The Department for Dodgy Deals: Ending the UK's support for toxic debt

The Department for Dodgy Deals Ending the UK’s support for toxic debt

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The Department for Dodgy Deals: Ending the UK’s support for toxic debt

Jubilee Debt Campaign works to eradicate the poverty and injustice that result from global debt, and campaigns for new structures to prevent the next debt crisis in developing countries.

Jubilee Debt Campaign The Grayston Centre 28 Charles Square London N1 6HT 020 7324 4722 info@jubileedebtcampaign.org.uk www.jubileedebtcampaign.org.uk Registered charity number 1055675 Company limited by guarantee number 3201959 We would like to thank: ■ Nic Benton for significant research work on this report ■ the Methodist Relief and Development Fund and the Scurrah Wainwright Charitable Trust for funding the research for this report and aspects of the accompanying campaign.

Design: Wingfinger Printed by Kolorco on FSC-certified chlorine-free paper with vegetable inks.

January 2011 © Jubilee Debt Campaign, 2011

Contents

The Department for Dodgy Deals Ending the UK’s support for toxic debts Preface Executive summary 1 The work of the ECGD

2

3

7

What is an Export Credit Agency?

7

Mountains of debt

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‘Forgiving’ ECGD debt

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How the ECGD deals with debt

11

Toxic debt

11

2 Case studies

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3 ECGD standards – weak and getting weaker

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Reckless projects continue

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Current standards – weak…

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… and getting weaker

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A race to the bottom – or the top?

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The problems with ECGD standards

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Standards are weak and getting weaker

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Impact assessments are weak and sometimes ignored

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Evaluation is non-existent

26

Debt is not properly taken into account

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Bribery and corruption

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4 Recommendations

29

CASE STUDY ONE

Supporting oppression in Indonesia

13

CASE STUDY TWO

Helping to rip off Kenyans

Drop the unjust debts

29

Respect human rights

29

15

Stop supporting the export of arms and fossil fuel technology

29

17

Crack down on corruption

30

18

Become accountable to parliament, the public and affected communities

30

Endnotes

31

14

CASE STUDY THREE

Underwriting a failed project in India CASE STUDY FOUR

Enabling corruption in Lesotho CASE STUDY FIVE

Fuelling conflict and human rights abuses in the Caucuses

1

Preface

Preface In December 2006, a little known government department became part of a national scandal when then Prime Minister Tony Blair called on the Serious Fraud Office (SFO) to drop a corruption investigation into how a British arms company, BAE Systems, secured a massive Saudi Arabian arms deal during the 1980s.

The Al-Yamamah deal was insured by the British government through the Export Credits Guarantee Department (ECGD) to secure the largest arms export deal in British history.

Now, not only were many people angry that a government department had insured the export of huge quantities of weapons to an extremely undemocratic and unstable regime, but that corruption appeared to be involved in securing that deal, and furthermore, that the deal itself was ‘above the law’ – too important to our ‘national interest’ to warrant investigation.

Those who have followed the history of the ECGD were perhaps less surprised. For over the last 20 years the department has insured many more projects which have been implicated in human rights abuses, environmental destruction, corruption and arms sales.

The negative impacts of these projects are not consigned to history, as the department would like us to believe today. Most of the remaining ‘Third World’ debt owed to the UK government is still held by this secretive department. Because when the projects the ECGD insures go wrong, the British government often pays out the business concerned and adds that amount to the debt of the country in which the project took place.

Many of these loans are owed for the most unjust projects imaginable – the sale of British arms to the brutal dictator General Suharto of Indonesia, an overpriced and under-used hydropower station in Kenya, a water transfer project shrouded in corruption in Lesotho, and many more besides.

2

“The ECGD is a debt collector for British corporations” GEORGE MONBIOT, GUARDIAN COLUMNIST

No wonder we call the ECGD the Department for Dodgy Deals.

As government insurance is increasingly seen as a means of stimulating our economy to combat recession, we fear standards will be lowered still further, and tomorrow’s Third World debts will start to accumulate once again.

That’s why we have written this report and are campaigning for radical changes to the ECGD. We believe the ECGD could serve a useful function in the UK economy – supporting and promoting green, new industries, while benefiting developing countries through the transfer of quality products and technical know-how.

But this will only happen if fundamental changes are made to the ECGD’s operations.

Now is the time to redress the injustices of the past, and ensure that our impact on the rest of the world is more beneficial in the future.

Nick Dearden, Director

Summary

Executive summary Why export credits matter?

The Export Credits Guarantee Department (ECGD) is a government department which helps exporters to invest in ‘high risk’ projects or areas of the world by providing a form of insurance. It supports large corporations, usually working in the arms trade, aerospace or fossil fuel-related industry – these industries typically make up over 75% of its portfolio. In 2009–10, 89% of ECGD support went to a single company, Airbus.

Many countries have similar ‘Export Credit Agencies’, which have an enormous impact on the international economy. A recent report estimates the top ECAs backed more than $260 billion of business in 2008 – more than twice the level of international aid.

ECGD-supported projects have been linked to corruption, human rights abuses and environmental destruction. When projects go wrong, the ECGD often charges the country in which the project took place – creating mountains of debt for developing nations.

Today the ECGD is by far the biggest holder of Third World debt owed to the British government. Developing countries owe £2 billion to the ECGD, including Kenya, Ecuador, Indonesia and Vietnam. Since 2005, the ECGD has gained £2.9 billion in ‘recoveries’ from poorer developing countries. In effect, these countries underwrite subsidies to big business.

Much of this debt is deeply unjust, based on loans that harmed the people or the environment of the country in which the projects took place. However, the ECGD gives no details on which projects the debts relate to, which makes it impossible to know the exact extent of the unjust debts in the ECGD’s portfolio. This lack of transparency makes it extremely difficult for

campaigners – either in the UK or in the developing country in which the project took place – to hold ECGD to account.

Case studies Supporting oppression in Indonesia ■

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Helping to rip off Kenyans ■

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“Imagine you went to your bank manager and said, can you lend me a few hundred million for a project that is environmentally unsound, highly corrupt, and unlikely even to materialise … or how about a few hundred mil so I can blow somebody’s brains out?”

PROFESSOR NOREENA HERTZ, ECONOMIST AND AUTHOR, CAMBRIDGE UNIVERSITY

Indonesia ‘owes’ the ECGD over £500 million – most run-up selling weapons to General Suharto, who killed between 500,000 and 1 million activists during his first year in office and conducted a 24-year occupation of East Timor.

From 1994, Suharto bought half of his military equipment from the UK, supported by the ECGD. UK weapons – including Hawk aircraft, Scorpion tanks and water cannons – were sighted in use against civilians, including during the attack on Aceh.

The Turkwel Gorge Hydro-Electric Power Station was built to provide energy to Kenya. Kenya is a low income country with $7.5 billion of foreign debts, yet has not been included in recent debt cancellation schemes.

In 1986 the Kenyan government awarded a construction contract to a French company for $250 million – more than double what they ‘should’ have paid.

The ECGD issued a guarantee to a British consulting company to act as second consultant and assistant employer on the project.

The eventual cost ran to $450 million, while it reportedly produced half of the energy expected because of low water levels. The Kenyan press called it ‘the whitest of white elephants’ and a ‘stinking scandal’.

Underwriting a failed project in India ■

■

The Dabhol oil and gas power plant is one of the largest foreign investment projects in India. Its construction was estimated to cost $2.9 billion, 50% greater than equivalent power projects.

Unable to deal with protest, the management company paid local police to provide security.

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The Department for Dodgy Deals: Ending the UK’s support for toxic debt

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Human Rights Watch noted: “Police forces arrested, harassed, and intimidated critics of the DPC power plant.”

In June 2001 the power plant was closed after the state electricity board decided not to buy any more power from the plant because it cost four times more than other domestic power producers.

In 2003 three UK banks filed claims for political risk insurance with the ECGD for about $60 million.

India, which has 450 million people living in extreme poverty, faces a compensation bill for a project that has not served its needs.

Enabling corruption in Lesotho ■

■ ■

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The Lesotho Highlands Water Project aims to provide revenue to Lesotho by transferring water to major centres in South Africa.

The ECGD provided support for four British companies totalling £215 million.

In 2002, the chief executive of the project was sentenced to 18 years in prison for receiving nearly £3 million worth of bribes from companies involved.

The High Court of Lesotho documented that one of the consortia involved in acts of corruption was the Lesotho Highlands Project Consortium, in which UK company Balfour Beatty had a 16% share.

A second consortium, which included British companies, paid £261,500 to the chief executive of the project.

Fuelling conflict and human rights abuses in the Caucuses ■

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■ ■

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4

The Baku-Tbilisi-Ceyhan (BTC) oil pipeline connects the Azeri-Chirag-Guneshli oil field in the Caspian Sea to the Mediterranean, passing through Azerbaijan, Georgia and Turkey.

From an early stage, campaigners pointed out that the pipeline violated human rights and environmental safeguards on 170 occasions and claimed its “poverty alleviation benefits are questionable… the potential for exacerbating social divides as a result of the unequal distribution of benefits and burdens is high.”

The ECGD provided a line of credit totalling $150 million to UK contractors.

In all three countries, local residents and international investigators were harassed, detained and arrested for asking questions in villages near the route.

Amnesty International argued that the host government agreements – which essentially prevented new laws from interfering with the operations of the pipeline – would “effectively create a ‘rights-free corridor’ for the pipeline”.

“What we are seeing is private debt turn into public debt. In effect, Northern governments and companies are forcing people in the Third World to subsidise their exports, the chief beneficiaries being the shareholders of some of the richest companies in the world. In the end it is the poor who pay the price.”

JUBILEE AUSTRALIA

Reckless projects continue While some of these ‘dodgy deals’ have left a legacy of toxic debt still being paid by the countries concerned, the ECGD’s rules would not be strong enough to prevent similar cases arising in the future.

New methods of support mean that projects are ever more ‘arms length’ from the ECGD, and measuring environmental and social standards becomes even harder. In 2010 the British government lowered the ECGD’s ethical and environmental standards to that required by the Organisation for Economic Cooperation and Development group of industrialised countries. The ECGD justified this on the grounds of competitiveness, ignoring representations from campaign groups.

For example, this change will mean that any smaller projects costing under £10 million, or where the repayment term is less than two years, will no longer be screened for social or environmental impact. This means, in effect, the ECGD will operate a ‘don’t ask, don’t tell’ policy towards these smaller projects – even on issues as significant as child labour and forced labour.

A race to the bottom – or the top?

We are now witnessing a ‘race to the bottom’ in terms of export credit standards across the world, with different countries trying to out-compete one another by providing ever easier access to credit for business.

There is one chink of light in this dismal picture.

In 2006, Norway agreed to cancel a proportion of its export credit debt, which had been run up in the 1970s when the Norwegian government had supported ship exports in an attempt to save jobs in the Norwegian shipping industry. Risk assessment was ignored and many countries ended up with ships they didn’t need, and which created huge quantities of unpayable debts.

After a long campaign by the Norwegian debt movement, on 2 October 2006 the government of Norway announced that it would unilaterally and unconditionally cancel the official debts of around $80 million to Ecuador, Egypt, Jamaica, Peru and Sierra Leone.

The problems with ECGD standards

Respect human rights ■

Standards are weak and getting weaker Indeed the current framework is non-binding and explicitly allows standards to be waived in ‘exceptional cases’.

Impact assessments are weak and sometimes ignored The vast majority of ECGD projects are not screened.

The $20 billion Sakhalin II oil and gas project was screened, but only after ECGD had given a commitment to support the project, even though it was rated ‘high risk’. Ultimately the project did not go ahead because the company withdrew their application.

Evaluation is non-existent The ECGD has no formal mechanism for complaints or for performance to be routinely and independently assessed. No access to justice is available to those who might be affected.

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Stop supporting the export of arms and fossil fuel technology ■ ■

While debt sustainability is considered for some very poor countries, none of the countries studied in our report would be eligible.

Prohibit support for arms and fossil fuels.

Place a limit on annual emissions associated with ECGD operations.

Crack down on corruption ■

Debar companies involved in bribery from receiving ECGD support.

Become accountable to parliament and the public ■

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Debt is not properly taken into account

Adopt mandatory standards on the environment, human rights and poverty.

Make an impact analysis a pre-condition for all projects.

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Establish and execute transparent and consistent procedures for monitoring and evaluation with an appropriate sanctions framework.

Adopt a ‘duty of care’ clause and establish an independent ombudsman.

Disclose all impact assessments and side agreements.

Improve and lengthen consultation with local communities and NGOs.

Bribery and corruption Despite an improved screening procedure on bribery, ECGD still has no policy of debarring companies found guilty of corrupt activities.

Recommendations It is possible for the ECGD to be a socially responsible actor, supporting human rights, sustainable development and new, green industries – an outcome that would benefit the UK as well as developing countries. But this requires tough, new impact standards and much better democratic scrutiny and accountability. The department must:

Drop the unjust debts ■ ■ ■

Audit existing ECGD debts and cancel those deemed illegitimate.

Stop turning export credits into debts.

Incorporate a debt work-out mechanism which allows future debt problems to be resolved in a fair and transparent way.

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The Department for Dodgy Deals: Ending the UK’s support for toxic debt

Photo: David Mdzinarishvili / REUTERS

Oil derricks are silhouetted against the rising sun at an oilfield in Baku October 16, 2005. Baku, the capital of Azerbaijan, is the starting point for the Baku-Tbilisi-Ceyhan oil pipeline, a project which has been accused of creating a human ‘rights free corridor’ through the Caucuses.

6

Chapter 1

The work of the ECGD The Export Credits Guarantee Department (ECGD) is a government department that operates ‘beneath the radar’ – with little public awareness, accountability or openness.

The ECGD usually supports large corporations working in the arms trade, aerospace or fossil fuel-related industry. The ECGD has supported projects that have been linked to corruption, human rights abuses and environmental destruction. When projects go wrong, the ECGD charges the country in which the project took place – creating mountains of debt for developing nations.

That’s why we call the ECGD, the Department for Dodgy Deals.

It is possible for the ECGD to be a positive and socially responsible actor, supporting human rights, sustainable development and new, green industries – an outcome that would benefit the UK by giving support to broader economic development, as well as developing countries.

But this requires tough, new impact standards and much better democratic scrutiny and accountability.

In fact, the ECGD is moving in the wrong direction. In the name of competitiveness, the government recently lowered lending standards and previously mandatory screening for child and forced labour was made, in effect, ‘discretionary’ in some cases.1 In other words, we believe that the ECGD acts like a rogue department within the government, using taxpayers’ money to maintain the profits of the wealthiest companies by making the general public and developing countries liable for private risk.

In doing so, government policy and international standards are disregarded, the environment polluted

“Many countries spend more each year on debt service than they do on the basic needs of their people, such as education and health combined.”

THE UNITED NATIONS EXPERT ON FOREIGN DEBT AND HUMAN RIGHTS, DR CEPHAS LUMINA (2009)

and global security jeopardised; all conducted under a cloak of secrecy and unaccountability.

What is an Export Credit Agency?

Many countries have an Export Credit Agency (ECA) which helps their exporters to invest in ‘high risk’ projects or areas of the world. ECAs provide insurance or guarantees that protect businesses against non-payment. As such, they make possible large infrastructure projects like gas and oil extraction in many developing countries.

The impact of ECAs is massive. A recent report by the British Exporters Association finds that the top 12 ECAs alone backed more than $260 billion of business in 2008.2 This is more than twice the level of international aid from industrialised countries. In turn, this leverages many times more funding from private and other sources. If we include private export credit into the equation, much of which is short-term, the figure leaps to $1.3 trillion (2009 figure).3

Jubilee Debt Campaign doesn’t believe the ECGD is fit for the twentyfirst century. It suits neither the interests of the majority of British business, nor a fairer world. The ECGD must: ■ Drop its unjust debts ■ Respect human rights ■ Stop supporting the export of arms and fossil fuel technology ■ Crack down on corruption ■ Become accountable to parliament and the public.

International campaign group ECAWatch has estimated that half of all new greenhouse gas-emitting industrial projects in developing countries have some form of ECA support. In addition, ECAs account for a very large proportion of developing country debt.4 Britain’s ECA is the Export Credits Guarantee Department (ECGD)

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The Department for Dodgy Deals: Ending the UK’s support for toxic debt

ECGD

UK exporter ECGD provides a guarantee to the bank that the loan will be repaid

The bank uses the loan to pay the exporter for goods and /or services delivered The UK exporter sells the capital goods and / or services to the foreign buyer

Bank The loan agreement is between the overseas buyer and the bank

How the ECGD works

– a government department reporting to the Secretary of State for Business, Innovation and Skills. Like other ECAs, the ECGD largely supports arms and carbonintensive industries, which typically make up over 75% of its custom. Astonishingly, the vast majority of the ECGD’s business in 2009–10 (89%) went to a single company, Airbus. The guarantees assisted Airbus in exporting planes to 24 different countries.

In 2009–10 the ECGD:5 ■ issued guarantees to companies of £2.2 billion ■ paid insurance claims to companies of £48 million ■ ‘recovered’ £205 million from other countries in principal and interest.

Because government subsidy of export credits is banned under international trade rules, the ECGD has to claim that it ‘breaks even’. But there is plenty of evidence to the contrary. In 2005 the ECGD itself admitted there was clearly an opportunity cost to providing below-market rate insurance to private companies which it estimated at £150 million per year.6 More recently, The Corner House has investigated an ‘off balance sheet’ company called the Guaranteed Export Finance Corporation, which effectively allows the ECGD

8

Overseas buyer

to disguise its losses.7 This gives UK voters a particular reason to be interested in the activities of the ECGD. But even on the ECGD’s own argument, the department only breaks even because developing world governments repay large amounts for projects that have gone wrong. Ultimately, developing countries are subsidising British business to carry out projects which too often do little or nothing for the people of their countries. When the UK has cancelled some ECGD debts, it has counted this as aid, effectively subsidising British companies with aid money (see Figure 1).

Mountains of debt In the event of an ECGD supported company not being paid by the relevant importing party, it is able to recover its project costs from the ECGD. The ECGD may then try to recover the total sum paid from the government of the recipient country – in effect it will become debt which that government owes to the UK government.

In this way developing countries have accumulated significant quantities of bilateral (government-togovernment) debt.

80%

70%

60%

Airbus

50%

Other aerospace 40%

Civil Defence

30%

20%

10%

0% 2004/5

2005/6

2006/7

2007/8

2008/9

Figure 1: Percentage of ECGD business support by sector – Five year summary8

Over the last 30 years, huge debts, often run-up in unjust ways, have prevented scores of developing countries from fighting poverty. Countries have been forced to spend more money repaying rich countries and banks than they have been able to spend on healthcare and education for their people.

This injustice has prompted campaigners around the world to call for debt cancellation for developing countries. To date some of this debt – around $100

Country

Debt (£m)

Argentina

45.26

Bosnia + Herzegovina

1.45

Cote D’Ivoire*

24.31

Cuba

125.62

Final payment date All in arrears December 2021 N/A All in arrears

Ecuador

35.51

Egypt

110.71

September 2021

Grenada

2.12

Indonesia

513.46

June 2021 January 2028

January 2024 July 2019

Iraq

288.17

Kenya

17.77

Pakistan

5.93

Serbia + Montenegro

202.68

Somalia**

52.53

Sudan**

653.44

N/A

Togo*

11.65

N/A

Vietnam

7.75

June 2020 November 2024 March 2024 N/A

January 2017

billion – has been cancelled.9 But developing countries still owe $3.7 trillion in debt and repay at a rate of over $600 billion a year. The very poorest countries in the world are still repaying over $20 million a day.10 Debt repayments from the poorest to the richest countries continues to dwarf development spending on international aid.

Today the ECGD is by far the biggest holder of Third World debt owed to the British government. Since 2005, ECGD has gained £2.9 billion in ‘recoveries’ from poorer (low and lower middle income) developing countries (see Table 1).

Some of these countries still urgently need debt cancellation if they are to reduce poverty and meet the Millennium Development Goals. For instance, Kenya, Ecuador, Indonesia and Vietnam, all require some degree of debt cancellation if they are to have any hope of achieving their poverty targets.14 On top of this, more developing countries have repaid debts in recent years. Since 2000, the ECGD has gained £3.4 billion in recoveries – £2.3 billion of which is effectively from developing countries (see Table 2).

This is all money which carries a large ‘opportunity cost’ – those countries could alternatively have spent that money domestically, developing their economies.

This is especially the case in those instances when the projects the developing countries were paying for were not beneficial for – or indeed even harmed – their people or environment. In those cases, they are truly toxic debts.

Table 1: Total debts owed by low and middle income countries to the ECGD11 *=HIPC ‘decision-point’12 13 **= HIPC pre-decision point 9

The Department for Dodgy Deals: Ending the UK’s support for toxic debt

‘Forgiving’ ECGD debt

Recoveries from 2005/06 (£ million)

The UK government has ‘forgiven’ a significant amount of debt since 2005. The majority of this debt was ECGD debt and the majority was given to just two countries – Nigeria and Iraq.16 Neither country was eligible for internationally-agreed debt relief schemes, proving that the UK government can give substantial debt relief outside of these schemes. In both instances, there was widespread recognition that many of the debts had been run-up in a reckless and unjust way, though the UK government did not state that this was the reason for cancellation in either case.17 Most of the remainder of the export credit debt cancellation was given under the Heavily Indebted Poor Countries Initiative (HIPC). HIPC was instituted in 1996 as a response by the World Bank and International Monetary Fund to the ‘Third World debt’ crisis. It has since been enhanced, including by the Multilateral Debt Relief Initiative (MDRI).

$3.7 trillion

151.72 13.49

Ecuador

35.82

Egypt

76.40

Indonesia

490.46

Iraq

3.17

Jordan

361.12

Kenya

7.88

Nigeria

1,735.12

Pakistan

4.42

Philippines

5.44

Vietnam

4.89

Table 2: Recoveries for the ECGD from low and lower middle income countries from 2005/06 inclusive of interest received.15

These schemes give up to 40 of the poorest countries in the world cancellation on a large proportion of their debts. In line with these programmes, the UK also offers 100% cancellation of historical debts to HIPC countries once they pass through the HIPC scheme. This includes the debts owed to the ECGD. There are many problems with the debt relief schemes to date, including: ■ Debts are not cancelled on the basis of injustice, but on the basis that they have finally been deemed ‘unpayable’ – cancellation is undertaken as a matter of ‘charity’ rather than creditors facing up to their own irresponsibility.

■ Creditors maintain control of the process. Debt cancellation is subject to a series of conditions imposed on the country concerned by the

Angola Morocco

■

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International Monetary Fund. This has included requirements that the country liberalise trade and capital flows, and undertake privatisations. These conditions often harm the country concerned and are always undemocratic.

Debt cancellation schemes were heralded by rich governments as offering ‘an exit from unsustainable debt’, but the definition of ‘sustainability’ is much too narrowly focused. It doesn’t, for example, recognise the overriding needs of poor countries to fight poverty. As such, far too few countries qualify for cancellation and low income countries like Bangladesh and Cambodia are not eligible.

Cancelled debts are counted as ‘aid’ to the countries concerned, despite the fact that, in the case of ECGD debts, they were not run-up for development purposes. In many instances, they also have their aid levels reduced by a similar amount to the debt relief given.

Global debt facts Poorest countries repayment per day $20 million

$600 billion $100 billion

All developing countries’ debt

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Debt cancelled to date under HIPC and MDRI schemes

Developing countries’ repayment per year

■

To receive debt relief, somewhat ironically, countries have to embark on a programme of proving that they can repay their accumulated debts and arrears. This means countries can spend many years paying far more in debt servicing once they enter the debt relief scheme than they did before they entered.

Although the cancellation of unpayable ECGD debts is to be welcomed, it is important to recognise that much of that relief came as part of such a problematic scheme.

How the ECGD deals with debt When a country reaches its HIPC ‘decision point’, the ECGD stops asking that country for debt service, but the stock is not written off and interest continues to accumulate for accounting purposes. Providing the country reaches ‘completion point’, the ECGD writes-off most of this debt when it is agreed at the Paris Club (the club of large nation-state creditors).

The Paris Club only cancels 90% of debt, so it is then up to the Department for International Development (DfID) to make up the rest of the debt cancellation to 100%. Since 2000, DfID has ‘reimbursed’ the ECGD with £93 million from its own budget. The ECGD has writtenoff over £1 billion owed by ‘HIPCs’ – countries eligible

Toxic debt While ‘toxic’ or ‘illegitimate’ debt has no formal definition in law, in broad terms it can include loans incurred: ■ by undemocratic means or by undemocratic regimes ■ for morally reprehensible purposes, such as suppression ■ in secret, without participation of legitimate representatives, or in a corrupt manner ■ carrying extortionate terms of interest ■ for useless projects that failed to benefit the country concerned, or caused harm to the people or the environment.

As the United Nations Expert on Foreign Debt and Human Rights, Dr Cephas Lumina said in 2009: “It can be argued that a common thread implicit in most definitions of illegitimate debt is the theme of injustice… Illegitimate debt impedes the realization of human rights due to improper actions on the part of the lender, borrower, or both. The negative impacts cut across all sectors but are particularly profound in relation to the provision of basic services in the areas of health, education, housing, water and sanitation.”

for HIPC debt cancellation. The ECGD has also written off a large amount of money (£3.4 billion) to two ‘exceptional’ cancellations: Nigeria and Iraq.

When ‘pre-decision point’ HIPC countries make payments to the ECGD, they have their money held in trust until they reach ‘decision point’, when it is reimbursed.

All of the debt write-offs by ECGD, as well as payments from DfID to ECGD are counted as overseas development assistance.

ECGD currently claims it is owed over £700 million from HIPCs which have not reached completion point – primarily Sudan. If and when this is cancelled, all of it will be counted as overseas development assistance, and £70 million of real money will be transferred out of the aid budget of DfID to ECGD.

Toxic debt Current debt processes fail to recognise that much debt is not merely unjust because it is unpayable, it is unjust because both the debts and the loans on which the debt was based have harmed the people or the environment of the country in which the projects took place. Loans have been used for projects and sales responsible for human rights abuses, for ecological destruction, for violations of international agreements or labour rights, or they have fuelled corruption.

We believe these debts to be illegitimate – the original ‘toxic debts’. In these circumstances creditor governments must accept co-responsibility for debts accrued, and cancel what is owed. Lenders have a responsibility to ensure that they are not providing support to projects that will be of detriment to importing countries – especially when the lender is effectively a developed country government.

It is particularly unacceptable when governments guarantee that profits be made from abuses of human rights, destruction of the environment or impoverishment of local communities.

The international lending system ensures that the responsibility for a debt is laid squarely at the feet of the debtor. However, it takes two parties to create a debt. If the international financial system is to function in a fair way – and to ensure that resources are allocated as productively as possible – responsibility for a debt must be shared.

The way in which the ECGD converts failed insurance into sovereign debt (debt which is owed by a country) prevents investors from taking their responsibility seriously. It ensures the debtor is held solely liable for projects that go wrong. This cannot possibly encourage responsible behaviour.

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The Department for Dodgy Deals: Ending the UK’s support for toxic debt

Photo: Darren Whiteside / REUTERS

Indonesian protesters shout slogans and carry a poster of former president Suharto as they march though the streets of Jakarta May 12 2000.

Indonesia is still paying the British government for arms sold to General Suharto’s regime.

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Chapter 2

Case studies The following cases demonstrate how export credits have been used to support harmful projects, sometimes creating toxic debts which survive to this day. There are doubtless many more, but the ECGD has consistently refused to disclose information as to which outstanding debts relate to which projects, claiming the information “is not held within ECGD’s reporting systems, and as such would involve searching through a number of paper files and other sources.”18 This means that large amounts of money are being ‘recovered’ from developing countries without the public of either country having any idea what that money relates to. This shocking lack of transparency is part of the reason we are calling for a full audit of ECGD debts.

CASE STUDY ONE

Supporting oppression in Indonesia

All debts that have been run-up in order to oppress people need to be considered ‘toxic’. Such loans should never have been lent and, after the fact, communities should certainly not be forced to pay for their own subjugation. The most obvious form of toxic debt is one that has been used to support a dictatorial regime to directly reinforce its rule at the expense of human rights.

This is not to say that all debts amassed by oppressive regimes should necessarily be considered illegitimate.

Some funds may have been used for beneficial human development projects, such as funding schools and hospitals. But in instances where no benefit to the population can be identified, then creditor governments must accept responsibility for this sort of toxic lending.

The ECGD has been guilty of supporting just such oppressive regimes – helping British business to make a profit regardless of the impact on people’s lives. The most notable case comes from Indonesia, one of the ECGD’s biggest debtors today.

Arms to Suharto Indonesia’s long term debt is truly enormous – currently standing at $151 billion; three times its national income.

In 2008, Indonesia paid $22 billion in debt service – that’s over $2.5 million every hour – of which $5.6 billion was interest. Nearly 20% of its budget goes on debt service, more than on education (17.2%).19 The majority of Indonesia’s £500 million debt to the ECGD, as well as the £400 million repaid since 2000, can

be attributed to arms sales made by the UK government to the brutal military dictatorship of General Suharto.

Suharto borrowed heavily from the time he seized power in 1967 until his fall in 1998. Creditors repeatedly funded Suharto, an avowed ‘anti-communist’, even though instances of brutal oppression and corruption were welldocumented. During his first year in power, Suharto had between 500,000 and 1 million political activists killed, arresting another 500,000 people, the vast majority without trial.20 He conducted a 24-year occupation of East Timor, which resulted in the unlawful killing and enforced disappearance of over 18,000 East Timorese non-combatants.21 In the words of Human Rights Watch, “Suharto presided over more than three decades of military dictatorship and systematic human rights abuses… He also presided over a famously corrupt regime in which he, his family, and his cronies amassed billions of dollars in illegal wealth – funds which could have addressed Indonesia’s widespread poverty and social problems.”22 Insuring arms sales to such a regime over a substantial period of time is grossly irresponsible. In 1998, then Foreign Secretary Robin Cook acknowledged that weapons manufactured and supplied by the UK were used against civilians.23 British supplied Hawk jets and Scorpion tanks were used when attacking resistance in Aceh.24 Some of these deals were corrupt, according to a Guardian newspaper report of 2004, and if they had taken place today would have been open to criminal prosecution. Witness statements show British arms 13

The Department for Dodgy Deals: Ending the UK’s support for toxic debt

Indonesia bought half of its military equipment from the UK.26

Photo: Studio Titus / Flickr

Indonesia defaulted on its arms payments to UK banks during the 1997 South-East Asia crash, brought about by deregulation of financial markets and subsequent speculation and price bubbles. The crisis led to millions of people being made unemployed. The International Monetary Fund ‘assistance’ to Indonesia made matters much worse when they instructed the government to close 16 banks, cut public spending and raise interest rates.27

Indonesia army soldiers.

company Alvis (subsequently taken over by BAE Systems) making bribes to a number of influential people in President Suharto’s regime, including his eldest daughter, to secure a £160 million sale of Scorpion tanks in the mid-1990s. These weapons were later used for internal repression.25 Other countries also supported the Suharto regime through export credits, notably Germany’s Hermes, which financed the sale and renovation of naval vessels in 1993. But from 1994 until the end of the 1990s,

CASE STUDY TWO

The Indonesian people should not still be paying for the atrocious decisions of the British government. On the current timetable, Indonesia will continue to pay unjust Suharto debt to the ECGD for another decade.

It is essential that the ECGD audit all past activities to ensure that guarantees approved for the sale of arms have not fuelled oppression. In instances of misuse the UK must accept responsibility and cancel debts owed.

While the ECGD now agrees to ‘take account’ of social and human rights impacts in individual cases, the potential to support damaging arms sales remains high, not least because arms are excluded from ECGD impact assessments, being covered by a different form of government assessment. All projects supported by the ECGD must be subject to a robust impact assessment that places particular emphasis on the country context.

Helping to rip off Kenyans

Unreasonable interest rates can mean that countries end up paying far more back than their initial debt but still get no nearer to reducing the amount still ‘owed’.

This problem explains why so many countries find themselves in a ‘debt trap’ – no matter how much they pay, the debt just keeps growing.

We believe that projects which lock countries into spirals of ever-increasing debt burdens should be considered unjust – it is unreasonable that nations should pay for projects that are not fair in terms of their repayment conditions, especially when based on expectations created by the lenders.

The ECGD claims to take a country’s ‘debt sustainability’ into account when supporting projects. But their view of ‘sustainable’ is similar to that of the World Bank and IMF, which only takes into account what’s payable.

True sustainablity has to take into account the money needed to fight poverty and provide basic services.

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Whilst its economy has been growing recently, 61% of the Indonesian population still lives on less than $2 a day.28 The New Economics Foundation has calculated that Indonesia needs between 73–87% of its debts cancelled in order to increase living standards to a decent level.29

Moreover, if a project fails to be profitable in the way envisaged, or if the country is hit by a crisis, even this narrowly defined ‘debt sustainability’ can be badly knocked off course.

Turkwel Gorge Hydro-Electric Power Station, Kenya Kenya is a low-income country, but its debt stock stands at nearly $7.5 billion and it paid $375 million in debt servicing last year – an amount that has increased year on year for decades. Average national income per person is just $1,600 a year and 40 per cent of the population live on less than $2 a day.30 The British government has recognised that Kenya is in need of some degree of debt relief, although it has claimed it cannot currently grant relief because of the unstable political situation.31 However, Kenya is not eligible for IMF and World Bank debt relief schemes as

its exports are considered high enough to service its debt, so the debt is considered payable.

The Turkwel Gorge project was first conceived in the 1960s and concerns about the project’s viability existed from the beginning. This is because the power station was to be situated on a known earthquake fault and because the seasonal flow of the Turkwel river is unreliable. A study by the Norwegian Agency for Development Co-operation (Norad) in particular feared that the dam would “have a devastating effect on the economy, as well as the ecology, of central Turkana District”.32 Nevertheless, in January 1986 the Kenyan government awarded a contract to build a dam in Turkwel Gorge to the French company, Spie Batignolles. A contract was signed for $250 million, some $102 million more than original estimates, and $60 million more than was judged economically feasible by the French consulting firm, Sogreah.33 In August 1986, the ECGD issued a guarantee of £17.5 million to a British consulting company, Watermeyer Lesse Piesold and Uhlmann (WLPU), to act as second consultant and assistant employer on the project.34 In March 1986, an internal memorandum written by Achim Kratz, then European Commission delegate to Kenya, noted that the contract price was “more than double the amount Kenya’s government would have had to pay for the project based on an international competitive tender.” The memo continued, “The Kenyan government officials who are involved in the project are fully aware of the disadvantages of the French deal ... but they nevertheless accepted it because of high personal advantages,” which Kenyan observers say included payments to Kenyan President Daniel Arap Moi.35 Overall, the terms of financing for the dam were extremely disadvantageous to Kenya as financing was predominantly provided in the form of non-concessional (full market rate) loans denominated in Swiss francs.

CASE STUDY THREE

This is significant, as prior to the awarding of the contract, there was an informal agreement among European countries that they would pay for major projects in Africa with low-cost concessional loans.36 When the Turkwel Gorge Dam was eventually completed, it had cost an approximate $450 million (£285 million) to build; a total sum nearly twice the contract price. 800 people had been displaced and ‘community projects’ set up to mitigate the impacts of the project were reported to be poorly designed. Around the dam, prostitution increased, school attendance fell and a typhoid outbreak was blamed on untreated water from the dam. The Kenyan press described the dam as “the whitest of white elephants” and a “stinking scandal”.37 Soon after its construction, concerns regarding the potential of the dam began to materialise as energy produced by the dam was nearly half what was expected because low water levels constricted energy output.

Commentators have claimed that it makes no sense to make a drought-prone country dependent on hydroelectric power. Kenya’s 1998–2000 droughts brought the country to its knees in terms of energy supply.38 Recent droughts in the area have caused immense hardship and Regional Red Cross chairman John Nakara has said the Turkwel project “has done more harm than good as water does not flow in large amounts”.39 The ECGD has a responsibility to ensure that projects do not place onerous burdens on importers. This means not lending to very poor countries and being clear that projects achieve what they set out to achieve. Kenya currently ‘owes’ £18 million to the ECGD and this will not be paid-off until 2020. One way of doing this would be to tie insurance more closely to successful completion and evaluation of the project. We believe that, by and large, export credits should not be underwritten by developing countries. If the UK government wants to provide additional incentives to encourage British investment, there is no reason why developing countries should have to shoulder that burden.

Underwriting a failed project in India

If a project fails to produce the benefits promised for the recipient country, the ECGD will still make certain that the exporting business is paid. This removes the incentive for a business to ensure projects are successful and costeffective. All of the responsibility and risk for a project is placed on the developing country.

In this way, the ECGD expressed a central problem in the international lending system; the interests and concerns of creditors are disproportionately favoured.

This reduces incentives to make lending just and responsible. This is compounded by the ECGD’s lack of evaluation and sanctions procedures, which mean that once support is given, there is very little the ECGD can do to hold companies to account.

Debts that have been accumulated for projects that have failed to achieve their objectives need to be considered unjust because otherwise the cost is effectively passed from those who have benefited to those who have not.

This is particularly true when concerns are raised about the effectiveness of a project prior to its commencement.

Clear success and failure indicators need to be adopted to evaluate a project’s success.

Dabhol Power Plant, India Despite a booming economy, India has immense poverty.

According to the World Bank, nearly 900 million people live on less than $2 a day with over 450 million living

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The Department for Dodgy Deals: Ending the UK’s support for toxic debt

unfairly acquired their land for the project – 2,000 people were displaced. Concerns regarding the environment were prominent, especially fears that the project would pollute water sources. 45 But as attempts to remedy these concerns failed, Dabhol Power Company paid the local police to provide security for the project, which led to human rights abuses. Human Rights Watch notes that: “Those police forces arrested, harassed, and intimidated critics of the DPC power plant. The company’s critics, including leading Indian environmental activists and village representatives, were subjected to beatings and detentions. In one instance in May 1997, police beat and arrested nearly 180 protesters who were demonstrating peacefully outside the company gates.”46

Location of the Dabhol power plant.

in extreme poverty.40 A high profile committee in India found that 77% of the country live on less than 20 rupees a day, which is the equivalent of around 50 US cents.41 The Dabhol oil and gas power plant is one of the largest foreign investment projects to have taken place in India.

Construction of the power plant was scheduled for two phases, costing some $2.9 billion – a figure 50% greater than equivalent power projects in India.42 In the early 1990s a joint venture called the Dabhol Power Company was created by Enron, General Electric, Bechtel and the Maharashtra Power Development Corporation. The first part of the project was complete by 1999. In 2000, the ECGD provided Overseas Investment Insurance (OII) to ANZ Bank, Standard Chartered Bank, ABN Amro and Citibank NA, as well as re-insurance worth £30.5 million through the Belgian ECA, OND, to UK company Kier International to build a liquefied gas port terminal linked to the plant.43 The Dabhol power plant proved hugely controversial and faced intense local opposition. The contract to build the plant included a power purchase agreement, where the Maharashtra state electricity board agreed to buy electricity from Dabhol Power Company at a guaranteed price, regardless of whether or not it was needed. Such contracts are another way of passing all the risk of a project from private investors to public authorities.

This contract was found by both the World Bank and India’s Central Electricity Authority to unfairly favour Dabhol Power’s interests. In particular, the tariff level was criticised for being so high that the company would have made $26 billion on a $2.6 billion investment; ordinary Indians would foot the bill. The World Bank refused to provide funding for the plant because of questions surrounding its economic viability.44 Local opposition grew throughout the 1990s, with farmers protesting that Dabhol Power Company had 16

When it started operating, power from the plant cost four times more than other domestic power producers – forcing the state of Maharashtra to spend more on payments for power than its entire budget for primary and secondary education. In June 2001 the power plant was closed after the Maharashtra State Electricity Board decided not to buy any more power from the plant. It was reported that even after the plant stopped production, the Electricity Board was still being billed $21 million a month.47 The refusal of the state government to pay for exorbitantly priced power was viewed by foreign investors as a breach of the power purchase agreement.

The aftermath of Dabhol was a dormant mega-project and lengthy arbitration proceedings to settle the claims of the companies, banks and export credit agencies involved.48 This cost Indian authorities huge sums of money – including hundreds of millions of dollars in payments to buy out the companies involved and settle claims with export credit agencies49 – and led to increased debt, which should have been spent guaranteeing electricity to India’s poor. US export credit agencies paid out more than $300 million to US companies, and added this to the ‘debt’ owed by India to the US.50 The ECGD’s support for Dabhol came well after serious concerns had already been expressed about the power plant’s viability. As such, its support merely meant the project’s costs increased at a time when it was already failing. The ECGD has no mechanism for penalising exporters for failing to achieve stated goals; instead all the repercussions are held by importers as they are committed to paying for projects even if they have been of no or limited benefit. In fact, when first asked in 2010, the ECGD denied that it had ever supported Dabhol, seemingly confused by the range of support tools at its disposal. It later acknowledged it did provide overseas investment insurance.51 The ECGD must recognise that it has a responsibility for ensuring that projects receiving support achieve their aims and objectives. In instances where they fail to do so, and this failure could have been easily foreseen, the legitimacy of a debt must be brought into question.

CASE STUDY FOUR

Enabling corruption in Lesotho

Corruption is broadly defined as the abuse of public or private office for personal gain. The British government believes that corruption is a significant cause of poverty and aid is often conditional on developing countries pursuing anti-corruption policies. In a speech in October 2010, Secretary of State for International Development, Andrew Mitchell, said “this government has a zero tolerance approach to corruption.”52 Good governance is a frequent call made by Western-backed institutions on poor countries. It is, therefore, clearly hypocritical if these same developed countries provide financial support, through export credits, to companies that are guilty of using corruption to win contracts.

The ECGD follows a set of anti-corruption policies laid down by the Organisation for Economic Co-operation and Development (OECD), the grouping of industrialised countries. Despite this, campaigners have claimed there remains “an institutional culture [in the ECGD of] disregarding corruption as a serious risk factor”. 53 There is an argument that all loans generated as a result of corrupt practices should be considered unjust, because, in the words of the Asia Development Bank: “The costs of corruption are often borne disproportionately by the poor, while the provision of public goods and services is skewed toward the rich.” Corruption “diverts resources away from social sectors and toward defence and major infrastructure projects”54 – in other words, the sort of projects supported by the ECGD.

Lesotho Highlands Water Project The Lesotho Highlands Water Project (LHWP) involves the construction of five dams in the Maluti Highlands of Lesotho and is due for completion in 2020, at a total cost of approximately £5.5 billion.55 Lesotho is a small landlocked country in Southern Africa which ranks 156 out of 182 countries in terms of human development indicators, with an average life expectancy of just 45 years and absolute poverty affecting 62% of the population (43% in severe poverty).56 The aim of the project, at least in its early stages, is to provide revenue to Lesotho by transferring water to major industrial and population centres in South Africa. This could provide an opportunity for Lesotho to generate the income necessary to invest in the country and raise its people out of poverty.57 Many have questioned whether Lesotho is truly benefiting, however, or whether the project is primarily about corporate interests in South Africa. The project was first conceived, when South Africa was still under apartheid rule, as a means of evading the sanctions imposed on that regime.58 Local campaigners have also accused South Africa of using military intervention to progress the project.59 Any project where capital investment represents several times a country’s GDP and when that country has little means to regulate such large flows of capital, should cause concern. The potential for corruption increases, while the ability of Lesotho’s economy to benefit from

The Al-Yamamah scandal In December 2006, then Prime Minister Tony Blair called on the Serious Fraud Office (SFO) to drop an ongoing corruption investigation into how British arms company BAE Systems secured a massive Saudi Arabian arms deal during the 1980s.

The Al-Yamamah deal was the biggest arms deal in British history, and had been controversial even when first discussed by the Thatcher government in the mid-1980s. Saudi Arabia had proved poor at paying for export credits, and concern was expressed that if oil prices fell, repayment would be even harder.

Eventually an ‘oil-for-arms’ agreement was signed, with the ECGD brought in to back the French bank, Banque Indosuez, who insured the deal to the tune of £1.43 billion.

In 2004, the Serious Fraud Office began looking at alleged corruption in the deals – notably that the sales had been overpriced in order to pay off and entertain members of the Saudi Royal Family and intermediaries. Only at the end of 2006, amidst negotiations for a further Saudi arms deal, did Tony Blair ask the SFO to drop the inquiry, which it did, claiming it was harmful to the UK’s alliance with Saudi in the ‘war on terror’.

Vince Cable, speaking for the Liberal Democrat Party, said at the time that the decision to drop the case: “has undermined the rule of law and Britain’s reputation … It has also undermined both our reputation in the developing world—where the government, through the

Chancellor and the Secretary of State for International Development in particular, lecture on corruption.”

The Organisation for Economic Cooperation and Development (OECD) has raised “serious concerns” about the termination of the investigation and the High Court ruled it to be unlawful (later overturned by the House of Lords).

BAE itself paid almost £300 million in penalties for international wrongdoing short of bribery, in sales relating to Tanzania, Saudi Arabia, Hungary and the Czech Republic – £30 million as a result of an SFO investigation and $400million for deals investigated by the Department of Justice in the US. The Saudi deals are reported to have made BAE $43 billion to date.71

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The Department for Dodgy Deals: Ending the UK’s support for toxic debt

that investment decreases. At a minimum, careful monitoring of such projects is essential.

receiving nearly £3 million ($5 million) worth of bribes over the course of a decade from companies involved.

Between 1990 and 1997 the ECGD provided support for four British companies working on the Lesotho project – Kier International, Sterling International, Balfour Beatty and Kvaerner Boving Ltd – totalling £215 million ($342 million).60

The High Court of Lesotho documented that one of the consortia involved in acts of corruption was the Lesotho Highlands Project Consortium (LHPC), in which the UK company Balfour Beatty had a 16% share; it was found that payments of nearly £34,000 were paid to Masupha Sole. It was also found that a second consortium, the Highlands Water Venture, which included British companies Kier International and Stirling International paid £261,500 to Sole between October 1991 and September 1992.68

So far, the project has created royalties for Lesotho, but the local poor have suffered tremendously. The influx of outsiders to a relatively self-contained community brought with it alcoholism, drug addiction, prostitution and, particularly worrying, a huge upsurge of HIV cases which locals blame on the migrant workers from urban areas.61 The Corner House research group has noted that some 27,000 people have already lost their farms or access to grazing pastures as a result of the first two dams, with about 2,000 people being resettled,62 most receiving vastly inadequate compensation packages.63 Demonstrations following the dismissal of 2,300 workers for ‘illegally striking’ left 5 people dead and 30 injured.64 Lesotho is a small country with only around 10% arable land. The loss of 925 hectares of arable land and 3,000 hectares of grazing land carries considerable social and environmental impacts.65 International Rivers claims that “During recent droughts, Lesotho has seen its own crops shrivel as its water was shipped to South Africa.”66 The scale of the investment relative to the Lesotho’s capacity was always going to present challenges and accusations of corruption have been a constant problem.67 In 2002, Masupha Sole – chief executive of the Lesotho Highlands Development Authority – was sentenced by a Lesotho court to 18 years in prison for

CASE STUDY FIVE

The Lesotho project did not translate into sovereign debt for South Africa, who counter-guaranteed the project rather than Lesotho, though it easily could have done. Although not as poor as Lesotho, the South African government has repaid some of the most odious debt in the world in recent years, the debt run-up under its apartheid regime. But that does not mean the debt did not impact on poverty in South Africa. Academic Patrick Bond has claimed that, in effect, “Johannesburg water customers became liable for Lesotho dam loan repayments, resulting in a 69% increase in the nominal cost of water supply from 1996–99”, having a particularly detrimental impact on poorer water users.70

Fuelling conflict and human rights abuses in the Caucuses

Lack of oversight and due diligence allow the ECGD to support projects where human rights, security and democracy lose out to economic concerns. Failure to conduct a thorough analysis results in lives, homes and livelihoods being destroyed while private companies prosper.

The true impact of a project on communities is often hidden from scrutiny as rules surrounding ‘business confidentiality’ and ‘access to government information’ allow for decisions to remain confidential, irrespective of the public interest.

The result is that obstacles to a project’s profitability (for example the rights of the poor) can be swept under the carpet and hidden from view, safe in the knowledge that no-one will be held to account. A democratic society demands transparency and accountability; the ECGD provides neither.

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None of the British companies has been convicted of corruption in Lesotho and they have refuted claims of bribery. The Lesotho court process has now ground to a halt through lack of funds, though the World Bank did debar German engineering company Lahmeyer International and Canadian engineering company Acres International from Bank-backed contracts elsewhere for their role in the Lesotho corruption.69

Baku-Tbilisi-Ceyhan oil pipeline The Baku-Tbilisi-Ceyhan (BTC) oil pipeline provides a stark example of how negligence in oversight and lack of any sort of sanctions mechanism can result in human rights abuses, environmental devastation, conflict and regional instability.

The BTC pipeline, constructed by the BP-led BTC Consortium, connects the Azeri-Chirag-Guneshli oil field in the Caspian Sea to the Mediterranean, passing through Azerbaijan, Georgia and Turkey. Conceived as a means of transporting Caspian crude oil to the West while by-passing Russia and Iran, the pipeline became operational in 2006 and can carry over a million barrels of oil a day. In 2003 the ECGD became associated with the project by providing a line of credit totalling $150 million, to finance UK contractors.72

While driven by geo-political objectives, the project also claims to provide significant revenue to its host countries, with promises that Azerbaijan, Georgia and Turkey will “derive substantial revenues by way of transit fees [and] taxes.” Transit revenue flows during the 20-year operation of the pipeline (2005–2024) have been estimated at between $2.4 and $3.4 billion for the three countries.73 However, when balanced against the costs of providing pipeline security (borne by the host governments according to the pipeline governing documents), transit revenues no longer appear as substantial.74 Concerns about the project have been voiced by NGO groups throughout the lifetime of the project. In design stage, a campaign opposed public funding of the project on the basis that it violated World Bank and European safeguards on human rights and the environment on more than 170 occasions.75 In a 2002 letter to relevant government departments, a group of NGOs noted that: “Although the project will generate revenues in transit and other fees, its poverty alleviation benefits are questionable. Moreover, the potential for exacerbating social divides as a result of the unequal distribution of benefits and burdens is high.” 76 In a study of the Turkish section of the pipeline, it was found that less than 2% of directly affected communities were consulted face to face. Azerbaijani landowners claim they were not fully compensated (or compensation was inaccurately calculated) for their land, violating World Bank safeguard policies, and villagers in Georgia reported that a BTC Public Relations Officer told them that if they protested they would not receive their compensation.77 In 2003 Heydar Aliyev, the then President of Azerbaijan, made a statement on national television threatening opponents of the project.78 A statement from the Georgian president also declared that protests against the pipeline would be considered a breach of the law and dispersed forcibly.79 A central aspect of controversy surrounding the project was the signing of a series of ‘Host Government Agreements’ with the countries involved. These agreements take precedence over all national laws except the constitution, and prevent the application of any new regulations, including improvements in environmental or human rights laws, which might affect the profitability, or ‘economic equilibrium’, of the project.

The companies involved argued that their agreements had higher environmental standards than local laws anyway, so they would only improve standards, but that has recently been revealed as untrue. Recently disclosed legal advice to the ECGD shows that, in several instances, operating companies like BP would be able to breach local environmental laws as a result of the agreements. One particular law relates to Turkey’s obligations to an international convention.80

Amnesty International argued that the host government agreements “effectively create a ‘rights-free corridor’ for the pipeline”.81 During pipeline construction and operation, much of the route was militarised. In all three countries, local residents and international investigators were harassed, detained and arrested for asking questions in villages near the route.82 Ferhat Kaya, a critic of BTC who raised concerns over land compensation, alleges that he was tortured in 2004, in part for his vocal opposition to the pipeline.83 In a scoping paper on the pipeline, BP declared “a pipeline carrying oil … which passes close to previous areas of conflict could create a significantly increased security threat to construction and operations personnel, as well as pipeline facilities.”84 In 2008 this concern was realised when an attack conducted by the Kurdistan Workers Party (PKK) destroyed a pump valve on the Turkish section of the pipeline, causing a major fire and the loss of some 12,000 barrels of oil. Separatist groups in South Ossetia and Abkazia also made threats to the Georgian section of the pipeline and tensions centred on Nagorno-Karabakh have threatened the security of the pipeline in Azerbaijan.85 The contracts governing the pipeline mean that Turkey, Georgia and Azerbaijan may be vulnerable to debt escalation as a result of disruption to the flow of oil. The ECGD admitted in a series of released papers that its Business Principles Unit did not assess political or security- or conflict-related risk.86 The pipeline has also inflamed inter-state tensions, threatening Russia’s regional domination of oil and gas transit. While the war between Russia and Georgia in 2008 was caused by political tensions over South Ossetia, it is the opinion of many that the BTC pipeline was an underlying source of tension.87 The plethora of problems and controversy surrounding the BTC pipeline is proof of the need for radical changes in the way the ECGD assesses and evaluates projects.

Ignoring the assessment of conflict and political risk when investing in billion-pound projects in tense regions is irresponsible even on purely financial grounds.

Ignoring concerns about British companies being empowered to violate national law goes against the most basic form of social and environmental responsibility.

And failing to have any sanctions when things go wrong in such a situation means essentially that the ECGD washes its hand of these projects as soon as they are signed off.

For the good of the environment, human rights and the fight against poverty – and indeed for the good of the British economy – the ECGD needs to change.

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The Department for Dodgy Deals: Ending the UK’s support for toxic debt

Photo: Arko Datta / REUTERS

A former contract employee of Dabhol Power Company (DPC), walks past the grid of towers meant for distribution of electricity, 156 miles south of Mumbai. The $2.9 billion Dabhol power plant, partially supported by the ECGD, sits idle, having cost the Indian government hundreds of millions of dollars.

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Chapter 3

ECGD standards – weak and getting weaker Poorly conceived projects which promote profit at the potential expense of people and environments are still being approved. No wonder, since ECGD standards have always been weak – and in 2010 they became even weaker. The ECGD has ignored advice from several Parliamentary reports. It continues to wash its hands of responsibility for the social and environmental consequences of the projects it has supported.

Reckless projects continue The Petrobras P-52 oil platform, 125km off the coast of Brazil is labelled one of the “riskiest oil-drilling projects in the Atlantic Ocean”, deeper than BP’s Deepwater rig that caused the disastrous oil spill in the Gulf of Mexico.

ECGD backed the involvement of Rolls Royce and other companies with a $52 million loan in 2005. But the ECGD’s environmental report makes no mention of how to mitigate a similar explosion, although the rig replaces one that exploded and sank due to human error in 2001, killing 11 people.88 Projects of little benefit or dubious value also continue to crop up, like the infamous ‘bridges to nowhere’ in the Philippines. The ECGD supported UK exporter Mabey & Johnson for its part in a £400 million bridge-building programme in the 2000s which, local campaigners document, led to the construction of large, heavily reinforced steel bridges which led into the middle of fields, were only used by pedestrians or connected up mud tracks.

Mabey was charging substantially more than rivals and, despite allegations of excessive profits, corruption and overcharging, the ECGD continued to give backing to the company. The company later became the first major British company to be convicted of foreign bribery, paying £6.5 million for paying bribes in six developing countries.89

“Our mainstream stuff is oil and gas, aerospace and defense.”

STEVE ROBERTS-MEE, HEAD OF COMMUNICATIONS, ECGD

from the project it is guaranteeing. Ensuring the projects meet environmental and social standards becomes even harder and the ECGD has done nothing to improve monitoring procedures to meet this difficulty.

Listed as a potential beneficiary of the scheme is Nigeria’s Intercontinental Bank. This is concerning as the Economic and Financial Crimes Commission (EFCC) of Nigeria is currently charging former Managing Director Erastus Akingbola with corruption, along with other members of senior management, accused of transferring deposits totalling Nigerian Naira 12 billion (£54 million) to companies connected to Mr Akinbola.92 Mr Akingbola was dismissed along with his management team after the Central Bank of Nigeria (CBN) had to bail the bank out owing to “poor corporate governance practices, lax credit administration processes and the absence or non-adherence to the bank’s credit risk management practices.”93 As the ECGD gets further away from the projects it is supporting, its standards and assessment procedures need to get stronger, rather than weaker.

The Philippines has a massive $65 billion debt and paid $12 billion in debt service in 2008.90 In 2009, the ECGD opened a new scheme – the Letter of Credit Guarantee Scheme – allowing it to insure short-term sales and projects in which it is not directly involved.91 The ECGD provides a master guarantee to UK banks that insure letters of credit from overseas banks in favour of UK exporters. It is one of the ways the ECGD is diversifying into new means of financing British exports – but causing concern for campaigners because it means that the ECGD is yet another step removed

Current standards – weak…

Following widespread public concern over the impacts of the ECGD’s activities abroad, the British government introduced the voluntary ‘Business Principles’ to guide the ECGD’s work in 2000. The principles were introduced specifically in order to ensure that the ECGD took account of the government’s wider policies on human rights, the environment and development.

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Photo: Ricardo Stuckert / PR

The Department for Dodgy Deals: Ending the UK’s support for toxic debt

The Petrobras P-52 oil platform

From the beginning, however, there has been concern that these principles did not go far enough – with particular concern about their non-statutory nature.

Standards were always discretionary, and secondary to the ECGD’s overriding duty to support UK exporters. A succession of parliamentary committees – notably the Trade and Industry Select Committee,95 the International Development Committee95 and the Environmental Audit Committee – have concluded that the ECGD should strengthen its policies on environmental and human rights monitoring and its anti-bribery measures.

In 2008, for example, the Environmental Audit Committee criticised the ECGD’s environmental standards. It recommended: “that the ECGD commissions an independent study into how its environmental and sustainable development standards could be tightened, including an assessment of how UK Sustainable Development objectives could be effectively reflected in the ECGD’s assessment standards.”96 More recently in December 2009, in the Joint Committee on Human Rights report on business and human rights, entitled ‘Any of our business?’, there was strong criticism of the ECGD’s human rights assessment procedures: “The ECGD decision-making process has been the subject of criticism by parliamentarians and others for many years. While the introduction of the Business Principles in 2000 has improved the framework for decision-making on the human rights impacts of business, it is not clear whether this has had any impact on the decisions of the ECGD. Without increased transparency and openness in the assessment of applications, this impression is likely to endure.”97 22

Aerospace has always been excluded from assessment processes, while most military goods have a separate process overseen by the Export Control Organisation (ECO), the Ministry of Defence and/or the Foreign and Commonwealth Office.98 This immediately excludes the majority of ECGD projects. In 2007/8, for example, 57% of the ECGD’s total business was concentrated on military and 30% on aerospace exports.99 As already stated, 89% of projects were taken up by a single aerospace manufacturer – Airbus – in 2009–10.

The ECGD claims that the environmental impacts of aerospace products are already assessed as part of their certification process and that it is difficult to ascertain how aircraft will be used. But the Environmental Audit Committee believes: “by excluding aerospace … too many important sustainable development impacts are left unconsidered.

We reiterate the conclusion of our predecessor Committee that the ECGD should bring all aerospacerelated applications within the [impact assessment] process, in addition to ICAO assessment.”100

… and getting weaker Unfortunately, the ECGD has not heeded this advice. In fact, it has moved in the opposite direction.

In 2010 the British government lowered the ECGD’s ethical and environmental standards to that agreed by the Organisation for Economic Cooperation and Development group of industrialised countries – laid out in the so-called ‘Common Approaches on the Environment and Officially Supported Export Credits’.

The ECGD justifies reductions in oversight by declaring: “It is HMG’s view that it is not right to impose a burden upon UK exporters which is not imposed by Common Approaches upon exporters of other OECD countries.”101

environmental destruction and corruption in other parts of the world. That is neither ethical nor sustainable.

The government ignored representations from environmental, development, human rights and anticorruption groups, including Jubilee Debt Campaign, who believed the changes to “be ill-conceived, unjustified, and, in a number of areas, potentially in violation of the UK government’s legally-binding international undertakings.”102 It went ahead with changes which will mean the UK will go no further than the common standard endorsed by all OECD countries.

A race to the bottom – or the top?

One example of what this change will mean is that smaller projects of around £10 million (SDR103 10 million), or where the repayment term is less than two years, are no longer subject to an impact analysis – they will no longer be screened for any sort of social or environmental impact.

The only way to stop this is a ‘race to the top’. The UK says it hopes to raise standards across the OECD as a whole in the future. But their action in scrapping the ‘Business Principles’ will have the opposite effect, as other countries take the opportunity to lower their own standards to the common base line.

This means, in effect, the ECGD will operate a ‘don’t ask, don’t tell’ policy towards these smaller projects – even on issues as significant as harmful child labour and forced labour. This policy really is the ‘lowest common denominator’ – as the majority of OECD countries actually do screen all applications regardless of their value and repayment arrangements.104

There are worrying signs that other countries are also lowering standards on their own export credit agencies.

But there are also some signs of hope.

These recently announced changes to the ECGD followed heavy lobbying from interested export groups who argued in 2009 that the ‘Business Principles’ should be “modified, if not scrapped altogether”.105 We believe this is short-sighted in the extreme. Lowering ethical and environmental standards means buying business for Britain at the expense of human rights,

The UK government claims that its changes to the ECGD are necessary to give British business a level playing field with their competitors. But this argument has always been used to justify a race to the bottom in terms of standards. Other export credit agencies have histories just as littered with bad projects and a legacy of debt as the ECGD.

Norway led the way in 2006 by auditing and cancelling a proportion of its export credit debt (see box).

The Norwegian decision proved it was possible for

“The principle of the shared responsibility of debtors and creditors is at the heart of an equitable global financial system.”

THE UNITED NATIONS EXPERT ON FOREIGN DEBT AND HUMAN RIGHTS, DR CEPHAS LUMINA (2009)

Norway leads the way In the mid-1970s, the Norwegian shipbuilding industry found itself in crisis. To save 30,000 jobs that were at risk, the government introduced the Ship Export Campaign – a mechanism by which developing countries would get cheap loans (export credits) in return for buying ships from Norwegian shipyards.

From 1976, Norway exported 156 ships and equipment worth $594 million to 21 countries, many with the help of the Norwegian export credit agency (the Norwegian Guarantee Institute for Export Credits or GIEK).

were also given to help countries buy the ships. These standard procedures, however, were ignored and, because of the special needs of the shipbuilding industry, credits were given for projects that would normally have been regarded as too risky.

GIEK was required to assess the risk and financial soundness of the projects, as well as its development impact, because development grants

In 1988–1989 the Norwegian parliament produced a white paper on the Ship Export Campaign which described it as having “had

In the 1980s, a combination of drastically falling ship prices, high interest rates and the mounting debt crisis meant the borrowers had problems repaying – only two countries managed to repay their debts.

limited importance as development aid”. After a long campaign by the Norwegian debt movement, on 2 October 2006 the government of Norway announced that it would unilaterally and unconditionally cancel the official debts of around $80 million incurred under the Ship Export Campaign by five countries: Ecuador, Egypt, Jamaica, Peru and Sierra Leone – and that these cancelled debts would not be taken out of the development assistance budget. According to a Norwegian Ministry of Foreign Affairs press release announcing the decision, the Ship Export Campaign had “represented a development policy failure”.106

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The Department for Dodgy Deals: Ending the UK’s support for toxic debt

governments to admit to past policy failures and put an end to the injustices arising from those failures.

We hope that this acceptance of some responsibility for past, unjust debts will also mean higher lending standards in future – the two aspects of dealing with past, unjust debts and not running up more unjust debts in the future must go hand-in-hand.

If countries like the UK continue to fail in their responsibility to correct past injustices, their hand may well be forced by developing countries themselves. In 2007, Ecuador became the first country in the world to conduct an official debt audit, implementing an election promise of President Correa to restructure the country’s public debt.

On 20 November 2008, the commission published the summary of its final report, finding that foreign loans, many of them export credit loans, had brought “incalculable damage” to the country’s economy. Only 14% of loans were invested in development projects and a large number of loans were granted on unfavourable conditions, most linked to the awarding of multimillion dollar contracts to foreign firms for projects that did not yield the expected benefits.107 When a developing country government finds itself repaying unjust debts it has no recourse to a fair process in order to get those debts cancelled. It can either continue paying and perpetuate the injustice, or repudiate and default on those debts – and risk being isolated from the international markets. Even so, when continuing to repay debts means that a government is unable to meet its people’s human right to development, there may be a strong case for those governments repudiating their debts.108

Ultimately, all countries need to have access to neutral forms of justice if they feel that lending or debts have been grossly unfair and unjust. That’s why an increasing number of countries and campaigners are calling for a ‘Debt Court’ – an international body based in neutral space like the United Nations, where countries could obtain an independent judgment on whether their debts are fair and payable.

In Norway, the Soria Moria Declaration on International Policy promises: “The government [of Norway] will support the work to set up an international debt settlement court that will hear matters concerning illegitimate debt.”109 In Germany, the coalition agreement signed between the Christian Democratic Union, Christian Social Union and Free Democratic Party, commits the parties of government to “advocate the implementation of an international insolvency code”.110 The former Dutch minister of Development Assistance, Bert Koenders, in a 2008 letter to Jubilee Netherlands, has also signalled support for a ‘debt work-out mechanism’ through the already existing Permanent Court of Arbitration situated in The Hague.

The British government needs to come out in support of a Debt Court. This could help build the critical mass of international support which could turn this long-overdue solution to debt problems into a reality.

What is a ‘Debt Court’?

The debt crisis facing Greece, Ireland and other European countries is proof that we are in a world where banks can lend with impunity and borrowers will always have to pay the price.

That price is currently austerity, but for decades this one-sided financial system has caused poverty and suffering in dozens of developing world countries. After months on the verge of economic collapse and a rescue package amounting to hundreds of billions of euros, the Greek crisis has still not been resolved because the mechanisms that could allow a solution to be reached do not exist in our financial system. A country has no access to justice to get rid of its unfair and unpayable debts.

24

When it comes to countries, people can go without healthcare and education but the lender can always expect repayment. Essentially, many developing countries have been, and continue to be, locked in a debtor’s prison.

An International Labour Organisation report says that the fiscal policies being forced on countries by the markets “may not be in their own interests if it leads to greater economic contraction or even a double-dip recession. It was just such a response that helped to bring about the Great Depression of the 1930s.”111 It doesn’t have to be this way. An international Debt Court could transform the situation, giving people back some of the power that has been taken from them by global finance.

If properly constituted, it would ensure that creditors recognised that a state’s primary duty is to its peoples’ human rights. It could prevent irresponsible lenders giving money for useless, damaging or dangerous projects. Such a court needs to be: Neutral: it cannot be controlled by creditors like the IMF Comprehensive: it must deal with all debts from all creditors and look at the justice of the lending behind the debt, as well as the sustainability of the debt Accessible to ordinary people to give evidence Empowered: Able to order an immediate freeze on payments for the country concerned.

Photo: Jubilee Debt Campaign

A protest outside the office of Vince Cable, Secretary of State for the Department of Business, Innovation and Skills, which oversees the ECGD.

The problems with ECGD standards

■

In February 2008, the European Network on Debt and Development, of which JDC is a member, launched their Charter on Responsible Financing.112 The Charter gives a comprehensive guide as to how governments and companies could lend responsibly to other governments – outlining the essential components of a responsible loan. These aim to ensure that terms and conditions are fair, that the loan contraction process is transparent, that human rights and the environment in recipient nations are respected and that repayment difficulties or disputes are resolved fairly and efficiently.

■

The Charter stipulates that, for example: Contracting a loan must be transparent and open – with loan documents making clear what a loan is for ■ Loans must be accountable – signed by those officials with authority to do so, but also with participation from parliaments and affected communities ■ Interest rates must be clear in advance with upper limits set ■ Lenders must not be allowed to unilaterally sell the loan to ‘vulture’ creditors ■ All loans must comply with human rights, national and international laws ■

The borrower must provide documentation to prove the loan is necessary Loans must not be tied to the purchase of goods and services from the lender.

In other words, it must enshrine the responsibly of both the borrowing government and the lending bodies.

The international community has already agreed that this ‘shared responsibility’ must guide lending in the Monterrey Development Consensus of 2002113 which states very clearly that “debtors and creditors must share the responsibility for preventing and resolving unsustainable debt situations.” This agenda is being taken forward at an international level by institutions like the UN Conference on Trade and Development (UNCTAD), which is working on a three-year programme to improve lending standards.

The British government claims to have already incorporated all of the concepts in the Eurodad Charter into their lending procedures. However, very serious flaws remain: ■ Standards are weak and getting weaker ■ Impact assessments are weak and sometimes ignored ■ Evaluation is non-existent ■ Debt is not properly taken into account ■ Bribery and corruption.

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The Department for Dodgy Deals: Ending the UK’s support for toxic debt

Standards are weak and getting weaker Throughout this report we have shown how the ECGD’s lending standards are too weak, and indeed are getting weaker. Perhaps most important, the OECD environmental, social and human rights standards, the so-called ‘Common Approaches’, which the ECGD will not now go beyond, are non-binding and explicitly allow standards to be waived in ‘exceptional cases’.114 Moreover, the ECGD still has no policy relating to climate change in projects, or any emissions reduction target. The ECGD also fails to operate a list of prohibited activities that are not conducive to sustainable development.

Impact assessments are weak and sometimes ignored For projects deemed to be high or medium impact, an economic and social impact assessment is carried out by the ECGD. However, as already stated, the majority of the ECGD projects are normally exempt from such screening, belonging as they do to the military or aerospace sectors. Of the remaining projects, very few fall into medium or high impact categories and, even when they do, the ECGD’s assessment remains limited and the standards discretionary. For instance, human rights are not effectively assessed.

The problems are well demonstrated by the ECGD’s decision, in 2004, to support the $20 billion Sakhalin II oil and gas development in Russia’s far east consisting of new oil and gas platforms, offshore and onshore pipelines, a liquid natural gas production plant and an oil and gas terminal. The size and nature of the development meant it was categorised as a high impact project which, according to ECGD policy, requires an environmental impact assessment. Despite this, ECGD gave a legally-binding commitment to support the project in March 2004, before an adequate assessment had been completed. The initial impact assessment, submitted by the Sakhalin Energy Investment Company (SEIC), after construction had already begun, was declared by potential lenders to be ‘unfit for purpose’.115 The support was only terminated when, in March 2008, SEIC withdrew their application to the ECGD. An effective impact assessment should be ‘context sensitive’; that is, it should map the different actual and potential causes of insecurity (local, national or international) that are generated by a project in order to understand how the project might have negative or positive outcomes. For instance, the ECGD’s impact assessment must define key sources of tension and their causes, economic development and distribution, democratic inclusion in decision-making, respect for human rights, natural resources, the environment, and other sources of insecurity. It must also undertake an analysis of local, national and international actors that influence or are influenced by a project. A stronger understanding of the interaction between exporters and local parties can assist in safeguarding against corruption.

Photo: TECH SGT HH Deffner

The impact assessment does not require information on a whole host of contextual issues such as: whether a project will increase the potential for local conflict (eg: increased crime and competition over natural resources); how it will impact on freedom of expression;

or how it will encourage transparency and accountability within society.

The 20th Brigade of the Royal Saudi Land Force displays a 155mm GCT self-propelled gun, left, and AMX-10P infantry combat vehicles during Operation Desert Shield.

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Evaluation is non-existent Once a project has been given the go-ahead, the ECGD does nothing further to meet its responsibility. In essence, it simply washes it hands of responsibility.

Despite many instances where the impact of the ECGD’s activities have been considerable, no formal mechanism for complaints or for performance to be routinely and independently assessed is available.

No access to justice is available to those who might be affected. Indeed, the ECGD does not even have a formal procedure for evaluating its impacts so that it can behave more responsibly in the future.

The ECGD must make enormous changes if it is to properly meet its responsibilities. First, it must adopt a ‘duty of care’ towards the people and environment its projects impact on. It must introduce evaluation and improve reporting on all activities, including direct and indirect emissions and sustainable development. It must have a system of appropriate sanctions when things go wrong and the government must create an independent ombudsman to deal with complaints.

Evaluation should be ongoing, asking key questions such as: Is the project of benefit? Is the project economically viable? Is the project sustainable in the long-term? Are the project’s aims achievable in the time forecasted? In answering these questions, the ECGD and affected communities will be better able to hold exporters accountable for their actions. In instances of failure, the ECGD will be in a stronger position to take punitive actions and local communities more able to claim for compensation.

of the export credit, ensuring risk is shared on both sides.

Bribery and corruption Despite a significantly improved policy and screening procedure on bribery introduced in 2006, the ECGD’s policies on bribery remain insufficient to guarantee that ECGD deals are corruption free. A number of problems remain, and truly tackling corruption would require comprehensive declarations of who companies use as agents, and improved rights of audit and inspection in projects. Perhaps most importantly, the ECGD still does not have a policy of debarring companies found guilty of corrupt activities – they can go on receiving the ECGD support.

Improving the ECGD’s standards unilaterally would not necessarily lead to a comparative disadvantage for UK exporters, as is usually argued by the British government. Several of the proposed reforms are already standard practice in other ECAs,117 with no apparent disadvantage. Moreover, by requiring best practice standards, the ECGD could play an important role in making British industry more competitive in future, when the British government itself hopes such standards will become commonplace. Indeed, the British government might help British industry meet such higher environmental and social standards.

Debt is not properly taken into account The ECGD does examine the debt sustainability of very poor countries before extending credits when there is a possibility that those credits would translate into debt.

Indeed, the ECGD rarely, if ever, now extends credits to debt relief-eligible countries (‘HIPC countries’). The ECGD can and does extend support to projects in other low income countries.116 Moreover, a debt assessment would not have been applied to any of the countries studied in this report even today, in spite of their high poverty levels.

Even within very low income countries, ‘debt sustainability’ is based on the International Monetary Fund’s flawed definition which aims to reduce debt to a level which is ‘just payable’ rather than truly consistent with poverty alleviation.

In fact, we have yet to be convinced of the need for a recipient country to underwrite export credits, a mechanism which transfers all risk onto the poorer and weaker party. At the very least, underwriting should be limited to a proportion less than 50% of the total value

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Photo: Siphiwe Sibeko / REUTERS

A woman carries a bucket of water on her head in Munsieville, an informal settlement outside Johannesburg, April 15, 2009. The Lesotho dam, was supposed to provide better water access to Johannesburg, but academics claim it led to vastly increased water charges, falling heaviest on the poorest.

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Chapter 4

Recommendations In a recession, export credits come to be seen as more important than ever. They are presented as a key way that the British government can support struggling industry and restimulate the British economy. In April 2009, all G20 leaders agreed “to ensure $250 billion of support for trade finance” – largely export credit funds.118 The new schemes and revisions to ECGD standards should be seen in this light.

Longer-term, we are experiencing major resource and environmental limitations on our economic development. For example, it is estimated that in the next few decades there will be a five-fold increase in resource extraction in Africa, a result of resource depletion in the developed world because of high expected returns on investments.119 This also means we could see increased use of export credits in order to protect ‘British interests’ in the world.

So changes to the ECGD are urgent. Now is the time to ensure that export credits are not used to perpetrate more abuses, to finance irresponsible projects or to create mountains of debt. If this chance is not seized, the cases outlined in this report could be the tip of the iceberg, allowing British governments to go on having a detrimental impact on the rest of the world.

A package of reforms to create a responsible ECGD includes: ■ Drop the unjust debts.

■ Respect human rights.

■ Stop supporting the export of arms and fossil fuel technology.

■ Crack down on corruption.

■ Become accountable to parliament, the public and affected communities.

■

■

Respect human rights ■

■

Drop the unjust debts ■

■ ■

Audit the ECGD’s existing debt portfolio to identify cases of illegitimate debt, like the cases documented in this report, and cancel all debts deemed illegitimate.

When such debts are cancelled, do not report them as Official Development Assistance.

Cancel debts which are preventing countries from meeting their human rights obligations. This requires use of a new measure of truly ‘sustainable’

debt. Poor countries such as Kenya, Pakistan and Vietnam should have their debts cancelled purely on the basis that those countries cannot both afford repayment and anti-poverty expenditure.

Stop using developing country counter-guarantees on export credits, wherever possible. As a minimum, counter-guarantees should be limited to no more than 50% of the total credits issued; should be publicly disclosed to the British public; and should be disclosed and debated in the counterguaranteeing country as a potential loan.

Adopt the principle that the creditor shares responsibility with debtor governments for lending decisions by incorporating a debt work-out mechanism which allows future debt problems to be resolved in a fair and transparent way by a body composed of debtor, creditor and neutral interests.

■

Adopt mandatory standards that incorporate environmental, human rights and anti-poverty criteria, consistent with those set down in the Eurodad Charter on Responsible Financing.120 Make an impact analysis a pre-condition for all projects, including aerospace, and ensure that no guarantee is issued prior to the conclusion of that analysis or the accompanying public disclosure and consultation procedures.

Dramatically improve the content of impact analysis to include conflict and political risk assessment.121

Stop supporting the export of arms and fossil fuel technology ■

Operate a categorical prohibitions list for types of projects that are not conducive to sustainable

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The Department for Dodgy Deals: Ending the UK’s support for toxic debt

■

development and human rights and should therefore not receive public financial support via ECGD facilities. This should include the arms and fossil fuel industries.

Place a limit on the aggregate annual GHG emissions associated with ECGD operations and the projects it supports. Annual emissions should not exceed a relevant baseline consistent with emissions reduction target policies of the UK as a whole and must be reduced over time.

■

■

■

Crack down on corruption ■

New standards on bribery, including that companies previously convicted of corruption should be debarred from receiving ECGD support for a period of five years after the date of conviction, and applicants should be required to disclose the identities of agents appointed by joint venture partners or subsidiaries.

■

■

Become accountable to parliament, the public and affected communities Quarterly reporting of details for projects under consideration by, or receiving support from, the ECGD.

Photo: Nick Ward / Jubilee Debt Campaign

■

■

Disclosure of a summary of the assessments made by the ECGD in its decision on categorisation for each project and publication of the casespecific assessment procedures and monitoring processes that will be undertaken in light of this categorisation.

Disclosure of all impact assessments, construction and off-take agreements eg: power purchasing agreements and host government agreements.

Establish and execute transparent and consistent procedures for monitoring the implementation of measures associated with impact assessments, plans and conditions, including periodic monitoring by both the ECGD and independent experts and the publishing of all monitoring reports. An appropriate sanctions framework must be created for client companies in breach of agreed performance standards to ensure the ECGD meets its ongoing responsibility for projects it supports.

All projects should carry clear success and failure indicators to be monitored as part of an evaluation procedure.

Improved and lengthened consultation with local communities and other stakeholders, prior to and throughout the lifetime of the project.

Adopt a ‘duty of care’ clause in the Act governing the ECGD and create an independent ombudsman to investigate and respond to issues raised by local communities and other stakeholders and monitor the activities of the ECGD in relation to their impacts on sustainable development.

A walking tour of the City of London makes the links between the financial crisis and global poverty, September 2009.

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End notes

References 1 While the ban on harmful child labour and forced labour in ECGD projects remains in place, no screening is required for projects with a short repayment period – and exporters are no longer informed as a matter of course that the ECGD has this nominal ban in place.

2 British Exporters Association (April 2010) Export Credit Agencies: Export support available to British exporters.

3 The Berne Union Statistics: Five Year Trends, 2010, www.berneunion. org.uk/pdf/Statistics%20from%20Berne%20Union%20Yearbook%20 2010.pdf

18 Email response to two Freedom of Information requests by JDC to the ECGD: FOI(10)27 on 26 May 2010 and FOI(10)29 on 4 June 2010 19 Global Development Finance, The World Bank and Human Development Index, Indonesia, UNDP, accessed Feb 2010 20 Amnesty International UK (28 January 2008) Indonesia: Atrocities conducted under Suharto should not be forgotten, says Amnesty, www.amnesty.org.uk/news_details.asp?NewsID=17626

4 ECA-Watch, Export Credit Agencies Explained, www.eca-watch.org/ eca/ecas_explained.html

21 The Commission for Reception, Truth, and Reconciliation, Unlawful Killings and Enforced Disappearances, Chega!, www.ictj.org/ static/Timor.CAVR.English/07.2_Unlawful_Killings_and_Enforced_ Disappearances.pdf

5 Export Credits Guarantee Department (2010) Export Credits Guarantee Department Annual Review and Resource Accounts 2009–10, www.ecgd.gov.uk/publications/reports/annual-report/ann-rev-resaccts-2009-2010

22 Human Rights Watch (27 January 2008) ‘Indonesia: Suharto’s Death a Chance for Victims to Find Justice’, www.hrw.org/en/ news/2008/01/27/indonesia-suharto-s-death-chance-victims-findjustice

6 UK government Secretary of state for Trade & Industry and Chief Secretary to the Treasury (16 March 2005), ‘Estimating the economic cost of ECGD’, http://webarchive.nationalarchives.gov.uk/tna/+/ http://www.dti.gov.uk/files/file16384.pdf

23 Cook R (1998) Speaking on BBC Radio 4 Today Programme. 14/05/98.

7 The Corner House (23 March 2010), ‘Complaint to EU concerning alleged unlawful state aid to UK’s export credit agency: Refinancing through GEFCO raises questions about ECGD’s financial losses’ 8 ECGD (2010) Annual Review and Resource Accounts 9 International Development Association and International Monetary Fund (2010) ‘Heavily Indebted Poor Countries (HIPC) Initiative and Multilateral Debt Relief Initiative (MDRI) – Status of Implementation’, www.imf.org/external/pp/longres.aspx?id=4481 10 World Bank (2010) The little book on external debt. World Bank.

Washington DC. 11 Email response from Export Credits Guarantee Department following a Freedom of Information request, 26 May 2010 12 The country has been accepted into the HIPC debt relief process and has embarked on an IMF programme which, if conditions are fulfilled, should eventually result in debt cancellation.

13 The country is theoretically eligible for HIPC debt relief but has not met the basic conditions to allow it to begin the process.

14 Stephen Mandel (2006) Debt Relief as if People Mattered: A rightsbased approach to debt sustainability, New Economics Foundation, www.neweconomics.org/publications/debt-relief-if-justice-mattered 15 Hansard HC (15 December 2010) Debts: Developing Countries, Helen Goodman to Ed Davey, Column 792W 16 The UK government reports that total debt relief between 2005 and 2010 was over £4 billion. £3.6 billion was export credit debt, with $2.7 billion going to Nigeria and £616 million going to Iraq. UK Department for International Development, ‘Aid Statistics 2010’, Additional Tables 4 and 5 www.dfid.gov.uk/About-DFID/Finance-and-performance/ Aid-Statistics/Statistic-on-International-Development-2010/AboutStatistics-on-International-Development-2010 17 See JDC et al (2005) Justice for Nigeria: Why the UK should return Nigeria’s £1.7 billion to fight poverty, www.oxfam.org.uk/resources/ policy/debt_aid/downloads/justice_nigeria.pdf; and Jubilee Iraq’s background briefing www.jubileeiraq.org/background.htm

24 Select Committee on Foreign Affairs (2004) Foreign Affairs – Sixth report, 05/05/04 25 The Guardian (9 December 2004 ) ‘Alvis: the president’s family and the payoffs’; and Rob Evans, David Leigh, David Pallister and John Aglionby, ‘Guardian victory in arms bribe case’ 26 CAAT-TAPOL (December 2005) Arms to Indonesia factsheet, www.caat. org.uk/resources/publications/countries/indonesia-0604.php 27 Business Week (20 January 1999 )‘Up in Smoke’, Michael Shari, and Wall Street Journal; ‘IMF Admits Errors in Asian Crisis, But Defends Its Tight-Money Policy’; Richard Borusk, Pierre Goad and Michael M Phillips 28 UNDP 2007 data 29 Stephen Mandel, Debt Relief as if People Mattered 30 UNDP (2010) Human Development Report. The real wealth of nations: Pathways to human development. And World Bank. (2010). Data indicators. http://data.worldbank.org/indicator/SI.POV.2DAY 31 DfID (2008) UK MDRI criteria change, May 2008.

32 Quoted in Dr Susan Hawley, Turning a Blind Eye: Corruption and the UK Export Credits Guarantee Department, The Corner House (June 2003) www.thecornerhouse.org.uk/sites/thecornerhouse.org.uk/ files/correcgd.pdf 33 Quoted in Dr Susan Hawley, Turning a Blind Eye 34 Dr Susan Hawley, Turning a Blind Eye 35 The Corner House (10 December 2000) Underwriting Corruption: Britain’s Role in Promoting Corruption, Cronyism and Graft, www. thecornerhouse.org.uk/resource/underwriting-corruption 36 Dr Susan Hawley, Turning a Blind Eye 37 The Corner House Underwriting Corruption 38 The Corner House Underwriting Corruption 39 Daily Nation (Kenya), ‘In Turkana, they live at the mercy of the elements’, Oliver Mathenge, 27 May 2009 40 World Bank (2010), Data indicators. http://data.worldbank.org/ indicator/SI.POV.2DAY

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41 The National Commission for Enterprises in the Unorganized Sector (the Arjun Sengupta Committee) The Challenge of Employment in India: An Informal Economy Perspective, April 2009: “Though the population suffering from extreme poverty … came down significantly from 1993–94 onwards, they seem to have moved only marginally above the poverty line and about 77% of them were stuck below the expenditure on average of Rs. 20/- per day per capita.” Rs. 20 is around 40 cents at market exchange rates and 55 cents taking into account different costs of living.

67 The Corner House (2000), Underwriting Corruption: Britain’s Role in Promoting Corruption, Cronyism and Graft, www.thecornerhouse.org. uk/item.shtml?x=51990

42 Dr Susan Hawley, Turning a Blind Eye

70 Patrick Bond and Molefi Mafereka ka Ndlovu, ‘Development Dilemmas of Mega-Project Electricity and Water Consumption’ in Bill Freund and Harald Witt ‘Development Dilemmas in South Africa’ University of KwaZulu-Natal Press, 2010; Patrick Bond, ‘Fighting for the Right to the City: Discursive and Political Lessons from the Right to Water’, Presented to the Right to Water Conference 2010

43 ECGD response to a Freedom of Information request, 6 October 2010.

44 Quoted in Dr Susan Hawley, Turning a Blind Eye 45 Human Rights Watch (January 2002) ‘The Enron Corporation: Corporate Complicity in Human Rights Violations’, www.hrw.org/en/ node/62409/section/4#_ftnref55 46 Human Rights Watch, ‘The Enron Corporation’ 47 See Dr Susan Hawley, Turning a Blind Eye 48 The Financial Times (4 July 2005) ‘Bechtel hopes to settle Dabhol case’ Khozem Merchant; Business World India, ‘Dabhol rerun’, Latha Jishnu and Ranju Sarkar www.businessworld.in/index.php/Dabhol-rerun.html 49 Wall Street Journal (14 July 2005) ‘Bechtel Sells Its Stake In Dabhol Power Plant’, John Larkin 50 Hawley S (December 2003) Underwriting bribery: Export credit agencies and corruption, The Corner House, Dorset 51 ECGD response to a Freedom of Information request, 6 October 2010.

52 Mitchell A (2010) Speech on wealth creation at the London School of Economics. 13/10/10. http://www.dfid.gov.uk/Media-Room/ Speeches-and-articles/2010/Wealth-creation-speech/ 53 Dr Susan Hawley, Turning a Blind Eye 54 Asia Development Bank (2000), Anticorruption policy, www.adb.org/ documents/manuals/anticorruption/anti.pdf 55 More details on the Lesotho Highlands Water Project website: www. lhwp.org.ls 56 Statistics of the Human Development Report, 2009 http://hdrstats. undp.org/en/countries/data_sheets/cty_ds_LSO.html 57 Lesotho Highlands Development Authority, Overview of the Lesotho Highlands Water Project (LHWP), www.lhwp.org.ls/overview/default. htm 58 ‘Lesotho Highlands Water Project: What Went Wrong?’ 31 October 2005, Presentation to Chatham House Conference, 10 July 2000 ‘Corruption in Southern Africa – Sources and Solutions’ www. internationalrivers.org/en/africa/lesotho-water-project/lesothohighlands-water-project-what-went-wrong 59 Strategic Review for Southern Africa ‘Foreign military intervention in Lesotho’s elections dispute: Whose project?’, Makoa, Dr Francis K, 1 June 1999 60 Email from ECGD Spokesperson to The Corner House dated 5 November 2002 quoted Dr Susan Hawley, Turning a Blind Eye 61 International Rivers, A Brief History of Africa’s Largest Water Project, www.internationalrivers.org/en/node/931 and UNICEF Lesotho feature www.unicef.org/sowc05/english/hivaidsfeat_lesotho.html 62 Dr Susan Hawley, Turning a Blind Eye 63 International Rivers (2006), On the Wrong Side of Development, www. internationalrivers.org/files/WrongSide2006.pdf 64 The Guardian (6 July 2002) ‘Blacklisting threat to UK firm in dam cash scandal’ David Pallister 65 US Department of State note on Lesotho www.state.gov/r/pa/ei/ bgn/2831.htm; Dr Susan Hawley (2003), Op cit 66 International Rivers (updated January 2005) ‘A Brief History of Africa’s Largest Water Project’, www.internationalrivers.org/africa/briefhistory-africa-s-largest-water-project

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68 Dr Susan Hawley, Turning a Blind Eye 69 The World Bank (6 November 2006) ‘World Bank sanctions Lahmeyer International for corrupt activities in bank-financed projects’; The Guardian (23 July 2004) ‘World Bank blacklists firm’, Charlotte Moore

71 Campaign Against Arms Trade, ‘Al Yamamah: the National Archive documents’ at www.caat.org.uk/issues/saudi-tna/saudi-tna-docs.php; Hansard (7 Feb 2007) ‘Al-Yamamah Arms Agreement’; The Guardian (6 February 2010 )‘BAE admits guilt over corrupt arms deals’, David Leigh and Rob Evans; The Times (21 February, 2007 )‘Al-Yamamah an echo of 1980s sleaze’, David Robertson; The Guardian (7 June 2007 )‘The al-Yamamah deal’ David Leigh and Rob Evans, www.guardian.co.uk/world/2007/jun/07/bae15; The Observer, Leader (17 December 2006) ‘The BAE affair sends all the wrong signals’; The Times (15 December 2006) ‘Blair: I pushed for end to Saudi arms inquiry’, David Charter, www.controlbae.org ‘Background’; The Times (6 February 2010) ‘Six-year BAE investigation ends with minor accountancy charges’, David Robertson and Alex Spence, http://business.timesonline.co.uk/tol/business/industry_sectors/ industrials/article7016732.ece 72 Export Credits Guarantee Department (17 December, 2003) ‘ECGD poised to back UK exporters in BTC pipeline project’ 73 Venkataraman Krishnaswamy (2010) ‘Regional energy projects: Experience and approaches of the World Bank Group’, http://siteresources.worldbank.org/INTESC/Resources/ RegionalTradeBackgroundPaper.pdf 74 Some of these implications are drawn out in: International FactFinding Mission to Turkey in July/August 2002, ‘Preliminary Analysis of the Implications of the Host government Agreement between Turkey and the BTC Consortium’, October 2002 www.bakuceyhan.org.uk/ publications/preliminary_legal_analysis_oct_02.pdf 75 House of Commons Trade and Industry Committee, ‘Implementation of ECGD’s Business Principles, Ninth report of session 2004–05’, 2005 www.publications.parliament.uk/pa/cm200405/cmselect/cmtrdind/ 374/374ii.pdf 76 Baku Ceyhan Campaign et al to DfID, etc, ‘Developmental, Human Rights and Environmental Impacts of the Baku-Tbilisi-Ceyhan Oil Pipeline’, 2002 www.baku.org.uk/correspondence/DfID_memo_feb_ 2003.pdf 77 CEE Bankwatch et al, Preliminary Report of a Fact Finding Mission: Baku-Tbilisi-Ceyhan Oil Pipeline: Human Rights, Social and Environmental Issues: Georgia, 2005 www.bakuceyhan.org.uk/ publications/FFM05Georgia.pdf 78 CEE Bankwatch et al (2004) Third Fact Finding Mission: Azerbaijan Georgia Turkey Pipeline: Azerbaijan Section, www.bakuceyhan.org. uk/publications/ffm_azeri_report_04.pdf 79 CEE Bankwatch et al (2005) BTC Pipeline – An IFI Recipe for Increasing Poverty, http://bankwatch.org/documents/report_btc_poverty_10_ 05.pdf 80 The Corner House (2010) ‘ECGD releases BTC Pipeline assessment documents’, www.eca-watch.org/problems/oil_gas_mining/btc/ ECGD_BTC_documents_July_2009.html 81 Amnesty International (2003) ‘Baku-Tbilisi-Ceyhan pipeline project puts human rights on the line’, www.amnesty.org.uk/news_details. asp?NewsID=14542

82 James Marriott & Mika Minio (2011 – forthcoming) The Oil Road 83 Kurdish Human Rights Project (2004) ‘The Trials of Ferhat Kaya’ 84 Quoted in Baku Ceyhan Campaign Baku Ceyhan Campaign to DfID (2002) ‘Developmental, Human Rights and Environmental Impacts’ 85 The Corner House et al (2008) ‘Regional Conflict and BTC Pipeline: Concerns over ECGD’s due diligence’, Submission to the Environmental Audit Committee, ‘Export Credits Guarantee Department and Sustainable Development’, http://bankwatch.org/documents/EAC_ BTC_Conflict_26.8.08.pdf 86 The Corner House (2010) ‘ECGD releases BTC Pipeline assessment documents’, www.eca-watch.org/problems/oil_gas_mining/btc/ ECGD_BTC_documents_July_2009.html 87 See Tracey German , ‘Pipeline politics: Georgia and energy security’, Small Wars & Insurgencies, Volume 20, Number 2, June 2009 (Routledge); Robert Cutler, ‘Oil in Troubled Mountains’, Asia Times Online, 13 August 2008, www.atimes.com/atimes/Central_Asia/JH13Ag04. html; The Corner House (26 August 2008) ‘Correspondence with Patrick Crawford – ECGD Chief Executive’, www.bakuceyhan.org.uk/080826_ ECGD_letter_diligence.pdf 88 The Guardian (30 June 2010) ‘UK backing loans for ‘risky’ offshore oil drilling in Brazil’, John Vidal; The Corner House statement (first published 1 July 2010) ‘UK backs loans for very deep Brazilian offshore oil drilling’ 89 The Guardian (20 December 2005) ‘British family firm accused of getting rich by building bridges to nowhere’, David Leigh and Rob Evans; Testimony by Sinag ng Bayan Foundation to the Ombudsman by the Philippine NGO, August 2005; The Corner House (May 2006) Evidence to Select Committee on Trade and Industry Written Evidence; The Financial Times (14 January 2010) ‘Ex-Mabey chief to face graft charges’, Michael Peel; The Guardian (25 September 2009) ‘British bridge firm bribed foreign officials to win contracts, court hears’, Rob Evans 90 World Bank Global Development Finance database 91 ECGD (May 2009) ‘Consultation on the Introduction of a Product Guaranteeing Reimbursement of UK Confirming Banks under Letter of Credit Arrangements’ 92 Punch (3 December 2009) ‘EFCC arrests four Intercontinental Bank officials over N12bn fraud’; Nigerian Inquirer (4 August 2010) ‘Wanted Erastus Akingbola, Intercontinental Bank MD Returns to Nigeria’ 93 Wall Street Journal (15 August 2009 )‘Nigeria plans $2.6 billion bank bailout’, Will Connors; Financial Times ‘Nigeria takes control of five banks’, Tom Burgis 94 For example Trade and Industry Committee (July 2006) ‘Export Credit’s Guarantee Department’s bribery rules’ 95 For example International Development Committee (December 1999) ‘Export credits guarantee department – developmental issues’ 96 Environmental Audit Committee, ‘ECGD and Sustainable Development’, www.parliament.the-stationery-office.co.uk/pa/ cm200708/cmselect/cmenvaud/929/92902.htm, 2008 97 Joint Committee on Business and Human Rights (2009), ‘Any of our business? Human rights and the UK private sector?’, www. publications.parliament.uk/pa/jt200910/jtselect/jtrights/5/511.htm 98 Export Credits Guarantee Department (2010), ‘Guidance to Applicants: Processes and Factors in ECGD Consideration of Applications’, www. ecgd.gov.uk/assets/bispartners/ecgd/files/prods-servs/guidance-onprocesses-and-factors.pdf 99 ECGD, Annual Report 2007–8 100 Environmental Audit Committee (2008), Op cit 101 ECGD (December 2009) ‘Public Consultation on Proposed Revisions to ECGD’s Business Principles and Ancillary Policies’

102 Joint Response by Amnesty International UK, Campaign Against Arms Trade, Jubilee Debt Campaign, Oxfam GB, The Corner House and WWF UK (March 2010) to Export Credits Guarantee Department’s (ECGD’s) ‘Public Consultation on Proposed Revisions to ECGD’s Business Principles and Ancillary Policies’ 103 Special Drawing Rights – The SDR is an international reserve asset, created by the IMF to supplement member states’ official reserves.

104 Countries that screen all applications include: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, France, Germany, Greece, Hungary, Italy, Japan, Korea, Netherlands, Norway, Poland, Slovakia, Sweden, Switzerland, Turkey and USA 105 British Exporters Association, ‘Consultation on the introduction of a product guaranteeing reimbursement of UK confirming banks under letter of credit arrangements’, 2009 www.bexa.co.uk/docs/ LC%20Submission%20final.doc 106 All taken from ‘Report of the independent expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights’, Cephas Lumina to the Human Rights Council of the UN General Assembly (Fourteenth session), 21 April 2010 107 ‘Report of the independent expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights’, Cephas Lumina to the Human Rights Council of the UN General Assembly (Fourteenth session), 21 April 2010 108 For more information see ChristianAid Enough is enough: The debt repudiation option, January 2007 109 Office of the Prime Minister (Norway), ‘Chapter 2: International Policy’, The Soria Moria Declaration on International Policy, 4 February 2007, www.regjeringen.no/en/dep/smk/documents/Reports-and-actionplans/Rapporter/2005/The-Soria-Moria-Declaration-on-Internati.html 110 Coalition agreement between the CDU, CSU and FDP (2009), Growth.

Education. Unity, http://cdu.de/doc/pdfc/091215-koalitionsvertrag2009-2013-englisch.pdf 111 International Labour Organisation (2010), ‘Recovery and growth with decent work’, Report of the Director-General to the International Labour Conference, 99th Session 2010 112 Eurodad (6 February 2008) ‘Responsible Financing Charter’, www.eurodad.org/whatsnew/reports.aspx?id=2060 113 United Nations (2002) ‘Monterrey Consensus of the International Conference on Financing for Development’, www.un.org/esa/ffd/ monterrey/MonterreyConsensus.pdf 114 OECD Working Party on Export Credits and Credit Guarantees (2007) ‘Revised council recommendation on common approaches on the environment and officially supported export credits’ 115 European Bank for Reconstruction and Development President Jean Lemierre quoted in Simon Pirani, ‘Russian Rage over Sakhalin Project’, Emerging Markets, 19 April 2004 116 From 2002 to 2009, the OECD finds the ECGD had extended over $600 million of support to 25 projects in these countries, OECD, ‘Review of Export Credit Commitments to IDA-only countries (2001–9)’ www.oecd. org/dataoecd/42/59/36945707.pdf 117 Joint Response by Amnesty International UK, Campaign Against Arms Trade, Jubilee Debt Campaign, Oxfam GB, The Corner House and WWF UK (March 2010) to Export Credits Guarantee Department’s (ECGD’s) ‘Public Consultation on Proposed Revisions to ECGD’s Business Principles and Ancillary Policies’ 118 G20 Communiqué (2 April 2009) ‘Global plan for recovery and reform’ 119 Paul Collier (2010), The Plundered Planet, Oxford University Press 120 Eurodad, ‘Charter on Responsible Financing’ 121 For further information on conflict sensitivity, see Saferworld et al (2004) ‘Conflict-sensitive approaches to development, humanitarian assistance and peacebuilding: A resource pack’, www.saferworld.org. uk/publications.php?id=148

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