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Azerbaijan suspended from the EITI – a Bankwatch and Counter Balance statement

A decision to suspend Azerbaijan’s membership in the Extractive Industries Transparency Initiative (EITI) adopted yesterday (Mar 9) is the latest reminder for international financial institutes to avoid supporting the Southern Gas Corridor (SGC) project.

In 2015, the EITI board downgraded Azerbaijan’s membership status due to its relentless crackdown on civil society, political opponents and journalists in the country, and in its October 2016 meeting board members decided to give Baku another chance to comply with international standards.

Yet, the Azerbaijani authoritarian regime that’s running a country completely dependent on the extraction and export of oil and gas, has so far proven that the concepts of democracy and human rights are simply foreign to it.

In the latest case, on Friday (March 3), Mehman Huseynov, a prominent blogger and chairperson of the Institute for Reporters’ Freedom and Safety, has been sentenced for two years in jail on defamation charges. Civil society figures believe this sentencing might be linked, among others, to the organisation’s work on the EITI.

Last month, an international group of 22 civil society organisations including Human Rights Watch, Reporters Without Borders and Bankwatch, has written to EITI board members, urging them to suspend Azerbaijan’s membership in the EITI.

Azerbaijan’s membership status in the international body is considered key to the Southern Gas Corridor project that is intended to bring 16 billion cubic meters of gas from Azerbaijan to Turkey and the EU every year.

The European Investment Bank (EIB), the EU’s house bank, is currently mulling a record EUR 2 billion loan to the western section of the SGC, the Trans Adriatic Pipeline (TAP), as well as a EUR 1 billion loan to the central section of the project, the Trans Anatolian Pipeline (TANAP).

The European Bank for Reconstruction and Development (EBRD) – which has already helped finance the Shah Deniz II project, the SGC’s source gas field – has also stated it is considering a loan of up to EUR 1.5 billion for TAP, and possibly another for the TANAP project.
Both institutions have committed to EITI compliance in their energy policies and are official partner organisations of the EITI.

“If there is no progress [on the implementation of EITI standards in Azerbaijan] it will be quite difficult to justify a large amount of financing,” the EBRD’s now former Managing Director for Energy and Natural Resources, Riccardo Puliti, told Anadolou Agency in a September 2016 interview. “It is important for both TAP and TANAP, but it is particularly important for TANAP, because [Azerbaijani state owned energy company] SOCAR is so prominent in TANAP,” he added.

In an open letter published in January, jailed Azerbaijani opposition politician Ilgar Mammadov warned European governments, as well as potential financiers of the SGC, about engagement with Azerbaijan’s rulers.

Specifically, Mammadov, who had worked closely with the EITI as a member of the Natural Resource Governance Institute until his arrest in March 2013, clearly warned that at this week’s board meeting, “those driven by pressing commodity and geopolitical interests … may ask the international financial institutions to disconnect the SGC loans from Azerbaijan’s compliance with the EITI.”

Anna Roggenbuck, EIB Policy Officer at CEE Bankwatch Network, says:

“The EITI board’s decision is but the latest confirmation that Azerbaijani fossil fuels export projects like the SGC only fuel the autocratic regime in Baku as it intensifies its repression of civil society and media in the country. The EIB and the EBRD should recall their commitments to human rights and take the EITI board’s decision as their cue to disengage from the project.”

Xavier Sol, Director of Counter Balance, says:

“EU leaders, who have long cited democracy and human rights as the cornerstones of modern day Europe, should recognize the EITI board’s decision for the stark warning sign it is. Knowing that any revenues from the Southern Gas Corridor project will only serve to entrench Azerbaijani President Ilham Aliyev’s regime, now is the time for Europe to think whether it is willing to put its highest energy bets on such partner.”

For more information please contact:

Anna Roggenbuck
Policy Officer, CEE Bankwatch Network
annar@bankwatch.org
+48 509970424
@RoggenbuckA

Xavier Sol
Director, Counter Balance
xavier.sol@counter-balance.org
+32 2 893 0861
@xavier_sol

EU watchdog investigating European Investment Bank for maladministration

The European Investment Bank (EIB) is being investigated for maladministration, after the European Ombudsman sent a formal letter opening the case this week (27 February 2017).

The investigation comes after ClientEarth, CEE Bankwatch Network and Counter Balance highlighted the lack of transparency at the bank, and its attempts to block scrutiny. This complaint, submitted in September 2016, was accepted by the Ombudsman, which announced it would investigate the case and ask the EIB to explain its transparency policy and reaction to the NGOs’ challenge.

ClientEarth, CEE Bankwatch Network and Counter Balance complained because the EIB – which invests around €80 billion in projects annually – blocked a challenge to its new transparency policy from the three NGOs.

The EIB has a huge impact on environmental decisions around the world, from whether a dam will be built on vulnerable ecosystems to whether funding will go to renewables or fossil fuels.

Its transparency policy keeps all information about investigations – including of corruption and fraud – confidential. It also creates illegal exceptions to people’s right to scrutinise the bank. Given the amount of money at stake, this raises serious concerns about the accountability of the bank.

ClientEarth lawyer Anaïs Berthier said: “If the EIB stops public scrutiny of its actions using its so-called transparency policy – and blocks challenges to that policy – it is failing doubly in its duties. The complaint mechanism is there to make sure the bank – and the projects it funds – are accountable for every Euro of public money spent, so it is essential that people can use it.”

Director of Counter Balance Xavier Sol said: “As an NGO coalition promoting a high level of transparency for the EU public banks, we welcome the Ombudsman’s decision to open an investigation. We hope this will shed light on the culture of secrecy still prevailing at the EIB and on the need for the bank to raise the bar on transparency. Indeed it is key for European taxpayers to know that European funds are spent in the public interest.”

Anna Roggenbuck, Policy officer at CEE Bankwatch Network said: “The European Ombudsman opened its investigation after our initial complaint was rejected by the Complaints Mechanism of the EIB on inadmissibility grounds. The Ombudsman decision is a clear signal the claims were admissible. We are glad she will investigate the way the complaint office took its decision a few months after it first confirmed admissibility for the complaint, and whether it was caused by management intervention.”

Now, the Ombudsman will ask the European Investment Bank to respond to the complaints. If she finds the bank guilty of maladministration, she will make recommendations to improve its transparency. This would shed light on the bank’s practices and exert significant pressure to improve.

Read ClientEarth’s Complaint to the European Investment Bank about its Complaint Mechanism alleging noncompliance of the European Investment Bank’s Transparency Policy with EU and international law on access to information

Read ClientEarth’s complaint to the European Ombudsman on the European Investment Bank’s Transparency Policy

Read the letter from European Obmudsman responding to ClientEarth’s complaint about the European Investment Bank

Bulgaria risks unnecessary breach of nature laws, threatening EUR 800 million of EU funding

The building of an EU-funded motorway linking Bulgaria and Greece, through Kresna Gorge – a stunning wildlife haven protected by EU nature laws – would be a disaster for nature and local people, and could result in up to €781 million being returned to the European Commission, claim Bulgarian and international NGO experts.

If the project is given the go-ahead in April, it would also provide the first test of EU Environment Commissioner Karmenu Vella’s recent pledge to better implement EU nature laws.

Good alternatives exist to complete the Sofia-Thessaloniki highway outside the protected gorge. At least one route – the “full eastern” option – complies with EU legislation, according to NGO experts. Any route inside the gorge would break EU nature laws, as damage to the gorge would only be permitted if no alternatives exist.

The European Commission determined in 2008 that routing motorway traffic through the gorge would be illegal. [1] The “full eastern” option would also prevent losses of endangered species of European importance, and foster local economic development of agriculture, wines and tourism. [2]

The gorge is home to more than 3,500 species of flora and fauna, including many snakes, turtles and bats found nowhere else in Europe. There are more species of butterfly in one square kilometre of Kresna Gorge than in all of the UK.

Construction of the motorway must be completed by 2023 and in full compliance with EU nature laws. If either of these conditions are breached, the Bulgarian government risks having to repay up to €781 million of grants to the European Commission.

Robbie Blake, nature campaigner for Friends of the Earth Europe said: “I visited Kresna Gorge and saw with my own eyes how this stunning natural jewel is a vital hotspot for Bulgarian and European nature. No motorway could be built here without completely destroying nature in the gorge and the local community.

If this project is railroaded through, all eyes will be on EU Environment chief Karmenu Vella – will he stick by his recent decision to better enforce and implement vital nature protection laws?“

Fidanka Bacheva-McGrath, international campaign coordinator of CEE Bankwatch Network said: “If the Bulgarian Government tries to route the motorway through the gorge, this would break our obligations under EU law, would result in legal challenges, and cause delays that risk Bulgarian taxpayers having to pay back the entire grant of nearly €800 million. Building through the Gorge would be a disaster for Bulgaria, it would lead to a whole new fiasco.”

Danniel Popov, Bulgaria national coordinator at CEE Bankwatch Network said: “There’s absolutely no need to carve the motorway through the Gorge, as a good bypass route to the east exists, which would save the wildlife haven, be much less environmentally damaging, would avoid so many road deaths in Kresna, and would be better for local people and sustainable local development. The authorities should move forward with this plan, and fast, as it’s the only option to get the job done in time and legally.”

What’s next?

The Bulgarian Government is currently carrying out an Environmental Impact Assessment to decide on the most appropriate route, with the results expected by the end of April. The local community and the wider Bulgarian public then will be able to express their views on this, and it will have to be approved by the EU Commission. The NGOs have met with the Kresna municipatily, the Bulgarian Government and Road Agency to offer assistance in creating a high quality assessment fit with EU law, so that the Struma motorway bypassing Kresna Gorge can be developed before 2023.

Notes:

[1] In 2008, the Environmental Impact Assessment for the Struma Motorway project, endorsed by the European Commission, deemed that any motorway construction in the gorge and the option to maintain the current road for international traffic (the so-called zero option) is not in compliance with the EU Habitats Directive because of the detrimental and unavoidable impacts on the protected biodiversity. The legally agreed conclusion was to route the motorway through the tunnel.

[2] Table comparing the differences between the “Semi Eastern” route half through Kresna Gorge and the “Full Eastern” motorway’s route fully bypassing the Gorge to the east.

 

Destructive hydropower project in Macedonia loses its only source of funding


Skopje, Prague – After a five years long campaign, Eko-svest, Front 21/42 and CEE Bankwatch Network welcome the cancellation [1] of a EUR 65 million loan from the European Bank for Reconstruction and Development (EBRD) intended for the Boškov Most hydropower project in Macedonia. As a result this controversial project is now highly unlikely to be realised.

In a statement posted last week on the EBRD’s website, the bank said that the loan agreement had been valid for five years but “conditions for disbursement were not met.”

Ever since plans for the Boškov Most hydropower project emerged, Macedonian and international environmental groups have repeatedly warned [2][3] of the detrimental ramifications this 68 MW hydropower dam inside the Mavrovo National Park could have for the fragile ecosystem and unique wildlife.

In particular, the project could severely threaten the already critically endangered Balkan lynx as well as several aquatic ecosystems and their species. In December 2015, the Standing Committee of the Bern Convention, the European wildlife treaty, called on the Macedonian government to suspend its plans [4] for establishing the Boškov Most and Lukovo Pole hydropower projects until the potential cumulative environmental impacts of these projects, as well as 19 other smaller hydropower projects across the Mavrovo National Park are fully assessed. Shortly after this resolution was issued, the World Bank decided to withdraw its support to the Lukovo Pole project.

Ana Colović Lesoska, Director of the Macedonian center for environmental research and information Eko-svest, said: “We expected the EBRD to have withdrawn from the project much earlier, even in 2013, when the independent expert report [5] came out as a result of our complaint to the bank’s Project Complaint Mechanism [6], stating that the EBRD had breached its own procedures when approving the project in 2011.”

Aleksandra Bujaroska from the Macedonian environmental lawyer association Front 21/42 said: “We regret that the Macedonian government haven’t properly implemented Strategic Environmental Assessment for the planned hydropower projects and wasted so many years and so much public money trying to push through a project which was never environmentally sound. Boškov Most raised environmental controversies from the beginning, having in mind that 80% of the project area is located in Mavrovo National park. In 2015 the Macedonia Administrative Court decision stated that the Macedonian Ministry of Environment had granted the license back in 2012 on the basis of an inadequate and incomplete environmental impact assessment and has therefore violated existing national environmental law.”

Fidanka McGrath, Bankwatch EBRD co-ordinator, said: “It was about time. This is now the second large hydropower project in the Balkans from which the EBRD had to withdraw, after the Ombla project in Croatia in 2013. We hope that this cancellation sends a strong signal to the bank to back off from protected areas and to reconsider the sustainability of large dam projects that cause irreversible biodiversity loss and the destruction of unique habitats.”

For more information please contact:

Ana Colovic Lesoska
Director, Eko-svest
ana@bankwatch.org
+389 72 726104

Aleksandra Bujaroska
Environmental lawyer
Front 21/42
aleksandra.bujaroska@front.org.mk
+389 78433713

Notes

[1] http://www.ebrd.com/work-with-us/projects/psd/boskov-most-hydro-power-project.html

[2] https://bankwatch.org/bwmail/62/pressure-mounts-ebrd-quit-macedonian-dam-folly

[3] https://bankwatch.org/publications/boskov-most-hydropower-plant-macedonia

[4] https://bankwatch.org/news-media/for-journalists/press-releases/macedonia-urged-suspend-controversial-hydropower-project

[5] http://www.ebrd.com/downloads/integrity/Boskov_CRR.pdf

[6] http://www.ebrd.com/downloads/integrity/Boskov_complaint_7.11.2011.pdf

World Bank’s controversial TANAP loan is bad news for human rights and climate action

Yesterday, the World Bank’s board of directors approved two USD 400 million loans, to Azerbaijan and to Turkey, to develop the Trans Anatolian Pipeline (TANAP), the centrepiece of the Southern Gas Corridor project. CEE Bankwatch Network and Counter Balance are deeply concerned that the decision to channel such large amounts of money to Europe’s biggest fossil fuels project could exacerbate the already dismal human rights situation in both Azerbaijan and Turkey, and undermine the global efforts to tackle the climate crisis.

Four multilateral development banks are considering finance for the Southern Gas Corridor project, which could get as much as USD 9.4 billion in public money. The World Bank’s loans approved yesterday are the first to support one of the project’s three pipelines.

“The World Bank has already postponed the vote on the loan at least once. But yesterday’s decision comes at a time when Turkey’s ongoing martial law means intensifying crackdown on journalists and civil society, thus preventing vital public scrutiny of the largest infrastructure project in the country,” says Anna Roggenbuck, Bankwatch’s EIB Policy Officer.

Ahead of the vote on the loan, Bankwatch, Counter Balance and 37 other international civil society groups sent an urgent letter to the World Bank’s directors, warning the project is in breach of the bank’s own policies.

The TANAP consortium has already received nearly 600 complaints from communities affected by the project. But the wide gaps between Turkish legislation and the World Bank’s standards on resettlement, as detailed in the letter, raise serious concerns about the ability of such loans to help mitigate the impacts on people living along the pipeline route.

In addition, a report released by Bankwatch last week exposed the trail of corruption behind 15 of the companies hired to build the Southern Gas Corridor pipelines. In Turkey, all subcontractors hired by the state-owned energy firm Botas for the project have close ties to Erdogan’s AK Party. According to the report, top executives in two of these companies have been convicted in two major corruption scandals. The Turkish Supreme Court overturned the rulings, clearing most defendants, but much of the evidence remains in publicly accessible.

“It is hard to see how the World Bank’s support to this project will benefit in any way citizens in Azerbaijan and Turkey. Such financing is at odds with any development logic since it mainly reinforces the reliance of both countries on revenues linked to fossil fuels for the autocratic regimes in place,” says Xavier Sol, Director of Counter Balance.

“European public banks should not take the approval of the World Bank’s loans as a green light for their own financing. For instance, the European Investment Bank, which now considers a EUR 1 billion loan to TANAP and another EUR 2 billion loan to the Trans Adriatic Pipeline, is legally obliged to comply with the European Charter for Fundamental Rights, and to ensure all its operations are in line with Article 21 of the EU treaties including the promotion of human rights and the rule of law,” says Counter Balance’s Xavier Sol.

The European Bank for Reconstruction and Development (EBRD) is also considering loans to the two pipeline projects.

“The EBRD has publicly announced it conditions its own decision on these loans on improvement in Azerbaijan’s human rights situation, as prescribed by the Extractive Industries Transparency Initiative in October. The EBRD must not interpret the World Bank’s hasty decision as a nod to its own loans,” says Bankwatch’s Anna Roggenbuck.

For more information please contact:

Anna Roggenbuck
EIB Policy Officer, CEE Bankwatch Network
annar@bankwatch.org
Mobile: +48 509970424 Office: +48 91 831 5392
Twitter: @RoggenbuckA

Xavier Sol
Director, Counter Balance
xavier.sol@counter-balance.org
+32 2 893 08 61
Twitter: @xavier_sol

Revealed: the EU’s flagship energy project is built by companies with a legacy of corruption

No less than 15 firms contracted to build the Trans Adriatic Pipeline (TAP) and the Trans Anatolian Pipeline (TANAP), the two main sections of the so-called Southern Gas Corridor, have been implicated in various forms of corruption in the past, according to a CEE Bankwatch Network report published today.

Note: This press release has been amended to correct several errors that have been idenfitied after publication.
Read a statement about those changes >>

The full report can be found here: https://bankwatch.org/risky-business

Using publicly available information on companies contracted to build the two main sections of the Southern Gas Corridor in Italy, Greece and Turkey, the report reveals how many of them have a worrying history of corruption. In several cases, construction companies and their executives have been convicted on different charges, or they are currently facing criminal investigation and prosecution.

Greece

Among the companies identified in the report are three Greek firms – Ellaktor (through its subsidiary Aktor), J&P Avax, and GEK Terna – that are considered by authorities in Greece to be part of a cartel which operated in the construction sector for nearly 30 years. Companies in this cartel are alleged to have taken turns winning large public tenders and then dividing them among themselves.

Aktor was contracted to build, together with French company Spiecapag, 215 kilometres of the pipeline, mostly in Greece, even though the Leonidas Bobolas, CEO of its mother company Ellaktor, has long been on the authorities’ radar.

In 2015, Bobolas, whose name appeared on the ‘Lagarde list’ of potential tax evaders, paid EUR 1.8 million in bail after he had been arrested in Greece on suspicion of money laundering and tax evasion. In May 2016 the Cypriot authorities issued a second European Arrest Warrant against him.

Siemens, who is to supply the TAP project with six gas turbine turbo compressor units, is also said to have taken part in the same cartel. The German firm has a history of corruption in Greece, primarily in connection with a major scandal that came to be known as “The black cash of Siemens,” in which it allegedly bribed state officials.

Italy

In Italy, three of the companies contracted by TAP for the construction of the pipeline, or their past subcontractors, have had affiliations with mafia groups in the past. One of them, Bonatti Group, was hired to build a 760 kilomteres section of the pipeline in Greece, while in Italy a company it had hired in the past has had its public contract suspended for its links to organised crime.

Turkey

Turkey’s state owned energy firm Botas is the company responsible for the construction of the TANAP project, and all of the main subcontractors in the pipeline project have close ties to the ruling AK Party.

Botas has been implicated in at least two major corruption scandals, where bribery has played a central role in winning public tenders. Among those convicted in these two scandals were top executives in Botas and in some of its subcontractors for the TANAP project, as well as senior officials in the Ministry of Energy and Natural Resources which partly controls Botas. The Turkish Supreme Court later overturned the rulings, clearing most of the defendants, but much of the evidence remains in the public domain.

An interactive presentation of the contractors building the two pipeline projects can be found here: https://bankwatch.kumu.io/risky-business

The Southern Gas Corridor, a 3500 kilometre long set of pipelines, is intended to bring 10 billion cubic meters of natural gas from Azerbaijan to Europe, and 6 billion cubic meters of gas to Turkey.

Priced at USD 45 billion, this is the most ambitious energy project the EU is currently promoting, and four of the world’s largest public banks – including the European Investment Bank and the World Bank – are considering record loans for both TAP and TANAP.

The Southern Gas Corridor has been listed under the EU’s ‘Projects of Common Interest’ (PCI), a status that allows faster and simpler permitting procedures as well as privileged access to European public funding. Italian authorities are currently investigating former MEP Luca Volonté who is suspected to have received a EUR 2.4 million bribe from the Azerbaijani government – money that has allegedly helped secure the Southern Gas Corridor’s PCI listing.

“Channelling billions of euros in public funds to dodgy companies – all in the name of so-called energy security – is this the legacy Europe wants?” says Mark Fodor, Bankwatch’s Executive Director.

“Public lenders such as the European Investment Bank and the European Bank for Reconstruction and Development should seriously consider whether they are willing to entrust their largest ever loans to companies that have a history of bribery, tax evasion and mafia connections,” says Anna Roggenbuck, Bankwatch’s EIB Policy Officer.

For more on Bankwatch’s campaign on the Southern Gas Corridor see: https://bankwatch.org/our-work/projects/southern-gas-corridor-euro-caspian-mega-pipeline

For more information please contact:

Anna Roggenbuck
EIB Policy Officer, CEE Bankwatch Network
annar@bankwatch.org
Tel.: +48 509970424
Twitter: @RoggenbuckA

Mark Fodor
Executive Director, CEE Bankwatch Network
mark.fodor@bankwatch.org
Tel.: +36 (1) 216 7297/5
Twitter: @markfodor_bwn