Friday, August 15, 2008

Fridays' Roundup #4 US tax dollars funded the oil pipeline in Georgia

Export Credit Agency Watch

How Taxpayer Money Is Wrapped Up in Georgian War

"A pipeline that runs through Georgia is the second largest in the world.

But a little-reported fact is that American tax dollars were used to help fund big oil projects in the region.

pray tell me more..

So, how is U.S. taxpayer money bound up in all of this?

It has to do with the role of the two government agencies, the Export-Import Bank (Ex-Im) and the Overseas Private Investment Corporation (OPIC), that lend money to private companies doing business overseas.

These agencies exist to promote U.S. business abroad, which they do by giving loans and guarantees for projects that are too big or, in many cases, too risky for the tastes of private banks and financiers.

"We exist to take risks that the commercial markets either cannot or are not willing to make," said Phil Cogan, spokesman at the Ex-Im Bank. "That's the reason for export credit agencies for the most part. It's to support the exporters of the United States because those exporters wouldn't be able to make the sale unless there was a guarantee or direct lending."

In the case of this pipeline, the Ex-Im Bank gave a $160 million guarantee to a group of banks that wanted to lend money to the companies involved in the project. If the project fails or goes up in flames (which it could do, literally) Ex-Im will bail out the private banks, and taxpayers will be left holding the bag.

Same deal for OPIC, which gave the project $100 million in "political risk insurance." In other words, the companies apparently weighed the risk of just the sort of conflict the region is now facing, and then went to a government agency for insurance.

Critics see these guarantees as a form of corporate welfare

There are times my eyes just roll and I really do not get the whole market thing. Speculation. Real worth vs what..whatever someone perceives it to be worth?

This whole free market ideology has taken over to the point that when you can't explain the workings in a simple enough fashion, it is convuluted for a reason. There are the market masters and the rest of us, good little daleks who are supposed to invest and spend money so that the economy runs well.

Anyhow..back to this article. The US is not the only player though..The UK has a big stake in this.. and if you reckon how much money goes into these ventures, perhaps risking war is a small amount to pay in order to safeguard your investment;

"...this week Background Briefing will take you on a bit of a tour of the Catastrophe Market.

A less sexy name is Export Credit Agencies. It’s a boring term for what are essentially loans and insurance, and the money involved makes them much bigger, and therefore more influential than the World Bank and IMF.

Yet very little is known about the new giants, the ECAs. They’re government agencies that use public money to underwrite risky private ventures.

Billions of dollars are involved, in some cases so much that the business venture becomes far more powerful than the country it’s operating in

Read more The Catastrophe Market: Export Credit Agencies

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