DEVELOPMENT: Green Groups Slam Loans for BTC Pipeline

By IPS Correspondents Reprint | | Print |

Stefania Bianchi

BRUSSELS, Feb 4 2004 (IPS) - Leading environment and human rights groups have slammed commercial banks for financing a controversial oil pipeline from the Caspian Sea to the Mediterranean.

The bank loans will help construct the 1,760 km pipeline that will run from Baku in Azerbaijan through Tbilisi in Georgia to Ceyhan in Turkey.

When fully operational early next year the Baku-Tbilsi-Ceyhan (BTC) pipeline as it is called 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.

Agreements on loans worth 2.6 billion dollars were signed in Azerbaijan’s port capital Baku Tuesday. Some 1.5 billion dollars have 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 destabilise 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 km through Azerbaijan, 248 km through Georgia and 1,076 km 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 dollars 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 organisations – 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 Tuesday. "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."

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 added. "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.

"Finalisation 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 (SCP) will spend some 30 million dollars (including 5.5 million dollars 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."