{"id":35064,"date":"2017-10-17T13:27:41","date_gmt":"2017-10-17T12:27:41","guid":{"rendered":"http:\/\/www.climatechangenews.com\/?p=35064"},"modified":"2018-02-06T17:21:17","modified_gmt":"2018-02-06T17:21:17","slug":"eu-bank-decide-huge-public-loan-europes-biggest-fossil-fuel-project","status":"publish","type":"post","link":"https:\/\/www.climatechangenews.com\/2017\/10\/17\/eu-bank-decide-huge-public-loan-europes-biggest-fossil-fuel-project\/","title":{"rendered":"EU bank to decide huge public loan to Europe’s biggest fossil fuel project"},"content":{"rendered":"

EU banks are set to\u00a0announce\u00a0on Wednesday the first tranche of\u00a0$2.5bn worth of public loans\u00a0being considered for Europe’s biggest\u00a0fossil fuel project, amid\u00a0warnings\u00a0the pipeline is unnecessary and\u00a0mired in the Azerbaijan\u00a0laundromat corruption scandal.<\/span><\/strong><\/p>\n

Spanning seven countries and\u00a0costing\u00a0$40bn<\/span><\/a>,\u00a0the\u00a0southern gas corridor\u00a0(SGC)\u00a0is due to begin piping 10\u00a0billion cubic metres (bcm)\u00a0of gas to Europe\u00a0per year\u00a0in\u00a02019,\u00a0according to<\/span><\/a><\/span>\u00a0the European Commission<\/span><\/span>.<\/span><\/p>\n

The EU aims to eventually\u00a0receive\u00a0up to 100bcm<\/span><\/a>\u00a0of natural gas annually through a pipeline\u00a0that will snake through Turkey, Greece and Albania before transiting across the Adriatic sea to Italy.<\/span><\/p>\n

The European Bank of Reconstruction and Development (EBRD) is due to make a loan statement\u00a0<\/strong>on Wednesday for a $500m investment<\/a>.\u00a0The European Investment Bank\u00a0(EIB)\u00a0is also mulling a $2bn loan<\/span><\/a>, the largest in the bank’s history. An EIB vote on their loan, also expected on Wednesday, has been postponed.<\/p>\n

The banks describe the project as critical for energy security in Europe. Critics say the industry-drafted gas demand forecasts the EU relied on when proposing the\u00a0corridor\u00a0have been discredited, its climate impact has not been investigated, and its construction will benefit organised crime<\/a> and human rights violators.<\/span><\/p>\n

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Report:\u00a0<\/strong>Turkish gas companies with corrupt past get World Bank loan<\/a><\/p>\n<\/blockquote>\n

Deepening the gloom,\u00a0Simon Pirani, a senior research fellow\u00a0and\u00a0author<\/span><\/a>\u00a0at Oxford University’s Institute for Energy Studies, told Climate Home News the EU’s dream of a supply\u00a0expansion beyond 10bcm per year was highly unlikely, with plans still unfinished and\u00a0private\u00a0investment\u00a0yet to materialise.<\/span><\/p>\n

\u201cI have doubts about any significant quantities of additional gas going along that route, because it’s not clear which gas fields in the Caspian they could come from,\u201d he said.<\/span><\/p>\n

\u201cThere is a field being developed by [Azerbaijan state oil company]\u00a0SOCAR with Total but that will not produce significant quantities of gas and those companies have already agreed that the gas produced there will go to the domestic Azerbaijan market. There won’t be any left for export. So the amount that Azerbaijan can contribute to [Europe’s gas market] is really quite minor.\u201d<\/span><\/p>\n

EU hopes for diversified supplies would likely be dashed, he argued, with neighbouring Turkmenistan far more interested on exporting eastwards to China, and little gas availability in Iran’s northwest, from where it could be pumped to Europe.<\/span><\/p>\n

The 10bcm of gas a year that Azerbaijan has committed to supply would constitute just 2.5% of the\u00a0400bcm<\/span><\/span>\u00a0Europe consumed in 2015<\/a>, and make little dent in its dependence on Russian supplies, Pirani said.<\/span><\/p>\n

The pipeline’s cost\u00a0is equal<\/span><\/a>\u00a0to the EU’s entire investment in low carbon transformation over the 2014-2020 period.<\/span><\/p>\n

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“\u201cI have doubts about any significant quantities of additional gas going along that route,” said Simon Pirani (Photo: Tanap)<\/p><\/div>\n

The European Commission did not respond to requests for comment.\u00a0As part of the G7, the EU has committed<\/a> to ending “inefficient” public subsidies to fossil fuel projects by 2025.<\/span><\/p>\n

But in Brussels, the\u00a0project is\u00a0seen as a\u00a0vital\u00a0diversification of energy supplies, freeing the continent from a potential Russian stranglehold.<\/span><\/p>\n

The bloc’s vice president, Maros Sefcovic\u00a0has\u00a0<\/span>hailed\u00a0the\u00a0SGC<\/span><\/a>\u00a0as\u00a0an historic \u201cturning point\u201d\u00a0shifting Europe\u00a0into mixed and diverse\u00a0energy markets.<\/span><\/p>\n

The EU’s decision to\u00a0include the southern gas corridor\u00a0on a list of “essential” projects of common interest<\/a>\u00a0was taken on the basis of a gas demand forecast by the European Network of Transmission System Operators for Gas (Entsog).<\/span><\/p>\n

Entsog is a coalition of gas companies and their subsidiaries, which is not listed as a lobby despite sharing\u00a0a building with the trade association, Gas Infrastructure Europe. Its analyses are not in line with the EU’s climate plans, and it has consistently overestimated gas demand for a decade,\u00a0according to Friends of the Earth Europe (FoE).<\/span><\/a><\/span><\/p>\n

Europe’s actual gas demand in 2015 was 27% lower than projections in 2008, when the pipeline was proposed, and the commission, the International Energy Agency\u00a0and Entso-E (Entsog’s regulated electricity twin) have all revised their forecasts downwards.<\/span><\/p>\n

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Report:<\/strong> Human rights report quashed in push for Azerbaijan-EU gas pipeline<\/a><\/p>\n<\/blockquote>\n

Think tank\u00a0E3G expects EU gas demand to flatline – or at best recover slightly \u2013 in the short term, and decline thereafter, as the clean economy transformation takes hold. An E3G\u00a0modelling study<\/span><\/a>\u00a0found that the SGC was not needed to safeguard against supply disruptions, under any scenario.<\/span><\/p>\n

That leaves an infrastructural white elephant that could \u201cquickly become a climate bomb\u201d, according to Antoine Simon, a spokesman for FoE. “We know the longer these mega-pipelines are, the higher the risks are for leaks to happen, and it does not get better as these infrastructure age,\u201d he said.<\/span><\/p>\n

Natural gas may have a global warming potential many times higher than renewables but, as SGC funders, Europe’s development banks have taken their lead from the commission, even though it has carried out no climate impact assessment.<\/span><\/p>\n

On paper,\u00a0the EIB<\/span><\/a>\u00a0and\u00a0<\/span>EBRD<\/span>\u00a0have committed to considering the climate impacts of their investments.\u00a0<\/span>In practice though, the banks are enablers,\u00a0said the NGO Bankwatch.\u00a0<\/span><\/p>\n

\u201cThe project is too big and risky to be financed only from private sources,\u201d said Bankwatch spokeswoman\u00a0Anna Roggenbuck. \u201cInternational financial institutions provide loans which also cover political and economic risks.\u201d<\/span><\/p>\n

Climate Home News approached both banks for interview. The EIB asked for questions in advance, and then turned down the request. The EBRD demanded editorial privileges before publication, which we considered unacceptable.<\/span><\/p>\n

The institutions’ guarded response follows the announcement of a Bulgarian government inquiry into\u00a0Kalin Mitrev,\u00a0the country’s representative on the EBRD board, after\u00a0the Guardian revealed<\/a>\u00a0he received almost $500,000 via\u00a0the $2.9bn Azerbaijani laundromat\u00a0scheme<\/span>. Mitrev says the payments were for legitimate consultancy.<\/span><\/p>\n

The ERBD loan\u00a0would be made to the\u00a0Southern Gas Corridor Closed Joint Stock Company, which is owned\u00a0by the Azeri government and\u00a0its state oil company.<\/p>\n

The slush fund was also used to pay medical bills worth tens of thousands of dollars to Yaqub Eyyubov, Azerbaijan’s deputy prime minister tasked with developing its oil and gas strategy. Eyyubov’s son also received millions of dollars from the laundromat via a Hungarian bank account, the Guardian reported.<\/span><\/p>\n

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Climate Weekly:<\/strong>\u00a0Sign up for your essential climate news update<\/a><\/p>\n<\/blockquote>\n

It is not known what due diligence measures\u00a0Europe’s\u00a0banks have\u00a0taken\u00a0to investigate Azeri laundromat payments –\u00a0or\u00a0to\u00a0vet, monitor and audit\u00a0SGC\u00a0funding disbursements. These have already been\u00a0beset by\u00a0<\/span>charges<\/span><\/a>\u00a0of corruption, cartelism and mafia\u00a0infiltration,\u00a0many substantiated in courts of law.<\/span><\/p>\n

According to Human Rights Watch, Azerbaijan is\u00a0a highly repressive regime<\/span><\/a>, where dissidents are routinely arrested, torture is rife, independent media are shut down and human rights monitors cannot operate freely.<\/span><\/p>\n

Two years\u00a0ago,\u00a0the European Parliament called<\/span><\/a>\u00a0for\u00a0the\u00a0EU\u00a0to suspend all\u00a0funds\u00a0to\u00a0Azerbaijan over\u00a0its\u00a0human rights violations<\/span><\/a>, which appear to also breach\u00a0EIB standards<\/span><\/a>.\u00a0In March, the central Asian country\u00a0withdrew\u00a0from the extractive industries’ global watchdog<\/a>\u00a0<\/span>in response to criticism of its poor\u00a0record on\u00a0civil society engagement.<\/p>\n

\u201cGiven its shaky business case, unresolved human rights issues and legitimate climate concerns, I\u2019m surprised the EBRD wants anything to do with the southern gas corridor,\u201d said Jonathan Gaventa, the director of E3G.<\/span><\/p>\n

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\u201cThe southern gas corridor is more than energy diversification and EU energy security for us,\u201d said EU foreign policy high representative Federica Mogherini (Photo: Tanap)<\/p><\/div>\n

Even the argument that it\u00a0can diversify the EU’s gas supply away from Russia appears shaky.\u00a0Russian giant Gazprom has said that\u00a0it may use the pipeline\u00a0to transport\u00a0Russian gas to Europe<\/span><\/a>, under the\u00a0project’s non-discriminatory auctioning system, and according to reports in the Azeri press may\u00a0already\u00a0be\u00a0planning<\/span><\/a>\u00a0on this.<\/span><\/p>\n

Russia’s Lukoil has taken a 10% share in Azerbaijan’s Shah Deniz drilling consortium and the Italian oil firm\u00a0Eni signed a memo of understanding<\/span><\/a>\u00a0with Gazprom in March to explore piping Russian gas to Europe through the corridor.<\/span><\/p>\n

But for the EU, Azerbaijan\u00a0is more than just a Caspian\u00a0gas\u00a0field. The<\/span>\u00a0former Soviet republic remains economically and culturally linked to Russia and the southern gas corridor offers the prospect of wedging what then-president\u00a0Dmitry Medvedev called<\/span><\/a><\/span>\u00a0<\/span>in 2011, \u201cthe closest friendship and trust links\u201d between the two countries.<\/span><\/p>\n

\u201cThe southern gas corridor is more than energy diversification and EU energy security for us,\u201d the EU’s foreign policy chief Federica Mogherini,\u00a0said last year<\/span><\/a>. \u201cIt is also about enlarging and deepening political, economic and social ties with a number of partners in a wider region… Azerbaijan, Georgia, Turkey, Albania.\u201d<\/span><\/p>\n

\u201cWe need an all-round strategic partnership between us,\u201d Mogherini added, \u201cand I am glad this is Azerbaijan\u2019s vision, too.\u201d<\/span><\/p>\n

Asked whether the southern gas corridor was in America’s national security interests, a US state department official told Climate Home: \u201cThe US sees it as certainly in its interest that the national security interests of partners – and their stability, whether economic or political – be assured.\u201d<\/span><\/p>\n

\u201cAnd if there is energy insecurity, we think that undermines security more broadly speaking,\u201d the official added.<\/span><\/p>\n

What is the Southern Gas Corridor?<\/strong><\/p>\n

BP calls it<\/a>\u00a0\u201carguably the global oil and gas industry\u2019s most significant and ambitious undertaking yet\u201d. It is a three part pipeline that, if completed, will carry gas from the\u00a0Shah Deniz 2\u00a0oil field in Azerbaijan\u2019s Caspian Sea through Georgia, Turkey, Greece, Albania into southern Italy.<\/p>\n

Sections:<\/p>\n