The Corner

Egregious Ex-Im Deal of the Day

In the last few weeks, we have found out about cases of fraud, and allegations of internal corruption and kickbacks at the Export-Import Bank. However, potentially illegal incentives aren’t the only reasons the bank undertakes questionable deals.

In many cases, the bank simply allocates money or extends a guarantee to a company without giving any thoughts about the consequences. The bureaucrats making the decisions at Ex-Im are using other people’s money, which just doesn’t demand prudent weighing of cost and benefits and invites decision making by political connections.

And it’s important to expose the negative consequences that can result, which is what Representative Jeb Hensarling’s Financial Services Committee is now going to daily, featuring a new series on its blog, called “Egregious Ex-Im Bank Deal of the Day.”

Here’s the first one

Hardworking American taxpayers, who are paying more for gas (“Gasoline prices at six-year high – AAA”) and “more for almost everything this year” (CNBC), might be wondering why President Obama refuses to approve the Keystone Pipeline but is using their tax dollars to finance foreign corporate welfare — like the nearly $5 billion in direct loans to help build a venture developed by Saudi Aramco, Saudi Arabia’s state-owned oil company.

This is the same Saudi Aramco, by the way, that one report this week said is “pulling the rug out from under the U.S. gas industry” and has announced plans to spend its money to build 11 45,000-seat capacity stadiums by order of King Abdullah.

Here are the deal details:

In 2012, the Ex-Im Bank provided a record-breaking $4.975 billion in direct loans to help build Sadara Chemical Company, developed by the Saudi Arabian Oil Company (Saudi Aramco). Saudi Aramco, the state-owned oil company of Saudi Arabia, is the world’s biggest oil company, with total assets reportedly in the trillions. – (Sources:  Export-Import Bank press release, 4/4/13:  “Sadara Chemical Company Transaction is Awarded Ex-Im Bank Deal of the Year”;Saudi AramcoForbesUniversity of Texas)

I am pretty sure that this Saudi Arabia state-owned company can access the capital market to finance its projects just fine. I am also sure that they are very happy to be getting a direct loan from U.S. taxpayers at lower rates and with better terms than competing oil producers.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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