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Report
November 29, 2010

The people of Southern Sudan are a little more than one … whether to remain part of Sudan or become an independent … war between the North and South . Two votes are scheduled …

Transcript
February 22, 2021

career covering the global south , with particular interest … transition countries like Sudan, Mali, South Sudan . So these are ongoing issues … southern Nigeria, in the south and in Abuja I think there’s …

Commentary
February 8, 2021 | By Nikos Tsafos

Iraq, Kenya, Romania, South Africa, Sudan, Uzbekistan, and Vietnam. The emphasis at the DFC was lower but still notable (DFC press releases are shorter anyway and often just used the word “energy”). By contrast, “climate change” appeared in only two EXIM press releases, once in the context of a meeting with other export credit agencies. The phrase appeared twice in DFC press releases, both times to describe the mandate of a foreign institution with which the DFC was meeting. But rhetoric does not equal transactions and looking at the money flow tells a different story. EXIM’s authorizations in FY 2019 and FY 2020 were modest, far below its activity before it lost its quorum in 2015 (although some of that is due to Covid-19). In oil and gas, EXIM authorized a $5 billion loan for Mozambique LNG in September 2019 (later changed to $4.7 billion). EXIM also financed a few transactions for oilfield services—$18 million to Argentina and $400 million to Mexico—and it supported the marketing affiliate of a U.S. LNG project with $50 million. DFC’s activity on gas was greater, even if it trailed EXIM in dollar terms. DFC extended political risk insurance to Mozambique LNG (up to $1.5 billion) and to a company that imports gas into Ukraine ($62 million). It financed a gas power plant in Mozambique (up to $200 million) and a gas processing facility whose output will generate power in Kurdistan (up to $250 million). It also capitalized the Three Seas Initiative Fund to the tune of $300 million, although it is not clear yet what projects that money might support. Together, these transactions made up about 29 percent of the $8 billion in authorizations from DFC in calendar year 2020. These numbers far exceed what the two organizations did for renewable energy. EXIM has a mandate to promote environmentally beneficial goods, of which renewable energy is a subset. In FY 2020, it authorized only $29.5 million for renewable energy exports—in fact, over the past 10 years, EXIM’s authorizations for renewable energy amounted to roughly $1.7 billion, almost a third of the amount allocated to one LNG project (Mozambique). At its peak, in FY 2011, EXIM authorized over $700 million for renewable energy, more than it spent over the last eight years combined. DFC’s record on renewable energy was stronger in 2020. It financed solar projects in Mexico ($241 million) and Costa Rica ($15 million), and provided a modest amount to jumpstart a geothermal project in Ethiopia ($1.55 million). But most of its emphasis was on solar power in India, where it executed a number of transactions, totaling roughly $435 million. At the same time, the total of almost $700 million was half as much as the political risk insurance for Mozambique LNG. In retrospect, the Trump administration had a mixed record in geoeconomics. It reorganized the institutions charged with supporting exports and private investment overseas, granting an extended authorization to EXIM and endowing DFC with more firepower and more tools than OPIC had before. But in practice, it is hard to discern much change, at least in the energy sector. The projects funded over the past few years were similar to the projects funded before. The Trump administration upped the rhetorical ante but delivered little by way of results. EXIM advertised its Program on China and Transformational Exports; but besides references to China in transactions that it would have approved anyway, there was little visible change. Geoeconomics under Biden As the Biden administration conceives a new strategy, it faces some choices that are simple and some that are hard. The easy decision would be to stop supporting fossil fuel projects. It would be hard to see a Biden EXIM, for instance, financing a project like Mozambique LNG. On its own, such a shift would have major repercussions. EXIM played a vital role in developing the world LNG market: between 1996 and 2019, EXIM authorized over $17 billion (constant 2019 dollars) in 14 transactions for projects in Trinidad, Qatar, Oman, Malaysia, Nigeria, Peru, Papua New Guinea, Australia, and Mozambique. Taking out EXIM from LNG finance is a bit hit. But not every gas project will be as clear cut. DFC financed a gas processing facility in Iraq, a country that flares gas, imports gas and electricity from Iran, faces chronic power shortages, and relies on oil revenue to fund its most basic operations. Is it sensible to deny financing to a project with such obvious benefits for development and national security? The same question could be posed for a gas-fired power plant in Mozambique: how can the United States lend money to support gas exports but not a project to provide power in-country? The intersection between export financing and national security will present other dilemmas. OPIC provided guarantees to export gas from Israel to Egypt, supporting a bipartisan effort to encourage gas trade in the region, with an eye to improving political relations. In Ukraine, OPIC and later DFC supported efforts to access non-Russian gas. And there are many countries that have been promised U.S. finance over the past few years. The administration in Washington may have changed, but those governments have not. Is there space for national security and foreign policy considerations, or will climate be the sole lens through which finance decisions are made? In reaching that equilibrium, the administration could benefit from clearer thinking about gas investments overseas. There are two (mutually exclusive) fears about gas infrastructure: that a project might “lock in” emissions because once built, it will operate for years; or that a project might become “stranded” if it becomes uncompetitive before it has paid back its debt or earned a return for its owners. There are ways to guard against these risks. For example, one could shorten the assumed economic life of a project or embed a decommissioning date to a project financing agreement or approval. Without such creativity, the Biden administration might be faced with very difficult tradeoffs. It is equally important to think clearly about how much leverage the United States has actually gained from its gas statecraft. There is a tendency in Washington to think that U.S. gas has upended energy geopolitics, especially in Europe, and to think that the promise of U.S. finance has materially advanced U.S. interests. The reality is more complicated. In practice, the most important contribution of the United States to gas security has been to produce more gas, thus changing the supply and demand dynamics for everyone; diplomacy has been less impactful. And since the United States has not been able to close any of the gas-related deals that it has touted, there is not much that is lost by walking away from pushing downstream gas finance. The more important objective, however, will be to encourage renewable energy. There is, sometimes, a tendency to assume that as long as we restrict capital to fossil fuels, then renewable energy will benefit. But the United States can limit fossil fuel financing without channeling more money to renewable energy—we should assume that less money for fossil fuel projects automatically means more money for renewable energy. One task consists of refusing to fund projects that are normally financeable; the other to develop a robust enough pipeline of projects that could benefit from public finance. The record on renewable energy from EXIM and DFC is not encouraging, although it is hard to know if that is because the private sector is not asking for help or the institutions are not extending it. DFC financed renewable energy projects in four countries in 2020, with most money going to India. EXIM extended a trivial amount of capital for renewable energy, and it is hard to believe that a mere shift in focus is what is needed. Some reforms already underway might help—for instance, lowering the domestic content requirements that projects must meet to qualify for export finance. But EXIM and the DFC depend on a certain level of activity and U.S. competitiveness—they can amplify what exists, supporting domestic manufacturing and exports of low-carbon energy technologies, but they cannot create something that does not exist. The agenda vis-à-vis international financial institutions is different. Most institutions are aligned on the need to allocate a certain portion of their capital to climate projects—and that spending is already rising. The challenge is to accelerate their activity—to do more, faster, better, and ideally in a way that limits the space for China to promote projects with low standards. The Biden administration is well aware of this, of course, which is why the president’s executive order mentioned the “voice and vote of the United States.” Both will be absolutely essential to bring about this necessary shift in international public finance. The final challenge will be to engage other export credit agencies that fund fossil fuel projects. The European Investment Bank (EIB) has already decided against gas, although there are still questions about whether any gas projects could qualify for funding. The Japan Bank of International Cooperation (JBIC) also finances coal and gas projects, including in the United States (the Cameron and Freeport LNG projects were financed by JBIC). These discussions will not be easy—the United States and Japan have differed on coal financing for years. In the end, this strategy requires that the world’s largest gas producer and consumer and an emerging LNG power stop financing gas projects overseas and help wean the world off gas. By definition, such a plan will be contested domestically, limiting export markets for a product that the United States has in abundance and which successive administrations have regarded as a geopolitical asset. Over time, such a shift is necessary. But it requires a deep change in thinking—a clear understanding of what the United States is giving up, and some creativity to find a balance between competing domestic and foreign policy priorities. Nikos Tsafos is deputy director and senior fellow with the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C. Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s). © 2021 by the Center for Strategic and International Studies. All rights reserved.

Critical Questions
June 21, 2011 | By Daniel F. Runde

tenure as foreign minister of South Korea, Ban built a reputation … successfully embodied by the postwar South Korean experience, a process … a university student in South Korea during the 1960s, he …

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