A Coal Prospect for the U.S., Far From the U.S.

LONG PHU, Vietnam — The towering lattice of blue steel girders rising above banana and lemon grass crops near Vietnam’s southern coast stands as public testament to the country’s drive to burn coal.

With help from a Kremlin-connected Russian bank, Vietnam is building a coal-fired power plant called Long Phu 1 that will produce an estimated 5.4 million tons of carbon dioxide a year, generating enough electricity to power millions of homes.

But the project needs something else first: help from the U.S. government.

The plant’s state-controlled owner has applied for assistance with the project from the Export-Import Bank of the United States. If the bank agrees, U.S. taxpayers will shoulder the financial risk behind Vietnam’s purchase of millions of dollars’ worth of turbines and other equipment from General Electric.

The bank has not yet decided whether it will back the project. If it did, it would show that the Trump administration’s commitment to using more coal at home also extended overseas. Critics say it would also challenge a growing global consensus that developed nations and groups like the World Bank should stop funding high-polluting energy projects in developing countries. Britain’s equivalent of the Export-Import Bank has already declined to participate in the project.

In addition, it would provide U.S. backing for a project partly funded by a Russian bank that has endured sanctions by the U.S. government since 2014 because of Moscow’s military intervention in Ukraine.

Support within the Ex-Im Bank is not clear. In a statement, the bank said it was reviewing the application to determine whether it complied with international rules and the bank’s environmental policy.

Analysts say the deal would almost certainly be structured so that neither Ex-Im Bank nor any U.S. companies were in direct contact with the Russian bank, Vnesheconombank, or VEB. The project’s backers in the United States and Vietnam say it would generate employment in both places.

“Our work on the Long Phu project supports the Vietnamese government’s goal of bringing power to approximately 4 million Vietnamese people, while also supporting hundreds of U.S. jobs,” said Una Pulizzi, a General Electric spokeswoman.

In Vietnam, the project is part of a burst of spending to meet rising electricity needs and support a fast-growing economy.

Thai Thuy Hang, for example, opened a restaurant near the construction site several months ago. Now she serves humble fare like rice and chicken feet to hungry construction workers. She said that she planned to recoup her $9,000 investment within a year — even if the project ran into problems.

“No one likes risk like me,” she said.

Developing countries building fossil-fuel projects have found that the number of places they can turn to for help has dwindled.

The World Bank, which earlier restricted funding for coal projects, said last month that it would mostly stop funding oil and gas projects after 2019. Criticized by environmentalists after approving tens of billions of dollars in financing related to fossil fuels, the Obama administration said in 2013 that it would restrict support for overseas coal projects. UK Export Finance, Britain’s export credit agency, has already rejected financing for Long Phu 1 because of the government’s climate change priorities, a spokeswoman said.

The timing of a decision on the Vietnam project is unclear. Last month a Senate panel rejected Scott Garrett, a critic of the Ex-Im Bank, as President Donald Trump’s nominee to lead it. But four other nominees to fill out its board are expected to go to the full Senate for confirmation, potentially enabling the board to begin making new financing deals more than two years after political fighting over the agency left its work at a standstill.

Vietnam sees coal as central to its energy needs. Long Phu 1, which is being built by PetroVietnam, a state energy company, would be the first element of a three-plant complex and burn coal from Australia or Indonesia.

Several advocacy groups say that PetroVietnam’s environmental due diligence underestimated the project’s likely carbon footprint. They also say the project is not clean enough to meet new guidelines from the Organization for Economic Cooperation and Development, a group of developed nations that includes the United States and that has tried to curb lending by government-owned export credit agencies to certain types of coal projects.

By approving the project, the United States would be “thumbing our nose to all the other countries that have striven so hard to reach this agreement,” said Doug Norlen, director of economic policy at Friends of the Earth, a nonprofit group that opposes Long Phu 1.

The final impact assessment for the project was submitted to the Ex-Im Bank in December 2016, days before the OECD guidelines took effect. The company’s supporters say the timing exempts the project from the guidelines.

The project’s Russian backer, VEB, has also come under criticism. The bank is under sanctions that effectively prevent it from taking on new business in the United States. It is also part of a federal investigation into possible collusion between the Trump campaign and the Russian government. While there is no suggestion that the Vietnamese coal plant is linked to that investigation, critics say Washington would be sending mixed messages if the Ex-Im Bank approved a project backed by the Russian bank.

“It’s striking in some ways to me that this is a project the Trump administration might pursue,” said Brian O’Toole, a former Treasury official who helped design U.S. sanctions on Russia.

“If you hold Russia accountable, you don’t do stuff like this with them,” he added.

VEB did not respond to an emailed list of questions. Activists who oppose the project also say that by approving it the Ex-Im Bank would risk violating an OECD convention designed to prevent export credit agencies from forming a partnership with corrupt foreign officials. On Monday, Dinh La Thang, PetroVietnam’s former chairman, was sentenced to 13 years in prison for economic mismanagement, in an anti-corruption push that experts widely regard as more a reflection of political infighting than a desire to eliminate graft in Vietnam, a one-party state.

Mat Tromme, a senior research fellow at the Bingham Center for the Rule of Law in London who previously worked on anti-corruption projects in Vietnam, said that proving a violation of the OECD convention could be difficult because its definition of corruption can be vague.

But he said that it was “relatively easy” to see how the case could fall within the convention’s provisions, and that the Ex-Im Bank might feel pressure from export credit agencies in countries like Britain, Canada and Germany that have what he called “tough” positions against bribery and corruption.

PetroVietnam officials did not respond to multiple requests for comment. The Ex-Im Bank said it would consider any evidence of mismanagement.

Work on the project is already underway. On a recent weekday, welding sparks could be seen inside the skeleton of the plant, which is about the size of an office building.

Le Thi Tam, who lives nearby, said that officials had paid her about $2,400 to relinquish her farmland on what is now the project site. Pollution from the plant is a concern, Tam said, but that is hardly worth complaining about.

“It’s government policy,” she said. “Who can argue with that?”