The real democratic deficit: BP, the Baku-Ceyhan oil pipeline and public funding
Oil companies are asking for taxpayers' money to build a pipeline that could disadvantage thousands, create a militarised zone and exacerbate existing conflicts.Anders Lustgarten
BP, Britain's largest company, is planning to build a pipeline over one thousand miles long, stretching from Baku in Azerbaijan through Georgia and down to Ceyhan on the Turkish Mediterranean coast, to bring Caspian oil to the West.
The impetus for the Baku-Tblisi-Ceyhan (BTC) pipeline comes from many directions. The United States, desperate for oil supplies from non-OPEC, non-Arab sources, has pushed remorselessly for years for this route, as opposed to shorter, cheaper paths through Russia or Iran. The governments of Azerbaijan, Georgia and Turkey look forward to oil revenues and more intimate links with the world's only superpower. BP has staked much of its financial credibility on the BTC project; only by promising big increases in oil and gas production in 2005, the year BTC is scheduled to start, has the company assuaged the concerns of oil analysts over its recent repeated failures to meet its own growth projections.
Yet none of these august bodies will be providing the majority of the money to build the Baku-Ceyhan pipeline; you - taxpayers' - will. If the BTC consortium gets its way, the bulk of the debt funding, up to $1.2 billion, for this supposedly "commercial" project will come from public sources. Some of it would be provided by international funders like the International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD), authorised by governments to lend public money directly to private companies. And some would come from the national export credit agencies (ECAs) of the companies involved: those of the US, Norway, Japan, Germany, France, Italy and, of course, from the British ECA, the Export Credits Guarantee Department. As John Browne, the Chief Executive Officer of BP, has noted, without billions of "free public money", BTC cannot go ahead.
One might assume, therefore, that serving the public interest, both locally and in its funding countries, would be pre-eminent in BTC's priorities, and BP has repeatedly emphasised to funders the supposed "poverty alleviation" and "regional development" aspects of the project. And yet the Inter-Governmental Agreement (IGA), the framework legal agreement for BTC, explicitly states that "the Project shall not involve the provision of services to the public at large in its Territory . . . [It] is not intended or required to operate in the service of the public benefit or interest."
Puzzled by this discrepancy, the Baku- Ceyhan Campaign - an international coalition of environmental and human rights groups - organised a seminar in October 2002 at the House of Lords to give BP the opportunity to justify its demands publicly. The company refused several times to attend.
A closer look at the specifics of BTC perhaps explains this reluctance; the potential negative impacts of the pipeline are immeasurable. In Turkey, the route passes through areas that until recently were caught up in a desperately brutal war between the state and Kurdish guerrillas, in which up to four million people were displaced, their villages burnt. Now the pipeline may well produce a form of "double displacement", preventing refugees from going back to their homes, perhaps permanently. Certainly that has been both the effect and the intention of other major infrastructure projects, notably dams, in the region.
A Fact-Finding Mission to the pipeline areas conducted by the Baku-Ceyhan Campaign in August 2002 found massive discrepancies between BP's claims about the consultation and compensation plans it must by law compile, and reality.[1] Less than one-quarter of our sample of concerned parties had been officially informed about BTC; one village, Haçibayram, listed by BP as consulted by telephone, was an abandoned wreck of shattered walls. Many of those who had received information remained confused and unsure of their rights. The idea of free consultation in the Kurdish regions is, in any case, chronically disingenuous, as anyone familiar with the Kurds' political situation (a situation which is notable in BP's literature by its total absence) must concede.
As for compensation, the BTC consortium insists on setting up bank accounts in the names of those that appear on the decades-old land registries; in doing so, BP will be paying the dead and depriving the living, their children and grandchildren, of their livelihoods.[2]
Were the pipeline to be built in such a politically volatile area, security would be a major concern. That prospect has led Turkey to grant BP unrestricted rights to land all along the pipeline; in other words, the very same territory it fought the Kurds so brutally for, it has now freely ceded to a multinational company. BP in turn has chosen the Turkish gendarmerie, militarised police implicated in some of the very worst atrocities inflicted on Kurdish civilians, to guard it. This effectively amounts to the creation of a militarised corridor down the centre of Turkey, selfconfessedly serving the interests of a private company.
And it is not only politics that are volatile here; the pipeline lies literally on top of the North Anatolian faultline, responsible for no less than ten major earthquakes in the last 60 years, coincidentally the likely duration of the BTC pipeline.
The situation in Georgia is, if anything, worse. The pipeline passes close to or through several active conflict zones; it also cuts through the Borjomi-Kharagauli National Park area, near to the Borjomi mineral water plant, one of Georgia's most significant sources of foreign income. In Borjomi, as anywhere, oil and water really don't mix. Even the Georgian government itself published a list of 32 questions it wanted to ask BP about the implications of its choice of route. Pressure to keep to its timeline on the project means that those questions will now go unanswered. BP wrote to President Edouard Shevardnadze in November 2002 instructing him "to inform experts who visit with you . . . that [alternative] routes are unacceptable." Shortly thereafter, following a visit from the US envoy to the Caspian, Georgia approved the route. It seems that consultation for BP, even at the governmental level, is rather like the pipeline: everything flows one way.
The impact of BTC in Azerbaijan likewise reveals the spuriousness of BP's regional development claims. Criticism has been raised over the plan to use the Azeri Oil Fund, set up by the World Bank and IMF expressly to promote the use of BTC oil revenues for socially useful investment, to pay 25% of the Azerbaijan State Oil Company's share of the pipeline construction costs. Azerbaijan was also recently voted the world's third most corrupt country by Transparency International, so allegations (denied by BP) of serious corruption, involving hundreds of millions of dollars and the Azeri President, Heydar Aliyev, are of considerable public concern.
But what has genuinely shocked the NGOs involved in the BTC campaign is the colonialist nature of the Host Government Agreements (HGA), the agreements signed between BP and the host countries which underpin the entire project. The Turkish HGA stipulates, among other extraordinary clauses, that it overrides all conflicting domestic law, both present and future, bar the Constitution. This means that should a future Turkish state less in thrall to the West decide to pass more stringent environmental, human rights or social laws to regulate the pipeline regions, BP will be exempt from them. Except in extraordinary circumstances, only BP and its consortium can terminate the HGA.
There's more. Should the new laws affect the "Economic Equilibrium" (BP's sonorous-sounding term for profitability) of the project, Turkey must pay BP compensation. And speaking of blank cheques, Turkey has indemnified any extra cost of building its section above the $1.4 billion that BP gave the Turkish state construction company, BOTAS. Not only was the general construction estimate at least $2 billion, but also pipeline costs normally spiral after the actual construction begins: BP's Alaska pipeline went 10 times over budget. So Turkey, a country deep in its most serious economic crisis since the 1940s, is potentially facing a bill of many billions of dollars, one that might very well breach the guarantee ceiling imposed by the IMF as part of its bailout package.
And that is not the only significant legal obstacle BTC may pose for Turkey: there is a very real possibility that the HGA and IGA will lead to breaches of Turkey's obligations under the European Convention of Human Rights, and that the agreements will seriously imperil the process of Turkey's EU accession towards which Turkey has recently made such stringent efforts. The greatest sufferers from that will, ironically, be the Kurds, who now look to Europe to restrain the continuing excesses of the Turkish military.
This, then, is the project that your money will be making possible. The Baku-Ceyhan pipeline symbolises the real democratic deficit of the twenty-first century: the unaccountable and unrestrained use by ECAs and funders of billions of pounds of the Northern public's taxes to finance massive infrastructure projects in the South. These neo-colonial projects benefit Northern and Southern elites at the expense of ordinary people everywhere, and in the process cause horrendous damage, add immeasurably to Southern debt burdens and generate thousands of migrants and refugees. Our position on the Baku-Ceyhan campaign and projects of its ilk is simple: we do not believe that any public money should go to them until the myriad of doubts that surrounds their public utility are answered, fully and publicly. We look forward eagerly to BP taking up our offer this time.[3]
Anders Lustgarten works with the Baku-Ceyhan Campaign. This is an edited version of an article that first appeared in The Observer On-Line, 1 December 2002.
[1] A copy of this and another fact-finding mission to Azerbaijan and Turkey in March 2003 is available at www.baku.org.uk
[2] BP has since said it will correct this. Nonetheless, significant problems with compensation still remain.
[3] The major potential funders of the proposed Baku-Ceyhan pipeline have now opened the project to public comment. The Baku-Ceyhan campaign has submitted a protest under the OECD Guidelines on Multinational Enterprises. It has also made a legal submission to the European Commission arguing that the pipeline breaches Turkey's accession agreement with the EU. For more information, see www.bakuceyhan.org.uk
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