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Caucasus: World Bank, ABN Amro Back BTC Pipeline

A multibillion dollar energy project will put to the test the avowed1310environmental commitment of the big banks

by Oliver BalchGuardian (London)
December 8th, 2003

If Richard Burrett, global head of project finance at the Anglo-Dutch bank ABN Amro, was hoping for a quiet run-up to Christmas, he may have to think again.

Later this week, the Dutch bank is expected to lend its weight officially to the 1,760km Baku-Tblisi-Ceyhan (BTC) pipeline, which even in Mr Burrett's own words is "seen as highly controversial".

Campaigners have taken issue with the idea to run a pipeline through Azerbaijan and Georgia to the Turkish coast ever since it was first mooted in the early 1990s.

Last month's decision by the World Bank to release $125m (72.3m) for the $3.6bn BTC project has only raised the stakes, especially as protest groups submitted a 220-page report alleging 153 ways in which the project contravened the World Bank's own lending criteria.

"It fails local people in every way from paltry compensation to increased exposure to security incidents and major accidents," alleges Anders Lustgarten in a statement for the Baku-Ceyhan Campaign.

What has really irked protesters, however, is that as little as six months ago ABN Amro was making much of having signed up to the so-called Equator Principles. By signing up to the principles, some 18 banks - including Barclays - agreed to adopt guidelines on sustainable development drawn up by the International Finance Corporation (IFC), the private sector arm of the World Bank. The guidelines cover issues ranging from environmental assessment and natural habitats to indigenous peoples and child and forced labour.

Of the 15 commercial banks involved in the BTC project, eight others are understood to be Equator signatories. The list includes Citigroup, ING, WestLB and Crédit Agricole.

"It's hard to see how ABN and Citi square their supposed environmental commitment with their involvement in the BTC pipeline. Our research makes it clear that financing is not consistent with the Equator Principles", says Greg Muttitt of the campaign group Platform.

Not surprisingly perhaps, the commercial lenders prefer the research done by the IFC and the European Bank for Reconstruction and Development, which comes to the opposite conclusion.

One point of agreement, however, is that financing the BTC project - which the private banks hope to wrap up by the end of the year - will act as a test case for the Equator Principles. Contrary to the protest wing, however, Mr Burrett believes that it will put a stamp on the validity of ABN Amro's progressive environmental and social commitment.

"There is a huge discrepancy between the feedback we're getting from environmental experts, who are telling us that the kind of work being done by BP and the other lead companies on the BTC project represents best practice in the industry, and what the NGOs are saying", says Mr Burrett.

With an estimated project lifespan of 40 years, this is a debate that is going to run and run. In an important sense, however, the BTC project already presents a minor triumph for corporate accountability.

"There will always be dissenters for a project of this magnitude", says Mr Burrett, "but what we've given them is a transparent set of benchmarks against which we can be judged."

There is no backing out of the public commitments made by the likes of ABN and Citigroup. If they decide to go ahead with financing the BTC project, they will have tough questions to answer. Failure to do so will only exacerbate the kind of damage to their reputation the banks had hoped to avoid by adopting an ethical position.

The wealth of detail already in the public domain will act as a welcome resource for those wishing to call the lenders to account. It is the first time in an infrastructure project of this kind, for example, that the host government agreements, inter-governmental agreement and production sharing agreement have been made public.

Even Mr Burrett is ready to confess, however, that the Equator Principles are not yet perfect. If nothing else, banks are still joining and more should be pressured to do so. The issue of implementation is also one that continues to bubble under the surface.

In the case of the BTC pipeline, the IFC has been doing all the running in terms of the project's transparency. Commercial confidentiality means that it is unlikely we will find the Equator Principle signatories following the recent example of the Co-op Bank in disclosing how much business it has turned down on ethical grounds. More's the pity.

Campaign groups will be following the project with a beady eye. Nevertheless, Mr Burrett and his Equator peers deserve some credit for putting their necks out and making themselves accountable to basic social and environmental standards. Slip up, though, and it won't be Christmas carols the protesters will be signing on their doorstep.





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