Pipeline approval sparks renewed criticism of Bank role

8 November 2003

On 4 November the World Bank Group agreed to invest in an oilfield and pipeline development stretching across Central Asia. Regional and international non-government organisations which have been investigating the project described the decision to move forward as "a blatant display of political cowardice which will lead to human rights abuses and environmental destruction".

The investment by the International Finance Corporation (IFC) will enable a 1,760 kilometer pipeline to be built from Baku in Azerbaijan through Georgia to a new terminal at Ceyhan on the Mediterranean coast of Turkey. It also includes funding for an associated oilfield development. The pipeline, known as the Baku-Tbilisi-Ceyhan project (BTC), has the potential to deliver a million barrels of crude a day for 20 years. The IFC will loan $150 million for the oilfield and pipeline projects and will syndicate loans to private banks for another $150 million.

Shahbaz Mavaddat, the IFC manager who has been leading the projects claimed: "what we bring is a combination of mobilizing money, political risk mitigation, additional lenders, and environmental and social leadership". However campaigners contest this bitterly. They point out that they have identified 173 likely violations of World Bank and other standards. The BTC project will provide relatively minor benefits to the host countries. And many burdens have been imposed under legal agreements between the consortium and the host governments.

a blatant display of political cowardice which will lead to human rights abuses and environmental destruction

The Bank’s loan follows intense lobbying by BP, the lead company in the consortium building the project. The Baku-Ceyhan Campaign says the project is primarily driven by the American desire for secure oil supplies, and could lead to severe economic hardship for thousands of people and the destabilisation of the entire Caspian region. The Campaign says "Executive Directors of the Bank acknowledged the severe problems with BTC but frequently observed that the ‘political nature’ of the project meant that there was little they could do to stop it". This charge echoes criticisms by an internal review published by IFC earlier this year.

The approval of World Bank funding will almost certainly spur approval by other financiers, for example export credit agencies and the European Bank for Reconstruction and Development. Whilst they are supposed to have their own independent decision-making criteria and processes these institutions often blindly follow the World Bank’s lead. Indeed BP, the lead company in the project consortium, has acknowledged that it did not need the World Bank’s money, but its political credibility. Campaigners are working, however, to challenge the European Bank for Reconstruction and Development and the interested private banks to ensure they confront the project’s problems.