PLATFORM Unravelling the CarbonWeb
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Unravelling the Carbon Web is a project by PLATFORM. We work to reduce the environmental and social impacts of oil corporations, to help citizens gain a say in decisions that affect them, and to support the transition to a more sustainable energy economy.

IN THIS SECTION
The Baku Ceyhan Campaign
Impacts of the BTC pipeline
The money behind the pipeline
Financial institutions - breaking their lending rules
Reports & Publications
Is it worth the risk? A financial analysis of the project

Financial institutions - breaking their lending rules

Unwilling to bear the political and economic risks of the BTC pipeline, BP turned to the international finance institutions, private banks and export credit agencies to underwrite the project. Despite the construction plans clearly violating lending rules and best practice,  the financial institutions provided $2.8 billion of project finance in 2004, covering 70% of the total capital construction cost.

Research by PLATFORM and its partner organisations found that on the Turkey section alone, there were 173 violations of mandatory applicable standards. This included 153 violations of the Operational Policies of the two main public financial institutions in the project, the International Finance Corporation (IFC) and the European Bank for Reconstruction & Development (EBRD). The research found a further 18 partial or total violations of the European Commission's Directive on EIA, and at least two direct violations of Turkish law.

The IFC and EBRD never directly responded to this analysis, nor required the BTC consortium to make any changes to correct these breaches, but instead went ahead to finance the project regardless.

PLATFORM also examined the compliance of the BTC project with the Equator Principles, a voluntary code on responsible lending adopted by 40 banks, which should preclude them from financing non-compliant projects. The research found 30 direct points of violation of the Equator Principles, plus 127 violations of 5 IFC standards, with which Equator Principles require compliance. The banks, including the Royal Bank of Scotland, did not require improvements from BP to ensure compliance.

Since the BTC pipeline was first conceived in the early 1990s, there has been much controversy over whether the project is really financially viable. Is it too long and expensive to build? Are the available volumes of oil enough to fill the line? Are the political risks too high? Independent financial analyst Mark Mansley of Claros Consulting conducted a financial analysis of the project and concluded that BTC's chances of success were marginal without inclusion of Kazakh oil - something BP had denied in public. Read the Executive Summary or the full report.

The public money comes from three multilateral institutions and seven export credit agencies; the private finance comes from fifteen commercial banks.

See list of institutions that financed the BTC pipeline>>>

 

article
Disaster in the pipeline
The failure of the Equator Principles banks on the Baku-Tbilisi-Ceyhan (BTC) pipeline
Chapter of the BankTrack report 'Principles, Profits or just PR?'
June 2004

Reponses to the analysis:

Royal Bank of Scotland, 14th November 2003
ABN Amro, 10th December 2003
Credit Agricole Indosuez, 2nd February 2004

Correspondence:

'BP accused of cover-up in pipeline deal' - Sunday Times article, 15th February 2004
Letter to banks regarding allegations of faulty welding and corruption, 20th February 2004
Royal Bank of Scotland response, 8th March 2004

Press releases:

Banks under fire over Caspian pipeline loan, 23rd October 2003
Barclays says no to Caspian pipeline loan, 1st December 2003
RBS slammed over pipeline loan, 3rd February 2004

'RBS attacked over unethical oil pipeline' - Sunday Herald article, 8th February 2004