Political Risk in Project and Infrastructure Finance: Rising Challenges and Modern Mitigation Strategies

This article was first published in the March issue of Butterworths Journal of International Banking and Financial Law.

Drawing on transaction experience across Europe, the CIS, Asia and Africa, this article examines the most material political risks affecting project finance today and assesses how mitigation strategies have evolved in response:

• Country and geopolitical risk have moved from a background consideration to a central structuring and credit issue, driven by sanctions, resource nationalism, industrial policy and heightened state intervention.
• Traditional contractual protections and political risk insurance remain important, but recent experience shows their limits in practice, particularly where events fall into grey areas between political risk, commercial risk and force majeure.
• Lenders are increasingly responding through pricing, enhanced conditionality, structural protections and tighter control rights, signalling a more selective and differentiated approach to cross-border risk allocation.