UK taxpayer may have to cover £50m in Russian loan guarantees

The government’s export department UK Export Finance (UKEF) runs a “buyer credit” scheme. It motivates overseas organisations to buy from British providers by underwriting loans.  

UKEF have issued four credit guarantees to Russian buyers since 2014, according to Financial Times. The scheme posits that “the loan is typically repaid over a period of two years or longer”.

The most recent UKEF-backed Russian loans went to Suek, a coal and gas company owned by Andrey Melnichenko. In 2019/20, UKEF underwrote a £43m loan for Suek for the purchase of mining equipment from Joy Global’s factory in Wigan.

Although not on the UK sanctions list, Melnichenko was one of the businesspeople Putin invited to discuss Russia’s invasion of Ukraine last month.

The development came as Thornberry submitted a written House of Commons question to trade minister Mike Freer on 28 February.

She asked “how much of the £171,099,381.84 maximum liability for UK Export Finance arising between 2014-15 and 2020-21 from the underwriting of credit for buyers located in the Russian Federation is still at stake at of the end of February 2022”.

Responding on 3 March, Freer confirmed that UKEF’s “remaining exposure from the underwriting of credit for buyers located in the Russian Federation between 2014-15 and 2020-21 as at 31 January 2022 (the latest date for which complete figures are available) was £49,970,667”.

Speaking to the FT, Thornberry said: “The British people will rightly want to know why their government has guaranteed tens of millions of bank loans to some of Russia’s richest men, and why taxpayers in our country now face having to foot the bill if those loans are not repaid”.

Thornberry feels that, because the Suek deals were the subject of the last two UKEF loan guarantees, most of the outstanding £49m is owed by them, because the others are likely to have been paid off, FT says.

But the Department for International Trade said they did not comment on individual transactions and could not say what loans were outstanding.

Thornberry said she feared Russian beneficiaries of the loan guarantees will simply fail to pay the money back, due to deteriorating relations between London and Moscow, FT reports.