BY Darini Rajasingham-Senanayake
Buenos Aires, Argentina, has been rocked by massive protests against austerity measures imposed by the International Monetary Fund (IMF). Structural reforms with austerity have resulted in soaring inflation, currency depreciation, poverty, and inequality that is eroding the Argentinean society and economy, while enabling the bailout of private lenders and vulture funds like BlackRock.
Argentina is now on its 21st IMF agreement and eighth default. Sri Lanka, negotiating its 17th IMF agreement, having defaulted for the first time in April this year, may be doing a bit better than Argentina, which is South America’s third-largest economy. However, the strategic Indian Ocean island, perpetually in the crosshairs of big power rivalries, appears to be in the midst of asset-stripping ex-ante IMF negotiations with International Sovereign Bond (ISB) debt holders, who caused the country to default.
As a staff-level agreement with the IMF is under discussion, Minister of Power and Energy, Kanchana Wijesekera gave BlackRock’s partner, Adani, provisional approvals and strategic lands for two wind power projects in sensitive ecosystems in Northern Sri Lanka, namely, Mannar and Pooneryn, without Environmental Impact Assessments (EIAs) being completed, last week.
Wijesekera had decided to award the projects and lands to Adani following a meeting with officials of the Ceylon Electricity Board (CEB) and the Sustainable Development Council on 16 August. The Minister added that public-private partnership agreements would be signed pertaining to 21 of the 46 projects that were delayed due to the amendments of the CEB Act. A total of 26 renewable proposals from expression of interests that was given provisional approval would be also expedited with grid clearance and transmission plans, with other proposals evaluated within 30 days.
As the Central Bank of Sri Lanka (CBSL) engages in talks for a staff-level agreement with the lender of last resort, Sri Lankan citizens may need to learn some lessons from Argentina, fast. Back in 2020, BlackRock had opposed a debt settlement deal with Argentina and lobbied other debt holders as the country grappled with soaring poverty and the Covid-19 pandemic.
The IMF said that it will need “adequate assurances” from Sri Lanka’s creditors for a new programme as it prepares a visit to Colombo later this month. The goal of the visit is to make progress on a staff-level agreement for an aid package “in the near term” to help the nation weather a severe economic crisis, the IMF said on 19 August. Staff from the global lender will be in Colombo from today (24) to 31 August.
Since the IMF has assessed Sri Lanka’s public debt “as unsustainable”, approval by its Executive Board of the Extended Fund Facility programme would require adequate assurances by Sri Lanka’s creditors that debt sustainability will be restored, the IMF said.
Last week, a global campaign by women’s groups asked the United Nations (UN) Women to rescind a memorandum of understanding (MoU) with BlackRock for gender lens funding due to its poor corporate responsibility track record.
IMF, BlackRock, and Lazard in Sri Lanka’s Default: Ex-Ante Asset Stripping
BlackRock, the world’s largest asset and investment management company, with over $ 10 trillion reportedly being handled, is the largest holder of Sri Lanka’s opaque ISB debt that caused the country’s staged default in April of this year. ISBs amount to almost 50% of Sri Lanka’s external debt.
In comparison to BlackRock’s trillions, Sri Lanka’s external debt is a mere $ 26 billion. BlackRock also obtained huge Covid-19 bailout funds from the US Government to asset-strip around the world during the economically devastating global lockdowns in 2020, and is an investor in India’s Adani Group.
Ironically, the IMF, which does not distinguish between illiquidity and insolvency, has assessed Sri Lanka’s $ 26 billion external debt as unsustainable, although the island is oil-, gas-, and mineral-rich and located at the centre of the Indian Ocean on the world’s busiest trade and undersea data cables, which if properly taxed, would make the island super-rich.
An economic meltdown ex-ante and ex-post the staged default in April of this year due to a purported lack of US dollars amid corporate media narratives of famine and fear as part of a psychological operation, along with the people’s protest, enabled the entry of the Washington Consensus (the IMF and the World Bank) into the strategic island that is perpetually in the crosshairs of big power rivalries and over-the-horizon operations, and all the more so as a cold war heats up in the Indian Ocean region.
While the IMF does not distinguish between a country’s illiquidity and insolvency, the valuation of strategic assets by Lazard et al. hired by the US-backed regime of President Ranil Wickremesinghe and former President Gotabaya Rajapaksa in Colombo may also raise troubling questions. Lazard, the US-based financial advisory and asset management firm, had visited Sri Lanka back in February 2018, to discuss divestment. As a privatisation advisor, Lazard involves both an advisory services branch and asset management branch.
On numerous occasions, Lazard has undervalued the price of a company, enabling its asset management branches to purchase the stock at low prices and sell it for a considerable profit, according to a report by the Netherlands-based Transnational Institute, which noted: “As with the Royal Mail, Lazard, Europe’s favourite privatisation advisor, played a key role in Aena’s under-evaluation before its initial public offering (IPO), as it helped determine the IPO price. And comparable to what happened during the privatisation of the UK’s Royal Mail, one of Lazard’s asset management branches, Lazard World Dividend and Income Fund, acquired Aena (Spain’s airports company) shares at the IPO and sold them roughly a month later, netting a 60% profit. By buying up and selling the Aena shares within such a short period of time, Lazard’s World Dividend and Income Fund deviated from its usual strategy. As the name suggests, the company usually focuses on long-term investments and profit generated by dividends. In the case of Aena however, Lazard’s World Dividend and Income Fund was only too happy to drop their customary strategy when it yielded a 60% increase of their investment in just four weeks. Once again, Lazard took full advantage of its privileged position on both sides of the fence, as seller and buyer, making a huge profit in the process.”
The IMF has long been accused of wielding the single blunt instrument of austerity in crises, and forcing the poor to the bear the costs of opaque and odious debt accumulated by corrupt and incompetent leaders in developing countries, passing it onto impoverished citizens, while “bailing out” vulture funds, prominent among them BlackRock and the global 1%.
It would appear that Adani and BlackRock are targeting the island’s coastal lands, energy, and telecom infrastructure at this time of IMF discussions on Sri Lanka’s debt and staged default and stand to benefit from the debt restructuring process – ex-ante. Where does the corruption end?
Adani and BlackRock greenwash
Adani, which partners with BlackRock, stands to benefit ex-ante IMF-CBSL-ISB talks from the Mannar and Pooneryn land deals for green wind energy. But questions arise: Why the rush for costly green energy, without a proper energy transition plan in Sri Lanka, which has a minute carbon footprint at this time of global fuel price increases, and as a result of unplanned green energy policies (like the organic fertiliser disaster)? Is this a “sweetheart deal” ex-ante IMF negotiations with ISB holders for BlackRock to toe the line?
These questions arise also given the poor environmental track record of both Adani and BlackRock, which elicited global protest campaigns against the latter’s funding of UN Women. Adani and BlackRock were also the subject of a global protest campaign given the environmental impacts of the Carmichael coal mine project in Australia on the Great Barrier Reef last year.
An IMF fire sale of assets in the strategic island would benefit the opaque ISB holders of Sri Lanka’s debt, with SriLankan Airlines set to be privatised soon. The State-owned Yugadanavi power plant was sold to a US company, New Fortress, last year. The Ceylon Electricity Board is being fragmented and plans are afoot to sell it off in parts, jeopardising national energy security, and so too the Ceylon Petroleum Corporation.
However, rather than privatise energy assets, globally, the re-nationalisation of energy infrastructure given soaring energy prices and commodities futures speculation is the trend, with France set to nationalise its largest electric company, and the Singapore Parliament passing legislation last year conferring on the Energy Market Authority more powers to secure Singapore’s electricity supply,
Adani had also sought to take over India’s agriculture sector during the Covid-19 “panic-demic” exercise, but two years of brave and sustained protests by India’s farmers (unlike Sri Lanka’s “aragalaya” [struggle], which fizzled out after a couple of months of protests that enabled a US-backed Wickremesinghe-Rajapaksa Presidency), prevented the global corporate takeover of India’s farming and agriculture.
IMF in Argentina: Lessons unlearned
Did the “lender of last resort” learn lessons in Argentina? The IMF’s “rescue package” in Argentina two decades ago imposed crippling cuts to Government programmes, sowing enduring bitterness. IMF Managing Director Kristalina Georgieva claims that the “lender of last resort” learned lessons and has sharpened a focus on protecting countries from impossible debt burdens.
However, BlackRock opposed a debt settlement deal with Argentina as the country grappled with soaring poverty and the pandemic in 2020 although BlackRock Chief Executive Officer Laurence D. Fink presents himself as the vanguard of a progressive form of capitalism in which profits are not everything, and has been rebranding the corporate while cultivating environmental and social protection causes.
But when Argentina defaulted in May 2020, on $ 66 billion worth of bonds, Fink’s faith in “stakeholder capitalism” collided with traditional bottom line imperatives. Though poverty soared in Argentina as the pandemic worsened a punishing economic downturn, BlackRock opposed a settlement proposed by the Government and rallied other creditors to reject it, while holding out for a marginally improved deal.
Meanwhile, in another continent, following massive protests in Australia and globally, Adani and BlackRock seem to be busy greenwashing themselves and presenting a green energy face in Sri Lanka. Thus, Adani has been given provisional approvals for two wind power projects in strategic and sensitive ecosystems in Mannar and Pooneryn, without EIAs completed, by a Minister who should have resigned given the incompetence and corruption in the sector that brought the country to a standstill in June-July ex-ante and ex-post the staged default, ensuring a crisis that legitimated the IMF’s eroding of Sri Lanka’s economic policy autonomy and sovereignty against its citizen’s interests.
UN Women campaign: From greenwash to pinkwash
Adani and BlackRock are accused of environmental pollution globally, and BlackRock was recently called out in a global feminist campaign that focused on the UN Women’s MoU for a partnership with BlackRock and taking funding from the investment giant. The campaign focused on the “fad of climate impact investment”, stating that civil society watchdog groups consistently identify BlackRock as among the worst performers on corporate accountability.
Its climate and socially destructive investments – particularly significant in impact because of the massive component that they represent of BlackRock’s portfolio – have been called out by activists, including indigenous leaders. Aware of the optics, BlackRock has attempted to “greenwash” itself by acknowledging the seriousness of climate change – in a move that The New York Times has condemned as “climate hypocrisy” that is intentionally misleading, which is worse than climate change denial.
The recently announced partnership with UN Women suggests that UN Women has been
recruited to BlackRock’s image cleansing efforts – this time it is seeking to “pinkwash” itself, read a letter addressed to the Head of UN Women and signed by hundreds of women’s organisations and individuals around the world. Thus, they wrote: “BlackRock funding UN Women gives it a veneer of feminist approval that it clearly does not merit. Given BlackRock’s phenomenal size and influence (reportedly managing $ 10 trillion) in assets, it is not unreasonable to assert that this UN Women partnership also gives a feminist imprimatur to the version of neoliberal global capitalism that is condemned by the UN Secretary General. This crisis-prone, speculation-based capitalism, spawning grotesque income inequalities, has also been linked to misogynistic neo-populism and entrenched poverty for many women, particularly those from ethnic or racial minorities, marginalised sexualities, and female-headed households”.
Importantly, the women’s organisations, academics and activists who signed the letter also noted: “UN Women needs to rescind the partnership with BlackRock and set standards for its private-sector partnerships. The same critique may be made of other UN agencies like the World Health Organisation funded by big pharma and the Gates Foundation, and the UN Development Programme funded by big oil companies like Shell to promote debt-for-nature swaps, need revised standards for private sector partnerships.
The privatisation industry: National security jeopardised?
The UN Secretary General Antonio Guterres called out profiteering by private oil giants earlier this month and said that it was “immoral” that the largest energy companies in the first quarter of the year made combined profits of close to $ 100 billion. He urged all Governments to tax these excessive profits “and use the funds to support the most vulnerable people through these difficult times”.
The worst time to privatise strategic assets is in a global emergency and can jeopardise national energy security as a Cold War looms amid soaring oil and gas prices. Privatisation is no panacea for cultivated State-sector corruption to undermine Government institutions as a pretext for privatisation, à la the privatisation playbook.
A trend away from privatisation towards the re-nationalisation of energy infrastructure is visible globally at this time, as the energy security of countries becomes paramount. Last November, the Singapore Parliament passed a Bill to safeguard Singapore’s energy security and reliability in the long term. The Bill provides the country’s Energy Market Authority with more powers to secure Singapore’s electricity supply, as the country transits to cleaner sources of energy to acquire, build, own, and operate critical infrastructure, which reverses privatisation.
The French Government likewise said last week that it plans to fully take over its largest electricity provider Electricity de France (EDF). The nationalisation of EDF comes as the European Union (EU) feels the effects of its partial bans on Russian energy. Russia is the largest supplier of energy products to the EU, accounting for 62% of crude oil imports and 25% of natural gas imports to the bloc in 2021. Soft re-nationalisation is also underway in Hungary.
However, Sri Lanka is self-destructing its energy security by “unbundling energy infrastructure” ex-ante IMF-ISB talks, despite evidence that privatisation is not a solution for citizens, as private global energy companies have made massive profits while inflation soars and people starve due to high oil and gas prices.
The IMF does not recognise the difference between “illiquidity” and “insolvency”, or the fact that “location, location, location” matters in valuing assets, or the fact that the island’s mineral-rich sea-bed has underwater data cables that keep the global financial and economic system going, and if taxed, would make the country rich. Thus, Adani, which is backed by BlackRock, is poised to take over sensitive lands in the greenwash project in Sri Lanka, while the IMF operation to divest the Island of valuable lands, energy, telecom, and transport infrastructure assets is ongoing as part of a bailout of predatory vulture funds that prey on the citizens of the global South in collaboration with the Wickremesinghe-Rajapaksa regime in Colombo.
The current President was also responsible for the biggest financial fraud in the country – the Treasury Bond scam of 2015 at the CBSL. The largest share of Sri Lanka’s ISB debt – nearly 70% – was accumulated during 2015-2019, when Wickremesinghe was in power as Prime Minister. He was brought back to power in a regime-change operation less than three months ago to steer IMF negotiations and to enable asset-stripping.
Indeed, as Sri Lanka negotiates a “staff-level agreement” with the IMF, it seems to be fully remote-controlled from Washington D.C., with New Delhi as a junior partner. The country is already in structural adjustment mode and being readied for an IMF fire sale and asset-stripping as part of a “bailout” of US- and EU-based ISB holders.
However, given the odious nature of the debt accumulated in deals between corrupt politicians and predatory ISB holders, academics and activists in Sri Lanka have called for the outright cancellation of ISB debt, and the restructuring of only bilateral and multilateral debts. While it is claimed that investors holding emerging market bonds run the gamut from specialised funds with a high tolerance for risk to conservative pension funds, the funds should do due diligence and ensure that they are not party to odious debt accumulation in poor countries in the global South.
The Adani List of the Carmichael Project
The Adani List page reveals BlackRock’s massive financial interest in Adani and the companies involved in the Carmichael coal export project in Australia that resulted in massive environmental protests. BlackRock has a huge stake in many of the companies that comprise the Adani List, which consists of the insurance, construction, engineering, and infrastructure providers to the Adani Carmichael mine and rail project. Companies on the Adani List show that BlackRock holds a total of $ 26.8 billion in companies that are providing services to the Carmichael project, including some very influential stakes in some companies.
BlackRock holds the following stakes in Adani List Companies:
- 7.25% of Aurizon, one of the two companies that could potentially provide coal haulage services to Adani to get the coal from the mine to the port
- 7.74% of the American International Group, which was insuring Adani as recently as September 2019, and has not declared themselves as being out of the project
- 7.94% of Decmil, a construction company which has a $ 40 million contract to design and construct three temporary camps along the Carmichael rail corridor
- 8.31% of Marsh, which is Adani’s broker and is attempting to secure insurance for the Carmichael coal mine and rail project
- 4.93% of Oracle Corp, a software company providing the Aconex project management software for use in the Adani Carmichael coal project
- 8.22% of Siemens, which has agreed to provide essential signalling services for the Carmichael rail line
- 0.66% of the State Bank of India, which is still bankrolling Adani’s Australian activities, most notably, the debt funded acquisition of the Abbot Point Coal Export Terminal, through which the Carmichael coal would be exported
- 0.9% of Telstra, a telecommunications company believed to be providing communication related links for the Carmichael project