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- One Disaster After Another: Will EXIM Chairman Reed Ever Learn?
One Disaster After Another: Will EXIM Chairman Reed Ever Learn?
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by Kate DeAngelis, international finance manager
EXIM continues to invest in projects with severe environmental impacts, human rights abuses, and detrimental effects on local communities and public health. While EXIM claims to reduce risk in its portfolio, its consistent investment in the fossil fuel industry highlights the poor judgment of Trump-appointed Chairman Kimberly Reed and the Bank’s other decision makers.
At no other time has this been more evident than during the COVID-19 crisis. The pandemic has exposed the vulnerability of fossil fuel markets and underscored some of the worst impacts of the fossil fuel industry. Many oil and gas projects have continued to operate through the pandemic, putting workers and communities at an increased risk of infection by the coronavirus. Fossil fuel projects backed by EXIM have become riskier as the likelihood of these assets becoming financially unviable increases. Whether or not public financiers like EXIM continue to finance these dangerous projects will have major lasting implications.
Now under Reed’s leadership, EXIM is set to double down on the Mexican state-owned oil company, Pemex, with $400 million in support – despite the fact that over 100 deaths have occurred at Pemex facilities. Even with this deadly history, EXIM voted on the project without ever publicly releasing the environmental and social impact assessment for the project, demonstrating Reed’s push to put fossil fuel profits over worker safety.
In addition to Pemex, EXIM also recently approved a $82.9 million line of credit for YPF, an Argentinian oil and gas company. EXIM failed to produce any environmental and social impact assessment for the deal, claiming that this financing was not for any specific project that could be assessed. But EXIM’s own announcement indicates otherwise, stating that the financing will be for “upstream and downstream activities, including equipment, materials, and services.” And in February of this year EXIM announced its support for YPF “to be utilized in development of the Vaca Muerta Formation.” Unless Reed thinks oil and gas magically comes out of the ground by itself, she clearly knows EXIM’s support will be used to develop specific upstream and downstream projects in Vaca Muerta — in the absence of the required environmental and social impact assessment.
Since Vaca Muerta is one of the most financially vulnerable fossil fuel projects in the world right now it’s no wonder EXIM wanted to downplay its support for the project. The United Nations has already spotlighted the project’s harmful impact on indigenous groups and the environment. Fossil fuel companies have quickly moved into the region to exploit its resources with little regard for local communities or the rights of indigenous groups in the area. Furthermore, oil and gas extraction in Vaca Muerta will contribute significantly to the country’s carbon dioxide emissions.
EXIM’s financial support for dangerous fossil fuel projects extends beyond central and South America – it recently approved $4.7 billion in financing for a liquefied natural gas (LNG) project in Mozambique. This project will emit several million tons of carbon dioxide annually, threaten nearby protected areas, and have severe impacts on local communities. The gas development already displaced many Mozambicans living off the land near the coast, forcing them onto more arid land further inland. Hardly any of the jobs for these projects are going to locals, and without the extremely expensive infrastructure required for natural gas distribution and use domestically, nearly all the LNG will be exported rather than benefit Mozambique.
Transnational corporations operating in the region refused to shut down during the onset of the COVID-19 pandemic – a dangerous decision that helped the gas site become the epicenter of Mozambique’s COVID-19 outbreak. The exploitation of the region has led to more extremism in the area which has been met by a greater military presence. Despite all the negative consequences, EXIM recently re-confirmed its commitment to funnel billions of dollars into Mozambique LNG extraction.
Sadly, these destructive projects are nothing new at EXIM. In 2010, EXIM provided the Sasan coal plant and mine in India with nearly $1 billion in financing. Since then, this project has caused an alarming number of fatalities, including six deaths under Reed’s watch earlier in 2020 when a wall of one of the plant’s fly ash dumps broke, releasing a flood of fly ash. Among these six fatalities were two children. Additionally, the incident polluted nearby land and water resources. This comes in the wake of at least previous 27 deaths the Sasan coal plant and mine.
As evidenced in a 2015 EXIM Office of Inspector General report, the project has demonstrated consistent negligence in complying with proper safety precautions. The project developers also failed to follow internationally accepted practice for project-affected community consultation. These safety concerns lead to a complaint being filed at EXIM in 2015, but EXIM decided that Sasan’s safety regime had improved even though it obviously had not. According to numerous media reports, ash from the coal plant has caused severe air pollution, harming nearby crops and increasing the risk for various respiratory health conditions like asthma. The long history of fatalities and public health risks associated with the project demonstrate a clear lack of adequate safety measures. Regardless, under Reed’s direction, project fatalities continue to mount, yet EXIM maintains its support for Sasan. The only public statement Reed has made on the debacle was in response to Congressional questioning, and even here her answer was only to say that the agency had met with Friends of the Earth and a couple other groups. As if one mere meeting was sufficient to address the loss of lives, livelihoods, and homes. Recently, Reed has traveled all over the world, but has failed to visit Sasan despite the dire need to ensure further deaths don’t occur there. Preventing loss of life at EXIM-supported projects is obviously not a priority for Reed..
EXIM has also provided over $800 million in financing to the Kusile coal plant in South Africa. Eskom, a South African public electricity utility provider, is EXIM’s applicant in the financing, and Black & Veatch, a U.S. engineering firm, is EXIM’s supported exporter. Eskom is now reportedly under investigation for allegedly violating tender laws in its contract with Black & Veatch. The cost of the continuing contract with Black & Veatch increased to over 100 times the initial cost. The cost of the Kusile coal plant has reportedly doubled. This is among several other corruption allegations that have been brought against Eskom in recent years. Despite the U.S. Government’s $800 million exposure on the Kusile plant, Reed has not publicly uttered a word on the investigation, but otherwise boasts about “cracking down on bad actors” on a separate $3 million fraud case.
In addition to corruption allegations and investigations, the Kusile coal plant itself is already creating harmful environmental impacts. Fly ash from the plant has polluted the air and problems with the plant’s wastewater facility have raised serious concerns. Cost overruns from this project are also crowding out financing that could help support renewable energy projects in the region.
Even with these consequences, EXIM continues to finance Kusile and other disastrous fossil fuel projects across the world. EXIM has provided funding to corrupt companies and projects that have displaced local communities and are leaving a massive environmental footprint. The decision to support these projects demonstrates clear negligence in the decision-making process of Chairman Reed and EXIM. How many more people need to die and how many more livelihoods must be ruined before Chairman Reed learns that EXIM should not support fossil fuel projects?
Header image shows Vaca Muerta development. Image via BNamericas.