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U.S.-Backed Financing For Big Eurasian Projects To Soon Dry Up

  • RFE/RL

A crucial source of financing may soon no longer be available for purchasing expensive equipment needed for farming in Ukraine, earth-moving in Kazakhstan, and oil and gas operations in Russia and Iraq.

That is because the U.S. Congress for the first time is allowing the U.S. Export-Import Bank, which has financed large projects throughout Eurasia, the Middle East, and the rest of the world for 81 years, to close its doors because of an unresolved dispute over whether its subsidized lending is needed any longer.

Congress left for an 11-day break on June 25 without renewing the bank's lending charter, forcing it to stop making new loans as of July 1. The bank will continue to service $112 billion in existing loans and guarantees, and process trade insurance claims through September 30, when its administrative funding also runs out.

At issue is whether the bank is needed for large U.S. corporations like Boeing, John Deere, AT&T, and Motorola to make sales overseas in a world where nearly every corporation they compete with, from Airbus to Mitsubishi and Samsung, gets subsidized financing from their national governments.

For several years, conservative Republicans in the United States have been pushing to close down the bank, arguing it provides a kind of "welfare" for fat-cat corporations that don't need taxpayer help.

Representative Jeb Hensarling (Republican-Texas), a leader of the crusade to close the bank, expressed gratification that he seems to have finally succeeded.

"This is a small step toward renewing a competitive, free-market economy, and arresting the rise of the progressive welfare state and the cronyism connected to it," he said.

But President Barack Obama, most congressional Democrats, and a few moderate Republicans say the United States will lose in the tough competition for export sales without the extra help provided by the government lender.

The bank's chairman, Fred Hochberg, expressed bewilderment that the bank was being cut off after decades of operating largely free of controversy.

"It's hard to believe Ex-Im is going to lapse. But we are," he said in a speech on June 25.

Hensarling, who chairs the House Financial Services Committee, has refused to allow legislation to renew the bank to move through his committee.

The bank's only hope is that proponents in Congress will succeed in attaching an amendment to keep it open to unrelated legislation moving through the Senate, such as a transportation funding bill.

"We've been expecting that it's going to get attached to something over in the Senate and come over to the House," said House Speaker John Boehner, who has backed the bank in the past. "When it does, we'll deal with it. Until then, we won't."

Amid the whirlwind of controvery stirred up by conservatives last year, the bank already had stopped lending to Russia, which was previously one of the biggest recipients of its loans.

Even Russia's giant Gazprom gas monopoly got a loan at one point. But since losing access to such government financing -- as well as private bank financing -- in the West, Russian companies have been forced to seek loans from their own government as well as from China and other non-Western lenders.

It is less clear where countries like Uzbekistan, Kazakhstan, Iraq, and Ukraine will find substitute financing should they wish to purchase American goods. The bank's proponents say they likely will throw their business to competitors backed by other countries that continue to offer favorable financing terms.

With reporting by Reuters