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Amos moves into spotlight - public funding approval process starts for controversial BP pipeline

DfID must favour human rights and development over oil profits, campaigners urge  

A new Caspian Sea oil pipeline moved a step towards receiving public financing today, despite extensive criticism from environment and human rights groups. BP’s US $3.5 billion Baku-Tbilisi-Ceyhan (BTC) pipeline entered the 120-day approval process of the International Finance Corporation (part of the World Bank) and the European Bank of Reconstruction and Development (EBRD) [1].

The BTC project, planned to run for 1,000 miles through Azerbaijan, Georgia and Turkey, will be an early test for the new International Development Secretary, Valerie Amos, just four weeks into the job. Amos is the minister responsible for the UK’s contributions to the World Bank and EBRD, and will have to decide how to cast the UK’s vote on whether to back the project. The project is also seeking backing from the UK government, through the Export Credits Guarantee Department. Nicholas Hildyard, of the Corner House, commented, "This pipeline will be a key test of the Government’s international development priorities. We know Blair is close to BP. The question is whether Amos is prepared to stand up to him and ensure that Britain’s international human rights obligations are met."

Kerim Yildiz, director of the Kurdish Human Rights Project, added, "We are amazed that World Bank and EBRD staff consider the project ready for their Boards and the public to consider. Fact-finding missions which have just returned from the pipeline route report major problems in consultation and land compensation, and serious human rights concerns. It seems the institutions have relied on what BP has claimed on paper - but the reality on the ground is far different." [2]

Last week, 72 human rights and environment groups from 29 countries called for a moratorium on the BTC pipeline, arguing that it would worsen the human rights situation along the pipeline route, and that a background of lack of freedom of speech in the region made proper consultation impossible [3]

. But the greatest criticism has been of the project legal agreements, which over-ride all laws that might affect the project (present and future) in the three host countries, for the next 40 years. if during that time any government tried to introduce a new law - whether environmental, human rights, social or other - which affected the pipeline’s profits, that government would have to compensate the consortium. Last month, a legal report by Amnesty International slammed the agreements for over-riding human rights rules, and found Turkey in breach of its obligations under their accession agreements with the European Union. [4]

In April, Friends of the Earth and other groups submitted complaints to the governments of France, Germany, Italy, the UK and the USA, charging that BP and its partners were violating the "Guidelines for Multinational Enterprises" of the Organization for Economic Cooperation and Development (OECD) [5].

Tony Juniper, of Friends of the Earth, commented, "This pipeline would make BP the effective governing power of a large swathe of three countries, with a right to decide which laws apply and which don’t. This is hardly what we would call corporate responsibility". He added, "This oil pipeline would be bad news for local people and the environment. It is time for the government to stop subsiding damaging fossil fuel projects, and instead focus on the clean energies of the future". The application to the World Bank and EBRD is for what BP’s Chief Executive Lord Browne has called "free public money". However, critics of the project argue that the real reason for public involvement is so that the consortium can use the political muscle of western governments to protect the project’s profitability. [6]

According to Greg Muttitt of PLATFORM, "BP needs public money mainly because if a future government of one of the countries tried to obtain a better deal from pipeline revenues, they would face pressure from the World Bank and EBRD, which they depend on, rather than just from BP. The irony is that the World Bank - whose mandate is to support development - is in fact being involved in this project specifically to hamper development, by restricting government revenues".

Kate Geary of the Baku Ceyhan Campaign added, "British taxpayers are being asked to subsidise a human rights and environmental nightmare. Public money should only be available where there is a public benefit".

Notes for editors

1: The $3.5 billion construction cost will come 30% from BP’s and its partners own capital reserves, and 70% from bank loans. IFC (World Bank) and EBRD are leading the loan package. Today marks the start of their formal consideration of the project, beginning with a 120-day disclosure of key project documents. During this period, banks will request comment from concerned parties, including the British public.

2: A Fact-Finding Mission to Turkey in March 2003 found a pervasive atmosphere of repression, especially in the northeast of the country, where there is a 40% Kurdish minority, raising serious concerns that the pipeline would lead to major human rights abuses. The Mission’s report is available at http://www.baku.org.uk/ffm_25_4_2003.htm

Although the World Bank has a number of lending guidelines designed to protect local people from the impacts of infrastructure projects, in the BTC case the Bank has declined to apply one of the most important standards, to protect ethnic minorities (Operational Directive OD 4.20: Indigenous Peoples).

The Turkey Fact-Finding Mission found the BTC project in violation of the World Bank mandatory standards on standards, including OD 4.30 (Involuntary Resettlement), and guidelines, including the IFC Good Practice Manual on Consultation and Disclosure and IFC Handbook on Preparing a Resettlement Action Plan. The Mission also found the project in potential conflict with the Turkish Expropriation Law, and hence also with the Host Government Agreement reached between BTC Co. and the Turkish Government.

Another Fact-Finding Mission has just returned from Azerbaijan and Georgia, finding further problems with resettlement and land compensation, human rights, corruption, development impact, environment and public consultation.

See http://www.foe.org/camps/intl/institutions/AzFFM03.pdf and http://www.foe.org/camps/intl/institutions/GaFFM03.pdf

3: see press release 5th June 2003, ‘Global call for moratorium on BP's Baku-Tbilisi-Ceyhan pipeline’, http://www.baku.org.uk/news06.htm

4: Amnesty International press release, ‘Baku-Tbilisi-Ceyhan pipeline project puts human rights on the line’, 20 May 2003, http://www.amnesty.org.uk/deliver?document=14542

5: Friends of the Earth International press release, ‘Groups file claim against BP and pipeline partners in 5 countries’, 29 April 2003, http://www.foei.org/media/2003/0429.html

6: The EBRD and IFC are each being approached for $150m of their own finance, plus $150m syndicated from the markets, out of the total project cost of $3.5 bn. BP’s annual capital expenditure is around $10 bn, so it could easily afford to build the pipeline with its own money.

See Mark Mansley (Claros Consulting), ‘Building Tomorrow’s Crisis - The Baku-Tbilisi-Ceyhan Pipeline and BP: A Financial Analysis’, pub, PLATFORM, May 2003, at http://www.bankwatch.org/issues/oilclima/baku-ceyhan/downloads/financial_analysis_03-03.pdf especially pp.19-22