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Furor over pipeline
loans
By Stefania Bianchi
BRUSSELS - Agreements on bank loans worth US$2.6
billion were signed in Azerbaijan's port capital Baku on
Tuesday for the financing of a controversial oil
pipeline from the Caspian Sea to the Mediterranean.
The loans will help construct the 1,760
kilometer pipeline that will run from Baku in Azerbaijan
through Tbilsi in Georgia to Ceyhan in Turkey. When
fully operational early next year, the
Baku-Tbilsi-Ceyhan (BTC) pipeline is expected to supply
50 million tonnes of oil a year from offshore oilfields
in the Caspian Sea to the Mediterranean for export by
tankers to Western markets.
Some $1.5 billion
has been spent already on the construction, and 52
percent of work is complete. But the project has faced
considerable criticism from international human rights
and environment groups. They say the pipeline will cause
environmental damage, undermine human rights and
destabilize a conflict-prone region.
Friends of
the Earth International (FoEI) and other green groups
have raised a number of concerns over the pipeline,
which passes through a national park in Georgia and
threatens several other ecologically sensitive areas.
The pipeline will run 443 kilometers through Azerbaijan,
248 kilometers through Georgia and 1,076 kilometers
through Turkey. Construction of the Azerbaijan stretch
of the pipeline is due to be completed in September. It
will be laid through Georgia by October and through
Turkey by March 2005.
The European Bank for
Reconstruction and Development (EBRD) and the
International Finance Corporation (IFC), the private
sector arm of the World Bank, will each loan $250
million for the project. A syndicate of 15 commercial
banks, and shareholders including the oil giants British
Petroleum (BP), Statoil, ConocoPhillips and Total are
also financing the project.
Four
non-governmental organizations - FoEI, the London-based
environment group Platform, the Kurdish Human Rights
Project, and Corner House, which promotes community
movements for environmental and social justice - have
condemned the financial institutions for giving the
pipeline the green light.
The groups say public
money should not be used to deal with social and
environmental problems that should be the responsibility
of the private sector. They say loans to the project
should be conditional on a positive contribution that
shareholders in the project make to economic and social
development in the region.
"This project has
already taken away people's land without proper
compensation," director of the Kurdish Human Rights
Project said in a statement. "With the Turkish
gendarmerie assigned to protect the pipeline, the human
rights situation looks set to deteriorate yet further."
The groups say that the institutions backing the
pipeline have failed to apply the protection measures
for minorities required by the Equator Principles. These
are a set of principles agreed by 18 major international
banks to apply the environmental policies of the IFC to
lending practices.
Nine of the banks financing
the pipeline have signed up to the Equator Principles.
These are Mizuho (Japan), ABN Amro (the Netherlands),
Citicorp (United States), Dexia (Belgium),
Hypovereinsbank (Germany), ING (Netherlands), KBC
(Belgium), Royal Bank of Scotland (UK) and West LB
(Germany).
In addition to barring support for
projects that threaten sensitive ecosystems, the
principles require financial institutions to assess the
impact of lending decisions on local communities,
particularly indigenous groups. "Our research shows that
the BTC pipeline breaks the Equator Principles on
numerous counts, and people and the environment will be
worse off as a result," Greg Muttitt from Platform told
IPS. "The fact that this deal nevertheless went through
makes it hard to see the banks' commitment to the
Equator Principles as any more than lip service to
responsible lending."
In October 2002, the IFC
convened a meeting of banks in London to discuss
environmental and social issues in project finance. At
that meeting, the banks present decided to try to
develop a banking industry framework for addressing
environmental and social risks in project financing.
This led to the drafting of the Equator Principles.
The FoEI is concerned also about the effect of a
new source of oil for Western nations on climate change.
"If the banks involved were serious about their
environmental performance they would put their money
where their mouth is and fully implement the Equator
Principles," says Nick Rau from FoEI. "But the
principles are just a first step - what's really needed
is for banks to stop funding dirty energy projects which
worsen climate change."
The multilateral lenders
and oil companies argue that the BTC is key to unlocking
the impoverished region's economic potential.
"Finalization of the financing agreements comes after
more than two years of far-reaching monitoring and
scrutiny of the project's environmental and social
impact, as well as a thorough public consultation
process," BP said in a statement.
"The pipeline
employs over 12,000 people along its entire route from
Baku to Ceyhan," BP says. "Overall BTC together with the
South Caucasus Pipeline will spend some $30 million
[including $5.5 million already awarded in Azerbaijan]
on community and environmental investment between now
and 2006 in Azerbaijan, Georgia and Turkey."
The
EBRD says it is confident that the pipeline meets
international requirements. "We conducted a thorough
examination of the projects' financial, legal,
environmental and social impacts," it said in a
statement. "They were shaped to meet EBRD, EU [European
Union] and World Bank standards, particularly with
regard to environmental concerns and land compensation."
(Inter Press Service)
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