Bankwatch

Home > Archives for Blog entry

Blog entry

Public action in Ukraine: Reminding the EBRD of the meaning of nuclear safety


Regular readers of our blog know that the ‘Safety Upgrade Program’ for Ukraine’s 15 nuclear reactors, for which the European Bank for Reconstruction and Development is considering a loan worth 300 million, is in fact a scheme that would allow Ukraine to prolong the operations of its reactors by another 20 years, although twelve of them reach the end of their designed lifetime between 2010-2020. [1]

To illustrate the very real danger of a nuclear accident that comes with these plans: In December 2010 the operation of the reactor #1 at the Rivne Nuclear Plant was extended by 20 years. Just one month later an incident occurred.

An action we held today together with Greenpeace (see images below) reminded of these dangers and reflected the growing opposition to financing the prolonged operation of outdated nuclear reactors in Ukraine with European public money. We called on the EBRD to reconsider its involvement as long as the ‘Safety Upgrade Program’ is not truly and exclusively designed for safety measures – which above all must include the decommissioning of old reactors.

The action was also part of ongoing efforts by Bankwatch and our member group National Ecological Centre of Ukraine (NECU) to make sure Ukraine’s nuclear plans do not remain as opaque as the government would like to have it. [2]

And as expected, disapproval in Ukraine and abroad is increasing with more people knowing about Ukraine’s intentions to rely heavily on nuclear energy [3] even though it hasn’t made any investments into the infrastructure that is necessary for the long-term storage and the disposal/reprocessing of used nuclear fuel and nuclear waste – and although safe low-carbon alternatives are available.

If the EBRD takes nuclear risks more seriously than Ukrainian authorities and really wants to improve the safety of Ukraine’s reactors it should work together with Ukraine on the decommissioning process of its oldest nuclear units.

Images from the action

See more photos here

See more photos here

Notes

1. The Energy Strategy of Ukraine until 2030 clearly implies the extension of operation of all nuclear reactors by 20 years.

2. The Government adopted the lifetime extension programme without discussing it with its citizens and without properly estimating its impact on the environment, which contradicts the requirements of the UNECE Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters” (Aarhus convention).

3. According to the Energy Strategy until 2030, the Ukrainian Government plans to cover over 50% of the country’s electricity needs with nuclear energy.

Doing more than just spotting the elephant: a new resource for campaigning on China, dams and finance


In April early this year, after Chinese Prime Minister Wen Jiabao announced a USD 10 billion credit line for infrastructure in central and eastern Europe at the China-Central Europe-Poland Economic Forum in Warsaw, China’s preeminence in the region’s hydropower market was given a major boost. Since then a number of projects with potential Chinese involvement have been announced in countries such as Bosnia and Herzegovina (Ulog), Macedonia (Vardar), Montenegro (Moraca and Komarnica) and Ukraine (Kaniv). The companies involved include Sinohydro, the world’s largest dam company, and CWE – China Water and Electricity corporation, with the China Development Bank and China ExIm Bank as the potential financiers.

With a track record of serious social and environmental impacts at numerous Chinese dams in Africa, Asia and Latin America, and the linguistic and cultural difficulties in communicating with Chinese investors, it might seem easy for a campaign organisation just to throw up one’s hands and assume that nothing can be done. But a new guide published today by International Rivers offers some tactical insights for civil society about how best to influence the projects and policies of Chinese dam builders and advocate for social and environmental interests. Using lessons learned from previous campaign experience, the report provides an overview of the relevant actors, laws and standards in the Chinese dam building sector.

In recent years, civil society groups have found ways to engage with and influence the projects and policies of Chinese dam builders and after protests by local communities and NGOs, Chinese companies and financiers had to suspend projects in Burma and Gabon, and withdrew from operations in Cambodia. Chinese government agencies have also issued guidelines for foreign investors to protect the environment and respect local communities in their host countries. Perhaps most surprisingly, Sinohydro has prepared an environmental policy that puts it at the forefront of the international hydropower industry.

The part that particularly caught my eye is that Sinohydro has committed to avoid projects in national parks, World Heritage-listed sites, habitats of threatened species and Ramsar-listed wetlands. This no-go commitment, if properly implemented, is stricter than the EBRD’s current Environmental and Social Policy, which merely requires an Environmental Impact Assessment for such projects!

All of this adds up to a highly useful and motivating guide showing that addressing the environmental and social impacts of Chinese investments is possible. “The New Great Walls”, is available for download from the International Rivers site.

For further information about the report please contact Grace Mang at International Rivers.

Time to iron out the EU budget differences – with a green shirt!


Here’s Alexander Stubb, Finnish Minister for Foreign Affairs, tweeting on his way to the summit in Brussels:

These are not mere sartorial concerns, alas. Several weeks ago, Herman van Rompuy himself tweeted that this summit was shaping up to be the first ‘three shirter’ under his presidency. By this he was referring to the possibility that the scheduled two day summit – Thursday and Friday – would stretch into Saturday, requiring an extra shirt for strung-out summit participants.

Now there is intense speculation that, because of the huge differences of opinion ranged around the budget (how much total funding should be made available being the main obstacle), this budget summit could well become a ‘four-shirter’, ie stretching into Sunday. Apparently the building hosting the summit has instructed its restaurant to be ready for business on Saturday night.

A lot of talk about shirts, then, and so far the first sign of summit ‘shirtiness’ came this morning from UK prime minister David Cameron as he arrived for a bi-lateral ‘confessional’ (more EU summit jargon, alas, but ‘confessional’ just means ‘talks’ – there could, though, be connotations of divine inspiration being sought to ensure a budget deal) with van Rompuy.

That’s why today we’re encouraging Mr Cameron and Europe’s other leaders to make life easier for themselves – not to mention also for people living in Europe and our collective environment – by donning a green shirt.

Bankwatch and our campaign colleagues are calling for 25 percent of the EU budget for 2014-2020 to go to tackling climate change and securing green economic dividends for all in Europe.

No less a figure than Jacques Delors, the former president of the European Commission, this week set out the case for significant green spending to feature in the next round of EU spending – it’s well worth a quick read. The gains to be had from better green spending are many and, crucially, they are sustainable.

Adding extra urgency to the need for a rigorously green budget deal this weekend has been a string of highly alarming reports that have been published by major international bodies in the last week.

The International Energy Agency, the World Bank and the United Nations (as well as separately the UN Environment Programme) have all issued dire warnings about the rising rate of global carbon emissions and atmospheric warming. In tandem they have issued strong calls for major new investment money to be targeted especially at energy efficiency measures and clean renewable energy technologies.

For Europeans, the starkest warning comes this morning, just as the EU summit gets underway. The BBC reports that climate change is evident across Europe, citing a new report from the European Environment Agency out today.

The agency’s director, Jacqueline McGlade is quoted – in black and white terms – thus:

“Every indicator we have in terms of giving us an early warning of climate change and increasing vulnerability is giving us a very strong signal … It is across the board … it is in human health aspects, in forests, sea levels, agriculture, biodiversity – the signals are coming in from right across the environment.”

This is grim news. But just fancy – there is an investment tool designed to serve Europe that is under discussion right now. It too goes across the board, covering EU agriculture, transport, energy, health and a host of other sectors. It’s called the EU budget. Now is the time for Europe’s member states to set aside their budget differences and at least come together on ensuring that the future budget has green, climate-friendly spending at its heart.

You can get up to date info and gossip from the EU summit via @ceebankwatch and @SustEUfunds. If you’re using Twitter yourself, look out for the hashtags #euco and #MFF , and of course you make a good green case yourself by using #wellspentEU.

European public development money for Monsanto? Whatever next?!


Amidst the media frenzy around the US Presidential election last week, the news that Californians would at the same time be voting whether to introduce labelling of genetically modified food in their state – so-called Proposition 37 – hardly reached this side of the Atlantic. In the event, even though polls show no less than 91 percent of American voters (pdf) back labelling of GMO food, Proposition 37 narrowly failed to gain a sufficient number of votes to pass into law.

Why? Possibly something to do with the initiative’s opponents having five times as much money to spend on their campaign as its supporters… And top of the list of ‘No’ donors was none other than Monsanto, which managed to find no less than USD 8.1 million to help prevent Californians from having the right to choose what they eat.

Monsanto lead the charge against GMO food labelling in California (Source: Food Democracy Now)

This particularly caught my attention because the very same company, which is incidentally the world’s largest seed company, the fourth largest agrochemical company and a Fortune 500 company, is at this very moment waiting to see whether it will receive USD 40 million worth of support from the European Bank for Reconstruction and Development . Quite why a company that can afford to throw USD 8.1 million at depriving people of the right to choose what they eat deserves backing with public development money is unfathomable to me.

The proposed support involves unfunded risk participation (ie. a kind of guarantee, rather than the usual loans or share investments made by the EBRD) for cases where farming companies cannot pay for seeds and agrochemicals that they have signed contracts for with the company. The target audience for the investments are medium-large farmers and a small selection of key distributors in Bulgaria, Hungary, Russia, Serbia, Turkey, and Ukraine.

According to the EBRD, there will be no GMOs involved, but I wouldn’t bet on it. In July-August 2011 Hungary had to destroy 8500-9000 hectares of corn due to GMO contamination from seeds originating from Monsanto and earlier this year Greenpeace Switzerland found Monsanto’s GT73 (also called RT73) GM oilseed rape (Canola) – which is illegal in Switzerland – growing wild in Basel’s port area.

In any case, Monsanto’s record of corporate social irresponsibility is breathtaking, and that alone would be reason enough to disqualify it from backing by public development institutions. In the last two years alone, in addition to the California vote and Hungarian seed contamination mentioned above, the company has been involved in a series of controversies, including:

The EBRD has already offended at least 109 organizations this year with its promotion of mass-scale industrial agriculture and derisive attitude towards small farmers. So rather than digging itself into a deeper hole by supporting Monsanto, it’s time for the EBRD to take a long hard think about whether it exists to help the 99 percent or the one percent.

First major project in Egypt reveals transparency oversight by European public banks


Cross-posted from the Platform blog.

Based on core values of solidarity, creativity and democracy, Platform combines art, activism, education and research to achieve long-term systemic goals.

Egypt’s largest refinery – squeezed between the densely-populated Shobra, Mostorod and Ain Shams districts – is to be enlarged. The public-private mega-project brings together every type of banker in Egypt: Mubarak-regime era financiers at EFG-Hermes, slick Citadel private equity investors based out of the Four Seasons Hotel, public banks like the European Bank for Reconstruction & Development and Western high-street banks like HSBC.

While the bankers made their deals, nearby residents in Mostorod and Shobra vehemently opposed the refinery extension due to pollution, diversion of water sources and planned evictions – demanding that it be moved to an uninhabited area.


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

Examining the impact assessments for the project, the Egyptian Initiative for Personal Rights (EIPR) was highly alarmed to discover that what is presented by the public banks as the Arabic language (pdf) “Non-Technical Summary of an Environmental & Social Impact Assessment”, is in reality merely a public relations document. It is not a translation of the English non-Technical Summary (pdf), but a much more superficial project overview, lacking even basic maps of the refinery. The discrepancies extend into the details. The English document has a section on “Resettlement/ Rehousing” examining the resettlement of 107 individuals and the economic displacement of informal workers who will lose their livelihoods. In contrast, the Arabic “version” makes no mention of resettlement at all – bar one paragraph denying the “removal of any houses or structures outside the complex”.


The two documents on the EBRD’s website – presented as merely different translations

The inferiority of the Arabic materials reveals a level of laziness, as well as a lack of commitment to communicating with the poor communities of Shobra and Mostorod crowded tight around the refinery. It begs the question of how any feasible consultation is possible, when local residents are provided with PR materials that say “look how great this project is” – not with real assessments based on due diligence.

Reem Labib of EIPR explained that “In effect, ERC [Egyptian Refining Company] has failed to supply an Arabic ESIA. If the EBRD goes ahead with funding the Mostorod refinery, this will make a mockery of the bank’s rhetoric of development, best practice and improving governance, by rewarding a dangerous combination of lazy documentation and forced displacement.”

The EBRD is currently considering a $40 million loan to the refinery mega-project. It plans to join other financial institutions including Citadel Capital, EFG Hermes, the World Bank’s IFC and the European Investment Bank. The impact assessments were disclosed by the EBRD on 17 October and the board will make its decision two months later by 18 December.

International finance institutions have been expanding their operations in Egypt since the revolution started in January 2011. This is despite repeated calls by social movements to stay away, with civil society pointing to the contradiction between their neoliberal intentions to privatise and deregulate, and the revolutionary mobilisation which has social justice at its core.

The EBRD – initially created in the 1990s to expand market economies across post-Socialist Eastern Europe – is in the process of expanding its mandate so that it can lend to corporations in Egypt, Tunisia, Morocco and Jordan.

While the bank presents its role as supporting democracy and improving governance, the fact that it has chosen the Mostorod refinery as its first target betrays its true intentions. Producing impact assessments in the language of the local community is not essential. Irrelevant are some of the highly controversial existing shareholders: $462 million of equity was provided by the private equity fund EFG Hermes, which is embroiled in corruption allegations involving Gamal Mubarak.

Presumably bank officials also didn’t consider the public opposition. Reports have been circulating in Cairo of many people being evicted for the construction work and not being satisfactorily rehoused. Concerns over air pollution causing lung cancer and asthma led to local public opposition. The company is also set to consume an enormous amount of water from the Nile and the Ismailia Canal. Processed water will apparently be pumped back into the Canal – raising fears over the impacts on fish and cattle. Hence the popular campaign called for the refinery expansion to be moved to uninhabited areas.


Excerpt from the ERC website – claiming that a Non-Technical Summary of the ESIA “is available in both Arabic and English Languages”

The impact assessments in question were not produced by the public banks. This is the responsibility of the operating company – the Egyptian Refining Company and the project management company – WorleyParsons. The banks then examine the documents, to see whether they meet their lending criteria, and upload them to their website so that stakeholders can submit comments or responses. Somehow the IFI staff monitoring the project documentation, either didn’t notice or weren’t bothered with the contradictions between the English and Arabic documents.

Production of the Environmental and Social Impact Assessments was outsourced to the Welsh Huckbody Environmental Ltd. The documents were then scrutinised by ERM, contractors working for the European Investment Bank. ERM have a controversial history, including producing some of the highly flawed impact assessments for BP’s Baku-Tbilisi-Ceyhan pipeline. One village was supposedly consulted despite the residents all having fled fighting, while another – still present – was erased from project maps and documents.

The refinery is widely known as the “Citadel Refinery”, and Ahmed Heikal’s private equity firm based in the Four Seasons on the Corniche has sourced the $3.7 billion for the expansion. Shareholders in the refinery include Qatar Petroleum (27.9%), Egypt General Petroleum (23.8%), Citadel Capital (11.7%) and the Inframed Fund (7.5% – itself controversially owned by EFG Hermes and European Investment Bank). “Development” lenders also bought stakes: the World Bank’s IFC (6.4%), the Dutch FMO (2.2%) and Germany’s DEG (2.0%). Other financiers include the African Development Bank and the Japanese and Korean Export Credit Agencies. HSBC, Credit Agricole, CIB, Bank of Tokyo-Mitsubishi and Sumitomo were also involved.

Public-private partnerships in the EU at lowest level for ten years, but more blood transfusions from project bonds coming soon


The EIB has recently published a market update for public-private partnerships (PPPs) in Europe for the first half of 2012 showing that during this period, the European PPP market recorded its lowest volume for 10 years. Only seven EU states closed PPP deals during the first six months of this year, with the UK signing most contracts (16) but France, with 11 projects worth a total of EUR 2.9 billion, remaining the largest PPP market in terms of value.

Instead of properly diagnosing the problem with public-private partnerships, the European Commission and the EIB prefer to keep administering more and more blood infusions, this time in the form of project bonds.


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

Not being great fans of PPP models of infrastructure financing here at Bankwatch, we weren’t too sorry to hear that more and more EU governments are deciding not to ‘build now and pay heavily later’, but it does raise the question of what is going on and why there are fewer PPP projects being signed at the moment?

Is it just because of the crisis? Or have governments finally started to take heed of the warnings that have been issued by PPP critics for well over a decade now? Unfortunately the EIB’s update itself does not offer any answers whatsoever.

However, another recently published EIB document does comment that:

“Since the onset of the financial crisis, commercial bank debt has become more difficult to secure and lending terms (e.g. pricing, tenors, loan volumes) have deteriorated significantly, affecting the bankability and value for money of PPP projects.”

It is true that the crisis did heavily affect PPPs, as the example of the M25 motorway widening in the UK showed. The UK National Audit Office found that the price of the contract increased by around EUR 826 million to around EUR 4.25 billion between the time when Connect Plus became preferred bidder and the contract letting in May 2009. Financing terms were much more expensive than before the credit crisis and accounted for 67 percent of this price increase. While this project did – controversially – go ahead, many other PPP projects caught by the crisis did not.

One of the answers, according to the European Commission, is the Project Bonds Initiative, in which the EIB will play a role by guaranteeing bonds issued for PPPs in EU member states. Today, Commissioner Olli Rehn and EIB President Werner Hoyer will be presenting project bonds at an event marking the signing of the cooperation agreement between the EIB and the Commission establishing the Pilot Phase of the Initiative.

But project bonds are the answer to the wrong question. Instead of asking how to finance more PPPs and helping private companies to transfer even more of their risks onto the public sector, the EU institutions should be focusing on asking whether to finance more PPPs at all, and if so, under what conditions.

The Commission and EIB have not shown any inclination to undertake this kind of in-depth and critical evaluation of PPPs so far, although around the EU the evidence is getting stronger and stronger that PPPs are a risky model for governments to follow and can result in huge, long-term budget burdens. Just look at Hungary, Portugal and the UK as examples. Instead of properly diagnosing the problem, though, the Commission and EIB prefer to keep administering more and more blood infusions, this time in the form of project bonds.

The hidden costs of public-private partnerships
Read more on our website ‘Overpriced and underwritten’