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World Bank Rejects Criticism And Funds Caspian Oil

by Emad Mekay


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Oil Consortium Ignored Safer Route For Caspian Pipeline, Group Says
(IPS) WASHINGTON -- The World Bank decided to back a multi-billion-dollar oil field and pipeline project in the Caspian region Nov. 4, overriding objections from activists who say the scheme will endanger the local environment and people.

In a statement the Washington-based institution said its private sector arm, The International Finance Corporation (IFC), approved investments in the Azeri-Chirag-Deepwater Gunashli (ACG) first phase of the project and in the Baku-Tbilisi-Ceyhan (BTC) pipeline, which will carry oil to an export location in Turkey, circumventing Russia.

Phase one, development of an oil field off of Azerbaijan in the Caspian Sea, will get a total of $60 million in loans from the IFC.

The total cost of the ACG project is approximately $3.2 billion.

The BTC pipeline, which will connect oilfields in the Caspian with a tanker terminal at the Turkish port of Ceyhan on the Mediterranean Sea via Azerbaijan and Georgia, will receive $250 million in loans from the IFC.

The total cost of the pipeline, expected to carry at least one million barrels of oil per day, is about $3.6 billion.

The consortium building the 1,800-km pipeline across Azerbaijan, Georgia and Turkey is seeking around 70 percent of the project's $3.6 billion cost in loans. The group is led by British oil giant BP and includes Italy's Eni, Statoil of Norway, California-based Unocal and France's TOTAL.

Although the IFC's loans are modest compared to the overall funding required, the presence of the World Bank, which uses public money from its member states, often has a catalytic effect, encouraging other multilateral and commercial lenders to invest in project.

The European Bank of Reconstruction and Development, another lender for the project, is scheduled to make its decision next Monday, while the German development bank, KFW Bank, could base its decision on Tuesday's outcome at the IFC, according to German newspaper 'Handelsblatt'.

Not surprisingly, the IFC vote angered campaigners, who tried to stop the World Bank from funding the project because of its environmental and social costs.

"IFC buried its head in the sand on this one," Carol Welch, director of international programs at the Washington office of Friends of the Earth (FOE), said in an interview.

"In the IFC's unrelenting pursuit to approve this project, it has ignored the fact that the BTC pipeline violates its own policies," she added.

Campaigners also accuse bank staff of deliberately misleading bank board members by glossing over the project's environmental and human rights implications.

They say they obtained a leaked report from the staff, whose performance is judged in part by how much money the institution manages to lend, that backs the pipeline.

International advocacy groups, including FOE, Bank Watch, Kurdish Human Rights Project and Amnesty International, have campaigned against the projects on several counts.

Some charged that the pipeline passes through Georgia's sensitive Borjomi region, home to mineral water and tourism industries, among the few promising sectors of the country's deepressed economy.

Other alleged that the Government of Turkey is using emergency powers normally reserved for national disasters to expropriate local peoples' land without fair compensation.

The Host Government Agreement (HGA), negotiated between BP and Ankara, "creates a huge disincentive for Turkey to protect human rights," says Amnesty, because the government has agreed to reimburse the consortium if pipeline construction or operation is disturbed for any reason.

The campaigners also say the IFC approval proves that the bank pays only lip service to human rights, since it ignored widespread electoral fraud and the president's violent crackdown on political dissent during the recent elections in Azerbaijan.

"There's no question the political and human rights situation is deteriorating and this will have a chilling effect on efforts to independently monitor the pipeline's impact," said Welch.

The World Bank is also faulted for appearing to ignore recommendations from independent bodies, including its internal Operations Evaluation Department.

The OED recommended in March that the Bank stop trying to increase investment in extractive industries, especially in countries with weak governance.

But despite the controversy around the project, major players have backed it, including the United States.

The development has become the centerpiece of the so-called "east-west energy corridor" and what U.S. officials have previously characterized as a bid to obtain "world oil security" and lessen the country's dependence on oil from Middle East nations.

The IFC denies that the multi-phased project endangers the environment or the region's people.

The pipeline includes extensive prevention and response measures against oil spills in the highly sensitive region and will cushion any effects on the local communities, it argues.

Revenues from the oil and gas projects in Azerbaijan will be placed in a state fund, which will be audited by the international firm Ernst & Young and disclosed to the public, adds the IFC.

The lending institution also says that compensation packages for land expropriated from locals are "consistently above market rates."

The IFC has pitched other benefits for the countries involved in the project. Azerbaijan, it says, will make a whopping $29 billion in oil revenue over the next 20 years, when the ACG fields are fully developed.

Pipeline transit revenues to Georgia are estimated at around $500 million, while Turkey stands to pocket $1.5 billion from pipeline and terminal operations, transit fees and upstream investments, says the IFC.



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Albion Monitor November 5, 2003 (http://www.albionmonitor.net)

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