El Maayergi makes the switch from Arab African International Bank, where he served as group chief operating and transformation officer since 2020.

At Afreximbank, he replaces Amr Kamel, who worked at the bank for nearly three decades before retiring in November 2022.

Based in Cairo, El Maayergi is tasked with sourcing new transaction opportunities for Afreximbank and developing products for trade finance and syndications, as well as advisory and capital market services.

He will act as a liaison between Afreximbank’s president, Benedict Oramah, and the lender’s board of directors, stakeholders and investors, and is further tasked with mitigating risks in the global trade bank’s value chains.

In a career spanning over three decades, El Maayergi has also held senior transaction banking, corporate banking and trade finance roles at financial institutions in the Middle East and North Africa, including Abu Dhabi Islamic Bank, Standard Chartered, Citi and Société Générale.

“El Maayergi boasts a long and proven track record of structuring innovative trade finance and bilateral lending solutions, including Islamic structures, for both multinational corporations and large local corporates,” Afreximbank says.

The post El Maayergi appointed to Afreximbank global trade post appeared first on Global Trade Review (GTR).

Under the deal, Attijariwafa Bank will extend confirmation lines to African lenders whose trade finance activity has been constrained by international financial institutions cutting correspondent banking relationships, the AfDB says.

The deal will help SMEs operating in several African countries gain access to trade finance instruments, it adds.

The bank notes there is “growing demand” for trade finance in several key economic sectors such as agriculture, renewable energy, manufacturing, health, telecommunications, as well as transport and services.

The agreement, the second of its kind between the AfDB and Attijariwafa, follows a similar risk sharing deal signed in 2019. Under the previous unfunded €10mn risk sharing scheme, Attijariwafa confirmed letters of credit issued by local African banks with the AfDB covering up to a maximum of 50% of the total transaction values.

The partnership comes amid growing concern over dwindling trade finance supplies on the continent. According to the Bank of International Settlements, a heightened focus by banks on regulatory, reputational and financial risks has led to a 29% decline in correspondent banking relationships over the last decade, leaving local banks struggling to clear funds, access foreign currency and conduct cross-border payments.

This de-risking is also a contributory factor to the global gap between trade finance supply and demand, which is estimated by the Asian Development Bank to have grown to US$2.5tn, a jump of more than 50% since 2021.

During a summit last month in Morocco, the head of the World Trade Organization (WTO), Ngozi Okonjo-Iweala, called on multilateral development banks to grow their trade finance business in low-income regions.

This was followed by the publication by the Bankers Association for Finance and Trade of an updated version of its guidelines for respondent banks, to help them maintain their correspondent banking relationships amid an increasingly complex regulatory environment.

The post AfDB and Attijariwafa target African trade with risk-sharing deal appeared first on Global Trade Review (GTR).

In recent weeks, Egypt’s legislature passed a bill enabling the creation of the Egyptian Export and Investment Guarantee Agency (EEIGA) and said it would replace the existing Export Credit Guarantee Company of Egypt (EGE).

The Central Bank of Egypt will acquire all of the agency’s shares from existing shareholders, including the Egyptian development lender, Ebank, as well as the National Investment Bank, which hold stakes of 70% and 22% respectively.

While the financing capacity of the ECA is yet to be confirmed, GTR understands that there will be an overhaul of the management and governance structure and the agency is slated to begin operations in the first quarter of 2024.

The ECA will initially target short-term receivables and trade-related working capital solutions, and in a second phase, will look to develop its offering to include longer-term structures and investment insurance.

The acquisition and new state-backed structure will more closely align the ECA with “international best practice”, according to a source with knowledge of the matter.

“The full underwriting of the ECA’s obligations by the government is a key change… This is the global standard and all the more important in a challenging credit environment,” they tell GTR.

Efforts to reform Egypt’s export credit system have been underway for at least the past four years, with the central bank announcing plans for a new export credit risk company in 2019.

At the time, the central bank said the agency would have a focus on driving up Egypt’s historically low trade volumes with Africa.

“When you look at the percentage of trade between Egypt and other African countries, we found it to be around 2% of the total exports,” said Ramy El-Shaarawy, then a general manager at Egypt’s central bank.

GTR understands that boosting Egypt’s limited trade with Sub-Saharan Africa is still a key focus, yet the EEIGA will seek to create a diverse portfolio of risks spread across markets globally.

This is “in line” with the mandates of other emerging market ECAs, such as those in Asia or elsewhere in Africa, the source says.

The announcement comes at a time of significant economic turmoil in Egypt, Africa’s second largest economy.

Last week, Fitch Ratings downgraded Egypt’s credit rating to B-, citing heightened financial risks as well as growing national debt, which was reported to stand at 97% of GDP in July, up more than 15% from a year prior.

A devaluation of the local currency by nearly 50% against the US dollar since March 2022 has acutely affected Egyptian businesses, while in September annual urban inflation soared to a historic high of 38%.

Foreign currency issues, high US interest rates as well as rampant inflation are making it difficult for Egyptian buyers to meet their financial obligations, says a September memo from the US Department of Commerce.

Local importers are struggling to secure hard currency from their banks to procure raw materials and machinery from abroad, it adds.

“Most of these companies have worked closely with their US company partners for many years with minimal problems. However, in 2023, the number of US companies that contacted the US Foreign Commercial Service in Cairo for assistance with non-payment issues more than quadrupled,” the memo says.

Despite the gloomy near-term outlook, Cairo is working to implement economic changes as part of a US$3bn International Monetary Fund package signed in December.

In May, the World Bank forecast that Egypt’s overall macroeconomic environment would improve in the medium term as the African country continues to push ahead with stabilisation and structural reforms.

Such efforts could help “unleash the private sector’s potential in higher value-added and export-oriented activities necessary for job-creation and better living standards,” the World Bank report said.

The post Egypt readies launch of new ECA appeared first on Global Trade Review (GTR).

In recent months, several European export credit agencies (ECAs) have pledged to boost their market capacity in Ukraine, in a bid to drive up trade volumes and foreign direct investment in the war-torn nation.

French and Polish ECAs have said they will provide coverage for businesses seeking to invest in Ukrainian projects or companies, including protection against war risks.

And in Sweden and the Netherlands, agencies have committed to providing tens of millions of dollars in fresh capacity from next year onwards, with a primary focus on boosting exports linked to Ukrainian reconstruction projects.

Such commitments are part of plans to finance Ukraine’s rebuild which, according to World Bank projections, will cost US$410bn over the next decade.

Ukrainian officials have emphasised the need for strategic alliances and collaboration to ensure the successful realisation of these ambitious rebuilding plans.

GTR speaks with Oleksandr Gryban, investment team lead at Advantage Ukraine, an investment promotion initiative set up by the government last year, to understand the role that ECAs can play in helping to secure vital imports and exports and support the nation’s reconstruction efforts.

GTR: The World Bank’s cost estimates suggest substantial private and public capital will be required to help rebuild Ukraine. How advanced are Kyiv’s reconstruction plans currently, and how many deals has Advantage Ukraine secured with project developers or investors?

Gryban: Advantage Ukraine is actively working on filtering a pipeline of feasible projects to funnel capital in from international and development finance institutions. The International Finance Corporation has said it will invest over US$1bn in Ukraine, the US government’s International Development Finance Corporation (DFC) has vowed to mobilise US$1bn and the European Bank for Reconstruction and Development (EBRD) has pledged €3bn.

There are a number of institutions that have made public commitments, but when you get down to utilisation and absorption of the funds, we are saying to them: ‘Okay, where are these deals?’ These international financial institutions typically support existing clients, provide refinancing, or undertake risk-averse activities – despite the fact that feasible and bankable projects exist.

Our team understands which Ukrainian companies are solid and meet all the eligibility criteria of these financiers. For instance, are they producing financial statements, are they audited by the ‘big four’, or hold sound legal structures? Advantage Ukraine is working especially closely with the DFC, which treats us as an outsourced execution team capable of leading and generating the projects, while also analysing these deals.

GTR: Which ECAs have you been speaking to in the past year, and what specific requests have you made to them? Are we likely to see a significant increase in ECA-backed transactions in Ukraine this year?

Gryban: We are in close dialogue with most of the OECD ECAs. We keep a matrix of all these agencies and map what limits they hold in the Ukrainian market, and whether these limits are restricted to public sector projects, or if ECAs are open to backing private sector transactions.

We expect the first pile of buyer credit transactions involving commercial banks and ECAs will happen soon.

The Export and Investment Fund of Denmark is incredibly flexible and is providing direct finance as well as credit and political risk cover of up to 100%. Not only do they have a capacity limit of about DKr1bn (US$140mn), but they are flexible when treating the financials of potential clients in Ukraine. For instance, they are willing to analyse Ukrainian companies based on their performance five years ago, long before Russia’s full-scale invasion and even pre-Covid-19. This is a very positive move in terms of being less risk-averse and encouraging development.

UK Export Finance is mostly focusing on the public sector and is largely active in defence-related transactions, aimed at securing Ukraine’s military supplies. They hold private sector capacity and are offering political risk insurance, though not up to 100%. In such instances, we still need other partners to mobilise bank financing because commercial lenders will only extend funding if they have full coverage in Ukraine.

At the same time, there is a list of projects involving Japan and Germany’s agencies that are progressing well. In mid-October, Germany’s Euler Hermes agreed to provide investment cover for a domestic construction materials manufacturer, Fixit, to build a second plant in Ukraine. This was the first case of ECA investment insurance since the war.

GTR: What role is Ukraine’s own ECA going to play in the country’s reconstruction efforts? Are you expecting its activity to increase?

Gryban: On paper, the Ukrainian ECA has also been engaged to supply war risk insurance in Ukraine. This is predominantly for SMEs who cannot get direct insurance from Miga or DFC because of the scale of their business or capital volume. This function is currently awaiting a second reading and vote in the Ukraine Parliament, and if passed, would extend the agency’s mandate and enable it to offer war risk insurance.

Ukraine’s ECA does not conduct traditional export credit business. Instead, it offers short and mid-term products, as well as providing additional collateral to Ukrainian companies – typically SMEs – seeking local bank loans.

GTR: Another key area of focus for Kyiv has been securing cover for the ships, trucks or trains importing goods into Ukraine. To what extent is insurance or reinsurance capacity constrained for the transport sector and can ECAs or international financial institutions address this shortfall?

Gryban: The EBRD is rolling out an initiative aimed at trade facilitation. As part of this, the bank has created a trust fund and is doing fundraising to issue war risk insurance for short-term trade operations, insuring vehicles and cargos, as well as life insurance for the drivers.

The European Commission has pledged €50mn, while the Swiss and Norwegian governments have also committed funding to the programme. The EBRD operated a similar structure in Africa involving Munich Re as the reinsurance company. For the Ukraine initiative, they are running a tender to decide who the operator will be – likely one of the big (re)insurance companies.

The Polish ECA Kuke’s reinsurance plan will also bring benefits to Ukrainian firms. Currently, it is possible for Ukrainian importers to secure transport and cargo insurance, but prices are skyrocketing and businesses are overpaying. If we can decrease the price of operational expenses, to some extent, this will be a great initiative. Anything that can bring costs down and increase their margins, which are very, very narrow at the moment, will be hugely beneficial.

Kuke is also set to issue political risk insurance even if there is no Polish content. The initiative was only recently announced and hasn’t been tested yet. Their government took this decision right before the elections in October, but their new ministry is quite progressive and we are hopeful the offering will be extended by the new administration.

GTR: The OECD Arrangement’s country risk classification has placed Ukraine in category seven, its highest risk grouping. What challenges does this pose to Ukrainian businesses seeking export credit support?

Gryban: Being in category seven increases the cost of financing dramatically. Before the war, companies could expect to pay a premium of roughly 1% per annum; this has since increased to roughly 2 to 3% per annum. The OECD risk category is a big issue for Ukrainian businesses, but that’s where different financing instruments can help. For example, ECAs or their wider governments can supply a grant which compensates Ukrainian companies for the high premiums.

GTR: How is trade through Ukraine’s Black Sea grain corridor progressing? Are you hopeful the private insurance market will restart cover for these flows in the coming weeks?

Gryban: Since its launch in August this year, over 50 ships have passed through the Black Sea humanitarian corridor, bringing over 2 million tons of agricultural products and other cargo to the world.

The Black Sea Grain insurance plan is on the verge of being finalised. Talks have been ongoing for the past few months and currently the Ukrainian government is in the process of selecting an official vendor for the initiative. This has been the missing component in the overall structure of the plan that would trigger the involvement of the Ukrainian banks, who will provide letters of credit enabling the whole system to work.

The vendor will act as a backstop for the scheme and provide first loss cover, reimbursing Lloyd’s of London insurers for losses they may incur. There are two questions: who is this vendor going to be, and what guarantee instruments can they provide to give comfort to the insurance companies?

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In recent months, Ben Grant has joined as commercial director and James Bowyer (pictured) has been appointed SaaS sales director.

Grant moved to Finverity after a seven-year stint at receivables finance specialist Aronova Interactive, where he had been leading commercial functions and partnerships. Prior to this, he held business development and sales roles at companies including Dun & Bradstreet, The Red Flag Group and Alternative Networks.

Bowyer made the switch to Finverity after nearly four years at tech-based working capital solutions provider Demica, where his more recent post was as associate director on the platform solutions team.

This month, Finverity announced the expansion of its FinverityOS system, which it says will now cover Islamic finance, purchase order finance, inventory finance and loans. Previously, the white label offering supported payables, receivables and distributor finance.

The expansion of FinverityOS is targeted at local and regional banks as well as non-bank financiers, enabling them to digitalise their operations and manage working capital and supply chain finance products all on one end-to-end system.

The system also includes a “create a deal” tool enabling lenders to produce and customise their own trade and supply finance products directly on FinverityOS.

“Bowyer’s remit focuses on expanding FinverityOS to ambitious but underappreciated local and regional financial institutions in new markets, including Eastern Europe, Nordics and the Middle East,” Finverity says in a statement.

Grant is tasked with crafting and implementing strategies aimed at driving Finverity’s expansion and developing a strong base of commercial partners.

Earlier this year, Finverity raised US$5mn in an equity funding round, which it said  would support the expansion of its trade and working capital products and allow the firm to open new offices in Dubai, Poland and Kenya.

In May, Starling Bank’s former head of SME banking, Symmie Swil, joined the company as head of operations.

The post Finverity hires duo to support rollout of new product range appeared first on Global Trade Review (GTR).

The credit facility was initially launched at US$500mn and closed at US$600mn. It can be increased by an additional US$200mn via an accordion feature.

The agreement renews BB Energy’s first US borrowing base deal – signed two years ago – and is once again a digital facility that will use Swiss trade finance fintech Komgo’s platform, the trader says.

ING Capital acted as arranger and bookrunner on the syndication and is serving as administrative agent, while Citi is cash management bank.

A total of 11 banks, including returning lenders Crédit Agricole, HSBC, Garanti Bank International, Natixis, Société Générale, UBS and Wells Fargo joined the facility, while Deutsche Bank and MUFG are new financiers on the agreement.

“The entry of new lenders and the resulting large oversubscription is a testament to the maturity of BB Energy’s operations in the Americas,” says Cauê Todeschini, head of trade and commodity finance  Americas at ING.

In July, BB Energy closed an oversubscribed revolving credit facility worth US$350mn with a pool of 27 banks, the proceeds of which are refinancing a maturing facility and for general corporate purposes.

BB Energy, headquartered in the UAE, was founded by Lebanon’s Bassatne family in the 1960s and primarily trades crude, refined oil products, liquefied natural gas and liquefied petroleum gas. In 2022, it traded 31 million tonnes of crude and petroleum products and gas, resulting in a turnover of US$24bn.

Through its Houston office, BB Energy trades energy products both within the US as well as Central and South America.

The post BB Energy closes bumper borrowing base facility, draws in new banks appeared first on Global Trade Review (GTR).

Under the deal, the World Bank agency will work with TDB and Moroccan fertiliser producer OCP to identify “suitable areas” for deploying Miga’s risk mitigation instruments.

The three parties will collaborate on trade finance transactions, where Miga will provide guarantees backing the import of strategic commodities such as fertiliser into Africa, which has been hard bit by the Ukraine crisis and the resultant disruptions to food supply chains.

“This collaboration aims to enhance food security, promote employment and farmers’ livelihoods, secure their access to international markets, bolster productivity, and increase foreign exchange availability and earnings by facilitating the export of commercial crops,” TDB, Miga and OCP say in a statement.

The agreement was signed during the annual World Bank Group and International Monetary Fund meetings – held in Marrakech – which brought together central bankers, ministers of finance and politicians.

African countries have faced a surge in fertiliser prices in the past few years, on the back of supply disruptions linked to the Covid-19 pandemic and more recently the fallout from the Ukraine war.

A June survey conducted by international charity organisation ActionAid found fertiliser prices had more than doubled in several African nations such as Nigeria, Kenya and Malawi, since February 2022.

This has “compelled farmers to reduce its use in their farms, resulting in loss of crop production in all surveyed countries”, ActionAid says.

US and EU-led sanctions have been designed to allow Russian agricultural exports to continue to flow, yet Moscow claims these supply chains have been affected by payment difficulties and a lack of insurance.  

Many African countries have a significant dependence on Moscow for their fertiliser needs, research shows.

A report published in late 2022 by African non-profit Akademiya2063 notes that the Central Africa Republic, Benin and Nigeria have all typically relied on Russia and Ukraine for over 45% of their fertiliser imports.

Niger, Senegal, Cameroon and Ghana are also considerably exposed at more than 30%, the report says.

OCP has also inked an agreement with another World Bank member, the International Finance Corporation (IFC), securing a €100mn green loan backing the construction of two solar power plants in Morocco.

The €360mn project will provide clean energy for OCP’s operations in the mining towns of Benguerir and Khouribga, home to Morocco’s – and the world’s – largest phosphate reserves, the IFC says.

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On October 12, Washington imposed sanctions on UAE-based Lumber Marine SA and Turkish company Ice Pearl Navigation Corp for transporting Russian crude above the US$60 per barrel cap.

Since early December last year, the G7, European Union and Australia have forbidden their companies from providing shipping, finance, insurance or other services if they facilitate the sale of Russian seaborne crude priced above the threshold.

The aim is to squeeze the Kremlin’s oil revenues while ensuring a steady flow of affordable energy to developing countries, though concerns have emerged over the cap’s effectiveness amid an uptick in global crude prices.

The US’ Office of Foreign Assets Control (OFAC), a sanctions body which sits within the Treasury department, says the SCF Primorye, owned by Lumber Marine, exported Novy Port crude from Russia priced above US$75 a barrel.

The Yasa Golden Bosphorus, a ship registering Ice Pearl Navigation as its owner, is also accused of carrying ESPO crude oil above US$80 a barrel.

OFAC claims both vessels used US-based service providers while transporting the Russian crude, contravening rules laid out by the Price Cap Coalition.

Jason Prince, a partner at law firm Crowell & Moring and former OFAC chief counsel, says the designations send a clear message to “fence sitter” countries such as the UAE, Turkey, China and India, “that they should no longer doubt the Coalition’s resolve to put teeth in the price cap regime”.

“I anticipate that these two designations are the opening salvo in a sustained price cap policy enforcement push by not only OFAC, but also other Coalition partners,” Prince tells GTR.

Analysts say both of these vessels were already considered to be high risk and would likely have been flagged by risk compliance programmes, based either on their ownership structures or frequency of visits to Russia.

Byron McKinney, director for trade finance at S&P Global Market Intelligence, says the sanctioning of the SCF Primorye is a “token gesture” as the vessel’s ownership is linked to the already blacklisted Russian firm Sovcomflot.

“A closer look at the group owner highlights the original risk on this ship was already fully transparent. Lumber Marine’s care of address is the same as [Sovcomflot subsidiary] Sun Ship Management, a clear association,” he says in a LinkedIn note.

However, the sanctioning of the Yasa Golden Bosphorus could be “taken as a warning” by owners and haulers of Russian cargo, he says.

“There are plenty of other examples of similar owners and vessels currently in operation; the coming weeks and months will determine if this sanctioning has had a knock-on effect.”

A “second phase”

The price cap’s impact on Russia’s energy revenues has diminished due to rising crude prices.

An October Oil Market Report published by the International Energy Agency finds that Moscow’s oil export revenues surged by US$1.8bn to US$18.8bn in September, their highest since July 2022.

This jump came on the back of strong sales, with oil export volumes rising by 460,000 barrels per day to 7.6 million.

There are growing concerns that Russia may increasingly use G7 or EU ships and services to continue trading crude oil above the US$60 mark, relying on false documentation and other deceptive practices, experts say.

Eric Van Nostrand, acting assistant secretary for economic policy at the US Treasury, says the White House is gearing up for the second phase of its Russian oil price cap plans, following a “successful” first stage.

He has previously claimed that the cap dented Russian oil revenues by nearly 50% in the first half of 2023, as compared to the same period last year.

In a speech at the Brookings Institution on October 16, Van Nostrand said Moscow has also incurred a “large expense” from constructing an alternative ecosystem of ships and services, often labelled Russia’s “dark” or “shadow” fleet.

“Putin has purchased hundreds of new oil tankers for billions of dollars, and he faces elevated costs of insurance, longer transport times to new importers, elevated capital expenditures on domestic oil wells without G7 involvement, and reinvestments in ports that service non-G7 providers,” Van Nostrand said.

US Treasury secretary Janet Yellen has foreshadowed further enforcement action over violations of the price ceiling, telling the Wall Street Journal last week: “We are looking at enforcement very carefully and we want to make sure that market participants are aware we take this price cap seriously, and, to the extent Western services are used, we mean business about abiding by the cap.”

Alongside its enforcement action, OFAC also published a maritime advisory offering industry guidance on compliance with the cap, amid “increased safety, environmental, economic, reputational, financial, logistical, and legal risks”.

For instance, Russia’s shadow fleet relies on older ships and laxer safety regulations, potentially driving up the risk of “maritime casualties”, OFAC says, while a lack of formal insurance may mean shippers are unable to cover the costs of oil spills.

OFAC lists a total of seven recommendations – some of which were covered in the regulator’s landmark 2020 maritime advisory – including requiring appropriately capitalised P&I insurance, and “vigilantly” monitoring automatic identification system activities of ships as well as ship-to-ship transfers.

Despite the risks, trade finance banks and insurers in the G7, EU and Australia are protected by a “safe harbour” provision in the price cap scheme.

“As long as these service providers comply in good faith with the safe harbour scheme’s requirement to request and retain certain documentation showing that the Russian crude oil or petroleum products were purchased at or below the relevant price cap – and they don’t bury their heads in the sand when red flags arise – they will not be penalised for unwittingly advancing the evasion schemes of bad actors,” says Crowell & Moring’s Prince.

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In fresh analysis of Russian trade data, the European Bank of Reconstruction and Development (EBRD) finds that Russia invoiced 20% of all imports in the yuan in 2022, a sharp uptick from 3% in the previous year.

The upswing in Chinese yuan invoicing came at the expense of both the dollar and the euro, both of which had consistently been used for roughly 80% of Russia’s imports prior to the war – but fell to a low of 67% last year.

There has been a “substantial increase in the use of the yuan in Russia’s imports from China, accompanied by a declining share of the US dollar”, says EBRD chief economist, Beata Javorcik.

She says the bank has “also observed an increase in the use of the yuan as an invoicing currency by third countries”.

The findings are outlined within an EBRD working paper titled Exorbitant privilege and economic sanctions, analysing millions of transactions involving Russian firms from January 2016 to the end of 2022.

The report lays bare the impact of western sanctions imposed on Russian firms – and their banks – such as the exclusion of major lenders from the Swift payments system in response to the Ukraine invasion.

Such restrictions have driven up costs and made US dollar invoice processes more complex, the EBRD says.

The rise in yuan invoicing was most notable for imports coming from China. Russian importers only invoiced 20% their imports from China in the yuan in 2021 but this share grew to over 60% last year.

There was also a jump in yuan invoicing for imports from third countries, including Taiwan, the Philippines, Malaysia, the UAE, Thailand, Japan, Tajikistan and Singapore. In one notable example, Russia invoiced 18% of all imports from Mongolia in the yuan last year, up from zero in 2021.

The data suggests Russian importers are using the yuan when seeking to bypass US and EU sanctions on certain goods.

The yuan’s share of transactions related to internationally sanctioned dual-use and industrial-capacity goods was typically between 6 to 8% higher than for non-sanctioned goods, the EBRD finds.

The research comes amid a growing push by Russia and China, alongside other members of the Brics alliance, to reduce their reliance on the US dollar.

The Brics group is set to be expanded from January, and experts say the upcoming entry of Saudi Arabia will add impetus to de-dollarisation efforts, given the state accounted for 17% of global crude exports last year.

Members of the group, which also includes India, Russia, Brazil and South Africa, have floated the idea of a common Brics currency, which could be used for both international trade and investments.

However, Brics members made little mention of these plans in a statement published following their latest summit in Johannesburg.

After that event, held in August, they instead “stressed the importance of encouraging the use of local currencies in international trade and financial transactions between Brics as well as their trading partners”.

Such developments have given rise to suggestions that the yuan could challenge the US dollar’s role in global trade.

The EBRD warns that while the US dollar’s dominance in global trade makes sanctions more effective, there is evidence that such measures may ultimately erode the greenback’s status in the coming years.

“The results are consistent with the use of trade sanctions gradually weakening the exorbitant privilege enjoyed by the US dollar and leading to the fragmentation of international payment systems, with the emergence of alternative global currencies such as CNY,” the bank says.

At a recent GTR conference in Geneva, one commodities trader said a split is emerging between a US dollar sphere on the one side, “and on the other side, Russia and China… starting to use the Chinese currency”.

They suggested a dichotomy may develop where the two spheres use different currencies for the same products, and then a third group of countries that are “happy to use whichever”.

But while the yuan is increasingly being used for bilateral trade settlements, the greenback remains dominant.

Between 1999 to 2019, the dollar accounted for 96% of trade invoicing in the Americas, 74% in the Asia Pacific, 79% in the rest of the world and 66% in Europe, the US Federal Reserve noted in June.

A July research note from Goldman Sachs said yuan usage remains “limited globally, especially relative to the size of China’s GDP and its influence in trade”, and pointed to Beijing’s capital controls as a key limiting factor.

The post Russia accelerates yuan trade invoicing as sanctions bite appeared first on Global Trade Review (GTR).

Last week, the Netherlands announced a €102mn package for Ukraine, which included fresh export credit support and funding to help Kyiv purchase gas and build up reserves ahead of the coming winter.

In total, the deal allocates an additional €60mn in export credits for Ukraine’s reconstruction and will encourage Dutch companies to contribute to projects by covering investment and transaction payment risks.

Support will be provided through the Dutch ECA, Atradius DSB, and doubles the agency’s coverage in Ukraine.

“The country has enormous investments needs in the area of infrastructure, transport, bridges, energy, housing, agriculture, [and] food security,” says Niek van der Beek, deputy head of SMEs and business development at the ECA.

“Our current perception is that private insurance capacity is fairly limited at the moment,” he tells GTR.

Meanwhile, the Swedish government announced last month it would create a special guarantee for exports to Ukraine.

The Swedish agency, EKN, says the scheme is expected to have capacity of SEK333mn (US$30mn) and premiums “will not reflect risk, which is otherwise a requirement according to EKN’s regulation”.

An EKN spokesperson tells GTR that Sweden’s government is still ironing out the details, though the aim is for the guarantee, which could boost construction, infrastructure and transport exports, to be available next year.

If approved, the scheme promises to dramatically boost Sweden’s ECA support in the market. Since February 2022, EKN’s guarantee volumes for Ukraine have amounted to about SEK41mn (US$3.3mn).

Other ECAs are also getting in on the act, such as BpiFrance, which has committed to insure corporate and bank investments in Ukraine for war, credit and political risks and can cover up to 95% of losses.

In a statement, Yulia Svyrydenko, Ukraine’s economy minister, said the move comes on the back of “renewed interest” in Ukraine from France’s private sector. “This decision is a signal to French companies that they can enter the Ukrainian market more actively,” she added.

In late September, Poland’s government formalised an amendment to its law on state-guaranteed export insurance to allow its ECA, Kuke, to provide 100% coverage of investments made by Polish companies in Ukraine.

The developments come just a few months after Ukraine’s central bank lifted restrictions on domestic firms’ repayments on loans backed by foreign ECAs in a bid to attract funding for imports as well as efforts to rebuild the war-torn country.

According to World Bank estimates, Ukraine’s current reconstruction bill is US$350bn, over 1.5 times larger than its GDP in 2021.

In recent months, Kyiv has initiated conversations about how western companies, financiers and insurers can help rebuild Ukrainian roads, bridges and buildings – though private insurance remains limited.

Oleksandr Gryban, Ukraine’s deputy minister of economy, said in a March op-ed – published in Tech EU – that while aid is Ukraine’s main source of foreign capital, Kyiv is keen to create an environment where private investors want to “come, stay and work for the country long-term, rather than depend on financial infusions”.

He touted the need to de-risk private investments in Ukraine and highlighted the role of the World Bank’s Multilateral Investment Guarantee Agency (MIGA), as well as ECA guarantees, in achieving these aims.

MIGA – which provides political risk cover for investments in developing countries – launched its Ukraine Reconstruction and Economy Trust Fund (Sure TF) in February to boost its insurance capacity.

Japan has contributed US$23mn to the Sure fund and several other countries have pledged to donate, GTR understands, though for now the agency is still short of its overall funding target of US$300mn.

The road to Kyiv

There is also a growing push among public and private insurers to cover ships, trucks and trains ferrying goods to and from Ukraine.

In the Black Sea, the Ukrainian government has carved out a temporary corridor to allow commercial vessels to load and export grain from terminals in the region, namely Chornomorsk, Odesa and Pivdennyi.

In late September, London-headquartered broker Miller said it had helped set up a new marine insurance facility for Ukraine exports using the Black Sea passage, covering both the cargo and the ship.

To support its short-term export insurance business, Kuke CEO, Janusz Władyczak says the agency is also developing a reinsurance programme for Poland’s transport sector to deliver goods – by land, sea, air or rail – to importers in Ukraine.

“Since the beginning of the war… only the Ukrainian companies are able to transport the goods, because the private insurance market is not able to insure the transportation means and the cargo [of Polish companies],” he says.

Kuke is seeking to reinsure Polish insurance companies who in turn could provide a contractual clause to their transport clients covering them against losses stemming from war hazards, such as missile strikes.

The Polish agency needs approval from the European Commission for the new programme, which Władyczak hopes could be granted within the coming three to six months – though admits could take longer.

“As far as we know, Kuke is the first to broach this type of subject and so it presents a new type of situation for the Commission,” he says. “In the rebuilding of Ukraine, somebody needs to transport those goods, so there is a clear need to secure the transportation means and the goods themselves,” he adds.

Kuke briefly paused coverage for Ukraine between March and June 2022, but in the past 18 months has covered roughly PLN2bn (US$460mn) worth of exports to the country, insuring trade receivables and bank letters of credit (LCs).

Such support is roughly equivalent to the monthly levels of cover provided before the Ukraine crisis, Władyczak says, while noting the agency has experienced practically zero losses.

Food accounted for 20% of Kuke’s portfolio vis-à-vis Ukraine, plastics around 15%, chemical and construction 10% and metals 6%. Companies from the fuel, pharmaceutical, automotive and clothing sectors also hold a significant share.

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