IFC Backs Baku Ceyhan Project


WASHINGTON–DC (Baku-Ceyhan Campaign–Financial Times–Reuters)–The International Finance Corporation–the World Bank’s private sector arm–almost unanimously approved funding on Tuesday for the Baku-Ceyhan oil drilling and pipeline project despite last-ditch pleas from some environmentalists to halt the scheme.

The decision of the IFC’s 24-member executive board is likely to be followed by approval by the European Bank for Reconstruction and Development–which holds its next board meeting next week.

The IFC’s decision will approve $310m funding for the project–around 10 per cent of the total cost. An 11-member consortium led by BP is building the pipeline. Other participants include Norway’s Statoil–France’s Total–Azeri state oil firm SOCAR–Unocal Corp. of the United States–and Italy’s ENI.

The loan package would include $60 million for the first phase in the development of the Azeri-Chirag-Gunashli (ACG) deepwater oil field off Azerbaijan.

Another $250 million would be for the pipeline. Half of the total loan package would consist of IFC money and the other half from private commercial lenders.

The 1,040-mile (1,760 km) pipeline–the longest of its kind in the world–would run from the Azerbaijan capital of Baku–through Tbilisi–Georgia–and on to Turkey’s Mediterranean port of Ceyhan.

The oil field contains an estimated 5.4 billion barrels of recoverable crude. On full development–expected by 2009–peak production is expected to be about 1 million barrels a day.

Azerbaijan should generate about $29 billion in revenue from the project over the next 20 years–which would be held in a state oil fund–audited by an international firm and disclosed to the public.

Georgia would reap about $500 million from transit fees from the pipeline–while revenue to Turkey would be about $3 billion from transit fees and for the use of the terminal at Ceyhan.

Some environmental and human rights campaigners have opposed the pipeline–which they say threatens ecologically fragile areas through which it will run.

In a letter sent to IFC board members ahead of Tuesday’s meeting–Anders Lustgarten of the Baku-Ceyhan Campaign–said the pipeline would undermine democracy in the region by handing more power to Ilham Aliyev–Azerbaijan’s new president–who won a recent election amid allegations of fraud.

The Baku-Ceyhan Campaign cites that the project also violates every relevant World Bank safeguard policy–and is in potential breach of Turkey’s obligations under international human rights and environmental law.

Turkey’s use of emergency powers–normally reserved for national disasters–has been criticized for expropriating local people’s land without compensation.

"Many of the affected villagers say that they will be forced to leave their lands because of inadequate compensation," says Kerim Yildiz of The Kurdish Human Rights Project.

Another concern is that security of the pipeline in Turkey will be provided by the state Gendarmerie–which has been censured by the Council of Europe for persistent human rights abuses–including torture and ‘disappearances’–against the Kurds. The European Commission has announced an investigation of the human rights impact of the pipeline in Turkey.

The pipeline has also been criticized for not addressing its environmental impacts–especially on the important mineral water springs of Borjomi in Georgia. A court case which is being heard in Georgia alleges that the pipeline consortium put undue pressure on the Environment Minister to approve the routing through the sensitive area.

One official present at the meeting said–however–the only abstentions on the IFC’s governing board were Iran and Russia–who have long-standing objections about control of oil in the Caspian.

Other executive directors said that the extensive environmental and human rights safeguards built into the project justified taking a risk.


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