Axios Pro Exclusive Content

Congress' anti-China energy counterplan

May 21, 2024
Illustration of a globe showing the Indo-Pacific with a stand made of stars from the  People's Republic of China on a red background

Illustration: Sarah Grillo/Axios

Congress is lurching toward unleashing financing for overseas energy projects.

Why it matters: Congress is hellbent to counter China's power in the energy transition by funding strategic projects abroad that bolster U.S. supply chains.

  • But it may be challenging to accomplish without changes to existing laws and federal practices.

Driving the news: Lawmakers have begun discussing whether to reauthorize the BUILD Act, a law establishing the U.S.-backed overseas investment office known as the Development Finance Corporation.

  • Senate Foreign Relations Chair Ben Cardin is working on reauthorizing the BUILD Act on a bipartisan basis before it expires next year, a Democratic aide told Axios.
  • In hearings this month, DFC chair Scott Nathan called for a reauthorization that would unshackle its capacity to invest.

Catch up quick: As we've explained, the DFC can inject equity into infrastructure and energy projects overseas, along with other financial practices that can shore up a strategic commercial project in another country (for example, insurance).

  • Officials and lawmakers see U.S. agencies as key to building alternate supply chains.
  • "We're never going to outcompete China or anyone else on state dollars.… That's not how we do things," Secretary of State Antony Blinken told Foreign Relations on Tuesday. "But we can use these instruments [like the DFC] to facilitate the private sector playing a role."

Between the lines: Nathan succeeded Andrew Herscowitz, who left the DFC and then began criticizing U.S. policies that he says hold back DFC activity.

  • Herscowitz — whose critiques have been brought up by lawmakers — told Axios that he's consulting with top House and Senate members on a BUILD reauthorization.
  • "I am trying to make sure they understand these restrictions," he said.

Zoom in: Lawmakers have discussed potential changes to the BUILD Act that would loosen requirements that the DFC not support projects in "high-income" countries.

  • Nathan has said this requirement has held back the DFC from potential strategic investments in Chile, a lithium chemicals hub.
  • On a bipartisan basis, members also appear supportive — or at least curious — about what it would take to fix an OMB scoring issue holding back potential billions in investment.
  • Cardin's effort will aim to do both of these things, per the Democratic aide Axios spoke with, as well as raise its "maximum contingent liability cap."
  • Republicans have also raised the need for DFC to consider U.S. mining in its decisions, as well as overseas natural gas financing.

What we're watching: Whether the NDAA or the State Department's annual appropriations become avenues for lawmakers to push a BUILD reauthorization.

Go deeper