgers in from all over the world as quickly as they can.

The project will largely be financed by bonds that have been sold to Egyptian citizens only. Additional project finance may have been made available from Arabian Gulf States. The Dutch dredging companies taking part in the consortium are said to have negotiated an advanced payment of 15% of their share in the project to avoid payment defaults similar to previous experiences in Egypt[1]. Despite these arrangements however, also ECA-cover by Atradius DSB is foreseen as part of the deal. The CEO of Boskalis – Mr. Berdowski – expressed confidence that this should not be a problem[2].

Nevertheless one already should take note of serious concerns that provide grounds to question whether this project should at all be eligible for a cover from Atradius DSB. Early September the English newspaper The Guardian reported that already thousands of people have been evicted for this project without compensation, while a total of 5.000 houses would be under threat of eviction[3]. Evicted villagers have simply been told that they had no right to live in the area, and some persons who protested the army making this claim have been arrested already. Also major concerns have already been raised on environmental impacts such as groundwater problems due to the absence of necessary research that should precede implementation[4].

For any Cat A project Atradius DSB would be required to publish an EIA for a public consultation period of at least 30 days before deciding on the export credit insurance application. In light of the tight timeline for the project ordered by President Al Sisi, it will be worthwhile to monitor how Atradius DSB will handle the announced application for this project. It may prove another test case for how Atradius DSB will balance its mission to support Dutch companies abroad with its duty to protect the environment and the people affected by this project.

Bonny Island LNG project

 

ARCHIVE ONLY – NOT MAINTAINED Nigeria’s Bonny Island LNG Project Corruption Case Summary

Brown & Root (KBR), the British subsidiary of Halliburton, has been accused of offering a USD $180M bribe to Nigerian officials to secure a contract for the construction of the Bonny Island liquefied natural gas (LNG) plant. Other scandals have plagued the Bonny Island operations, and at the same time the operations threaten a large area of mangrove forests, which local people depend upon for fishing. The US ExIm Bank and the UK ECGD back this project. SACE of Italy and NCM (now Atradius) of the Netherlands also have provided backing.