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(Bloomberg) – Through its little-known industry financial agencies, Germany, Italy and France have been among the biggest backers of Russia’s oil, fuels and petrochemical advances in recent years, helping to enrich and isolate the country as it prepares to invade Ukraine.
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Since Russia’s annexation of Crimea in 2014 through the end of 2021, German, Italian and French export credit agencies have secured approximately $13 billion in investments for projects in Russia, according to exclusive data compiled by the Global Strategic Communications Council, a global nonprofit network. of meteorologists. German and Italian state-owned banks lent another $425 million.
Many funded projects have ties to sanctioned individuals, adding Leonid Mikhelson, Russia’s second-richest person, and Gennady Timchenko, a close associate of Vladimir Putin. Germany and Italy agreed on $4 billion in pledges linked to Russia’s largest herbal fuel processing plant, run through Gazprom PJSC, which it sanctioned in February. Its lead executive, Alexey Miller, has been under sanctions since 2018.
The five — Euler Hermes, SACE, Bpifrance Assurance Export, KfW-IPEX Bank and Cassa Depositi e Prestititi — told Bloomberg they stopped new policies or loans to Russian projects after the invasion of Ukraine and said they were complying with applicable sanctions.
Many export credit agencies operate without much public oversight. They provide credit guarantees, loans and insurance to domestic corporations doing business in riskier parts of the world. French, Italian and German corporations would probably have remained outside Russia for the past decade. without this support, said Marcos Alvarez, director of insurance for global monetary establishments at DBRS Morningstar, a rating agency. “They are agents of last resort. “
The United States banned its export credit firm from transacting in Russia after the annexation of Crimea. And while European agencies have halted new business in Russia, Oleg Ustenko, Ukraine’s top economic adviser, is pressuring them to make it permanent. it includes them in a long list of money industry players who, he says, helped finance Russia’s war.
“These state monetary establishments have made their governments complicit in Putin’s war crimes, filling Russia’s war chest and helping the Kremlin secure new export routes for its bloody oil and gas,” Ustenko said.
Material risk
Agencies are not required to disclose the main points of loans and the promises they make, so it’s complicated, as it should be, to estimate their current exposure to Russia-related claims, analysts say. The typical duration of funding your assignment is 10 to 15 years. , suggesting that billions of dollars in promises and loans may be notable today.
In June, Russia defaulted on its sovereign debt for the first time in a century. Corporate borrowers have also defaulted, billions of Russian debts in technical default.
No claims have been submitted to the German export credit firm since Russia began its invasion of Ukraine on Feb. 24, according to a spokeswoman for the German Ministry of Economic Affairs and Climate Action who answered questions from Euler Hermes. The other corporations declined to comment on any claims similar to their Russian debts.
There is a “significant threat exposure” for FFS that offer promises in case of lack of Russian names, Alvarez said. But “with all the credits and the government of your country, they will probably be stored, and that means taxpayers money. “
SACE’s exposure is “closely and thoroughly monitored,” a company spokesman said. Like Euler Hermes, Bpifrance and CDP, he refused to provide percentages of the existing figures. 2022 “in accordance with all valid sanctions”.
Sourcing in Asia
At least two of the projects receiving European money have helped Russia expand export routes to Asia, which in turn has become imperative to Russia’s ability to mitigate the effects of Western sanctions.
In 2021, Euler Hermes, on behalf of SACE of Germany and Italy, secured 25% of the $9 billion in debt financing for the Amur Gas Chemical Complex, a petrochemical facility in eastern Russia. owned through the Chinese company Sinopec.
In the same year, SACE agreed to secure more than $560 million in loans from Italian banks CDP and Intesa Sanpaolo for Arctic LNG 2, a questionable fuel drilling facility in the Russian Arctic Ocean. Production is scheduled for 2023 and, once underway, it would be consistent to allow Russia to export nearly 20 million tons of liquid herbal fuel this year, mainly to Asian markets.
In March, bank loans were suspended, but deals were cancelled, Reuters reported. SACE and CDP declined to comment on the matter with Bloomberg.
“Massive Delays”
State monetary institutions have been under pressure to reduce investment in fossil fuel development in Russia and elsewhere since before the war, as part of a broader crusade to reduce emissions and oppose the effects of climate change. ACEs are among the most enthusiastic funders of polluting projects, offering 11 times more for fossil fuels than renewables from 2018 to 2020, according to an October report through Oil Change International.
FFS are “big laggards” when it comes to climate policy, said Nina Pušić, ECA strategist at Oil Change International. “Part of the explanation is that they were able to hide closed doors. “
Germany, Italy and France were among the 34 countries that agreed last year to end public investment for coal, oil and fuel projects until 2023.
“The way FFAs can be consistent with your country’s climate and human rights commitments is to avoid supporting any new oil, fuel and coal projects with public money,” said Lucie Pinson, executive director of Reclaim Finance in France. “Your entire mandate desires to be changed. “
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