Bankwatch hits out at EBRD's pipeline loan to “non-transparent, oppressive” Azerbaijan

Bankwatch hits out at EBRD's pipeline loan to “non-transparent, oppressive” Azerbaijan
By bne IntelliNews October 19, 2017

Representatives of watchdog CEE Bankwatch on October 18 hit out at a development bank’s lending of $500mn for the Trans Anatolian Pipeline (TANAP), one of three interconnected pipelines that will deliver Azerbaijani gas to Turkey and Europe starting in 2019.

Azerbaijan's withdrawal from an institution that oversees transparency in extractive industries earlier this year, as well as a series of current human rights, corruption and money laundering scandals involving Baku and European institutions, should preclude the advancing of the loan from the European Bank of Reconstruction and Development (EBRD), CEE Bankwatch contended.

Anna Roggenbruck, policy officer at CEE Bankwatch, said the gas project benefits "only a handful of corporations and oppressive governments" and that it is regrettable that it be valued "more than sustainable development and freedom of ordinary people". “With this loan, the EBRD has showed disrespect to its fundamental principles of multiparty democracy, the rule of law and respect for human rights,” she added in the strongly-worded statement.

After having its statement of compliance rescinded in 2014 due to Baku's failure to engage civil society in monitoring oil revenue spending, Azerbaijan eventually chose to drop out of the Extractive Industries Transparency Initiative (EITI). Comprising 50 oil- and mineral-rich countries, EITI is a voluntary organisation that oversees transparency in mineral-rich sectors in developing countries.

The EBRD and the European Investment Bank (EIB) have been mulling loans for TANAP and the Trans Adriatic Pipeline (TAP), another part of the project, for more than a year. Critics say the fact that the EBRD decided to finance the project is significant in that it goes to show that it is willing to compromise on its own codes of conduct, which stipulate that the multilateral lender promote integrity, good corporate governance and high ethical standards in its operations.

The EBRD press release announcing the board approval of the $500mn loan made no mention of another credit, a $1bn syndicated loan, that the bank is expected to lend to the project.

Responding to CEE Bankwatch's criticism, an EBRD spokesperson told bne IntelliNews that the development bank does believe the approval of the loan is consistent with its principles and code of conduct. “An overwhelming majority of EBRD shareholders voted in favour of this project which is of strategic importance for the region and Europe. It will lead to a diversification of the sources of energy supply and lead to the development of an energy mix moving away from traditional fuels towards cleaner forms of energy [rather than, for instance, coal and lignite],” he said.

Earlier, the Financial Times reported Francis Malige, the EBRD's managing director for eastern Europe and the Caucasus, as saying that EITI principles had been applied to the project despite Azerbaijan’s withdrawal from the initiative.

TANAP is designed to be part of the $40bn, 3,500-km-long Southern Gas Corridor (SGC) running across six countries. The key components of the SGC are the Shah Deniz offshore gas field in Azerbaijan, the Southern Caucasus Pipeline in Azerbaijan and Georgia, TANAP in Turkey and the Trans Adriatic Pipeline (TAP) , to run across Greece, Albania and Italy. The initial annual throughput capacity will be up to 16bn m3, which is equivalent to the annual energy consumption of more than 10mn households in the region.

TANAP is expected to become operational in 2018.

In February, the World Bank signed a $400mn loan deal with Turkish gas grid operator Botas for the TANAP project. In addition to the World Bank, the Asian Infrastructure and Investment Bank and other international finance institutions are supporting TANAP with $2.4bn

The State Oil Company of Azerbaijan (SOCAR) holds a 58% stake in TANAP, while Botas has a 30% stake and BP owns a 12% stake.