Climate campaigners are urging the White House to block the Export-Import Bank of the United States (US Exim) from supporting fossil fuels on “national security” grounds as the agency weighs a US$743mn petrochemical project in Malaysia.

In recent months, US Exim has faced growing scrutiny over its ongoing backing for fossil fuels with two members of its climate advisory committee quitting in February over an oil and gas field project in Bahrain.

The export credit agency (ECA) has repeatedly responded to critics by arguing it is focusing on sectors such as renewable energy but cannot discriminate against transactions based on sector, even oil and gas.

But in a letter published today, two organisations – Friends of the Earth and the Global Law Alliance for Animals and the Environment – say the White House should block future applications for oil and gas deals through a little-known rule within US Exim’s charter known as the Chafee Amendment.

The rule – sparingly used since its creation in the 1970s – allows the White House to intervene on the basis of “national interest” reasons such as preventing terrorism, bribery, or environmental and human rights abuses.

In their letter to US Secretary of State Antony Blinken, the NGOs say this rule should apply to divesting from fossil fuels, especially given President Joe Biden’s pledge to halt public finance for oil and gas overseas at the Cop26 summit.

“Such a determination would be in the national interest because it would clearly and importantly advance US policies related to combatting climate change and protecting the environment, human rights, national security, and global financial stability,” the NGOs’ letter reads.

“In 2023 alone, the agency provided almost US$1bn,” the NGOs say. “Alarmingly, Exim shows no signs that it intends to cease providing this financial support anytime soon.”

In a notice published in the Federal Register this week, US Exim said it is considering whether to provide a direct loan of US$743mn for a petrochemical complex in Johor, Malaysia, that will produce goods such as jet fuel and diesel.

The financing would support exports from American multinational Honeywell UOP, a supplier of petroleum refining technology.

The agency is also weighing fossil fuel projects in Mozambique, Mexico, Papua New Guinea and Guyana.

US Exim’s total portfolio exposure as of September 2023 was more than US$34bn, with aviation accounting for 32.7%, oil and gas 24%, manufacturing 20.2% and power projects 8.2%.

The Chafee Amendment has been sparingly used since its creation in the late 1970s, blocking a handful of transactions involving buyers in Chile, Argentina, Cameroon and Russia.

In early 1982, the White House stopped a US$500mn loan for a hydropower project in Argentina over the Falklands War, yet lifted its opposition just months later as it sought to begin normalising relations.

But climate activists suggest the rule could be deployed, given a rise of global temperatures of more than 2 degrees Celsius would be devastating for the US economy.

“Climate change directly threatens the livelihoods of American workers, including but not limited to fishermen, farmers and loggers, a threat Exim seems intent on exacerbating,” the NGOs’ letter reads.

Erica Lyman, clinical professor of law and director of the Global Law Alliance at Lewis & Clark Law School, says previous administrations have triggered the Chafee Amendment when national interests “hang in the balance”.

“The catastrophic impacts of climate change are among the worst human rights, environmental and national security challenges we face,” Lyman says in a statement issued by Friends of the Earth.

 

Between a rock and a green place

The push by NGOs underlines the competing pressures on US Exim over fossil fuel financing.

The New York Times reported in February that two of US Exim’s own advisors quit the agency’s climate committee in anticipation of a US$500mn loan guarantee being approved for an oil and gas field expansion in Bahrain.

The US is also facing pressure from fellow G7 countries to slash export financing for fossil fuels.

In mid-March, the European Union tabled a comprehensive proposal to members of the OECD Arrangement on export credits that would halt billions of dollars in oil and gas financing annually, though climate groups warned of likely opposition from the US, Japan as well as Korea.

But a US Exim spokesperson tells GTR – in response to the NGO letter – that its own charter contains a non-discrimination clause, which prohibits it from rejecting deals “solely on the basis of industry, sector or business, which includes the oil and gas sector”.

“Any change to Exim’s Charter must be passed through Congressional action,” they say.

The agency is also battling accusations from Republican politicians in US Congress – where the agency must secure reauthorisation in 2026 – over a perceived lack of fossil fuel financing. They argue American jobs are on the line.

Blaine Luetkemeyer, a Republican congressman, said at a committee hearing in June that US Exim’s charter “rightfully requires” it to ignore political considerations, noting hydrocarbons are “disfavoured” by the current administration.

“To your credit, Chair Lewis, on your watch Exim approved hydrocarbon projects in Indonesia, and Bahrain. And the green orthodoxy criticised you for doing so,” Luetkemeyer said at the hearing.

Though he suggested it would “be natural” for US Exim’s officials to “be cautious about acting independently”.

“There must be enormous political pressure to ignore your charter by applying a green filter to transactions,” Luetkemeyer said. “That is why it is so worrying to this committee that major projects, particularly the enormous natural gas projects in Mozambique, have been delayed and remain unfunded by Exim, leaving tens of thousands of American jobs waiting.”

US congressman Andy Barr, a Republican house representative in the state of Kentucky, echoed such views, noting: “I hope the holdup is not related to political influences of administration’s climate agenda.”

“I am concerned the bias against fossil energy projects compromises US national security,” he added.