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Guest post: Development banks and the Arab Spring, new report takes stock


Remember the Arab Spring, the wave of popular revolts that hit several Arab countries in 2011. They initially resulted in the ousting of cruel dictators and brought about impressive political changes. Following these events, the European Union decided to change its approach to the region and to channel in more resources from international financial institutions (IFIs) such as the European Investment Bank, the European Bank for Reconstruction and Development and the International Monetary Foundation.

The IFIs had longstanding relationships with the Arab countries. When a new wind started blowing they were willing to change their narrative but not necessarily their methods. The positive aura of change might have left most of the Arab countries but the IFIs have not. We think that the Arab Spring is worth an evaluation of the EU’s engagement in the region, and tracking the records of development banks in the Middle East should be a key priority.

The role of development banks

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The Great Middle East Beanfeast – How ‘Development’ Banks are Using Public-Private Partnerships to Carve Up the Arab Spring Countries (20 page report, pdf)


Not a silver bullet for public infrastructure. Our website Overpriced and underwritten exposes the hidden costs of public-private partnerships.

Our latest report “the great Middle East beanfeast” is a first attempt in that regard. Anders Lustgarten, the author of the report, investigates the role of the development banks in Egypt and how they responded to the Arab Spring. The report reads as a fierce critique to the policies of liberalisation and privatisation promoted by those institutions in Egypt and in the MENA region (Middle East and North Africa). It also targets the use of Public Private Partnerships (PPPs) and what we call the “financialisation of development finance”.

These development banks betray the spirit of the Arab Spring by the financial mechanisms they use, Lustgarten argues. While the slogan of the Arab Spring was ‘bread, freedom and social justice’, the policies and financial mechanisms used by the development banks mainly bring about the opposite.

PPPs, one of the priorities of the European Investment Bank when it is active in the region for example, are a tool to shift public assets into private hands. The list of privatisations under the Mubarak regime is impressive. It has been much contested and successfully challenged in court. Extensive recourse to private equity and the use of financial intermediaries typically benefit a small elite and subject the economy increasingly to the whims of the financial market. The increasing role of the private sector decreases the ownership of civil society and undermines the ability of the state to redistribute wealth. In brief, these were not exactly the aspirations of the Tahrir demonstrators.

Before and after the Arab Spring – a different approach?

Moreover, the author shows how the EIB and the World Bank were deeply entangled with the pre-Arab Spring dictatorships. The EIB has a significant track record of supporting the Mubarak regime for instance, lending nearly €4 billion to Egypt in the decade preceding the Arab Spring. In the whole MENA region, the EIB invested €15.5 billion in the same decade, twice as much as in any other region outside Europe.

So when those institutions now refer to “democratic development of the region”, it must be remembered that they loaned more under the old dictators’ regimes than to any other regime, and they used the same justifications to do so than as they use now. For instance, a 2004 joint financial package for the MENA region between the EIB, World Bank and EU Commission claimed that it “will be used to lend support to institutional and economic reform, human rights and democracy projects, the fight against poverty and education and training”.

More on the launch debate that included a discussion on the use of the term “development mafia” on the original Counter Balance blog post

Guest post: New studies fail to prove that the Ombla hydroplant is fit for EBRD financing


When the EBRD prematurely approved the Ombla hydropower project in November 2011 – before the project’s environmental impacts had been properly assessed or publicly consulted – it did so on the condition that the project promoter, Croatian electricity company HEP, carried out an assessment of the project’s impact on flora and fauna of the Vilina Cave – Ombla Spring protected area. This assessment confirms that the site in question is among the most diverse such habitats in the country.

The research shows that the construction of the Ombla hydropower plant would have irreversible and long-lasting impacts on the Vilina Cave – Ombla Spring system and could permanently destroy habitats that are set for protection as part of Croatia’s future Natura 2000 network and already form part of the country’s National Ecological Network. While some mitigation measures exist for certain individual species, the effectiveness of these measures are unknown, and no mitigation is possible for habitats as a whole.

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Full comments on the nature impact assessment for the Ombla hydropower plant (pdf) by Zelena akcija/FoE Croatia

Croatia’s Ombla HPP project comes under scrutiny after NGO complaint – EBRD (Bankwatch in the media)

Ombla hydropower plant, Croatia (Project background)

To be more specific, in the study altogether 68 cave species were identified, of which almost all are endemic to the Southern Dinaric region in southern Croatia and Western Bosnia, and many are endemic to the narrower region around Dubrovnik . The study finds as many as 14 species are endemic to the Vilina Cave – Ombla Spring site alone.

However, rather than admitting that potentially wiping out tens of endemic species and destroying critical habitats means the project cannot go forward, the assessment concludes that the project will go on, garnished with some almost laughable ‘mitigation measures’ such as making a new concrete cave for some of these extremely choosy species to live in.

Such damage might, according to Croatian law and the EU Habitats Directive, be justified – but only if the project is of overwhelming public interest. If the project brought exceptional economic and social benefits, then it could potentially go forward in spite of the damage to the environment. However the Ombla hydro plant looks set to bring neither, and in fact a leaked 2011 study by EBRD-hired consultants suggests just the opposite.

With the damage that the Ombla project will have on critical natural habitats, along with its questionable economics and the skewed consultation process to date, it is high time for HEP, the EBRD and the Croatian government to finally look at the evidence and stop pushing the Ombla hydropower plant forward.

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Read Zelena akcija/FoE Croatia’s full comments on the nature impact assessment for the Ombla hydropower plant:
Download as pdf

EBRD with disastrous start in Kosovo, European Parliament not amused


At the end of last year, Kosovo became the newest member of the European Bank for Reconstruction and Development (EBRD). One of the first words we heard from the bank on their financing plans for the country indicated an interest to invest in a new 600 MW lignite plant, Kosovo C, planned to be built close to capital Pristina.

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European Parliament wants green energy, not coal, as part of Kosovo integration (Press release)

Lignite power plant, Kosovo (Project background)

EBRD enters Kosovo: Past IFI failures must be heeded (Bankwatch Mail article)

In March this year, the EBRD concretely spelled out what it considers to be investment priorities in its draft strategy for Kosovo (pdf). In the document, the EBRD confirms its interest in giving a loan for the new coal plant, which has been for years pushed by the World Bank and the United States:

“The Bank will consider engagement in the implementation of the greenfield thermal power plant Kosovo C that is planned to start construction in the second half of the strategy period, provided the project complies with EBRD environmental and social standards, its policy on financing energy projects and delivers high transition impacts.”

Following comments to the draft strategy from Bankwatch and Kosovo coalition KOSID and a letter complaining (pdf) about the hurried nature of the strategy’s public consultation process, the European Parliament now adopted a resolution that strongly criticises the EBRD’s plans. It reads:

“regrets that the EBRD is planning to support new lignite capacity (Kosova e Re) in its draft country strategy, and calls on the Commission to take action to contest plans such as this that run counter to EU climate commitments.”

(See more details in our press release from today)

Coal is misguided progress for Kosovo

An end to coal subsidies in Europe

Two European public banks are currently reviewing their energy lending policies. We call for an end to coal subsidies.

Data, demands and expert comments

The EBRD’s enthusiasm for this project is misguided. Burning coal to produce electricity at the country’s two existing coal plants (Kosovo A and Kosovo B) is already costing the country over 100 million euros annually only in health related issues, with people dying prematurely and children suffering respiratory diseases, and building a new plant will perpetuate these health problems.

Importantly, Kosovo already produces more energy than it consumes domestically, but much of it is wasted due to inefficiencies in the distribution network, lack of insulation in buildings, irrational usage such as using electricity for heating, commercial losses (ie. electricity used but not paid for, eg. through illegal connections to the network or unpaid bills).

These are the areas where the EBRD should be focusing on, particularly on remedying technical inefficiencies. In addition, providing support for energy efficiency measures for residential buildings would come a long way in avoiding energy waste and reducing bills for households. Kosovo does not need new coal generating capacity; it needs to stop wasting energy and to explore sustainable energy sources.

An alternatives analysis carried out by the Renewable & Appropriate Energy Laboratory Energy & Resources Group University of California, Berkeley, shows that in the period until 2025, Kosovo can meet its energy needs through energy efficiency improvements, wind and hydro energy, as well as biomass and geo-thermal. This scenario would also result in three times more jobs created for the country, and address environmental problems.

Is the EBRD listening?

And these are the messages that Bankwatch sent to the bank in our contribution (pdf) to the public consultation of the strategy draft. The problem is, it seems that the bank could not care less about what NGOs like ours or our colleagues from Kosovar coalition KOSID, who submitted similar points (pdf) to the attention of the bank, have to say.

Why? Because the deadline for submitting the inputs was yesterday, April 18. But the final country strategy document will be approved by the EBRD on May 1, less than 10 working days later. It is highly unlikely that the bank has time and capacity in this interval to seriously assess the fundamental objections we raised.

Despite the bank bragging (pdf) about its openness to civil society in Kosovo, NGOs there are already frustrated with the hurried nature of the development of a document that will send strong but wrong political signals in Kosovo. KOSID and Bankwatch have this week sent a letter to the board of directors of the EBRD (pdf) to criticise the rush of the adoption of such a momentous strategy and the superficiality of the civil society engagement.

The EBRD claims it has come a long way over the past years when it comes to cleaning up its energy portfolio and improving communication with stakeholders and certainly it has increased its renewables and energy efficiency investments.

With regards to the energy lending, however, Bankwatch maintains that the continued support for fossil fuels and above all, coal, undermines this progress and locks in an unsustainable energy infrastructure in many countries. And the start of operations in Kosovo does not set an example for an improved communication with civil society.

[Campaign update] Arctic Sunrise joins campaign against coal power plant in Croatia


The ship dropped by Plomin Bay with a banner saying “Zaustavimo Plomin C” (Let’s stop Plomin C) to protest against the economically and environmentally damaging construction of a new unit at the Plomin coal power plant.

It is not clear who will finance the project, but we are concerned that public banks may be approached to do so. Both the European Investment Bank and the European Bank for Reconstruction and Development are currently reviewing their energy lending and we are calling on them to phase out coal and no longer contradict climate science and political commitments by supporting one of the dirtiest energy sources.

The Plomin C project is being presented as a reconstruction of unit 1 at Plomin, even though it is nothing of the kind. Plomin C would have four times greater capacity than Plomin 1:

This and other facts on the Plomin C project can be found on our project page

Bankwatch’s Croatian member group Green Action has more images from the action on their website.

* Campaign updates are a new feature on the Bankwatch website intended to highlight news from projects we monitor as well as from our member groups and partners.

[Campaign update] New bills for green energy in Serbia


Since March, electricity bills in Serbia include the price of subsidies for renewable energy. One of the leading newspapers, Politika, estimated in March that it will cost households about 16 dinars (15 euro-cents) per month for the average use of 400 kW. Estimations expect that about 10 million euros will be accumulated this way in 2013 alone.

While being welcomed by for example by the Serbian association for windmills, newspaper reports rather painted a negative picture of the additional costs for customers and subsequently of support for renewable energy. Yet, Serbia urgently needs to strengthen green energy investors. At the moment, the country has 37 mini hydro power plants with a merely symbolic output. Also the potential for wind energy still needs to be exploited, partly due to the fact that “[s]tate organized projects in this area were never initiated, as this sector is left for private investors” (Source: Serbia Energy).

EBRD added value at the Kolubara lignite mine


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More interestingly, however, the critical voices do not argue against the continued support for the dominant coal sector that receives funding from international financial institutions and is planned to be further developed despite the obvious need to increase the share of renewables in Serbia’s energy mix.

An approach that has the interests of Serbia’s consumers in mind would focus on energy efficiency, cutting electricity bills by reducing the still enormous electricity losses – 16% in 2010 compared to 9% (and falling) in neighbouring Bosnia and Herzegovina (2010 World Bank figures). The freed up funds could offer the much needed boost for renewables.

The EBRD’s support for Serbian electricity company EPS and specifically for the Kolubara lignite mine further cements the current structure of Serbia’s electricity market. It fails to increase the wiggle room that innovative private investment in renewable energy in Serbia urgently need.

* Campaign updates are a new feature on the Bankwatch website intended to highlight news from projects we monitor as well as from our member groups and partners.

Shale gas in Poland: Government gags local opposition


Amid the excitement about a European shale gas boom – that sooner or later will also get international public lenders interested – critical voices and any opposition to the controversial “fracking” technology are a thorn in the sides of governments dreaming of an end to the dependence on Russian gas and energy firms dreaming of a shale gas bonanza.

In Poland, where almost one third of the land area is subject to exploratory drilling licences, the government apparently wants to avoid any interference in the exploitation of the already “dwindling” reserves (so far every new estimation of the size of shale gas deposits has been a downward correction of earlier figures).

All short-term local protest movements are simply and by decree rejected as a bunch of opportunistic racketeers. This is the Polish environment ministry speaking!

Liberty for oil companies

Firstly, the Polish government seems adamant to ensure shale gas investors a minimum of regulation rushing on with new rules on hydrocarbon extraction before the European Commission can finalise a regulatory framework for the extraction of unconventional fossil fuels in Europe.

The proposed law prescribes only very liberal rules for exploratory works, not taking standard environmental safeguards into account. More precisely, the law would allow exploratory drilling without environmental impact assessments even though such activities result in the same types, extent and intensity of environmental impacts as the actual exploitation. And All the while Poland has delayed the nationalisation of Europe’s Renewable Energy Directive so long that it is being taken to court for it.

Gagging environmental opposition

Secondly, while quarrels between Warsaw and Brussels are not unexpected, even Polish citizens are being treated as a nuisance rather than legitimate stakeholders when it comes to the energy sector.

Among the most disturbing aspects of the mentioned law is the attempt to shut out local initiatives from public consultations. Environmental organisations would only be allowed to participate in administrative procedures if they were active in the field of environmental protection and nature conservation during at least 12 months before the administrative procedures began.

In practice this means that organisations formed specifically in reaction to newly planned investments (such as shale gas exploration works) would be excluded from the decision making processes concerning these same investments. Worse even, if a procedure lasts for some time already the required timeframe of being active can be prolonged to an absurd dozen years or so.

This is yet another attack (see an older example here) on Poland’s civil society and an attempt to limit its ability to influence our country’s energy policy. Shale gas exploration, open pit mines and similar endeavours obviously lead to opposition on a local level. Communities and villagers that fear health, environmental and geological impacts often quickly and spontaneously organise to protect their homes and themselves – like in Zamojszczyzna, where Chevron had started exploratory drillings.

The reason brought forward by the Polish Ministry of the Environment illustrates the impossible bigotry that environmentalists have to face in Poland:

“Sometimes in Poland people set up an environmental organisation, but only in the name. Just because they want to make some kind of business, and say we will stop your investment because we will sit in the court for years and you will never do your job, until you do this or that.” (Source: RTCC)

All short-term local protest movements are simply and by decree rejected as a bunch of opportunistic racketeers. This is the Polish environment ministry speaking!

The doubts surrounding shale gas exploitation in Europe are still extensive and range from the obvious environmental dangers to the fundamental question whether shale gas is at all economically viable in Europe.

Poland is rushing to create new, liberal legislation regarding the exploitation of shale gas. But haste makes waste. We could avoid some far reaching mistakes by waiting for the finalisation of the EU’s “Environmental, Climate and Energy Assessment Framework to Enable Safe and Secure Unconventional Hydrocarbon Extraction”. That way we could use the experience and knowledge of other EU member states regarding hydraulic fracturing. We could avoid amending our law yet again when European legislation is put in place.

Instead, Poland is again putting profit before people. And by trying to silence legitimate concerns early on, the Polish government yet again proves just how bad our country is for the environment and for its own citizens.