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In December 2006, a little-known government department became part of a national scandal when Tony Blair told the Serious Fraud Office to drop a corruption investigation into how a British arms company secured a massive Saudi Arabian arms deal in the 1980s. The controversial deal had been insured by the British government through the Export Credits Guarantee Department (ECGD).
Opposition MP Vince Cable said at the time that the decision to drop the case ‘undermined the rule of law and Britain’s reputation’ and made a mockery of Gordon Brown’s fondness for lecturing the developing world on corruption.
Vince Cable is now in charge of the ECGD, answerable as it is to the Department for Business, Innovation and Skills. To date, little has been announced by way of reform.
The ECGD exists to support British exports by providing them with a sort of insurance. It normally supports large companies involved in big projects in the developing world. Over the past 10 years, support for fossil fuels, arms sales and aerospace has accounted for around 75 per cent of its work. Last year one single company, Airbus, received 89 per cent of ECGD support.
From arms sales to dictators through oil and gas pipelines to mega-dams, the ECGD has backed projects that have been implicated in corruption, environmental destruction and human rights abuses. Even worse, when deals go wrong, it is often the developing country that ends up in debt. The ECGD pays out on the ‘insurance’ claim from the British public purse, and the amount paid becomes a debt of the country where the project took place. Today, developing countries owe £2 billion of debt to the ECGD and have repaid £2.9 billion since 2005.
To really get to grips with the problem with the ECGD, you only need to look at some of its past projects. Indonesia currently ‘owes’ it more than £500 million, most of which accrued from the sale of British weapons to the brutal General Suharto in the 1980s and 1990s.
Suharto killed between 500,000 and a million people during his first year in office and conducted a 24-year occupation of East Timor. From 1994, he bought half of his military equipment from the UK, supported by the ECGD. Some of these weapons, including Hawk aircraft, Scorpion tanks and water cannons, were seen in use against civilians, including during the attack on Aceh. Yet the current Indonesian government is still paying for these tools of repression.
As fossil fuels become more difficult to access, export credits are again being used to protect ‘British interests’ throughout the world. That’s why the ECGD supported the Baku-Tbilisi-Ceyhan oil pipeline connecting the Azeri oil field in the Caspian Sea to the Mediterranean, passing through Azerbaijan, Georgia and Turkey.
Building the pipeline included arranging a series of controversial agreements between oil companies and the countries involved, which gave those companies special legal status. In essence, the agreements took priority over all national laws except the constitution, and prevented any new laws, including improvements in environmental or human rights laws, from affecting the companies’ profits. Amnesty International argues that these agreements ‘effectively create a “rights-free corridor” for the pipeline’.
Then there’s the hydro-electric power station in Kenya that cost four times what it should have done and produced only a fraction of the power promised. The Kenyan press called it ‘a stinking scandal’. The government is still paying.
In a recession, export credits are presented as a key way for the British government to support struggling industry and stimulate the economy. But what sort of economy is the ECGD promoting? It could help useful innovation. It could help create jobs in renewable energy sectors. But there isn’t much chance of that when it does not even have a policy on climate change.
While campaigners have given the ECGD a relatively easy ride in recent years, business lobbyists have been pushing back on the already poor standards that do exist. Early in 2010, the Labour government watered ECGD standards down. Smaller investments will no longer be screened for any sort of social or environmental impact – even on issues as significant as child labour and forced labour.
So ‘British interests’ are supported at the expense of human rights abuses, environmental destruction and corruption. If we want to avoid another generation of reckless projects and toxic debts, we need to challenge the ECGD now.
Read a new report and join the campaign at www.jubileedebtcampaign.org.uk/dodgydeals