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Long awaited investigation into Glencore for alleged tax dodging shows EU Bank’s lack of transparency and vulnerability to abuse

Brussels – The European Investment Bank (EIB) is virtually powerless in the face of abuse of its own funds, an internal investigation published last week by the EIB shows. What’s even worse is that the EIB’s new transparency policy – to be adopted in the coming weeks – would formally allow the bank to keep such internal investigations into abuses of its funds secret, hereby undermining public scrutiny of public money.

The draft transparency policy, which has been criticised by civil society on several occasions, includes a provision allowing the EIB to refuse the disclosure of any documents related to internal investigations, reports and audits even when they concern matters of public interest. The provision goes against EU legislation and is based on a biased interpretation of the jurisprudence of the EU Court of Justice.[*]

In parallel to this policy process, the bank last week finally released a brief summary of its 2011 investigation for alleged tax dodging into the Zambian Mopani copper mine owned by mining giant and former beneficiary Glencore. Despite numerous requests by civil society organisations, the bank’s management refused to make the outcomes of its investigation public for more than three years and even neglected the advice of its own Complaints Office to disclose it. The bank’s behaviour on the Mopani case illustrates its reluctance to face public scrutiny despite managing public funds. It was only following a recommendation by the European Ombudsman that the EIB caved in and finally released a two page summary last week.

The summary revealed that the bank never managed to complete its investigation because the beneficiaries refused cooperation:

“The work of the EIB Review Team was non-conclusive due to the difficulties faced in the investigation of the case. As not all of the necessary information could be obtained, it was not possible to comprehensively prove or disprove the allegations raised in the Leaked Draft Report regarding Mopani’s costs, revenues, transfer pricing, employee expenses and overheads.”

Consequently the EIB closed a deal with Glencore to repay the entire loan in 2012 but a proper investigation was never carried out.

Xavier Sol, Counter Balance director said:
“This confirms what we have seen on several occasions: once a deal is agreed upon the EIB is virtually powerless in the face of abuse of its funds. The Inspectorate General of the bank has clearly fallen short of its responsibilities but instead of drawing adequate conclusions, the EU Bank opts for a watered down transparency policy that would allow them to keep similar abuses secret in the future.”

Anna Roggenbuck, EIB coordinator at CEE Bankwatch Network said:
“The watering down of the EIB’s commitments to transparency is particularly worrying at a time when the Bank’s responsibilities are being expanded to orient and manage Juncker’s EUR 315 bn investment plan. As it stands today, the new transparency policy casts serious doubts over the EIB’s ability to manage EU funds in a responsible and transparent manner.”

Laetitia Liebert, Sherpa director said:
“We currently see international trends for transparency where companies, governments, and even the banks are more and more required to be transparent. This is particularly true at the EU level with the various EU directives adopted in the last few months. By reducing opportunities for transparency in its policy, which message does the Bank send to the European citizens? We are here to remind the EIB that it is a public bank that should work in the public interest and we have all the right to know how its money, our money, is managed.”


* See Client Earth contribution to the public consultation on EIB Transparency Policy:
http://www.eib.org/attachments/consultations/eib_group_tp_comments_client-earth_20150109_en.pdf

For more information contact:

Xavier Sol
xavier.sol@counter-balance.org
+32473223893

EBRD suspends loan for Romanian coal plant Turceni


UPDATE (September 7, 2015): The EBRD’s project summary document for the Turceni project now confirms that the loan has been cancelled.

Bucharest — The European Bank for Reconstruction and Development (EBRD) confirmed this week [1] that it has suspended plans to finance the refurbishment of the Turceni coal power plant in Romania [2]. The project is currently subject to a number of legal challenges on environmental grounds and Romanian authorities are investigating allegations of corruption at the plant.

“We welcome the news that the EBRD dropped financing for the coal unit at Turceni,” commented Ionut Apostol of Bankwatch Romania. “We hope that the EBRD will now focus on assisting authorities and businesses in the Turceni region to diversify away from coal and create much needed employment alternatives.”

“The Turceni project suffers from multiple legal issues including the failure to carry out a full environmental assessment and misclassification of the plant as an existing one instead of a new one to allow higher pollution levels, despite the EBRD financed project implying the reconstruction of unit 6 practically from scratch”, added Kristína Šabová from Frank Bold, Czech Republic. “Suspending financing of this project is likely to protect the EBRD from another scandal such as that at the Sostanj coal plant in Slovenia”. [3]

Thermal power plants (TPP), and particularly coal plants, are at present having difficulties in Romania because either their production is not needed or they cannot compete with prices of other energy sources. The mix of power production capacities has seen some changes in recent years, with old thermal power plants closing and the commissioning of (mainly) wind and solar facilities (many of which were supported by EBRD financing). Overall, the total installed capacity for power production remains similar to the level of the year 2000. More than half of capacity is kept in reserve and this over-capacity offers a short and medium term buffer for the system to transform into a cleaner and more efficient one and phase out fossil fuel based capacities, and it excludes the need to build new coal power plants. [4]

It was in this context that the EBRD approved a EUR 150 million loan in 2008 for the rehabilitation of units 3 and 6 at the Turceni TPP, a project that was never carried through, even though EUR 12 million in commissions were paid to the EBRD and a partner commercial bank. In early 2013, the EBRD decided to restructure and re-finance the loan arranged for the Turceni project, which turned into a EUR 200 million syndicated loan meant only for unit 6.

“Even though the loan to Turceni is just suspended at the moment, it is hard to imagine that the EBRD could possibly resume it, after having adopted its new energy policy in 2013 restricting coal lending,” comments Ionut Apostol. “According to the new policy, the EBRD can only invest in coal when cleaner and less climate damaging alternatives are not available, which is far from being the case in Romania these days.”

For more information:

Ionut Apostol, Bankwatch
+40 721 251 207
ionut@bankwatch.org

Kristína Šabová, Frank Bold
+420 720 565 672
kristina.sabova@frankbold.org

Notes for the editors:

[1] In a January 27 email addressed to Bankwatch, the EBRD confirmed that “the Bank has currently suspended considerations for financing of this project.”

[2] Turceni is the largest coal thermal power plant in Romania and it is part of a complex consisting of several coal power plants and lignite mining operations in Gorj county, south-western Romania. Out of the seven units that were built at the Turceni power plant, 3 units (plus possibly unit 6, if refurbished) are set to continue operating in the near future. The power plant uses local lignite and it was the second most polluting industrial facility in Europe in 2009; since then, facilities were built to comply with sulphur oxides emission standards. In its last form, the EBRD organised syndicated loan of 200 million euros was supposed to help finance the rehabilitation and modernisation of unit 6 at Turceni.

[3] An environmental impact assessment should have been conducted for the project along with a public participation process. This was partly triggered by an incorrect categorisation of the project, which was not considered to be about financing a new coal unit as should have been the case. As unit 6 has been out of operation since 2006 and partially dismantled, constructing unit 6 should have been considered building a plant from scratch and the baseline for this rehabilitation project should have been zero emissions. The project would have led to estimated emission levels of 1.6 million tonnes of carbon dioxide per year, as well as additional emissions of sulphur and nitrogen oxides, particulate matter and heavy metals. Furthermore, if refurbished, unit 6 of the Turceni power plant would need to comply with stricter emission limit values under the Industrial Emissions Directive (for new units) and not the emission limit value for existing units. The due diligence process conducted by the EBRD also failed to assess other issues directly related to the project, mainly the deforestation of certain areas to expand lignite mining to feed into the Turceni plant using a practice of slicing areas to avoid thorough environmental permitting. Finally, the due diligence for the project failed to review carbon capture and storage readiness for the project.

[4] More information is available in a briefing paper at
https://bankwatch.org/publications/briefing-turceni-coal-power-plant-rehabilitation

EIB set to weaken transparency standards

Brussels — One week before the European Investment Bank’s board of directors is expected to approve the bank’s new transparency policy, 13 civil society groups* monitoring the EIB warn that, as it stands, the draft policy amounts to a weakening of the already dismal transparency standards of the EU’s house bank.

In a letter sent today to the directors of the EIB who will take the final decision during their meeting on February 3, the NGOs criticise in particular that:

  • The EIB will not be responsible to disclose to the public any documents related to internal investigations, reports and audits, even if they concern matters of public interest and even once investigations are closed. This is hardly in line with EU legislation and the jurisprudence of the European Court of Justice.
  • The policy therefore disregards provisions in the Aarhus convention [1] that calls on EU institutions to make available a wide range of such information. Indeed, at the moment, the EIB only discloses a limited set of environmental documents for the projects it supports.
  • The EIB will not be required to disclose the list of final beneficiaries of its loans going through financial intermediaries – mostly commercial banks who on-lend EIB loans. Those loans will remain a black box for public scrutiny.

Xavier Sol, director of Counter Balance comments:
“The fact that the EIB is set to weaken its transparency standards precisely at the time when it will play a major role in managing the new European investment plan worth 315 billion euros is outrageous. Approving the transparency policy in its current form would mean that the European public would have very limited control over the institution which is charged with such a crucial role in alleviating the pains of the economic crisis. This is no time for the bank to hide behind a noncommittal policy, instead, it should be opening up in front of European citizens.”

Anna Roggenbuck, EIB campaign coordinator at Bankwatch, adds:
“Already now the bank is lagging behind the transparency of other international lenders. If this draft policy is approved, the EIB would become one of the most opaque financial institutions in the world. This is ironic at best coming from the house bank of the European Union which preaches transparency and accountability to the world.”

Notes for the editors:

* List of groups signing the letter: Counter Balance, CEE Bankwatch Network, BothENDS, WWF Europe, Eurodad, Centre for Law and Democracy, Ibis, Sherpa, Publish What You Fund, Arab NGO Network for Development (ANND), Transparency International (EU office), Action Aid International, Article 19.

1. The list of information provided by the EU regulation 1367/2006 which outlines how the Aarhus Convention should be applied by EU institutions includes “data or summaries of data derived from the monitoring of activities affecting, or likely to affect, the environment” as well as “authorisations with a significant impact on the environment, and environmental agreements” and “environmental impact studies and risk assessments concerning environmental elements”. In addition, the Aarhus convention mentions that each Party shall provide “sufficient information to the public about the type and scope of environmental information held by the relevant public authorities”.

2. Read about the the Aid Transparency Index and the EIB’s disappointing ranking:
http://www.counter-balance.org/european-banks-are-most-opaque-multilateral-organisations/

Croatians say no to coal in referendum

Zagreb – Inhabitants of the city of Ploče on the Croatian coast overwhelmingly rejected a plan to build an 800 MW coal plant in their town in a referendum taking place over the weekend. The vote raises questions about the acceptability of other coal projects planned in the country, including the controversial Plomin C.

„We congratulate the citizens of Ploče for the excellent result in yesterday’s referendum,” says Bernard Ivcic from Zelena Akcija. „This vote clearly shows that Croatians are worried about the environmental and economic consequences of coal plants, that such projects are not welcomed here, and that it would be very difficult for investors to implement them.”

Over 90 percent of those voting in the referendum in Ploče said no to the new coal unit, and the 60 percent attendance rate means that the vote is valid. While the referendum is not legally binding, the mayor of Ploče stated that the vote represents the will of the people and should be taken into account by central authorities.

The new 800 MW unit in Ploče was proposed last year by Luka Ploče energija and it has the backing of Croatia’s ministry of economy. However, locals have been protesting against its construction arguing that it would negatively affect the health of the people in the region.

„The referendum in Ploče is also a strong signal to the Croatian government and to our state electricity company HEP that residents of Istria could vote the same in a potential referendum about the Plomin C coal unit planned in their region,” adds Ivcic. „The time for pushing dubious projects through against the will of the people has passed.”

The Croatian electricity company HEP is planning to construct a new 500 MW unit at the Plomin power plant on the Istrian coast. The project is already marred in controversy, not only because of its potential health and environmental costs, but also because of doubts about its economic viability and concerns about the corruption record of the two companies tasked with constructing the unit, Japanese Marubeni and French Alstom.

“This referendum is not only a warning for the future of coal in Croatia, but also for the entire Balkans, where authorities have been proposing a series of environmentally harmful and economically shaky coal projects over the past years, without consulting their citizens,” says Ioana Ciuta from Bankwatch. “Listening to its citizens and rejecting coal would bring Croatia closer to the European Union’s decarbonisation goals, an objective all governments across the Balkans must take seriously.”

For more information, contact:

Bernard Ivcic, Zelena Akcja
bernard@zelena-akcija.hr

Notes for the editors:

Read more about the Plomin C plant here:
https://bankwatch.org/our-work/projects/plomin-coal-power-plant-croatia

More about coal units planned in the Balkans and controversy around them:

coal

Pipe Dreams: Why the Southern Gas Corridor will not reduce EU dependency on Russia


Brussels – The Southern Gas Corridor [*], the EU’s new pet energy project, is not only unnecessary in light of gas demand projections, but also seems likely to fall short on the much flaunted goal of bringing energy independence from Russia, according to a new NGO study “Pipe Dreams” published today.

The authors of the study are CEE Bankwatch Network, Re:Common, Platform, and urgewald.

The study is available online here:
https://bankwatch.org/sites/default/files/PipeDreams-LukOil-21Jan2015.pdf

Photos from the study are available here:
http://stories.bankwatch.org/azerbaijan

According to calculations included in the study, the 16 billion cubic meters of gas yearly planned to be brought into Europe via the Southern Gas Corridor might not be necessary after all. The EU already has an overall surplus of gas import infrastructure. According to European Commission scenarios, natural gas imports to Europe are expected to decrease by 2050 under all scenarios included in the EU 2050 energy roadmap. This means that the infrastructure surplus will just widen over the next decades, potentially meaning that a costly mega-structure such as the Southern Gas Corridor will turn into a liability.

Despite the Southern Gas Corridor being touted as Europe’s solution to reduce energy dependency on an unreliable Russia, the irony is that the project involves Russian company Lukoil benefiting from 950 million US dollars worth of loans from the EBRD and the Asian Development Bank for the development of the Shah Deniz field. Since 2014, Lukoil has been a target of EU and US sanctions alongside other Russian companies. Lukoil, a long-term EBRD beneficiary, has a dismal environmental and human rights record at its past operations in Russia, one notable example being the destruction of Komi lands by spills.

In another vulnerability of the gas corridor, turning Azerbaijan into the new gas supplier for Europe only leads to strengthening an authoritarian regime that over the past months has undergone one of its most abusive stages, arbitrarily imprisoning a number of high-profile opposition figures. Arguably, Azeri President Ilham Aliev has been able to tighten the grip at home not in the least because he emerged as a potential more important ally following the Russian invasion of Ukraine.

“The Southern Gas Corridor is actually a corridor of abuses leading from the Caspian into Europe,” comments Pippa Gallop from Bankwatch, one of the authors of the study. “From arbitrary arrests in Azerbaijan, to expected militarisation in Turkey along the route similar to what we have seen with the Baku-Tblisi-Ceyhan pipeline, to companies apparently trying to ignore court rulings in Italy in order to push for the pipeline. This is no way for Europe to ensure its energy independence, it’s just switching our dependency from one authoritarian ruler to another.”

“Ever since the Russian invasion, the Commission has repeatedly emphasised that the best way to ensure energy independence is via reducing demand,” adds Klara Sikorova from Bankwatch, another author. “In central and eastern Europe, the most vulnerable region to Russia’s energy whims, the energy savings potential is huge. If the EU has the money for such a mammoth project as the Southern Gas Pipeline, why doesn’t it spend it on measures which are cheaper and safer such as energy efficiency? This looks an awful lot like blindness if not hypocrisy and dirty lobbying.”

In brief about the Southern Gas Corridor:

Estimated to cost 45 billion US dollars, the Southern Gas Corridor is a chain of projects meant to bring gas to Europe from the Shah Deniz offshore gas field in Azerbaijan, owned by British Petroleum, Russia’s Lukoil and Azerbaijan’s SOCAR. The corridor would pass through Georgia, Turkey, Greece, Albania and Italy to other EU markets, and consists of the South Caucasus Pipeline extension, Trans-Anatolian Pipeline (TANAP), Trans-Adriatic Pipeline (TAP) and other branch lines. Turkmen gas may become a part of the equation at a later stage.

The Southern Gas Corridor is set to be backed with public money via the Connecting Europe Facility, potentially the European Investment Bank (EIB) and the Project Bonds Initiative, and indirectly via a loan by the European Bank for Reconstruction and Development (EBRD) to Lukoil for the second phase of developments at Shah Deniz, a loan set to be approved in early 2015. It is one of the most important projects on the EU list of Projects of Common Interest which are to receive political and financial backing in the following period.

For more information, contact:

Klara Sikorova
CEE Bankwatch Network
+ (420) 274 822 150, Ext. 27
klara.sikorova@bankwatch.org

Ohrid Lake facing damage by EBRD financed infrastructure projects

Concerns mount about increasing threats to Macedonia’s protected areas and the Lake Ohrid UNESCO site by EBRD investments in fast-tracked infrastructure projects.

On 13 January the Macedonian parliament is set to approve a sovereign guarantee for a loan of up to EUR 160 million for road projects, including the Ohrid-Pestani road that threatens the integrity of the Lake Ohrid World Heritage site of Outstanding Universal Value and the Galicica National Park. The road section is part of a new expressway to the Adriatic sea that threatens to significantly damage the landscape and biodiversity value of Macedonia’s prime tourist attraction.

“It is absurd to damage the UNESCO site and the Galicica National Park, in order to turn Lake Ohrid into a transit stop on the way to the seaside. Macedonian parliamentarians should question the rationale of this investment.” said Fidanka Bacheva-McGrath, EBRD Policy Officer at Bankwatch. “It is beyond comprehension, how this infrastructure is going to encourage regional development, if it will damage Macedonia’s main tourism asset – the natural and landscape value of the Lake Ohrid area?”

The state guarantee will benefit an EBRD investment into a National Roads Programme that includes four road sections. The project was approved by the bank’s board in November and financing of EUR 74 million for two sections was already committed by the bank, however the approval of the second tranche of EUR 86 million that concerns the construction of the Ohrid-Pestani section is subject to completion of environmental and social procedures.

The slicing into small sections of the new expressway around Ohrid and the bundling of the Ohrid-Pestani section within a large investment package is an attempt to conceal the significant impacts of the new road. This infrastructure project will necessitate the rezoning of 54 hectares of the Galicica National Park, and furthermore, UNESCO has already expressed its grave concerns about the lack of comprehensive infrastructure planning in the Lake Ohrid World Heritage site. [1]

“It appears that both the EBRD and the Macedonian authorities have failed to learn a lesson from the Boskov Most hydropower project, where in 2011 the bank approved EUR 65 million sovereign guaranteed loan for a dam in the Mavrovo National Park,” says Pippa Gallop, Bankwatch research coordinator. “A year ago the bank’s Project Compliance Mechanism found the project failed to comply with the bank’s own environmental standards and last month the Bern Convention opened a case as well. The Ohrid-Pestani road is bound to run into the same complications, so decision-makers should think twice before pushing it ahead in spite of all odds.”

For more information, contact:

Fidanka Bacheva-McGrath
Bankwatch EBRD Policy officer
fidankab@bankwatch.org

Notes

For more background, read a letter sent to the EBRD concerning this project:
https://bankwatch.org/sites/default/files/letter-EBRD-MKroads-06Nov2014.pdf

[1] The Galicica National Park and the Ohrid Lake UNESCO World Heritage property of Outstanding Universal Value (OUV) are under severe pressure from several projects including a ski resort, a lakeside tourist resort, Corridor VIII railway and the Ohrid-Pestani road. UNESCO expressed concern regarding the lack of comprehensive infrastructure planning and impact assessment for the Ohrid region at the

UNESCO Doha meeting in June 3, 2014:

“There is some concern about the potential individual and cumulative negative impacts of the planned infrastructure projects on the OUV of the property, and ski developments in the property would be likely to be incompatible with its World Heritage status. The mission’s recommendations should be recalled, in particular that a comprehensive action plan for the lakeshore be developed before the projects progress further and that Environmental and Heritage Impact Assessments of these projects be prepared in conformity with IUCN’s World Heritage Advice Note on Environmental Assessment, and the ICOMOS Guidelines on Heritage Impact Assessments for World Heritage cultural properties, and submitted along with further technical details of these projects to the World Heritage Centre for review by the Advisory Bodies before any decisions are taken that would be difficult to reverse, in accordance with Paragraph 172 of the Operational Guidelines.”