(Price of Oil, Hiroshima, 20 May 2023) G7 Leaders in Hiroshima concluded that there is “an important role” for “increased deliveries of LNG” and that “publicly supported gas investments can be appropriate”, jeopardizing the 1.5ºC warming limit and directly contradicting last year’s G7 commitment to end international public finance for fossil fuels by the end of 2022. The G7 endorsement of increased gas finance comes despite strong opposition. Leading up to the Summit, activists organized over 50 actions in 22 countries to urge Japan and fellow G7 countries to end their support for fossil fuels and to stop driving the expansion of gas and other fossil-based technologies such as ammonia co-firing in coal-fired power plants. In their Leaders’ Communique, the G7 claim that “they are steadfast in their commitment to … keeping a limit of 1.5ºC global temperature rise within reach”. A true commitment to 1.5°C, however, requires the G7 to explicitly exclude continued investments in new upstream gas projects and Liquefied Natural Gas (LNG) infrastructure. Today’s G7 endorsement of increased gas investments came after a push from Japan and Germany, with Japan using its G7 Presidency to also promote other fossil fuel-based technologies such as hydrogen, ammonia and CCS. The G7 play a central role in enabling the global buildout of LNG infrastructure.
Newsletter
OECD ECAs urged to scale up climate ambitions
(Global Trade Review, London, 24 May 2023) The export credit agencies (ECAs) of OECD countries should take more ambitious action to protect the climate after pouring 77% of their spending into fossil fuel projects between 2018 and 2020, a campaign group has argued. OECD members pumped an annual average of US$41bn into fossil fuel exports during the three-year period, totalling almost five times the amount of financing provided for clean energy, according to NGO Oil Change International. The report uses energy finance data for OECD members with ECAs which held assets above US$1bn between 2018 and 2020. “This directly contradicts internationally agreed climate goals, including the Paris Agreement objective to align financial flows with the low-carbon energy transition,” says the organisation, which campaigns for an end to public financing for polluting energy sources. ECAs have come under increased scrutiny for their role in fossil fuel finance in recent months, and campaign groups called for strict curbs on such financing as part of the modernisation of the OECD framework on export credits, announced earlier this year. OECD Arrangement participants are meeting in Paris this week to begin drafting the text of the updated framework. It will likely result in an expansion of the types of projects classed as climate-friendly to include clean hydrogen and ammonia, low emissions manufacturing, zero and low emissions transport, and clean energy minerals and ores. The OECD Arrangement’s announcement of the modernisation package did not include any measures on limiting oil and gas support.
CSOs condemn G7 leaders for dangerous backsliding on gas, breaching commitments to end fossil fuel finance
(Oil Change International, Washington, 20 May 2923) G7 Leaders in Hiroshima concluded that there is “an important role” for “increased deliveries of LNG” and that “publicly supported gas investments can be appropriate” [i.e. by ECAs], jeopardizing the 1.5ºC warming limit and directly contradicting last year’s G7 commitment to end international public finance for fossil fuels by the end of 2022. The G7 endorsement of increased gas finance comes despite strong opposition. Leading up to the Summit, activists organized over 50 actions in 22 countries to urge Japan and fellow G7 countries to end their support for fossil fuels and to stop driving the expansion of gas and other fossil-based technologies, A majority of international public finance for fossil fuels is provided by OECD governed Export Credit Agencies – more than even Multilateral Development Banks – with 71% of export financing for energy going to oil and gas. OECD ECAs invested in 56% of new hazardous liquified gas (LNG) export terminal capacity built in the last decade (providing at least $81 billion total), helping drive the global fossil gas boom. Overall, about 42% of all fossil fuel finance [comes] from ECAs under the OECD supported midstream infrastructure activities, such as pipelines, LNG ports, and shipping. At COP26, the 2021 global climate conference in Glasgow, 34 countries and 5 institutions pledged to end direct international public finance for unabated fossil fuels by the end of 2022 and prioritize their public finance fully for the clean energy transition. A regularly updated OIC briefing tracks implementation efforts and assesses whether countries are on track to keep their stop funding fossils promise.
Chinese & foreign banks & ECAs bolster Belt & Road Initiative
(China Daily, Beijing, 11 April 2023) Some of China’s large State-owned commercial banks and foreign lenders have continuously consolidated the Belt and Road Initiative and expanded into new areas of business to align with China’s new development pattern and advance the country’s high-level opening up. As of the end of last year, the bank had followed up on more than 900 corporate credit granting projects in BRI-involved countries and regions, with total credit exceeding $269 billion. Between 2015 and 2019, BOC issued five series of BRI-themed bonds in seven currencies. The total amount was equivalent to $14.5 billion. China Construction Bank, as of the end of last year, had supported 342 projects in 60 BRI countries and regions, with a total financing quota of more than $50 billion. In addition, the outstanding balance of its international business guarantees reached $17 billion, covering projects in 112 BRI countries and regions. Standard Chartered, a UK-based international banking group, has extensive cooperation with domestic financial institutions and corporate clients in BRI countries and regions, said Jerry Zhang, executive vice-chairman and CEO of Standard Chartered Bank (China) Ltd, the group’s local subsidiary. Standard Chartered participated in a large solar power project in the Middle East. The contractors concerned were Chinese companies. While some of the financing was provided by the Export-Import Bank of China and the China Development Bank, European manufacturers also contributed to the project, which involved multilateral development banks, such as the Asian Infrastructure Investment Bank and the African Development Bank.
UK export credit agency gains £10bn in additional financing
(Institute of Export & International Trade, London, 4 April 2023) UK Export Finance (UKEF) has been granted an extra £10bn of capacity to support UK businesses selling overseas. According to a press statement, this brings the total cap on its financial exposure to £60bn and adds extra capacity to the agency’s work supporting UK exporters. UKEF says it provided £7.4bn in financing in the 2021-22 financial year, which supported 72,000 jobs in the UK. The government credit agency also states that, as part of its renewed focus on combatting climate change, the additional capability will help it focus on building long-term, sustainable growth.
Angolan food production plant supported by Deutsche Bank and SACE
(Trade Finance Global, London, 17 April 2023) Today, Deutsche Bank and SACE announced the close of a €57 million, 10-year lending facility in support of local food production in the Republic of Angola. This facility was guaranteed by SACE, the Italian Export Credit Agency (ECA), and Desenvolvimento de Angola (BDA). The facility will be used to fund an export contract with the Italian company, Andreotti Impianti Spa, and Carrinho Empreendimentos SA, a local Angolan company for the supply of a fully automated soybean and sunflower crushing plant. Located in Lobito, the plant will be the largest of its kind in Africa, with a throughput capacity of up to 4,000 tonnes of soybeans or 2,400 tonnes of sunflower seeds per day. Construction of the soybean and sunflower crushing plant will take approximately two years and is expected to create around 300 direct jobs and thousands of indirect jobs related to soybean and sunflower planting.
SINOSURE pulls out of Nigerian AKK pipeline funding
(Guardian.NG, Abuja, 19 April 2023) Financiers of the Abuja-Kaduna-Kano pipeline have pulled out of the project, citing an alleged 570% inflated contract sum, far above global threshold. Infrastructure and Commercial Bank of China (ICBC), Infrastructure Bank of China and China Export Credit Agency (SINOSURE) – were to provide 85% or $2.38 billion of the funding requirement. Their Nigerian counterparts, Oilserve and Oando, are to shoulder the balance 15% or $420 million. With this development, the project has been stalled, as there is no funding to cover cost of the second and third legs from Abuja to Kaduna and Kaduna to Kano. It was learnt that the Nigerian National Petroleum Corporation Limited (NNPCL), through the Nigeria Gas Transport Processing Company (NGTPC), had attempted to bridge the funding gap, but lacked the needed liquidity. Globally, the cost of high-pressure transmission gas pipelines is built at $800,000 per kilometre. In Nigeria, the Final Investment Decision (FID) for EPC was scheduled at $4,560,260 million, which is a 570% inflation above global standards.These examples clearly show that Nigeria has the highest cost of contract in the world. These companies cannot afford to go into cahoots with Nigerians because they would be easily caught when they submit their financial reports to their countries of origin.”
Export Credit Norway (ECN) covers 85% of Hungarian missile system purchase
(Daily News, Budapest, 22 April 2023) Hungary buys high-tech Norwegian missile system A 21st-century high-tech Norwegian missile system, NASAMS, Hungary is getting from Kongsberg, Norway’s premier supplier of defence and aerospace-related systems, will reinforce the country’s air defence from this year, Defence Minister Kristóf Szalay-Bobrovniczky said in Kongsberg. The NASAMS system is expected to be inaugurated in Hungary in August, the ministry said. Hungary signed the contract on the NASAMS system in November 2020. In March 2021, the country signed a financing agreement with Export Credit Norway (ECN) and the Norwegian Export Credit Guarantee Agency (GIEK) that will cover 85 percent of the 410 million euros cost of the NASAMS. The NASAMS, used widely among NATO members, will replace Hungary’s more than 40-year-old Soviet missile system, MTI wrote.
Five decades later, UKEF-backed Iran missiles deal lands in court
Global Trade Review, London, 17 April 2023) UKEF is suing BAE Systems, one of its biggest clients, over contracts for the supply of missiles to Iran in the 1970s. The UK’s export credit agency is trying to recover £13.9mn it paid to the defence and aerospace giant in the 1980s, under three export credit insurance policies issued between 1973 and 1977. A trial is set for London’s High Court on May 8. The government guaranteed contracts for the supply of weapons, spares and maintenance for BAC’s Rapier surface-to-air missile systems to Iran, then led by the Western-backed autocrat Shah Mohammed Reza Pahlavi. In around 1980, BAC called on the guarantees due to “their Iranian counterparty’s non-performance” under the contracts, according to UKEF’s statement of claim in the case. The document does not describe the reason the contracts fell apart but in 1979 the Shah was overthrown by a popular uprising that became the Islamic Revolution, and was replaced by a clerical regime hostile to the UK.
Italian credit agency SACE to allocate additional USD 1.1bn for Ukraine
(Euromaidan Press, Kiev, 26 April 2023) In addition to the previously announced €500 million ($522 million), the Italian Export Credit Agency SACE will allocate an additional €1 billion ($1.1 billion) to support trade and financial operations. This is a highly important signal for Italian business, as reported by Interfax-Ukraine, referencing the statement by Prime Minister of Ukraine Denys Shmyhal during the briefing in Rome.During his meeting with Prime Minister Shmyhal, Italian President Sergio Mattarella advocated for Ukraine’s swift EU accession.
