FRONT PAGE CONTRIBUTOR
Export Import Bank subsidizes Russian companies under US sanctions
We posted earlier today on how the Russian adventurism in Ukraine seems poised to escalate into a full blown war. Since March 3, Obama has issued three executive orders imposing sanctions on a number of individuals and businesses (or on-going criminal enterprises if you are a stickler for accuracy) closely associated with Russian president Vladimir Putin. In light of recent statements emanating from the White House, statements which label Russia and Putin as culpable in the shootdown of Malaysia Air MH-17 over Ukraine, we can expect an additional round of sanctions.
So far, so good. I’m not a believer in sanctions in general but symbols are important when you find yourself with no other options than symbolism.
Incredibly, the US Export-Import Bank, which epitomizes the institutionalization of corporate welfare, continues to guarantee loans to Russian companies. Indeed, at least one Russian company under sanctions continues to benefit from subsidized financing paid for by US citizens.
The latest round of sanctions involve two major energy firms, Novatek and Rosneft, as well as two state-controlled financial institutions, Vneshekonombank (VEB) and Gazprombank. The firms will be restricted in raising capital from U.S. investors. Previous sanctions imposed travel bans on influential Russians and the freezing of commercial assets.
VEB is a development bank that underwrites infrastructure and technology projects. It also “owns” two other public institutions, Roseximbank and EXIAR, which provide credit insurance and financing to Russian exporters.
In 2012, Ex-Im approved a 12-year loan guarantee of $497 million to VBE to finance the purchase of Boeing aircraft for Aeroflot Russian International Airlines. Boeing is the largest beneficiary of Ex-Im subsidies. The sanctions do not appear to have any bearing on the deal.
Chairman of the House Committee on Financial Services, Jeb Hensarling, has taken notice. He has sent a letter to Obama asking him to pull the plug on all Export-Import Bank financing to Russia in light of the current international situation. This wouldn’t prevent US companies doing business with Russian entities not covered by sanctions but it would remove the unsightly mess of us subsidizing a murderous thugocracy that we are in the process of punishing.
The situation in Ukraine grows worse every day. Russia bears responsibility for this conflict, including the atrocity of the downing of Malaysia Airlines Flight 17, because Russia is supplying the sepai atists with advanced weapons and encouraging their attacks on aircraft and on the people of Ukraine. Russia’s actions are in direct conflict with our national interests.
Yet, still, the Export-Import Bank remains open for business in Russia. In fact, total authorizations for deals between Ex-Im and Russia have increased nine-fold since you took office. While your Administration announces sanctions on Russian companies on the one hand, on the other it offers sweetheart deals to Russian companies through Ex-Im. Indeed, some of the very same Russian firms that are being sanctioned by the United States have benefited from Ex- Im: Vnesheconombank (VEB) and Gazprombank — two state-owned Russian banks.
As you know, Congress is in the midst of debating whether to reauthorize the Export-Import Bank. But in the face of growing Russian aggression, Ex-Im’s continuing — and even increasing — connections with Russian companies, many of them run by Vladimir Putin’s cronies, has got to stop and stop immediately.
Section 2(b)(1)(B) of the Export-Import Bank Charter provides the President of the United States with the authority to deny applications for financing that would benefit Russian companies. I therefore ask you to immediately halt any and all deals the Export-Import Bank is working on with Russia and with Russian companies and to suspend consideration of future Ex-Im deals involving Russia.
The time is long past for the Ex-Im Bank to be put out of business. It is crony capitalism at its worst. In this case, it is making a mockerey of American foreign policy, as such exists under Obama, and puts the US in the rather indefensible position of asking allies to participate in sanctions while we openly flout them.