The Export-Import Bank of the U.S. decided to lend $4.7 billion to a gas project in Mozambique despite its own analysis warning about security risks that have since forced Total SE to suspend work at the site.
Ex-Im Bank approved the financing last year, outlining that it would support about 16,700 U.S. jobs over a five-year construction period. The funding accounted for the biggest share of about $15 billion raised for the project and, according to the bank displaced funding efforts by China and Russia as the U.S. government sought to deflect their growing influence in Africa.
The concern about Islamist militants in northern Mozambique was flagged in the due diligence the bank undertook before the loan was reaffirmed in July, according to documents obtained through a Freedom of Information Act request by the environmental group, Friends of the Earth United States.
An insurgency is the “primary security threat” to the project’s “schedule and costs, not to mention potential threats to life,” the lender said in redacted documents on the Mozambique transaction.
The Ex-Im security summary all but prophesized later attacks that have grown in scale and sophistication.
“Mozambique presents a rapidly evolving security dynamic with an equally challenging physical risk scenario,” it said. “The security environment is highly variable, security threats and risks to the project will evolve rapidly, and the situation is likely to worsen before it improves.”
Attacks by a group known as al-Shabaab erupted in Mozambique’s Cabo Delgado province in October 2017. By 2018, the group had pledged allegiance to Islamic State, which a year later began taking responsibility for the raids. Last month, the insurgents raided a town near Total’s project site, leaving dozens of people dead and forcing the French energy giant to freeze plans to return to work after violence in December.
“The attacks are horrific and show a complete disregard for the life, welfare, and security of the local population,” an Ex-Im spokesperson said in an emailed response to questions last week. “As the situation unfolds, Ex-Im is communicating our concerns and expectations.”
The lender’s earlier analysis of the security situation found that direct assaults could result in damage to facilities and increase security costs, while violence against “employees and villages outside of the project perimeter” could discourage local participation in the project and affect labor availability.
“This is compounded by a potential perception among local Mozambicans that they are not seeing benefits from the project,” it said.
Most of the insurgents are believed to be disenfranchised youth from one of the most deprived areas in one of the world’s poorest countries. The group includes fighters from Tanzania and other countries in the region.
The Mozambican government has repeatedly failed to contain the violence, resisting help that other nations like South Africa have offered, while hiring mercenaries who have had limited success in confronting the militants.
The bank remains committed to the project that it participated in to support U.S. and local jobs, the spokesperson said. “We will continue to assess this project to ensure that a reasonable assurance of repayment is maintained.”
Ex-Im first received an application to support the transaction in April 2015, according to an addendum to a board memorandum dated Sept. 19, 2019, addressed to the bank’s then-President Kimberly Reed and board members. It was presented to the board on Aug. 22, 2019, “having determined that the structure presented a reasonable reassurance of repayment,” with a benefit of more than $2 billion to the U.S. economy, the document read.
Friends of the Earth had requested that the Ex-Im financing be rejected, citing its concern that local communities may not benefit from the project and that it might lead to environmental degradation. The concerns, along with those of other non-governmental organizations, were dismissed in an assessment by the bank.
“The overall tone of the articles and letters appears to be critical of the project rather than any specific gaps or weaknesses that have been identified in the way that the project is managing the key environmental and social issues,” analysts said in the Ex-Im documents.
The bank will continue monitoring the impact on the local community to ensure that it meets environmental and social governance commitments, the spokesperson said. “Moving forward, Ex-Im will be working hard to support clean energy solutions to fight climate change, in accordance with the priorities of the Biden-Harris administration.”