Petrobras: UK taxpayers pay millions to support deals with Brazilian oil firm caught in corruption scandal

The oil giant Petrobras is at the centre of the largest corruption inquiry in Brazilian history

Chris Green
Sunday 18 October 2015 22:11 BST
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A protester  impersonating Brazilian former president Luiz Inacio Lula da Silva outside of the pentrobras headquarters in Brazil
A protester impersonating Brazilian former president Luiz Inacio Lula da Silva outside of the pentrobras headquarters in Brazil

Millions of pounds of taxpayers’ money is being used to support business deals with a Brazilian oil giant despite the company’s involvement in a huge corruption scandal.

Petrobras is at the centre of the largest corruption inquiry in Brazilian history. Yet UK Export Finance (UKEF), the Government department which helps British firms sell goods and services overseas by underwriting deals with foreign companies, provided £115m last year to support the construction of two large pipe-laying vessels chartered by the firm.

As well as helping with the deal involving Newcastle-based engineering firm IHC, the Government has not ruled out doing “further business” with Petrobras, according to UKEF’s latest annual report.

The scandal involves allegations that firms bribed politicians to secure contracts with the state-owned oil company, which at the time was chaired by Dilma Rousseff, who is now the Brazilian President. She has been cleared of involvement, but other politicians and executives have been implicated.

The allegations surrounding Petrobras surfaced in March last year, but UKEF’s annual report for 2014-15 reveals the Government has continued to do business with the oil giant. The admission was first highlighted by EnergyDesk, the news website run by Greenpeace.

“Reinsurance was provided to support the UK element of two large pipe-laying vessels, being built by IHC, to be chartered initially to Petrobras to assist the development of oil production,” the UKEF report states. “The value of the UK element was £115m. Further business involving Petrobras is under consideration.”

In numbers

  • £115m: British taxpayers' money supporting Petrobras deal
  • £1.7bnLoans to fossil-fuel projects during the last parliament
  • pipe-laying vessels chartered to Petrobras by UK company

Greenpeace said the Government’s support for deals involving fossil fuels coupled with decisions on the UK’s green-energy policy – including cuts to solar-panel subsidies – were a disaster for the environment.

“The Government says it has run out of money for clean energy at home yet it is funding deals with a fossil-fuel giant embroiled in a corruption scandal thousands of miles away,” said the group’s chief scientist, Dr Doug Parr.

“Ministers have their energy priorities all wrong. They’re wrecking clean-tech businesses and putting people out of jobs in the UK whilst lending millions to Russian coal giants and Brazilian oil drillers. They are pulling the plug on onshore wind, our cheapest power source, whilst squandering billions on new nuclear plants. This is economic incompetence on a staggering scale.”

In 2010, the Coalition Government promised that UKEF’s funds would be channelled towards “innovative and green technologies, instead of supporting investment in dirty fossil-fuel energy production”. But support for companies such as Petrobras has continued, with figures released in January showing that the UK provided around £1.7bn in loans to fossil-fuel projects during the last parliament.

UKEF said it had taken “careful account of the reforms undertaken by management at Petrobras before deciding whether our support could or will be given to UK export contracts relating to the firm”.

It added: “Our support in 2014-15 relates to vessels supplied by UK exporter IHC Engineering Business Ltd which were chartered to Petrobras. Our due diligence has indicated that Petrobras has taken steps to reform its managerial and compliance structures and to create greater financial transparency.”

Petrobras has said the scandal resulted from the work of contractors, politicians and only a small number of employees, and the company as a whole should not be blamed.

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