U.S. Groups Push Ex-Im Bank to End Russian Subsidies

Federal agency has financed Russian energy projects and companies with Putin ties

Russian President Vladimir Putin looks on as Crimean leaders signing a treaty to incorporate Crimea into Russia / AP
March 19, 2014

Free market groups are pushing for the federal government to cease financial support for Russian companies in light of the country’s continued occupation of Crimea.

The Club for Growth, a conservative nonprofit, is also pushing groups that have in the past supported the Export-Import Bank (Ex-Im), which finances the purchases of U.S. exports, to encourage the agency to drop projects in Russia.

"We don’t think that the Export-Import Bank should exist at all, let alone even consider giving loans and loan guarantees to Russian oligarchs and companies with ties to the Russian mob," said Club for Growth president Chris Chocola in a statement on Wednesday.

Chocola was referring to a 2000 Ex-Im loan guarantee benefitting Russian oil company Tyumen, a subsidiary of the Alfa Group, which was accused of involvement in drug trafficking operations and ties to organized crime.

Chocola also cited reports last year that Russian billionaire Gennady Timchenko was hoping to secure Ex-Im financing for his luxury jet charter company to purchase planes from Boeing, the largest U.S. beneficiary of Ex-Im subsidies.

Another conservative group, Heritage Action for America, cited Timchenko’s campaign to obtain Ex-Im financing in criticizing the bank’s activities.

"Even as Americans sour on Russia their financial activity in the country has soared" due to Ex-Im financing, wrote Heritage Action communications director Dan Holler on Wednesday.

Timchenko has close ties to Russian President Vladimir Putin, Reuters reported last year. Despite extensive lobbying efforts in the United States, his company has not received Ex-Im support.

However, the bank remains highly active in the country. It authorized $629,854,155 in financing for Russian purchases last year, according to its annual report.

The majority of that financing came in form of loan guarantees, but the bank also lent more than $32 million directly to a Vietnam-based company last year to build a petroleum refinery in Russia.

Sberbank, the largest financial institution in Russia, is listed as that loan’s guarantor. Ex-Im and Sberbank signed a memorandum of understanding in 2012 to facilitate $1 billion in financing for projects in Russia.

"We see great opportunities, especially for the aviation, finance, and leasing sector, and also for infrastructure and energy sectors, including both conventional and renewable energy," said Sberbank chairman Herman Gref, formerly a member of Putin’s cabinet, in a statement at the time.

Proposed U.S. and European Union sanctions against Russia are expected to include measures targeting the country’s energy sector, which, experts say, the Kremlin uses as a means to impose its geopolitical will in the region.

Ex-Im has supported the energy sector in Russia. In addition to its loan for a petroleum refinery, the bank helped finance the purchase of a gas turbine generator set by a Romanian company operating in Russia last year.

The Ex-Im Bank did not respond to a request for comment on its relationship with Sberbank and how that relationship might be affected by ongoing Russian hostilities and U.S. sanctions against Moscow.

A Senate bill instituting sanctions, introduced by Foreign Relations Committee Chairman Bob Menendez (D., N.J.), would cut Ex-Im’s budget by $23.5 million to finance additional military and civil aid to Ukraine, but would not specifically target the agency’s activities in Russia.

The Club for Growth is encouraging organizations that have traditionally been supportive of Ex-Im subsidies to join its push to restrict the bank’s activities in Russia.

"We hope the Chamber of Commerce will join us in asking the Export-Import Bank to immediately cease doing business with all Russian companies, and finally acknowledge that an agency that has given subsidies to everything from Enron to Mexican drug cartels to a company with ties to Russian organized crime should be completely eliminated," Chocola wrote.

Published under: Ex-Im Bank , Oil , Russia