Letter to the Rt Hon Hilary Benn MP, Secretary
of State for International Development, 23 October 2003
Annex 2
BAKU-TBILISI-CEYHAN
OIL PIPELINE
Further to our meeting with officials from DfID
and other departments on Monday 20 October, we are writing to
express our grave concern over the terms of reference that DfID
has set for the independent consultant's review of the Environmental
Impact Assessment (EIA) for the Baku-Tbilisi-Ceyhan oil pipeline
project. We would also seek to draw your urgent attention to the
human rights abuses that have followed the flawed elections in
Azerbaijan and the implications of this for any decision on funding
of the pipeline.
As stated on DfID's website, the TOR for the
consultant's review is to "assess how the EA is compliant
with IFC and EBRD policies, procedures and guidelines". However,
it is clear from conversations with Mr Ron Bisset, the consultant
undertaking the review, and from Ms Cund's interventions at our
Monday meeting that the scope of the review is limited to an examination
of whether or not the EIA complies with World Bank and EBRD standards
on paper: consideration of potential violations arising from implementation
of the project is specifically excluded.
We find this completely unacceptable. There
is ample evidence, provided by NGOs to both DfID and other departments,
that many of the claims made in the EIA with regard to the extent
and nature of consultation have proved false when checked out
through field visits. Indeed, the evidence shows that implementation
of expropriation and compensation along the Turkish section of
the pipeline is flawed and falls foul of World Bank guidelines,
despite a moderate degree of compliance reported in the project
documents, and that many claimed mitigation measures are inappropriate
given conditions on the ground. Furthermore, doubts have been
expressed about the thoroughness of the IFC's own investigations
into the alleged violations of World Bank standards.
In such circumstances, to base any decision
on funding the project on the EIA's "paper compliance"
with IFC and EBRD standards is likely to be at best unsafe, at
worst highly damaging to the interests of the poorest sections
of the affected community. We would therefore urge you to insist
that the project's compliance with IFC and EBRD policies, procedures
and guidelines is assessed against implementation on the ground,
and would further recommend that this is "ground-truthed"
by visits to the region by DfID staff themselves.
The case for such an assessment is made all
the stronger by the recent IFC Compliance Advisor-Ombudsman's
report to which we referred in our letter of 8 October. Given
the widespread evidence found by the CAO of IFC staff failing
to apply safeguard standards, it is imperative, in our view, that
the World Banks board take action to verify staff claims as to
project compliance with regard to both project design and implementation.
A failure to do so might reasonably be interpreted as a signal
that the findings of the CAO are not being taken with the seriousness
they undoubtedly merit.
Moreover, DfID's refusal to investigate the
implementation of the project effectively negates the IFC's own
principal justification for its involvement. Having belatedly
recognised that it has come on board too late to effect fundamental
project decisions like routing and legal framework, the IFC now
claims its involvement is necessary to improve the standard to
which the project is implemented. It is surely impossible to demonstrate
this function if DfID refuses to look at how the project is being
implemented already.
We would therefore urge you to ensure that the
assessment commissioned by DfID of the EIA is broadened to include
a thorough investigation of the 173 violations of World Bank,
EBRD and host government law identified by NGOs and furnished
to you.
We recognise that a full assessment of project
implementation will take time. It is for that reason that we are
requesting that the UK government press the boards of the IFC
and EBRD to delay their consideration of potential public funding
for the project for a further six months. Given that DfID has
undertaken no field investigations at all on the project—despite
NGO requests dating back over a year—and that winter is
fast approaching in Northern Turkey, we believe that a delay of
six months is the minimum that would be required to identify the
measures that are undoubtedly needed to bring the project into
actual (as opposed to "virtual") compliance with IFC
and World Bank guidelines and, perhaps more significant still,
host government law.
We note that DfID's narrow interpretation of
the TOR for the review of the EIA is already being interpreted
in some quarters as reflecting either a lack of "joined up
government" or, less charitably, an attempt to limit inquiry
in order to push the project through the IFC and EBRD, whilst
appearing to give the issue of compliance proper consideration.
Given DfID's well-earned reputation for promoting sustainable
development, it would be regrettable if such an interpretation
were to gain wide currency, particularly when the remedy—a
full assessment of the EIA and a delay in order to ensure that
it is properly carried out—is readily to hand.
Finally, we would draw your urgent attention
to the rapidly deteriorating human rights situation in Azerbaijan,
which, in our view, considerably alters the context in which the
BTC project is being implemented. Following the presidential elections,
which international observers reported being marred by widespread
fraud, hundreds of opposition leaders and activists have been
arrested in what Human Rights Watch describes as "a massive
and brutal political crackdown". We believe that to approve
funds for the BTC project in these circumstances would be to send
a signal that drastically undermines the UK government stated
commitment to encouraging good governance through its development
aid. Again, the case for a delay in any decision on funding would
appear overwhelming.
Annex 3
Letter to the Executive Directors, International
Finance Corporation, World Bank Group, 28 October 2003
IFC STAFF REPORT
TO BOARD
ON BAKU-TIBILISI-CEYHAN
OIL PIPELINE
We are in receipt of the report prepared by
IFC staff for the Board meeting on 30 October 2003 that will consider
IFC financing for the Baku-Tibilisi-Ceyhan oil pipeline.
We have analysed the document and are shocked
by its failure even to report a range of material facts that would
be central to enabling the Board to make an informed decision
as to project risks, legality, compliance with IFC standards and
benefits. For example:
— Conflict risk to pipeline:
Although the pipeline passes through areas where PKK Kurdish guerrillas
were active during the recent 18-year armed conflict between the
PKK and the Turkish state, the report fails to mention that the
PKK has now abandoned its unilateral ceasefire or that it has
specifically named pipelines as "legitimate targets".
Significantly, the report fails to make any mention or comment
on the Kurdish conflict in Turkey when assessing project risks.
— Potential breach of International
Law: The report states that Armenia, Iraq and Syria have been
notified as to potential downstream impacts from oil spills, as
required under the Bank's safeguard policy in International Waterways.
However, it fails to inform Executive Directors that general international
law requires not only notification but also consultation and negotiation,
neither of which are reported to have taken place.
— Political Instability: The
report states that the Government of Azerbaijan has a "strong
interest" in maintaining stability. The events surrounding
the seriously compromised elections in Azerbaijan, featuring the
first dynastic transfer of power in the post-Soviet states amid
widespread allegations of vote-rigging and well-chronicled assaults
on journalists and members of the opposition, suggest that the
IFC staff's assessment is highly misleading or based on inadequate
intelligence about political stability in Azerbaijan. Indeed,
all the evidence suggests that the region is becoming less democratic
rather than more so.
— Azerbaijan Oil Fund: In Azerbaijan,
the State Oil Fund used for BTC revenues is non-transparent, accountable
only to the president and its uses and aims have not been clarified,
although it was previously used to pay for BTC construction costs,
in contradiction to IMF rules. The IFC report discusses the oil
fund (p40) but omits to mention the abuse of the fund to date
or the problems experienced in ensuring its democratic oversight.
— Non-compliance with IFC Safeguard
Policies and Project Agreements: The report neither mentions,
nor responds to, the 173 violations of World Bank safeguard policies
identified by NGOs for the Turkish section of the pipeline alone,
despite IFC staff being informed of them during the EIA public
disclosure period. Such violations include: 153 partial or total
violations of IFC and EBRD Operational Policies; 18 partial or
total violations of the European Commission's Directive on EIA;
two direct violations of other Turkish law.
— Breaches of Host Country Law:
Because compliance with the above standards is required under
the legal regime for the project, such violations of relevant
standards put the project potentially in conflict with host country
law. As such, the project appears to be in fundamental breach
of the IFC's requirements that the projects which it finances
comply with domestic law. The report neither addresses this issue
nor replies to violations identified by NGOs.
— Continuing concerns over human
rights implications of Host Government Agreements: The report
suggests that Amnesty International's concerns over human rights
issues related to the Host Agreements have been resolved (p 14).
In fact Amnesty has stated that it still has reservations about
the agreements, despite the Deed Poll signed by BTC Co. Although
Amnesty responded before the IFC staff report was written, the
group's disclaimer is not mentioned;
— Outstanding Legal Issues:
the report fails to mention that the project is subject to an
official complaint to the European Commission (EC) by non-governmental
organisations and affected villagers from Turkey. The complaint
argues that the project agreements with Turkey put Turkey in breach
of its Accession Partnership with the European Union, since in
derogating from so many sovereign powers it is moving away from
rather then towards the acquis communitaires. The EC is
currently investigating the project and will report on 5 November
2003. IFC have stated to NGOs that a ruling by the EC in favour
of the NGOs' case would mean that the IFC could not fund the project.
— Inadequate Consultation: The
report states that there has been "comprehensive consultation"
and that consultation procedures go beyond IFC requirements. This
is highly misleading. The EIA for the project itself reveals that
fewer than 2 per cent of people were consulted face to face and
NGOs have identified 83 violations of six key World Bank guidelines
related to consultation. The report neither mentions nor discusses
these violations. Claims made in the report on consultation also
conflict with the evidence presented in the EIA—for example
it is stated that consultation took place "before specific
corridor selected" (p 35-36) when the EIA only places the
start of face to face consultation with communities at September-October
2001.
— Natural Habitats: IFC staff
have given Executive Directors an incomplete list of sensitive
natural habitats (para 9.21). In particular, no mention is made
of the Ullas and Alacorak potential Ramsar wetland sites, which
contain species significantly at risk.
— Use of Emergency Powers to speed
up resettlement in Turkey: In order to keep to the project's
construction timetable, Emergency Powers available to the Government
of Turkey have been invoked to override key provisions of OD 4.30,
in breach of both Turkey's obligations under the Host Government
Agreement for the BTC project and in flagrant violation of the
BTC Consortium's commitments within the Resettlement Action Plan.
For poorer people, the likely outcome is that they will be worse
off than before the project. Some are already talking of having
to leave their lands. The invocation of emergency powers is not
mentioned in the report nor are its implications discussed, including
the high probability of cases being brought to the European Court
of Human Rights.
— Cumulative Impacts: The IFC
staff report misleadingly states that the EIAs have reviewed all
known regional oil developments (para 9.39). No mention is made
in the EIA of trans-Caspian oil shipments from Kazakhstan which
are likely to be routed via BTC and without which BTC is arguably
financially marginal.
— Alternative Routes through Borjomi:
The report omits to mention that the Dutch Commission for EIA,
which reviewed the EIA for Georgia at the request of the Georgian
Government, has deemed a number of alternative routes technically
feasible. Other inadequacies in the assessment of alternatives
raised by NGOs during the disclosure period are neither mentioned
nor addressed.
— OD 4.20: The report argues
that OD 4.20 is not applicable. It fails to respond to detailed
NGO representations made during the disclosure period which contests
this view or to inform the Board that NGOs are preparing a complaint
to the Compliance Advisor Ombudsman on the failure to apply OD
4.20. It also fails to inform the Board that its "vulnerable
peoples" approach does not reflect any agreed IFC policy.
— Monitoring: Although the report
stresses the multi-layered monitoring procedures for the project
(p 20), it fails to mention that the BTC Consortium had failed
to comply with its commitment to publish an external resettlement
review at the beginning of September, as required under its resettlement
monitoring plan. The report was still to published at the time
IFC wrote to Eds. Yet timely publication of monitoring reports
is described as "key" by the report (p 20). Other statements
claiming that the mitigation procedures have been "proven"
to be in compliance with IFC standards are simply not true.
— Doubts over Competence of Implementing
Agency: The report acknowledges the poor social and environmental
record of BOTAS, the company that will build and operate the pipeline
in Turkey (p 43). However, it claims that this risk has been mitigated.
No mention is made of the fact that BOTAS's implementation of
the resettlement programme has already led to major violations
of the Bank's resettlement policy which have not been addressed
through mitigation measures (see also below).
— Financial Profitability: The
IFC report states that the transit fee will be $4.67 a barrel.
BTC Co has repeatedly given figures in public that are below $3.50.
As recently as September 2003, SOCAR stated publicly that the
fee will be in the range of $3.30-$3.50. The discrepancy is not
mentioned, nor discussed, despite the clear implications for the
finances of the project.
The above omission constitute a serious abuse
of the IFC's decision-making procedures and raise serious questions
as to whether or not the IFC staff have deliberately attempted
to mislead the Board. If EDs are not properly informed by staff
of the full range of risks associated with a project, they are
not in a position to make an informed judgment as to a project's
legality, political risks, development impacts and reputational
risks to the World Bank Group.
In addition to investigating the IFC staff's
failure to present key material facts before the Board we would
therefore urge you to press for a delay in the Board's decision
on the Baku-Tibilisi-Ceyhan project. We believe the case for such
a delay is now overwhelming:
(1) Unresolved Problems: Can the
IFC confirm that none of the 173 identified violations identified
by NGO are valid? Does the project not need to be amended if they
are? Are the necessary structures in place in the three countries
and within BTC Co to ensure local "stakeholders" really
benefit? What is the likely impact of Kazakh oil if, as predicted,
it enters the pipeline?
(2) Ongoing Investigations into the project:
As well as the European Commission investigation, there is an
OECD complaint pending against BP, a court case ongoing in Georgia
and a complaint to be raised with the IFC CAO about the failure
to apply OD 4.20. Why decide to fund the project before all these
are completed, particularly when the IFC report admits an adverse
ruling in the Georgian courts would amount to a default in the
loan?
(3) Lack of Legal Clarity: Does the
HGA imperil Turkey's EU accession? Why does BTC Co insist on retaining
the "stabilisation clause" allowing it to get compensation
from the host countries if, as it insists, it doesn't intend to
use it? How are affected people supposed to get their rights to
effective redress?
(4) Due Diligence Concerns: there
are serious failures of due diligence in the IFC's work thus far.
Bearing in mind the very critical report of its own CAO, will
this report simply confirm that the IFC seems willing to put political
pressure over its own mandate for development?
|
