US Ex-Im Bank has approved an insurance policy for CoBank for up to US$180mn in letters of credit to support US exports to Iraq.
The insurance will be used to support trade financing from CoBank, a cooperative bank and part of the US Farm Credit System. Under this policy, Ex-Im will support letters of credit issued by the Trade Bank of Iraq in favour of US exporters, including Telwar International to purchase bulk agricultural commodities, including an estimated US$27mn a month in rice and wheat shipments.
“This financing will enable US exporters to provide the Iraqi people with large volumes of bulk agricultural commodities and other goods and services on a timely basis,” says US Ex-Im chairman Philip Merrill. “Ex-Im Bank remains fully committed to supporting Iraq’s reconstruction and is diligently working to find new and creative financing solutions to meet Iraq’s financing needs.”
Ex-Im’s action was taken under its US$500mn short-term insurance programme for the Trade Bank of Iraq (TBI). This programme provides for bank letter of credit insurance policies, which provide assurance to US companies that they will receive payment for goods and services exported to Iraqi buyers.
On October 5, 2004, Ex-Im, the Iraqi Ministry of Finance and TBI signed an agreement that replaced a December 2003 agreement between Ex-Im, TBI and the Coalition Provisional Authority. This agreement reflected the assumption last June of sovereignty by the Iraqi government and enabled TBI to continue to access this $500 million facility.
Ex-Im Bank also can support US exports to Iraq through its Working Capital Guarantee Program under which it will consider applications to support pre-export activities of subcontractors, particularly small businesses, operating under US government-funded reconstruction projects.
In addition, Ex-Im will consider applications for financing of US exports to Iraq under its loan guarantee, working capital, and credit insurance programmes if there is a creditworthy source of repayment in a third country.