Blog entry

Kyrgyzstan’s crackdown on civil society: Are international development banks doing enough?

If approved by the country’s parliament in its upcoming third and final hearing, both draft laws will impose firmer control on the registration and continuing presence of non-governmental organisations and media outlets. This will have implications for the ability of many Kyrgyz organisations to access financial support from international donors, otherwise unavailable locally. The proposed laws, which infringe on the rights of freedom of expression, association and assembly, also impose heavy penalties and sanctions, including prison sentences of up to five years.

Kyrgyz journalists have also come under increasing pressure, reporting persistent persecution and reprisals, with several independent media outlets facing criminal proceedings. In a ruling last year, the Kyrgyz court ordered Radio Azattyk to cease operations. In January 2024, further legal actions were brought against local media outlets along with the arrests of several prominent journalists previously involved in anti-corruption investigations. And in February, the same court issued a ruling to liquidate Kloop Media.

In its pursuit of further economic development, Kyrgyzstan has heavily relied on international investment for many years, receiving millions of euros in financial assistance from major European and Asian development institutions. According to recent reports, last year’s borrowings from international financial institutions rose by USD 258.5 million.

No accountability without civil society

Civil society is crucial for reducing the risks of implementing investment projects. Public engagement ensures transparency and builds trust among communities. The participation of civil society in monitoring these investments helps identify potential issues early on and find alternative solutions. Public engagement minimises conflicts and fosters a sense of ownership among community members. All of this contributes to the overall success and sustainability of investment projects.

At the end of 2023, Bankwatch sent a formal letter to three major development banks active in the country – the World Bank, the European Bank for Reconstruction and Development (EBRD) and the Asian Development Bank (ADB). In a letter to the banks’ management, we raised concerns about the situation unravelling in Kyrgyzstan. We strongly advised the banks to reinforce their joint efforts in signalling to the Kyrgyz government that the proposed laws jeopardise the country’s democratic direction and future economic development. In particular, we urged local authorities to take the following steps:

encourage all development partners and donors to coordinate efforts to signal that the current legislative crackdown on non-governmental organisations runs counter to the spirit and principles of development assistance to the Kyrgyz Republic;
revitalise the existing Development Partners’ Coordination Council (DPCC) by jointly developing and adopting specific proposals and recommendations for the Government of the Kyrgyz Republic, including clear conditions for their implementation;
facilitate greater systematic engagement between international donors, partners and local civil society, such as organising multi-stakeholder platforms involving government, donors, civil society, business and other groups with the aim of encouraging open discussions and inviting feedback on government policies and decisions.
develop and communicate specific positions on the enactment of repressive legislation in bilateral discussions with government, sharing these positions with national civil society and publicising where possible.

Will the banks follow through on their commitments?

In their response to our letter, the World Bank and the EBRD acknowledged that they were monitoring the situation and confirmed their commitments to democratic values. The ADB has yet to formally respond.

Speaking at the launch of the World Bank’s new Country Partnership Framework (CPF) with the Kyrgyz Republic in October 2023, Tatiana Proskuryakova, the World Bank’s Regional Director for Central Asia, announced that the bank’s investments would ‘focus on the key priority sectors of energy, water and agriculture to create a better and more sustainable future for the citizens of the Kyrgyz Republic’.

But as the World Bank’s commitments in Kyrgyzstan reach USD 1.1 billion, public involvement in these investments – a major tool of accountability and due diligence – is at serious risk. It is difficult to imagine how the bank will ensure its objectives bring about a brighter future for the country’s citizens amidst intensifying reprisals against citizens themselves.

These financial institutions should confirm their positions on the potential risks that the present situation poses for international investments in the country. They should convey to the Kyrgyz government the necessity for coordinating investment project objectives with the needs of citizens and insist that meaningful public participation with a strong civil society is crucial for successful project implementation. The World Bank in particular should monitor risks associated with the new proposed laws and introduce effective measures and procedures to assess and mitigate such risks and impacts to ensure project compliance with its Environmental and Social Standards.

Safeguards for green initiatives should not overshadow social risk assessments

Since 1992, the EBRD has invested around EUR 900 million in Kyrgyzstan through projects that support the private sector, the transition to a green economy, and sustainable infrastructure. Like other development banks, the EBRD seems to have steadily increased its focus on green projects in recent years.

It is true that Kyrgyzstan currently faces significant environmental challenges. But the country is also blessed with a large number of non-governmental organisations that are determined to share their knowledge and expertise to help the country resolve these issues. These and other representatives of Kyrgyz civil society, as well as media outlets, are under immediate existential threat as a consequence of the proposed legislative changes and recent surge in persecution.

What’s important to remember is that the EBRD’s political mandate stipulates that its countries of operations should maintain their democratic course. In her response to Bankwatch’s letter, the EBRD’s Regional Director Aytem Rustamova assured us of the EBRD’s intent ‘to address the issues relating to recent political developments in Kyrgyzstan in its new Country Strategy’, which is currently being developed.

Bankwatch will continue to keep a trained eye on these developments. Hopefully, both environmental and social risks will be reflected with equal importance, reinforcing the bank’s commitment to achieving its objectives and helping Kyrgyzstan return to its democratic path.

New study offers reality check on fossil gas in North Macedonia

In 2021, the whole Western Balkans used less than 1 per cent of the fossil gas used by the EU. But North Macedonia has ever-expanding plans to increase its consumption, in households, industry and power generation.

Plans to form a circular main gas pipeline and distribution network have existed for years but are moving very slowly. The Skopje-Tetovo-Gostivar pipeline was reported to be 53 per cent finished in November 2019, but more than four years later, it is nowhere near complete. It is unclear whether the problem is expropriation, landslides or something else.

The government is now focusing on building a gas interconnector from Greece, with an initial capacity of 1.5 billion cubic metres per year. In 2021, North Macedonia’s highest gas-consuming year so far, the country used 426 million nm3, less than a third of the planned pipeline’s capacity. Considering that the existing gas pipeline from Bulgaria will also continue to operate, this raises a considerable risk – either of stranded assets or of locking in increased fossil gas use for decades to come.

The European Investment Bank and Western Balkans Investment Framework approved financing for the project back in 2021, just before Russia’s full-scale invasion of Ukraine once again drove home the folly of relying on imported fossil fuels. Yet not only have neither of them reconsidered the project since then, but the European Bank for Reconstruction and Development is now also considering financing it.

As none of these institutions, nor the North Macedonia government, have published information to the public on the feasibility of the pipeline or expected gas demand projections since the energy crisis (the latest EBRD study was in 2020), Bankwatch member group Eko-svest commissioned a study by the REKK consultancy to look into what has changed and the impact this would have on households.

Higher network costs render conversion unfeasible for households

Not only have gas prices in recent years become highly volatile, but pipeline construction costs have also risen. REKK estimates that an increase of at least 35 per cent is to be expected compared to the government’s plans, leading to a total construction cost of EUR 791 million to 1.086 billion for the gas network, without land use costs and additional compressor investments.

Assuming that system users pay for the development and operation of the network, this would have a major knock-on effect on consumers, with an estimated network tariff of 12-26.6 EUR/MWh. Current gas network tariffs applicable for households make up 6 EUR/MWh, so the tariffs would be 100 to >300 per cent higher than now.

According to current regulations, network costs are under-estimated. But if network users have to pay for the network development – which would be only fair – the end-user price of gas may be 55-79 EUR/MWh depending on the gasification scenario.

Based on a detailed model of household decision-making, REKK’s modelling revealed that if households and other users are to pay the total cost of investment in the network, the network tariffs would be so high that none of the households would switch to gas.

High costs make household conversions unlikely

North Macedonia’s gasification plans assume high connection rates of households to gas For example the EBRD’s 2020 study assumed rates of 55-105 per cent (105 per cent meaning all existing buildings plus some not yet built), depending on the municipality. But this was based on the experience from Thessaloniki in Greece, not on North Macedonia’s own experience, and it was also noted that many of these connections were enabled by waiving the connection fees for households, though the costs were subsequently recovered via system use tariffs.

In North Macedonia, on the other hand, by 2022, it had taken more than 12 years to connect only 503 customers directly to the gas distribution network in Skopje, Kumanovo and Strumica. This is mainly because people find it expensive.

REKK also confirmed that the heating equipment and installation may be prohibitively high for many households in North Macedonia, and considered a range of conversion scenarios based on the income levels of people who would be able to switch. The result had a significant impact on demand, so is important to predict accurately: if 20 per cent of households switched to gas, demand would reach at most 0.5 TWh/year at low relative gas prices (so even lower at high prices), while in the unlikely event that 80 per cent switched, it would reach 2 TWh/year.

Although REKK noted that this can be influenced to some extent by subsidies, this is in our view a very poor use of public money. If incentives are to be provided to households, these must be for non-fossil technologies such as heat pumps and solar thermal.

Gas costs remain unpredictable but have a strong impact

REKK found that the relative prices of fuels were crucial for the outcome of the modelling. The price of gas skyrocketed in the energy crisis, but the price of regulated electricity for households in North Macedonia did not follow. So only a low cost of gas compared to electricity and/or firewood would drive households to switch towards gas.

According to REKK’s research the cost of gas in Bulgaria, Greece and North Macedonia closely follows the Dutch TTF wholesale price, which is predominantly determined by the global LNG market, followed by the influence of European demand. Although this is vulnerable to large fluctuations, previous research by Eko-svest suggests that potential household gas consumers in North Macedonia may not be aware of this and believe fossil gas is quite cheap. Still, due to the connection costs cited above, this would not automatically result in a large number of households connecting to the network.

All of this casts major doubts on claims by the EBRD and others that gasification will significantly decrease air pollution from household heating.

Wiser uses of public money

REKK also looked at what else could be done with the money expected to be spent on the gas network. It found that, with a scheme covering 90 per cent of costs and leaving 10 per cent to households, 49 per cent of detached and semi-detached houses could be provided with 3 kilowatt solar photovoltaic installations, 40 per cent with air-to-air heat-pumps or 15 per cent could have their building envelope insulated.

With such urgently needed options on the table, it is more than high time for North Macedonia to reconsider its pursuit of fossil gas and upgrade its energy plans to be fit for the coming decades. And if the European Commission and European public banks want to do good for the people of the region, they must support this turnaround immediately.

Why Samarkand’s Green City Action Plan alone is not enough

In November 2023, the second in a series of stakeholder engagement workshops was held in Samarkand as part of preparations for the GCAP. The two main questions on the agenda: How do people see Samarkand in 20 years? And what goals should the plan achieve? The workshop saw EBRD representatives, government departments, universities, civil society organisations and the media come together to discuss and exchange their views on the project.

Samarkand has the chance to lead by example

In his opening remarks, Nozir Ibragimov, assistant to Samarkand’s governor on local industrial development, emphasised Samarkand’s international importance. He referred to the city’s rapid development as a ‘tourist gateway to the new Uzbekistan’, which has recently hosted global leaders on prominent state visits.

‘Samarkand serves as an important bridge for world civilizations. The authorities of this region and, of course, its residents are dedicated to ensuring that the city, with its rich ancient history, is a liveable city that attracts investment projects in order to develop its social, transport and utility infrastructure and build a sustainable economy,’ said Ibragimov.

According to Hiroyuki Ito, co-ordinator of the EBRD’s Green Cities Action Plan, these workshops help to translate the results of monitoring at the local level into the goals of the Action Plan. He stressed the importance of involving all interested parties to help them claim ownership of the plan:

‘We want to see Samarkand become a leading city in the field of environmental protection while prioritising socio-economic inclusion as part of its development, thus serving us a successful model for other cities in the country.’

Samarkand might be the first EBRD Green City in Uzbekistan, but there are more than 50 cities of its kind around the world. Ever since the Green Cities project was first launched in 2016, several GCAPs have been implemented. However, their execution in cities such as Yerevan and Tbilisi has left a lot to be desired. Samarkand should take note.

Human rights and the environment top the list

Participants at the workshop shared their visions for the city’s future and listed priority issues that the Green City Action Plan should address. For example, activists from non-governmental organisations Ezgulik, Zarafshan, Hayot and Save Samarkand stressed the need to uphold human rights and laws, promote sustainable development, preserve the city’s historical heritage, create conditions for a green and liveable environment, and improve the well-being of its residents.

After months in the works, a group of consultants led by Aecom and IKS Consulting recently presented their technical report to the local authorities. The report, which was discussed at the workshop, contains data on seven sectors and 110 indicators; for instance, PM10 particles are proposed as a key indicator of air quality. The authors expressed their concern that decisions made in relation to the GCAP and its targets for each sector are largely dependent on the accuracy of the data available, which can often prove challenging to gather.

Anvar Nasritdinov, operational manager of Samarkand’s GCAP, explains the process: ‘To obtain data on each indicator, we contact the relevant authorities such as the Hydrometeorological Service of Uzbekistan. We compare the indicators with publicly available data from open sources. If they match or are close, we add them to our database. But when discrepancies arise, we ask for an explanation and then seek out more reliable data.’

The GCAP needs to be part of an integrated approach

According to Nasritdinov, the plan will be the property and responsibility of either the city or the Samarkand region: ‘The document will be adopted by the authorities tasked with implementing it. This means it won’t become just another report that gets shelved. In our experience, in all cities where we develop the GCAP, it’s accepted as an official binding document.’ However, Samarkand residents and activists warned that this cannot be taken for granted.

According to the EBRD Green Cities website, the development of Samarkand’s GCAP will contribute to ‘Uzbekistan’s goal of carbon neutrality by 2050’. However, it’s hard to reconcile the financing of the GCAP’s environmental ambitions with the fact that each winter almost all of Samarkand’s educational and healthcare institutions, including hospitals, schools and preschools, still run on coal heating.

A long-standing problem of the ancient city is the failure to adopt a general urban plan to guide its strategic development, a topic that has been regularly discussed in the media since 2018. Yet, Uzbekistan’s Cabinet of Ministers has still not given its approval.

Without a general urban plan in place that lays out the city’s long-term development objectives, the opportunities for Samarkand’s GCAP to falter increase. That’s why having a general urban plan in place is important because it ensures the integration of all urban systems. Samarkand’s GCAP has no such plan to consult. Inevitably, this casts doubt on whether the timelines and geographical contexts for the projects proposed are viable.

Saša Jovanovic, Cities campaign leader at Bankwatch, urges caution:

‘Unfortunately, in many cities today, some of which are also EBRD Green Cities, we see a situation where new general urban plans are being delayed for long periods of time. This results in development running ahead of the strategic framework, which often favours private rather than public interests.’

Without a holistic, strategic planning document that aligns with Uzbekistan’s planning and development laws, there’s a real risk that the GCAP will end up as a vague set of guidelines that never gets implemented.

Now that these concerns have been brought to the attention of the EBRD’s representatives, it’s up to them to make sure Samarkand’s GCAP becomes a truly integrated document that brings about real change.

Bitola’s heating future: a pipeline to nowhere or solar solutions?

Both district heating and individual heating systems in the Western Balkans heavily rely on burning fossil fuels and using wood as a heating source. 97 per cent of the district heating systems in the region are based on fossil fuels, and only 3 per cent on renewable energy sources. They are mostly quite old and operate with high network losses which makes them inefficient, while significantly contributing to air pollution and greenhouse gas emissions.

In North Macedonia, currently Skopje is the only city with a district heating system, and that one is operating on fossil gas. The southern city of Bitola unfortunately aspires to follow in its footsteps to use fossil fuels for heating, using the coal-fired power plant for now, with a prospect of replacing it with gas at some point in the future.

The infamous 40-year-old idea for a district heating system in Bitola

At the beginning of November 2023, representatives of the Government, the state-owned ESM utility and the Toplifikacija Bitola district heating company held a press conference to mark the completion of the construction works on the pipeline connecting the largest thermal power plant in North Macedonia, REK Bitola, to the city. The introduction of a central district heating system for the city of Bitola by using thermal energy from REK Bitola is an idea that has been around for four decades, since REK Bitola was built.

The first phase of the project to bring the pipeline to the city was realized with a EUR 40 million loan from Germany’s KFW Bank, signed back in 2015, as well as an additional EUR 7 million of ESM’s own funds. It was also part of the Single Project List 2022 of North Macedonia’s ‘strategic’ investments.

The construction of the pipeline, as the Director of Toplifikacija, Bitola Kozarov, recently claimed in the media, ‘will continue along the streets of Bitola and in the next 18 months, 10.5 kilometres of pipeline is planned to be built’. The district heating project is anticipated to provide thermal energy of 100 megawatts (MW), first connecting 35 state-owned facilities detected as the largest polluters using solid fuels, such as municipal buildings, schools, kindergartens etc. It also includes the old heating network that used to be connected to eight heavy oil boiler rooms, and used to supply about 3,000 apartments in the city. The system is planned to be put into operation during the heating season 2025/2026 and in parallel the pipeline is to be extended to heat residential buildings in Bitola as well.

A slight catch – what happens when the coal plant closes?

North Macedonia’s National Energy and Climate Plan (NECP) foresees a coal phase-out in 2027, with the possibility of a delay until the end of 2029. That’s six years from now. Quite why ESM decided to build a district heating system based on a coal plant that will close so soon is anyone’s guess, as is why the government and KfW decided to support it.

One reason might be ESM’s plans for a gas power plant at the site. Building a new gas plant is a costly idea that will only create dependence on another fossil fuel, while renewable energy sources are becoming much more affordable and accessible. And it currently appears to be at a very early stage.

North Macedonia’s energy strategy says between 0 MW and 245 MW of new gas plants will be built in the country, depending on the scenario, but does not specify the location.

But the draft energy strategy implementation programme – which is supposed to implement the energy strategy, not re-write it, and which was never officially adopted – says the country should build 450 MW of new gas power plants in any case. It mentions plants in both Negotino and Bitola. A few months before the draft programme was published, plans for an 800 MW plant in Bitola were also announced in the media, but don’t appear in any strategic documents.

Although the gas plans for Bitola are often presented as a ‘conversion’ of the existing coal plant, this is misleading. It would entail most, if not all, of the important parts of the plant being replaced by completely new facilities.

As anticipated by ESM, unit 1 will be shut down in 2026 and meanwhile the gas power plant will be built, independently from the operation of REK Bitola, for production of both electricity and heating. However, this seems optimistic to say the least.

In 2021, media reported on the preparation of a feasibility study for a cogeneration gas power plant with a capacity of 250 MW at Bitola. Consequently, a public procurement process took place for a feasibility study for Bitola and ‘Energetika’ Skopje, published by ESM on 29 July 2021. However, a few months later it was annulled due to unforeseen changes in the budget of the contracting authority.

To be, or not to be?

The most recent claims by the Government confirm their plans for a new gas cogeneration power plant at Bitola, but this time, it would be able to operate on hydrogen in future, too – opening a whole new range of problems.

The government’s revised Single Project List 2022 even admits that construction of a new 250 MW cogeneration gas power plant in Bitola is indeed a non-mature project. So far it seems to have no feasibility study, no environmental impact assessment, no gas pipeline actually reaching the site, and no financing – not very promising for a project that is supposed to supply Bitola with heat starting in a little over two years’ time.

If the coal plant really does close, the pipeline will simply end up leading nowhere.

New fossil fuel-based infrastructure is a thing of the past

Yes, indeed, investments in renewable energy sources will bring the country closer to its decarbonization goals, but investments in capacities and infrastructure that push further dependence on another fossil fuel – gas – certainly will not.

Giving up on old ideas that are not relevant and feasible today is necessary for the country to move towards investments in renewable energy sources, for both heating and electricity production, which will bring greater security and independence of the energy sector.

Fresh proposals for Bitola

For instance, an Analysis of alternatives to coal-based central heating in the Bitola Region developed by Vanja Dzinlev, Energy Researcher at the Federal Institute of Technology in Zurich, examines the current heating situation in the Bitola Region, covering the municipalities of Bitola, Mogila and Novaci. It offers alternative solutions using decentralized systems. The findings of the analysis suggest that the most feasible option for heating would be photovoltaic systems coupled with inverter air conditioners for both apartments and houses. The options provided in the study are both economically and environmentally sustainable alternatives for individual heating.

Additionally, it offers specific recommendations for multi-apartment buildings and municipal institutions to form so-called energy communities to lower their heating and energy expenses, and in future, even generate some income.

The analysis was recently presented to university students at the Faculty of Information and Communication Technologies in Bitola, as well as at the IT Crowd co-working space with young professionals from the IT industry. Students and young IT professionals can play a key role in the energy transformation of the Bitola region. Renewable technologies in the energy sector, especially those related to the development of community energy, are inevitably connected to the development of new technological and software solutions for energy and heat production.

In addition, other district heating systems incorporating sustainable renewables can be found in different countries around Europe, such as Denmark, Sweden, Hungary etc. Such examples are becoming reality in the Western Balkans region as well, with the approval of the district heating project in Prishtina worth EUR 23.2 million, co-funded by EU as part of the Western Balkans Invest Framework (WBIF), with KfW as the lead financial partner. 30 MW of solar capacity including storage is planned, with up to 38,000 residents who will directly benefit from being connected to Pristina’s district heating system.

Investments must be directed towards clean heating solutions based on sustainable renewables

Continuing to pour money into fossil fuel-based power and heating infrastructure directly contradicts the green energy transformation and decarbonization goals that the leaders of the Western Balkan countries committed to achieve by 2050 by signing the Sofia Declaration. Thus, both governments and international financial institutions must turn their full focus and investments towards clean and modern heating solutions offering greater sustainability and security for the region. Such action will unlock the potential for new types of jobs and businesses related to renewables and smart systems, as well as for young people to become an active part of the green transformation by working on modern heating solutions.

Why the Bulgaria-Turkey gas deal could be a Russian Trojan horse

Bulgaria used to be heavily dependent on Russian fossil gas. In the beginning of 2022, before the Putin regime’s invasion of Ukraine, Russia supplied around 90% of the gas consumed in Bulgaria. After in April 2022 Bulgaria became one of the first countries to be cut off by Gazprom, the Bulgarian government, led by then Prime Minister Kiril Petkov, took a hard stance against paying for Russian gas in rubbles and announced that other sources of gas will be sought.

In the beginning of 2023, it emerged that the Bulgarian caretaker government had signed a deal with BOTAŞ, Turkey’s state-owned gas monopoly. President Rumen Radev announced the ‘historical agreement’, but no details of the deal were made public. All that was known, was that Bulgaria will have access to Turkey’s gas infrastructure and more importantly, to liquified gas (LNG) terminals – indeed, a first, as Turkey had refused to provide such access so far. In the beginning of the year, when the deal was first announced, the only clear parameters were that Bulgaria will receive 1.5 billion cubic meters (bcm) of gas a year via Turkey, and the gas will be transported via the old Trans-Balkan pipeline particularly through long-term contracts,.

As details about the deal started surfacing in recent months, it became increasingly clear that the deal is benefiting BOTAŞ a lot more than Bulgartransgaz, the Bulgarian gas transmission operator. Bulgarian news outlet Capital published an article outlining these details which they obtained through a leaked private and confidential government document. According to this article, Bulgargaz doesn’t actually get access to the Turkish transmission network, but only the right to unload tankers at a specific terminal and to receive the same amount of gas at its border. At the same time, BOTAŞ is given access to the Bulgarian gas transmission network and can even supply end consumers. The Turkish energy giant will be able to sell gas on the Bulgarian market to third parties without coordination with Bulgargaz, and to deliver to other states without specifying the origin of the gas in question.

Finally, the reserved capacity of the deal is 1.85 bcm rather than the announced 1.5 bcm; considering the low gas consumption in Bulgaria (2.7. bcm), any increase in the gas imports may risk a push towards consuming more. If Bulgarian policymakers are serious about their commitments to transition the country’s energy away from fossil fuels, rather than looking for additional ways to increase gas imports particularly through long-term contracts, the more logical trajectory remains to reduce consumption.

What is of particular importance about this deal though is the elephant in the room – there is no specific mention about where the gas will be coming from.

In December 2022, Russian news agencies circulated that Presidents Vladimir Putin and Recep Tayip Erdogan discussed the possibility to create a ‘regional gas hub’ in Turkey with Russian gas. Russia’s economic interest in this hub is obvious, as at that point – in the end of 2022 and beginning of 2023 when the deal was signed – Russian gas exports to Europe have nearly been eliminated since the beginning of the war in Ukraine. Putin’s Russia has an interest in regaining its strong position in Europe, by using another route – via Turkey. Commenting on the hub, Putin says can it be used as a “regional supply hub for Russian gas exports to European countries” given Europe’s reluctance to buy gas directly from Gazprom.

It is unlikely that all of these factors are a coincidence – the talks between Turkey and Russia to create a ‘hub’ for Russian gas, the ambitions of both countries to dominate the energy sector, the fact that Turkey has never been really open to giving access to its LNG terminals before, the fact that the deal was made by the interim caretaker government – the one that was willing to resume talks with Gazprom in the summer of 2022 in order to have access to cheaper Russian gas.

Even Turkey’s energy minister, Fatih Dönmez, described the deal with Bulgaria as a “stepping stone” in establishing the new hub. While the Bulgarian government stated that Bulgaria will have access to all gas ‘from all global producers’ through this deal, there is hardly any way to know the origin of the gas; it is highly likely that Russian gas would make its way into Bulgaria’s gas grid, considering that around half of the gas Turkey imports is Russian.

In general, this potential turn towards Moscow is inexplicable against the backdrop of the war in Ukraine and the sudden and unlawful disruption of supplies by Russia. The deal with Turkey still carries geopolitical risks as well the risk of working with unreliable partners, which is a concern that should be especially valid with regards to long-term contracts, as this one.

The European Commission itself has concerns about this deal and its transparency and in October 2023 even opened an investigation. Putting aside the question of whether the caretaker government even a right had to make such long-term fossil fuel deals, the more important thing to consider is that long-term contracts with such high economic and political risks are doing more to hinder Bulgaria’s energy security than to promote it.

Crunch time for European development bank’s fossil fuel spending

For this year’s UN climate summit, the EU has chosen to champion the call for phasing out fossil fuel subsidies. Yet, on Thursday, December 14, barely two days after COP28 is scheduled to conclude, the board of directors of the European Bank for Reconstruction and Development (EBRD), where EU governments and institutions collectively own over half the shares, could be greenlighting a policy that allows public money to continue enabling fossil gas projects.

The board will be deciding on a new energy lending strategy to guide the Bank’s investments and policy initiatives for the next five years. But the draft strategy published for consultation in July 2023, shows that the Bank still refuses to rule out financing fossil gas, even after fossil energy companies have posted record profits.

The draft leaves the door open for midstream and downstream gas investments, i.e. gas pipelines and power plants, subject to a long list of conditions. The sheer number of conditions may look impressive at first glance, but some are simply requirements of the EBRD’s environmental and social standards that anyway apply to any project supported by the Bank, while others are vague and open for interpretation.

The EBRD has been boasting that since January 2023 it is in ‘full alignment’ with the Paris Agreement. Yet, instead of finally ending all financial support to fossil fuels, the draft strategy’s complex and vague criteria only expose the poor reasoning behind it.

The case against new fossil fuel infrastructure is clear. The scientific consensus indicates that there is no room for new gas if we aim to stay below the 1.5-degree Celsius target set in the Paris Agreement.

In recent years, the EBRD has increased its renewables investments and decreased its support for fossil fuels, but this is no longer enough. Since its exit from coal in 2018, the EBRD has continued to finance carbon-intensive fossil fuel projects.

Despite its mission to promote environmentally sound and sustainable development, from 2018 to 2021, the Bank invested EUR 2.9 billion in oil and gas, averaging EUR 741 million per year, compared to EUR 5.6 billion invested in clean energy during the same period—an average of EUR 1.4 billion per year. Some of the projects funded since 2018 include a liquified gas terminal in Cyprus, facing constant delays in its construction, and the 1500 MW Syrdarya gas-fired power plant in Uzbekistan.

Currently, the Bank is mulling support for a gas pipeline between Greece and North Macedonia, with other projects also under consideration. The pipeline’s alleged ‘Paris alignment’ rests on the idea that it will be ‘hydrogen-ready,’ based on a technically and economically unproven theory that renewables-based hydrogen will eventually become an affordable fuel to replace fossil gas.

Not counting the greenhouse gas emissions from burning the gas transported by the pipeline in the project’s environmental assessment may have helped to support this bizarre conclusion as well. Hiding behind such methodological sleights of hand also ignores the fact that solar and wind power are already cheaper and readily available.

The EBRD’s lack of climate leadership sends the wrong signal to the Bank’s countries of operation about how the energy transition should look.

As one of Europe’s most influential state-owned investors in the energy industry the EBRD holds significant sway in development of its countries of operation. Its investments span central and eastern Europe, the Caucasus and central Asia, Turkey and, more recently, parts of north Africa and the Middle East. Many of these countries are heavily reliant on fossil fuels for energy and are among the most vulnerable due to climate change.

The EBRD has an opportunity and an obligation to speed up a just energy transition that is genuinely sustainable. Investments in power grids and heating technologies – from heat pumps to geothermal energy to solar thermal – are desperately needed throughout the EBRD’s countries of operation and are particularly crucial if the Bank is to address deepening energy poverty.

The EBRD must prioritise energy efficiency, both on the policy and project level. Investing in insulation and retrofitting residential buildings — thus significantly cutting energy consumption and energy bills — instead of channelling money to fossil fuels, should be a no-brainer.

Continued EBRD financing of fossil fuels at this stage of the climate emergency is indefensible. 2023 has so far shattered all climate records, bringing increased storms, floods, droughts and wildfires in Libya, Canada, South America, the Bay of Bengal, Greece, the Horn of Africa and beyond.

Fossil fuel subsidies are still a massive elephant in the room that needs to be tackled yesterday. The EBRD’s next energy strategy is a chance for the Bank to join the right side of history. When they vote on the new energy strategy, EBRD board directors representing EU governments must heed the EU’s call to halt fossil fuel subsidies and ensure the Bank is finally part of the climate solution, not the problem.

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