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Belgium’s export credit agency (ECA) Credendo is weighing up the future of its joint venture with a commercial Russian insurer amid Russia’s invasion of Ukraine, as it nurses an exposure to the country of around €4bn.

Credendo, which also offers private trade credit insurance, owns 67% of a joint venture, Credendo-Ingosstrakh Credit Insurance, with Ingosstrakh, one of Russia’s largest insurers. The venture offers coverage for domestic and international transactions involving Russia and the former Soviet states.

Credendo’s 2020 annual report disclosed an exposure of €4bn to Russia as of December 31, 2020, its largest exposure by country. The same report recorded €23.8mn in written premiums for transactions covered in Russia, making it the insurer’s third-most lucrative market.

Credendo declined to provide the most recent exposure figure or say how much of it relates to its ECA business. Asked about the future of the Ingosstrakh joint venture, Credendo’s group deputy CEO Nabil Jikali tells GTR: “We are of course following and assessing the situation, but we don’t provide any comments at this stage.”

Jikali confirmed that the ECA is “off coverage” for Belarus, Russia and Ukraine.

Russia’s invasion of Ukraine in late February and the wave of sanctions unleashed by western governments has caused many ECAs to halt coverage of transactions involving Russia and Belarus, its ally in the campaign. Most have also suspended coverage for Ukraine.

Italy’s ECA, Sace, has remained tight-lipped as the invasion has unfolded, but a webinar hosted by the agency in December 2020 disclosed that as of June that year, it had a €4.3bn exposure to Russia, primarily in the oil and gas sector, according to Rome-based NGO ReCommon.

In 2020 Sace underwrote one project in Russia worth €310mn alone, according to its financial statements for that year. A Sace representative declined to comment.

On Tuesday, UK Export Finance (UKEF) joined the flood of public insurers leaving the Russian market, confirming it will no longer provide any coverage for Russia and Belarus. £3.5bn of capacity will be kept available for exports to Ukraine, however, which UKEF said is part of the UK’s “continuing and unwavering alliance” with the country.

Few ECAs have publicly estimated potential losses as a result of guarantees and other coverage products being called on by exporters in their home markets.

But late last week Finland’s ECA, Finnvera, said it had increased its loss provision for its export credit guarantee exposure to €250mn, which it said may tip the London- and Helsinki-listed business into an overall loss for 2022. The company said only weeks earlier that it may turn a profit this year despite losses stemming from the ongoing coronavirus pandemic.

Finnvera recorded a €1bn exposure to Russia in its 2021 annual report. Its corporate accountability report for the same year acknowledged that Russia represents the largest single political risk to the company. Due to sanctions already in place over Russia’s annexation of Crimea in 2014, Finnvera only “grants enterprise and bank risks guarantees for exports to Russia on a case-by-case basis”, the report says.

Mark Norris, a partner at law firm Sullivan with a focus on export finance, says ECAs with hefty exposures to Russia may have to be forced to curb coverage more widely. “It’s going to impact on how they do business going forward if they’re having to make provisions for those exposures,” he tells GTR.

ECAs typically offer coverage directly to exporters in their home markets, or to importers through buyers’ credits, and also provide guarantees for commercial banks. Some also offer direct financing products.

Their role is particularly important in markets such as Russia, where commercial banks and insurers may have been hesitant to tread without backing from government-backed export credit agencies.

Norris says if an ECA pays out to the beneficiary of a guarantee, its chances of successfully recovering that money from companies in Russia will depend on the type of assets involved in the transaction.

“If you’re financing infrastructure, that’s different from if you’re financing an aircraft, because you may be able to arrest and seize the aircraft if it’s located outside of the jurisdiction.”

Widespread sanctions on Russian banks will also complicate the efforts of willing borrowers to repay funds in export finance transactions. Norris suggests that Russian corporates could ask their banks to use set-off arrangements, if available, to avoid the actual transfer of funds, or offer to pay in roubles.

Norris says another long-term consequence of the war in Ukraine for ECAs could be that many increase their commitments in the oil and gas sectors as economies in Europe scramble to secure alternative fossil fuel supplies that previously came from Russia.

It may accelerate discussions on how to restart development of Total’s liquefied natural gas project in Mozambique, where the company declared force majeure in April last year after a series of attacks on workers by militants. The project has the backing of several ECAs, despite pressure and legal action by climate campaigners.

“If export credit agencies then decide that they will support oil and gas projects, in safer environments, then what you’re going to see is the percentage of their cover in those sectors increasing,” Norris says.

A previous version of this article said UK Export Finance has £3.5mn of capacity for coverage of exports to Ukraine. This has been corrected to £3.5bn.