WASHINGTON -- A key Capitol Hill lawmaker is calling on President Barack Obama's newly formed administration to strengthen U.S. government vetting procedures for Export-Import Bank assistance abroad (see GSN, Jan. 8).
(Feb. 23) -
U.S. Representative Brad Sherman (D-Calif.) last week urged the Obama administration to tighten oversight of an agency that provides trade benefits to overseas firms (Tim Sloan/Getty Images).
Representative Brad Sherman (D-Calif.) late last week said the State, Commerce and Treasury departments must do a more effective job of investigating the potential ties to rogue nations of prospective foreign recipients of aid from the Ex-Im Bank.
His remarks followed revelations late last year that the official U.S. export credit agency had approved loan guarantees for an Indian oil refinery, despite the company's past gasoline sales to Iran.
Sherman in December led seven other House members in lambasting the Ex-Im Bank for offering $900 million in loan guarantees to the Mumbai-based Reliance Industries Limited. An earlier letter to the agency, sent by two U.S. senators, voiced similar concerns.
While the Ex-Im Bank is expected to operate outside the political fray, the agency's charter also states that the White House could deny applications for assistance if those transactions might violate U.S. nonproliferation or antiterrorism laws.
The United States has led an international effort to block Tehran's development of capabilities that could be used to produce nuclear weapons, though Iran insists its efforts are entirely peaceful (see related GSN story, today). The Persian Gulf nation has also been condemned for supporting terrorism.
Ex-Im Bank officials said they coordinated with a number of federal departments their 2007 and 2008 proposals to guarantee repayment of Reliance Industries loans for facility expansion and other projects. No officials at the State Department or other U.S. agencies raised any objections after reviewing the credit agency's plans, according to Ex-Im President James Lambright.
Unconfirmed news reports last month suggested that the Indian firm had reacted to the U.S. lawmaker pressure by pledging to stop supplying gasoline to Tehran.
After receiving a Jan. 16 letter from Lambright describing his agency's extensive coordination process, Sherman no longer appears to be targeting the Ex-Im Bank for criticism. Now he has set his sights on improving U.S. interagency review procedures to ensure that the bank is informed in advance of any foreign policy conflicts associated with future credit proposals.
"What this episode demonstrates is that we need a better intergovernmental system for vetting major projects that will be assisted by the United States government," Sherman told Global Security Newswire in a written statement on Friday. "We need to look below the surface and ask: What are these corporations doing with respect to the countries that support terrorism, countries that are hostile to the United States, or those that have an abominable human rights record?"
Ex-Im Bank last year authorized $14.4 billion in loans, loan guarantees and export credit insurance, supporting a projected $19.6 billion in exports to markets around the globe, according to its 2008 annual report.
Had a more exhaustive interagency investigation raised concerns about Reliance Industries' ties to Iran, the Ex-Im Bank might still have decided to issue the loan guarantees in the interest of promoting Indian commerce with the United States, said Sherman, who chairs the House Foreign Affairs Terrorism, Nonproliferation and Trade Subcommittee.
"The problem here is that no such serious consideration took place," he said. "The reviews that were undertaken by State and others were likely only pro forma or superficial."
Sherman said he hopes to work with the Obama administration to initiate a more thorough review process.
Information gleaned from such reviews could offer "leverage that sometimes comes with major U.S. assistance to achieve key national security goals -- in this case, the potential to further isolate Iran economically until it abandons its nuclear weapons program," the lawmaker said.
"It's heartening to see Congress doing its oversight role," said Henry Sokolski, executive director of the Nonproliferation Policy Education Center. "As long as Congress asks the questions, sooner or later we're going to get the right answers."
In his letter last month to Sherman, the Ex-Im Bank president said public information about the Indian firm's transactions with Iran was available prior to his agency's May 2007 decision to grant an initial loan guarantee. A second loan guarantee was approved in August 2008.
However, Lambright said, agency staff involved in the transactions "did not conduct inquiries on this issue" because particular sectors of Reliance Industries benefiting from the loan guarantees would be separate from those that have conducted transactions with Iran.
"We ... take seriously our obligations to comply with all U.S. laws regarding the prohibition of support for state-sponsored terrorism," Lambright told Sherman last month. "Staff now has a heightened sensitivity to borrowers' activities with sanctioned countries."