Private Sector


Leak reveals Bank oil pipeline threat to pillar of Georgian economy

2 October 2003

Friends of the Earth has obtained clear evidence of the risks the proposed Baku-Tbilisi-Ceyhan (BTC) oil pipeline will present to a major Georgian industry. The NGO has released a copy of a confidential November 2002 letter from the international food conglomerate Groupe Danone to the Georgian Glass and Mineral Water Company. This confirms that Danone withdrew from potential investment in the company because of announcements “concerning the layout of the oil pipeline in Georgian Territory”.

The World Bank, through its private sector lending arm the International Finance Corporation (IFC), will vote on Oct. 30 to approve financing for the controversial pipeline. The pipeline has been contentious for many reasons, but a major one has been its route through the Borjomi region of Georgia that is home to the mineral water and tourism industries. These are the leading sectors of the Georgian economy and damage to them may cancel out revenues from the oil pipeline.

The letter further states that “in the given circumstances, we cannot proceed with the evaluation of this project unless such a threat on both the [water] and indirectly the [Danone] brand equity has been removed.”

These revealing documents show that oil takes precedence over jobs and the environment in World Bank lending

“These revealing documents show that oil takes precedence over jobs and the environment in the World Bank’s lending portfolio,” said Carol Welch, director of international programs at Friends of the Earth. “If the World Bank approves financing for the BTC, it will shoulder total responsibility if Georgia’s mineral water industry collapses.”

The Monitor Group, a leading international strategic consulting firm, found in another confidential report that “the very presence of the pipeline will have a significant detrimental impact on the Georgian Glass and Mineral Water Company”. Market research indicates the presence of the BTC pipeline in the Borjomi Region is likely to damage the reputation of Borjomi water, and reduce demand for it.

The IFC was once an investor in the Georgian Glass and Mineral Water Company, but in Oct. 2002, it sold its shares to a mutual fund, the New World Value Trust. According to a source, the purchase and sale agreement said “there is presently under study the development of the Baku-Ceyhan pipeline which may cross some of the fields ” in areas where spring water is collected and extracted to produce Borjomi Springs and Borjomi Light.” With the subsequent public revelation of the pipeline’s route through Borjomi, the purchasers are reportedly calling into question IFC’s candor in the purchase and sale agreement.