Blog entry

Is this development? Public development banks must rethink their investments and put local communities first

On 4 to 6 September, the world’s public development banks will gather for the Finance in Common Summit in Cartagena, Colombia. They’ll be discussing key development issues – from climate change to infrastructure – issues that affect the lives of millions of people around the world. Bankwatch is on the ground to expose the adverse impacts of investments made by development banks and advocates for meaningful community participation in decision-making on development projects.

Over recent years, Bankwatch has been monitoring cases of human rights violations and environmental damage connected with projects financed by development banks. Here are some of the worst offenders. You be the judge: Is this really development?

Corridor Vc Motorway, Bosnia and Herzegovina: A threat to the unique Neretva valley

Aerial view: construction of Počitelj bridge (southern BiH), part of the Corridor Vc motorway. Credits: Bankwatch.

Currently under construction, the Corridor Vc motorway is expected to stretch 335 km through Bosnia and Herzegovina from north to south. The project is funded by loans from the European Bank for Reconstruction and Development (EBRD), the Western Balkans Investment Framework (WBIF) and the European Investment Bank (EIB). Some sections of the corridor, especially in southern BiH around Mostar, have long faced opposition from local communities. Many environmental and social impacts have been overlooked during the development and construction of the project. Critical habitats along the Buna, Bunica and Neretva rivers have been put at risk, and there has been no meaningful engagement with local communities throughout the entire spatial planning and route selection process. The potential risks to ethnic minorities and war returnees, including resettlement issues and negative impacts on their property and livelihoods, have also been ignored.

DFF Adriatic Metals mining project, Bosnia and Herzegovina: mining at all costs

Unplanned access road to the Vareš mine, following the Vrući potok riverbed (located in central Bosnia). Credits: Bankwatch

Financed by an EBRD loan, DFF Adriatic Metals is a mining project located between the towns of Vareš and Kakanj in BiH. While a small section of the project is situated on a brownfield site (previously used for mining), most of the works are being carried out on a new large greenfield area. This has had widespread environmental impacts on the surrounding forested areas and watercourses, with Kakanj residents raising concerns about the potential effects of the project on the town’s water supply. Furthermore, the access road to the mine has been built in a completely different location to the one initially examined in the EBRD’s environmental assessments. Additional studies reveal that the mine and its access roads will damage critical habitats, a potential risk that was not properly assessed or mitigated. Finally, the local community in Kakanj was not involved in contributing to decisions on the project design at any stage.

Tbilisi public transport reform, Georgia: between resolution and resistance

People waiting for public transport in Tbilisi. Credits: Green Alternative

The EBRD and the Asian Development Bank (ADB) have been providing critical investments for the Tbilisi public transport sector since 2015. However, none of the planned reforms and infrastructure projects have been completed, nor do they fully comply with the goals of the public transport policy overhaul, such as giving priority to pedestrians, enhancing mobility opportunities for the city’s residents, and improving air quality in the capital.

Today, car ownership is still rising rapidly, congestion has worsened, and air quality continues to deteriorate – the average monthly concentration of PM2.5 in Tbilisi is four times higher than WHO’s annual threshold. Not only that, urban public transport is still overcrowded and unreliable. Other problems that need to be addressed are the widespread sexual harassment of women and discrimination against lesbian, gay, bisexual, transgender, and intersex (LGBTI) people, and a lack of proper accessibility for people with disabilities. Read our story on what can be done to resolve Tbilisi’s transport policy conundrums.

International North–South Transport Corridor, Georgia: culture and livelihoods under threat

Backed by international financial institutions, including the EBRD and ADB, the International North–South Transport Corridor (INSTC) is a multimodal transportation route that aims to connect India, Iran, Russia and Europe. Construction on a section of the corridor, which passes through Georgia, has caused significant environmental damage to the picturesque 9-kilometre Khada Valley known as ‘the valley of 60 towers’. The project, which involves the excavation of five tunnels and the construction of six bridges in this tiny valley, has dealt a devastating blow to the unique cultural heritage, landscape and biodiversity of the region.

Beyond the environmental impacts, the corridor has severely affected the livelihoods and safety of local communities in the name of ‘development’. Since 2021, there has been an alarming rise in cases of land grabbing and intimidation in the valley. Locals have faced legal repercussions for attempting to register their ancestral land, and the road department is now demanding repayment of compensation from more than 75 households. It unofficially claims that, because the project has incurred higher costs, locals must return the land and compensation to the state. The public prosecutor’s office has even initiated criminal proceedings against those who refuse to comply. The INSTC is yet another case where development banks have failed to identify appropriate stakeholders and ensure a meaningful public consultation process.

Indorama Agro project, Uzbekistan: unmitigated human rights violations persist

The Indorama Agro project in Uzbekistan received two loans of USD 70 million from the EBRD and USD 60 million from the IFC to promote mechanised cotton harvesting and environmental and operational improvements. For this purpose, Indorama Agro acquired 54,000 hectares of land from farmers through ‘voluntary’ terminations of land leases. However, this practice is questionable at best, especially in a situation where local officials exercise disproportionate power over citizens who lack secure land tenure. Many farmers previously used small plots of land for the cultivation of fruit and vegetables, cattle grazing, and the collection of cotton stalks to sustain their livelihoods.

Indorama cotton collection point, Uzbekistan. Credit: Bankwatch

However, the farmers who refused to be employed by the company received have no compensation for the termination of their land lease agreements. Those who did agree to employment with the company subsequently either lost their jobs or experienced a significant decrease in income. Indorama has already laid off hundreds of workers, a situation that may affect over 13,000 workers. There have been regular reports of Indorama failing to uphold labour rights. This includes refusing to honour contracts, pay wages and bonuses, misclassifying permanent workers as service providers, and depriving them of employment benefits.

Civil society and affected local communities have raised numerous concerns related to the project and the client. There have been ongoing accounts of retaliation and obstacles to the establishment and operation of the first independent trade union in Uzbekistan. Additionally, Indorama has failed to implement the EBRD’s conditional Environmental and Social Action Plan in a timely manner and to ensure meaningful consultations. Yet, Indorama continues to receive loans from other banks, including the ADB, which recently awarded the company USD 15 million for the purposes of Covid-19 recovery and climate change mitigation.

Budapest Airport expansion, Hungary: residents’ fundamental rights at stake

The Budapest Ferenc Liszt International Airport is located 16 kilometres from the centre of Budapest. With a license for a capacity of 6 million passengers per year, peaking at 15 million in 2019, new plans to expand the airport, financed by the EIB, aim to increase passenger turnover to 21 million – more than twice the population of Hungary.

A plane flying over a house in Budapest. Credits: Bankwatch

The quality of life of local inhabitants has been decreasing proportionally with the increase in air traffic. Noise and air pollution from burning kerosene (the fuel used in airplanes) is affecting a wide geographic area. Despite the anticipations of increased air traffic, the project has not been subject to an Environmental Impact Assessment as would be expected under the EU’s environmental legislation. This was made possible because the promoter divided the project into a series of smaller projects (a practice called ‘salami slicing’) and ignored their cumulative impacts. In addition to the construction at the airport itself, the project has also planned for a new cargo facility, a rail connection with a new railway station, and a range of projects aimed at ensuring a continued high-level service for travellers. In 2021, the EIB Complaints Mechanism confirmed all allegations against the project and recommended that a cumulative environmental impact assessment be carried out. However, to date, these recommendations have not been implemented and none of the breaches identified have been corrected or remedied.

Akiira geothermal energy project, Kenya: the dark side of EU development funds

The EIB has a long history of financing geothermal power plants in Kenya. In 2019, it was considering providing financing of EUR 155 million for the Akiira 1 geothermal plant, located near an informal settlement in post-colonial Kedong Ranch. Previously, the livelihoods of residents depended on charcoal burning. Tragically, in November 2019, the settlement was burned to the ground, with residents forcibly displaced by the police. This resulted in a humanitarian crisis, requiring the intervention of the Red Cross to provide aid to inhabitants, especially children, who had been left without food or shelter.

The EIB immediately halted its consideration of the loan for the Akiira project, removing it from its project pipeline. However, it soon turned out that the 70 MW geothermal energy project had received European public money through the Global Energy Efficiency and Renewable Energy Fund, a joint fund-of-funds initiative of the EIB and the European Commission, where the EIB has dual roles as advisor and investor.

Following a complaint from an evicted person, the EIB’s Complaints Mechanism acknowledged that the EIB Group had not adequately monitored the eviction process to ensure compliance with the Bank’s standards, and had thus failed to identify this act of non-compliance in a timely manner. Eventually, a social expert was hired to conduct an in-depth investigation. As a result, a corrective action plan is currently being implemented.

Mombasa Port Access Road, Kenya: a highway of destruction

The narrow, crowded road from Mombasa to Nairobi is the main traffic artery of eastern Africa. Kenya’s National Highways Authority (KeNHA) is working to expand a 41.7-kilometre section of the route to a dual carriageway standard. The EIB is supporting the project with a EUR 50 million loan. In 2015, more than a hundred families from the Jomvu area were forcibly evicted from their homes on the roadside to make way for the construction works. Only thanks to the adamant efforts of the affected community to seek help and the outreach work of civil society groups did the banks together with KeNHA halt the works to mitigate the harm and revise the Resettlement Action Plan for the whole project.

However, the mitigation process was far from satisfactory, and ultimately the EIB Complaints Mechanism facilitated a mediation process covering complaints from 316 people. In 2017, the community leaders reported intimidation by the project grievance mechanism established by the promoter. Despite the revision of the resettlement scheme for the project, between 2017 and 2019 the complaints mechanism received another 250 complaints in relation to the implementation of the revised plan. To date, the EIB Complaints Mechanism is still monitoring the implementation of the agreed corrective actions and recommendations.

Romania’s fossil fuel-driven district heating plans are holding back a sustainable energy transition

The measure is expected to reduce air pollution and enhance environmental sustainability. However, these district heating systems will be powered by fossil gas, neglecting the potential of the country’s renewable energy sources.

Four projects in the municipalities of Râmnicu Vâlcea, Arad, Constanța and Craiova have been approved to receive funding from a pool of EUR 300 million allocated for this measure. In June, the Ministry of Energy announced that contracts had been signed, marking completion of the first milestone in the investment.

The most acute issue with the scheme is its exclusion of financing for renewable energy sources in these district heating systems. The call for projects has been designed in such a way as to support only fossil gas projects, thus limiting the possibility of a transition to renewable heating systems, an approach that that needs to be urgently adopted in the coming years.

The irony is that projects benefitting from EU public money under the recovery plan are supposed to meet higher environmental standards. For one, they should comply with the principle of ‘do no significant harm’. Even the funding guidelines drawn up by the Ministry of Energy state that such projects must meet the following three criteria for environmental protection:

Keep within the emissions limit of 250 g carbon dioxide per kilowatt hour (CO2/kwh) over the lifetime of the project;
Have the capacity to use a mix of so-called ‘renewable gases’ and be compatible with 100 per cent renewable hydrogen by 2030;
Replace polluting solid fuel or oil-based power plants.

Unfortunately, transparency is absent from the Ministry’s criteria. Neither the project promoters nor the relevant ministry departments have published any assessments of the project’s alignment with the ‘do no significant harm’ principle. In response to a request for information filed by Bankwatch, the Ministry of Energy confirmed that the projects would meet the greenhouse gas emissions limit and be hydrogen-ready, but did not provide access to any supporting documents.

To analyse the compatibility of the projects with climate objectives, we have reviewed the documentation submitted for the environmental impact assessment, a mandatory process that any project with potential environmental impacts must go through. But the devil is in the details. None of the approved projects was found to fully comply with the environmental criteria outlined in the funding guidelines.

For example, the Ministry’s guidelines mandate that only energy projects intended to replace coal or oil can be included in Romania’s recovery plan. However, the gas-fired power plants planned for Constanta and Arad, which the delevelopers claim could be switched to hydrogen in the future, are intended to replace existing units already running on fossil gas. And although these obsolete units undoubtedly need to be modernised, the new plants would necessarily undermine Romania’s emissions reduction targets.

Production data from the operator’s environmental report as well as data from the European Union Emissions Trading System reveal that in 2022 the district heating power plant in Constanta produced 209 g CO2/kwh. However, the new plant will generate CO2 emissions of around 226 g for a similar amount of energy produced. This means that instead of slashing emissions, they will be increased.

Furthermore, it’s unclear how any of the approved projects will use hydrogen. Although some documents mention the possibility of a 20 per cent hydrogen input, they provide no details on the operation or source of the hydrogen supply. Nor do any of the promoters demonstrate how exactly these projects will stop using fossil gas after 2030.

In any event, the criteria for switching to green hydrogen are biased from the outset, considering that the use of hydrogen in electricity and heating is notoriously inefficient. A huge amount of renewable energy is needed to produce green hydrogen, which is then used to power thermal power plants, a process that loses around 60 per cent of the energy initially invested.

Ultimately, continuing the use and even increasing the demand for fossil gas will undoubtedly worsen the escalating climate crisis. New projects of this kind deepen dependence on fossil gas, hamper the energy transition and do little to tackle exorbitant energy prices. Renewable energy is already cheaper than conventional sources and has zero emissions during operation.

That’s why EU Member States need to create a pathway for its development in the heating sector. Thankfully, significant EU funding for the green transition via the Modernisation, Cohesion and Just Transition Funds will be made available in the coming period. The crucial thing is that these funds are allocated for the right purpose, not wasted on inefficient projects that perpetuate the fossil fuel saga.

The European Commission should closely monitor how these projects are implemented to make sure they achieve the EU’s climate targets. But more importantly, it should exclude financing for fossil fuels and create more space for innovative sustainable projects.

Bulgarian government’s Black Sea gas ambitions: a dangerous distraction from a just energy transition

In late July, the Energy Committee of the Bulgarian parliament tasked energy minister Rumen Radev with negotiating the state’s participation in offshore fossil gas explorations in Block 1-21 Khan Asparuh. The minister will explore the possibility for state-owned Bulgarian Energy Holding to join the OMV Petrom-TotalEnergies consortium as a 20 per cent shareholder ahead of the exploratory drilling scheduled for 2024. This comes after the Energy Committee heard from TotalEnergies about the company’s plans for future exploration wells and potential findings.

There is a clock ticking on this. The consortium’s exploration in the Black Sea has been ongoing since 2012; the license has since been extended a few times, but unless a geological discovery is registered, the current extension, due to expire in late 2024, is the final one, according to the law. Previous explorations have failed to identify viable gas reserves, and in 2020 the third partner in the original consortium, Repsol, left the project.

Bulgaria has managed to decrease its dependence on Russian fossil gas over the last year, and this is a step in the right direction. At the same time, the country is in a favorable position to reduce its gas demand overall due to the relatively small share of fossil gas in its energy mix. Developing a new fossil gas field in Bulgaria would only undermine this effort.

Bulgaria’s aspirations to develop Block 1-21 Khan Asparuh in the Black Sea carry high risks – both economic and environmental. Although the plan is to export most of this gas, should it be discovered, the trend is that gas demand is falling – in Europe it fell by 17.7 per cent between August 2022 and March 2023, according to Eurostat.

Any transportation of gas from a fossil gas field in the Black Sea could take a toll on marine ecosystems. There is also a high risk of the release of volatile organic compounds (VOC) from the exploitation of the gas field, as well as the release of the potent greenhouse gas methane.

According to an analysis by the International Energy Agency (IEA), in order to meet the targets set in the Paris Agreement for reducing greenhouse gas emissions, new oil and gas fields should not be developed at all.

In 2021, Bulgaria, alongside more than 100 other countries, committed to reducing methane emissions by 30 per cent by 2030 compared to 2020 levels. New methane and gas legislation obligations are currently being finalised at the European level as part of the Fit for 55 legislative package.

Yet the Bulgarian government is advancing its Black Sea gas ambitions while another controversial Black Sea gas production project is also pushed through in Romania. And OMV is involved in both.

New fossil gas extraction projects in Bulgaria must not be allowed. Areas where local gas exploration and drilling has been discussed such as Dobrudzha, where Bulgaria’s wheat production comes from, are particularly sensitive. Following the ban on shale gas extraction through fracking in Bulgaria in 2012, there has been interest in using conventional gas extraction methods in the region, which triggered waves of protests by locals. Even conventional gas extraction methods cause water and soil pollution, which would be detrimental to the region known as the ‘breadbasket of Bulgaria’.

According to a UN report, Bulgaria, and more specifically northern Bulgaria and the Danube basin, is seriously threatened by droughts. Fossil gas production requires large quantities of water, in addition to polluting water sources, which would tax the country’s already precarious water supply.

Considering the significant economic, social and environmental risks, environmental group Za Zemiata (Friends of the Earth Bulgaria) is urging decision makers to rethink the development of any new fossil gas fields on Bulgarian territory, regardless of whether these are offshore drillings in Black Sea or onshore drillings.

What Bulgarians need now is a just energy transition, moving away from fossil fuels while providing access to affordable energy from cleaner and more reliable renewable sources and ensuring the redevelopment of fossil fuel-dependent regions. Unlike fossil fuels, sustainable forms of renewable energy are becoming ever more affordable and have minimal risks. Electricity transmission and storage technologies are already available, and access to renewables for individual consumers and municipalities would make a strong impact on achieving sustainable energy goals and strengthening energy security in the country.

Hungarian public given just two weeks to voice concerns over EUR 5.5 billion REPowerEU chapter

The fiasco of the Recovery and Resilience Facility’s (RRF) residential solar grant programme, worth EUR 520 million, has already shown the consequences of minimal consultation and the failure to take full and timely account of comments from the public, solar companies and civil society organisations in the process.

The prime minister’s office is now calling for a public consultation on the massive draft REPowerEU chapter (total EUR 6.9 billion, of which EUR 5.5 billion from the RRF), which is ten times larger than the RRF residential solar grant programme, to be completed in a very short time. Although the draft provides a positive example of a EUR 583 million investment programme for energy renovation (efficiency and renewables) in the residential sector, relevant stakeholders (the future implementers of the programme, the target groups) are concerned that the lack of sufficient consultation time could lead to delays, sidelining of the programme or implementation problems similar to those experienced with the RRF residential solar grant. Holding such consultations during a short two-week period in the middle of summer seems inappropriate for this crucial issue.

Besides positive investments such as the residential energy efficiency programme mentioned above, the draft also includes some fossil fuel investments. Of the EUR 5.5 billion RRF funding, the government plans to allocate over EUR 598 million to fossil fuel infrastructure, such as gas network capacity expansion, gas storage investments, and increasing oil pipeline capacity and refinery flexibility. In addition, a further EUR 624 million is earmarked for ‘green economy/technology’ investments, which could unfortunately prolong the country’s fossil fuel dependency, including support for carbon capture, utilisation and storage (CCUS), an end-of-pipe pseudo-solution.

To achieve a sustainable and significant reduction in household energy bills, it’s essential and urgent to renovate at least 2.6 million energy-wasting and inefficient Hungarian homes. This requires the renovation of an average of 130,000 to140,000 homes per year until 2030. However, the government’s plan to support such renovations with only EUR 582.4 million from the REPowerEU plan (enabling the renovation of 20,000 households by 2026) is baffling and inadequate. Even when combined with the home renovation budget of the Environment and Energy Efficiency Operational Programme Plus (enough EU funds to renovate about 38,000 homes by 2029), the funding remains painfully inadequate.

Hungary’s civil society organisations have consistently emphasised that the sustainability and successful implementation of the REPowerEU chapter depends on meaningful public consultations. Despite calls for the timely publication of the draft, the government referred to preparatory negotiations with the European Commission as an excuse for its delay in publishing. Six organisations jointly sent a letter to Minister Navracsics’s cabinet and his RRF State Secretariat (responsible for the Hungarian RRF and REPowerEU chapter), urging them to open the public consultation in September or extend it through that month. The organisations are still waiting for a response. Such a short consultation period in the middle of the summer could be viewed negatively not only by the Hungarian public, but also by the European Commission.

The Georgian Road to Russia: when everything goes south

The European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ADB) financed up to EUR 423 million in 2019 for the Kvesheti-Kobi road project, part of the North-South Corridor, an investment that continues to raise concerns among the Georgian public, environmentalists and cultural heritage specialists. The contribution of the Georgian government (EUR 73.7 million) was supposed to cover the costs of compensating landowners and preparing the project. The construction of the 23-kilometre highway with six bridges and five tunnels affects 9 kilometres of the Khada Valley, a unique area with a rich cultural and natural heritage. The construction of the road led the International Council on Monuments and Sites (ICOMOS) to recognise the Khada Valley as an endangered cultural landscape area in 2020.

In addition, the Georgian Road Authority started construction on the road without a proper environmental, social and cultural impact assessment. As a result, numerous failures have been noted in relation to the protection of cultural heritage, resulting in retaliation against local landowners, and the destruction of livelihoods.

Until now, there has been no road through the valley, and locals had to leave their homes every autumn once it began snowing to access major services such as schools, medical clinics and shops. The promoters of the project claim that thanks to the project, the people living in the Khada Valley will have a road available to them all year round. A visitors centre, designed by the project’s sponsors, is intended to help them promote the valley’s cultural heritage. But after two years of construction, locals are losing hope that the valley will survive the scale of transformation and retain its unique identity and cultural heritage, not to mention the safety of local communities. Locals have consistently asked for support from the banks’ management and later via their redress mechanisms. Despite their efforts, the situation has not improved.

Livelihoods stolen in the name of development

One of the concerns reported by locals relates to land ownership. From the outset, the land acquisition and resettlement plan failed to present any evidence that the road would positively impact people’s lives. The plans did not provide for adequate compensation to restore the livelihoods of people who used the land for subsistence. In addition, the plans do not entitle those whose land or assets have already been acquired to in-kind income and livelihood improvements. In 2019 and 2020, locals demanded adequate compensation and recognition of their rights to the traditionally owned land. (This type of land ownership establishes their right to property based on historical residence; it has been recognised by the international financial institutions even though Georgia’s legal system does not recognise it as a legitimate form of ownership.) They repeatedly called on the EBRD and ADB to take action. In 2020, to meet the banks’ requirements, the Road Department was forced to increase the amount of compensation owed to locals whose land or assets had been acquired four times, and to support the locals in registering their lands as traditionally owned.

Since 2021, there have been increasing incidences of land grabbing and intimidation in the valley. Some villagers from Arakhveti, one of the valley’s villages, have been accused of fraudulent appropriation of land. Two people were arrested after they openly expressed their concerns to the media and accused the prosecutor’s office of intimidation as part of community protests. Yet claims against accused individuals have nevertheless proceeded: in total, the Shida Kartli and Mtskheta-Mtianeti regional prosecutor has opened investigations against 20 residents of Arakhveti.

In 2022, land grabbing continued and expanded to other villages. In 2023, the Roads Department started demanding the repayment of compensation from more than 75 households that had registered traditionally owned land. The land titles were given to them with the support of the project funded by international financial institutions, and the government was forced to pay them compensation. According to the locals, representatives of the Road Department argued that the project had become more expensive than initially expected, and that the locals would have to return the land and compensation to the state. The public prosecutor’s office has even initiated criminal proceedings against those who refuse to comply.

Such practice criminalises locals who register their ancestral land; violates their rights; and significantly reduces trust in the government, financial institutions and the project. When people understood that multiple households were victim to the same demands, protests and anger grew in local communities. In response, the government began to deploy police forces, while the affected people started organising direct actions, such as road closures and protests. In a disturbing trend, the government started to apply this practice in other communities in the region, such as in the cases of the Nataktari – Jinvali and Stapansminda-Gveleti road projects.

Some people’s land has been damaged due to the construction. Construction works have also changed the valley’s natural drainage systems, and some agricultural land plots were eradicated. The rise in the groundwater level is also recognisable in basements in the region, where humidity has increased.

The Khada Valley’s unique treasure at risk

The valley’s cultural heritage monuments, as well as the majority of the houses in the valley, are built with a dry stone method, which makes them more vulnerable to cracking and destruction as a result of vibrations and nearby earthworks. Therefore, from the beginning, there were concerns that drilling in the mountains and some blasting operations could disturb these buildings, as well as increase the risk of possible avalanches and landslides. Unfortunately, the proposed and approved Environmental and Social Impact Assessment offers neither a proper assessment of the potentially adverse impacts, nor proposes effective measures to decrease them.

According to the ADB Compliance Review Panel report, the Bank’s management did not conduct proper due diligence on the physical-cultural resources and cultural dimensions of the Khada Valley landscape, as required by Bank policy, prior to approving the project. An initial three-day fieldwork on cultural sites was deemed satisfactory, but subsequent studies revealed the presence of an additional 155 cultural heritage objects within the project area. These monuments have yet to be given protected status by the Ministry of Culture. In addition, although the National Heritage Conservation Agency has collected artefacts from excavated sites, no public statement has been made about their significance and planned actions. Delaying the project to provide enough time to complete archaeological studies has been ruled out.

Similar findings were echoed by the EBRD Independent Project Accountability Mechanism (EBRD IPAM), which stated that the EBRD failed to verify that the project had an up-to-date cultural heritage study to assess impacts. The Bank also failed to identify appropriate stakeholders and did not ensure a meaningful public consultation process.

People remain deeply concerned about the cultural heritage of the valley. Promises that the construction works in the valley would not endanger residential houses and cultural monuments have rung hollow. Cracks are already visible, for example, on a tower in the village of Rostiani.

From 2019 to 2022, residents also raised their concerns directly with the management of the two international financial institutions. There have been attempts by these banks to address some of the shortcomings of the project, such as developing a historical reference plan for the Khada Valley, defining the general protection zones, and even preparing a Development Plan to relieve locals of the impacts of the road project. The draft plan was presented to both civil society organisations and local community representatives in January 2023, but the important questions of who will fund its implementation and how it will be implemented remain unanswered.

Living under the threat of man-made hazards

Construction-related safety standards have also raised concerns. For example, the construction company China Railway 23rd Bureau Group (part of China Railway Construction Corporation) informs people about blasting operations 15 minutes before the event, and sometimes only after the fact.

Local communities are concerned about the safety of the construction, considering the number of accidents that have already occurred, including those in June 2022 in which one worker died and 10 were heavily poisoned by CO2 emissions in the Kobi-Tskere tunnel. The ADB’s CRP report also highlights that the social impact assessment failed to consider how to avoid or mitigate social impacts, maximise social benefits and enhance positive social influence. It is obvious from both the CRP and IPAM reports that the road construction started without proper due diligence, and as a result, the project’s design did not comply with the banks’ own safeguard policies.

The elephant in the room – Russia

The Roads Department is eagerly working to continue construction of the North-South Corridor, namely the Nataktari-Jinvali and Stepansminda-Larsi highways. According to the Georgian government, the same international financial institutions and the World Bank are also interested in investing in other parts of the corridor. However, the question of why Georgia needs a road to Russia has not been addressed by the government or the banks.

In 2019, the banks were enthusiastic: ‘The project extends the efforts of the ADB and other development partners to upgrade the country’s national highway network along key economic corridors. It will promote inclusive economic growth and regional connectivity.’ The reasons behind the decision are strange, however, considering that 20 per cent of Georgia’s territory is currently occupied by Russia and the two countries have no diplomatic relations. In addition, since Russia’s occupation of Crimea in 2014, which was followed by numerous international sanctions on Russia, the project should have been considered a ‘no-go’ for the EBRD, which effectively suspended all of its activities in Russia that year.

The Russian government recently openly praised the Georgian government for building the new road. Since the start of Russia’s war in Ukraine, Georgia has become one of the main routes through which Russia receives banned goods from Armenia, Turkey and Iran, according to the United States State Department. With increased traffic, the lack of capacity at border checkpoints creates better opportunities for the shipment of prohibited goods to Russia.

Finally, one more ominous question lingers in the air: will the banks turn a blind eye if the project does not comply with their own safeguard policies and continue to support Georgia’s increasing ‘connection’ with Russia? If so, why?

Chinese-built Dabar hydropower plant in Bosnia and Herzegovina set to destroy four Emerald and two Ramsar sites

On 26 June 2023, in a ceremony on the beautiful meadows of the Dabar karst field, representatives of the Republika Srpska entity of Bosnia and Herzegovina, power utility Elektroprivreda Republike Srpske (ERS) and contractor China Energy Gezhouba Group announced the start of the ‘main works’ to build the Dabar hydropower plant. The cost of the 160 MW plant is at least EUR 338 million, including EUR 180 million in debt to the China Eximbank and around EUR 80 million that has already been spent on a 12-km tunnel.

While the European Parliament recently approved the Nature Restoration Law aiming to restore 20 per cent of the EU’s habitats, Republika Srpska plans to destroy the most important wetlands in Herzegovina – impacts that extend to the Federation of BiH and even Croatia. Two Ramsar sites (Hutovo Blato and Neretva River Delta), three karst rivers (Buna, Bunica and Bregava), one Natura 2000 site (Delta Neretve), four Emerald sites (Gatačko, Nevesinjsko, Dabarsko and Fatničko karst fields) and at least three Key Biodiversity Areas are threatened, with the Fatničko polje already having been damaged by a giant channel crossing it.

The unique flora of the meadows in Dabarsko karst field (polje) with the Nevesinjsko polje-Dabar hydropower plant tunnel construction in the background.

Dabar is the largest hydropower plant of the massive Upper Horizons (Gornji Horizonti) scheme, first conceived in the middle of the 20th century. Upper Horizons consists of three hydropower plants, two reservoirs with multiple dams, four diversion tunnels, one pumping station, and four karst fields drained by large channels. The longest tunnel, Nevesinjsko polje – Dabar hydropower plant, is being built by the company Integral Inženjering PLC, owned by the controversial businessman Slobodan Stanković, a close associate of the Republika Srpska president Milorad Dodik and placed on the US sanctions list.

Bankwatch representatives explored the project area in June 2023 as part of the Neretva Science Week and followed the water flow from the upper poljes (that’s where the name Upper Horizons comes from), through the lower poljes and rivers all the way to the Adriatic coast at the Neretva Delta in Croatia.

Cave-diving to explore the underground biodiversity of Nevesinjsko polje during the Neretva Science Week. Such activities have the potential to discover new endemic species. Photo: Andrey Ralev

The karst of Eastern Herzegovina and the natural movement of water – one of the most amazing and unknown natural phenomena in Europe

The mountain areas of Bosnia and Herzegovina have up to four times higher precipitation than the Adriatic coast. After heavy rainfall and snowmelt, the karst fields at higher altitude become flooded. These fields, called poljes in the local language, contain a complex of wetlands – lakes, marshes, wet meadows and temporary springs. The poljes are enclosed on the surface but incredibly interconnected underground. Karst springs in the poljes give birth to rivers that sink into sinkholes. Multiple sinkholes can drain one polje, forming multiple underground rivers that emerge many kilometres downstream as sources of new rivers in the lower poljes. More than 100 such connections between poljes in Eastern Herzegovina have been discovered so far.

The Zalomka river water disappears into the Biograd sinkhole and appears in the springs of the Bunica and Bregava rivers. The underground karst system and the Neretva tributaries would be left with almost no water if the Dabar plant is built. Photo: Andrey Ralev

Unique adaptations of animals, plants and humans that live in the poljes

For millions of years the rivers of the karst poljes have fluctuated – discharging millions of cubic metres of water in spring and becoming dry on the surface after summer. The karst hydrogeology is so complex that depending on weather conditions and season, some caves (called estavelles) can serve either as a sinkhole or as a source of freshwater, and some underground rivers can change their flow towards one spring or another. The animals that live in the karst have adapted to these changes – during high water they feed on the biomass that is flushed in the system, migrate and reproduce, during low water they hide in the caves or under rocks. Many of them are endemic to Eastern Herzegovina or to only a few poljes like the recently described fish Dabarsko dace (Telestes dabar) found only in the Dabarsko and Fatničko poljes or the striped dace (Telestes metohiensis) from the Gatačko and Nevesinjsko poljes already heavily impacted by pollution. The flora has also adapted to the water fluctuation – the wet meadows and protected plant species of the poljes depend on the spring floods. People have also benefited from the water fluctuations – grazing animals in the green meadows, having good yields from the fertile soils and using traditional fishing techniques during the floods.

The endemic striped or Dalmatian dace (Telestes metohiensis) endangered due to water pollution from the Gacko thermal power plant. The Upper Horizons hydropower scheme would probably drive it to extinction. Photo: Centre for Environment (CZZS)

The impacts of the Dabar hydropower plant and Upper Horizons scheme

The potential impacts from Upper Horizons are hotly debated and may be extremely far-reaching. It is likely they are not all understood due to the complexity of the karst underground. First, the unique karst fields in Republika Srpska would be completely destroyed. As with the already built Lower Horizons scheme, the idea is to completely control the water movement – from reservoirs to tunnels to hydropower plants to channels to reservoirs and so on. This will stop the natural water fluctuations and dry up underground karst rivers, caves and springs. Three endemic fish species (Telestes dabar, Telestes metohiensis, Delminichthys ghetaldii), several amphibians and invertebrates would probably be driven to extinction.

Channel through Fatničko polje that has already greatly impacted the local biodiversity by changing the water regime. Photo: Andrey Ralev

Second, Upper Horizons would also involve closing or drying several sinkholes, which may endanger the water flow to the iconic Buna, Bunica and Bregava rivers that are of crucial importance to towns in the Federation of BiH like Blagaj and Stolac as well as being home to protected species. According to the Dabar plant’s environmental impact assessment (EIA) report, 85 per cent of the water of these rivers would be diverted towards the Bileća artificial reservoir, and most of it will not be returned to the Neretva basin. Having in mind the authorities’ current inability or unwillingness to control existing hydropower facilities, it is very doubtful whether even the remaining 15 per cent will be left. The already seriously impacted Hutovo blato wetland, which is of international importance according to the Ramsar convention, would receive even less water if all parts of Upper Horizons are built.

Entrance to the tunnel Nevesinjsko polje-Dabar hydropower plant which would divert 85 per cent of the water from the Zalomka river towards the hydropower plant. Photo: Andrey Ralev

Third, the project would decrease the flow of the river Neretva, whose delta in Croatia is already suffering from salination. As an important wetland and agricultural area, this in itself is a massive impact.

Local, regional and international legal cases

At least three villages would be partly flooded by the Nevesinje reservoir – Lješčice, Solakovići and Kosovača with agricultural land impacted in many more. Some of the people don’t want to move – some have been offered compensation they are not satisfied with and some of them are fighting in court against expropriation. An unknown number of villages could be impacted by a second reservoir upstream, which still has no EIA.

The waterfalls of the river Bregava at Stolac are a major tourist attraction. The Dabar plant would leave them dry for most of the year as water from the Nevesinjsko and Dabarsko poljes would be diverted towards Bileća reservoir. Photo: Andrey Ralev

The project has faced strong public opposition in both the Federation of BiH and Croatia, and the Federation’s government launched a court case against the EIA approval in 2012. Since the competent court was in Banja Luka, it unsurprisingly ruled in favour of the Republika Srpska authorities. Local people from the Mostar and Stolac municipalities are also concerned about the imminent threats to the rivers Buna, Bunica and Bregava they depend on for agriculture, fishing, tourism and recreation.

Houses threatened by the Upper Horizons scheme. Photo: Andrey Ralev

In December 2022, the Bern Convention opened a file against Bosnia and Herzegovina because of hydropower threats to the Neretva Basin. Point 13 of Recommendation No. 217 (2022) requests the country to implement a ban on development of further hydropower plants in all candidate Emerald sites in the Neretva River basin, including the Gatačko, Nevesinjsko, Dabarsko and Fatničko karst fields. Continuing with the Upper Horizons scheme is clearly in violation of this point.

What can still be done?

Part of the Upper Horizons scheme is already built – the Fatničko polje-Dabarsko polje and Fatničko polje-Bileća reservoir tunnels and the channel through Fatničko polje. The Dabar plant and the Nevesinjsko polje-Dabar tunnel are under construction.

Longitudinal profile of the Trebišnjica hydropower system – The Lower Horizons scheme was built during Yugoslavia, while Upper Horizons includes everything above the Bileća reservoir (402-973 m.a.s.l.). Graphic: Dabar EIA and CEE Bankwatch Network.

Nevertheless, the whole scheme is far from completed and for some main parts like the Zalomka reservoir the permit granting process has not even started. The Federation of Bosnia and Herzegovina and Croatia need to stand up for the interests of their people and nature threatened by the downstream impacts of the project.

International institutions need to ensure that Bosnia and Herzegovina abides by its obligations under the Bern Convention on Conservation of European Wildlife, Ramsar Convention on Wetlands, Espoo Convention on the Environmental Impact Assessment in a Transboundary Context and the Energy Community Treaty.

European bee-eater breeding at Gatačko polje. Photo: Andrey Ralev

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