Human Rights and Export Credit Agency Projects 1
Baku-Tbilisi-Ceyhan (BTC) Oil Pipeline
Drawn from presentations by Nick Hildyard (The Corner House, UK)
and additional research by ESCR-Net
Project Description
On 25 May 2005, the first section of the Baku-Tbilisi-Ceyhan Oil Pipeline (BTC) was filled with oil, and the
presidents of Azerbaijan, Georgia and Turkey inaugurated the pipeline at the head pump station in the
Sangachal Terminal near Baku, Azerbaijan. The pipeline runs 1,760 kilometers underground, from the
Caspian Sea, through Georgia, to Turkey on the Mediterranean Sea. When it is fully completed in 2009,
the pipeline will be capable of delivering up to one million barrels of crude oil per day to the port of
Ceyhan and then onto international markets, primarily in the US. None of this oil will go to the affected
countries. (A parallel natural gas pipeline is also planned.) Similar to the opening ceremony, the
Secretary of Energy Spencer Abraham attended the groundbreaking ceremony in Baku, in September
2002, reading a letter of support from President Bush and adding his own conviction that the pipeline
would strengthen international oil security. While the US is eager to secure diversified supplies of oil, a
strong constituency in Azerbaijan is eager to solidify its independence from Russia and perhaps
strengthen international pressure on Armenia. Each of the governments involved in the BTC Pipeline
have already received military and other forms of aid from the US.
However, pressure from the US government has also been immense. Other routes preferred by BP,
through Iran or Russia, were rejected by the US. While BP, the lead partner in the BTC Consortium,
could fund the pipeline from its own revenues, the Consortium has secured the investment of international
financial institutions, including the World Bank’s International Finance Corporation (IFC), the European
Bank for Reconstruction and Development (EBRD), and seven export credit agencies (ECAs) or
insurance guarantee agencies.
While the project plans speak of financial rewards for each of the partners and the Inter-Governmental
Agreement aims to ensure ‘freedom of petroleum transport,’ approximately 36,000 people in the path of
the pipeline are likely to have their lives and livelihoods impacted The project is governed by an InterGovernmental Agreement (IGA) between Turkey, Azerbaijan and Georgia, and by Host Government
Agreements (HGA) between each state and the BTC Consortium. The HGAs contain stabilization
clauses that do not allow a State’s policies or laws to change without paying compensation to the
Consortium for any loss in profit. The IGA has the status of an international treaty. As written, the
Agreements supersede domestic law, apart from the respective countries’ Constitutions, and they do not
require the exhaustion of domestic remedies for settlement. Turkey has signed a 40-year HGA,
renewable for an additional 20 years, which conflicts with key elements of European Convention on
Human Rights and international human rights and environmental law. The HGA also suggests that the
project is to be regulated by ‘the standards and practices generally prevailing in the international
petroleum pipeline industry for comparable projects.’ Obviously, these may fall far below international
human rights standards. Although a commitment is made to ensure that the pipeline standards are “no
less stringent than those generally applied within member states of the European Union,” the only
standards specified are those operating within the petroleum industry.
BP has subsequently stated, along with the other companies in the Consortium, that it will not invoke the
stabilization clauses, unless new laws are deemed to constitute “rent-seeking”. However, the statement is
1
These project and campaign overviews were first given in draft form, as accompaniments to fuller presentations, at
a Conference on Human Rights and Export Credit Agencies, co-organized by ECA-Watch and ESCR-Net, from 11-14
September 2005. The overviews were subsequently revised for wider distribution in November 2005, with input from
the conference presenters.
Human Rights and ECA Projects 1
unilateral and does not form part of the project documentation. 2 Significantly, while environmental and
human rights violations persist, the companies involved in the Consortium are promoting the BTC as a
model project. As Nick Hildyard highlighted in his presentation, this project involves a daily abuse of
power; power imbalance, often manifest in environmental and human rights violations, is the central issue
in this highly political project.
ECA Support and Other lnvestment
The Baku-Ceyhan Campaign reported that BP and its partners in the BTC Consortium had successfully
secured $3.3 billion to finance the pipeline, including 30 percent equity from the oil companies involved
and 70 percent from debt. The primary lenders are the International Financial Corporation (IFC) and
European Bank of Reconstruction and Development (EBRD), which both approved loans for $300 million
in November 2003. This occurred just weeks after Azerbaijan’s deeply problematic election, in which
many opposition candidates were barred from running or arrested, democracy protesters were harassed,
and power was handed Heydar Aliyev to his son Ilham. In a financial package designed by Lazards and
signed in February 2004, these loans were joined by investments from fifteen commercial banks (now
fourteen due to NGO pressure and environmental due diligence concerns tied to the IFC assessment),
and seven export credit agencies (ECAs). The ECAs, primarily providing political risk insurance, include
ECGD (UK), EXIM (US), JBIC (Japan), COFACE (France), SACE (Italy), Hermes (Germany), and OPIC
(US).3 On 30 December 2003, Forbes reported that the US Ex-Im Bank had approved a loan of $160
million for the BTC. Noting that engineering services, control systems and pump systems will be supplied
by US companies, the Ex-Im Bank Chairman Philip Merill claimed, "U.S. participation in the project will
support thousands of U.S. jobs among exporters and suppliers."4 (As described below, the USA is also
utilizing taxpayer money to support the project through military aid and training.) While BP and most of
the oil companies involved could finance the pipeline with their own resources, SOCAR-the Azerbaijan oil
company-being an exception, the primary reason for involving international financial institutions, including
export credit agencies, is to reduce the risks of conflict, fiscal instability, and even nationalization or
expropriation.5
Human Rights Violations
Dispossession without ‘public interest’ and lack of or inadequate compensation: Repeated claims
suggest that many of those whose land is being expropriated for the project are being paid below market
price for their land via imposed prices. Few have been given information about their rights or the potential
impacts of the project. In Turkey, independent legal counsel has often not been available to persons
during negotiations [NH: the offer has been there – but the difficulty has been finding lawyers locally who
have not already been employed by BP] . Some persons have received no compensation for land usage
and property destruction
While the Inter-Governmental Agreement, in Article II, clearly states: “Project is not intended or required
to operate in the service of the public benefit or interest in its territory,” the European Convention on
2
With clarifications and additions from Nick Hildyard (The Corner House), this Project Description is drawn from the
following resources: Baku Ceyhan Campaign, “Azerbaijan, Georgia & Turkey – BTC Pipeline,” Race to the Bottom,
Take II, ed. Gabrielle Watson, ECA-Watch, September 2003, p. 10-15. Michael T. Klare, Blood and Oil: The Dangers
and Consequences of America’s Growing Dependency on Imported Petroleum, Metropolitan Books, 2004. Human
Rights on the Line: The Baku-Tbilisi-Ceyhan Pipeline, Amnesty International UK, May 2003, at
http://www.bankwatch.org/issues/oilclima/baku-ceyhan/downloads/report_btc_hrights_amnesty_05-03.pdf. Bank
Information Center, various resources:
http://www.bicusa.org/bicusa/issues/bakutbilisiceyhan_btc_pipeline_project_azerbaijangeorgiaturkey/.
3 Baku-Ceyhan Campaign Website: “Financial Institutions Involved in the Pipeline,” updated April 2005, at:
http://www.bakuceyhan.org.uk/more_info/ifi.htm
4 “US Ex-Im Bank oks $160 mln loan for Caspian pipeline,” Forbes, 30 December 2003,
http://www.forbes.com/business/energy/newswire/2003/12/30/rtr1194354.html
Mark Mansley, Claros Consulting, Building Tomorrow’s Crisis? The Baku-Tbilisi-Ceyhan Pipeline and BP: A
Financial Analysis, PLATFORM, May 2003, p. 19-22, at: http://www.bankwatch.org/issues/oilclima/bakuceyhan/downloads/financial_analysis_03-03.pdf
5
Human Rights and ECA Projects 2
Human Rights, as well as the Turkish Constitution, only allow interference with private property in pursuit
of the public interest.6
Discrimination: The right to non-discrimination frames the enjoyment and protection of human rights in
international treaties and in the European Convention on Human Rights. In addition to the effective
exclusion of many ethnic minorities, such as the Kurds in Turkey, and women from consultations and
participation in decision-making, resettlement and compensation policies further heightened this
discrimination, particularly for women. Women are likely to be excluded from negotiations over
compensation, and since the majority of property is owned by males or in a male’s name, compensation
will be paid to the male owner or family member, under the Land Acquisition Plan. 7 Additionally, there is
also a significant danger that all project-affected persons will face unequal treatment due to the
stabilization clauses of the HGA; new laws may not be applied to the project area for its lifetime and
reservations might potentially be entered in the ratification of treaties
Training, equipping and use of military and paramilitary forces known to violate human rights:
Grievances from project-affected persons, as well as separatist movements and conflicts, plague each of
the countries through which the pipeline runs; and each of the governments have histories of violently
suppressing the right to freedom of expression and assembly. However, despite having continued to
violently suppress demonstrations, to use torture, and to jail political prisoners, particularly with regard to
the Kurdish minority, Turkey’s Gendarmerie has been given full responsibility for maintaining the security
of its section of the pipeline, whilst the HGA exempts the oil consortium from any liability for human rights
abuses that result from security operations. 8 These security arrangements are in turn bolstered by US
military aid. Beginning in 1997, US President Clinton decided to secure a new oil and gas pipeline route
that avoided both Iran and Russia (although Chechnya is close to the route) and to build military ties with
the States of the Caspian Basin. President Eduard Shevardnadze of Georgia received $302 million in
military aid from 1998-2000, as well as training from US European Command and visits from high-ranking
members of the Clinton administration. Although the US Department of Defense was barred from
sending direct military aid to the Aliyev regime in Azerbaijan, they included the military in joint exercises
and ensured that aid and training were delivered by their NATO ally Turkey. Between 2002 and 2004, US
military aid to the Caspian Basin rose to over $1.5 billion, with anti-terrorism and oil security being closely
linked in statements to the US Congress. In 2003, $11 million of US military aid to Georgia was
earmarked for US Special Operations Forces to train a 400-person ‘pipeline protection battalion.’ When
Shevardnadze was ousted in late 2003, US Secretary of Defense Donald Rumsfeld quickly flew to
Georgia, followed by Secretary of State Colin Powell, who attended the inauguration of the new
President, Mikhail Saakashvili, in January 2004. 9 The Host Government Agreements allow security
forces to take action in cases of “civil war, sabotage, vandalism, blockade, revolution, riot, insurrection,
civil disturbance, terrorism, kidnapping, commercial extortion, organized crime and other destructive
events.” As UK campaigners noted in their 2003 case study for ECA-Watch, “The extraordinary
vagueness of a rubric like ‘civil disturbance’ would be worrying enough in a region with a decent human
rights record.”10
This is compounded by the presence of serious existing conflicts. Georgia is struggling against a
separatist movement in Abkhazia, which has formed its own ethnic state on the Black Sea, and the
government faces periodic conflicts with ethnic minorities in South Ossetia on its border with Turkey. In
Azerbaijan, the Armenian majority, in the western region of Nagorno-Karabakh, removed all evidence of
Azerbaijani rule and created an independent state; the resulting war ended in a tenuous ceasefire in
1994, with Azerbaijan losing one-fifth of its territory and 750,000 persons in refugee camps.11 Finally, the
tensions between the Turkish government and the Kurdish minority in the eastern part of the country
remain unresolved.
6
Ibid. Amnesty International UK, p. 17.
Ibid. Amnesty International UK, p. 19.
8 Ibid. Amnesty International UK, p. 6, 22.
9 Ibid. Michael T. Klare, p. 132-138.
10 Ibid. Baku-Ceyhan Campaign, p. 12.
11 Ibid. Michael T. Klare, p. 131.
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Human Rights and ECA Projects 3
Threats to the right to health and denial of the precautionary principle: The Host Government
Agreements only allow state regulation for an ‘imminent, material threat to public security, health, safety
or the environment.’ This is a significant regression from the precautionary principle, reinforced by the
European Court of Human Rights, which requires reasonable and proactive measures to prevent potential
dangers to health and safety.
Limitations on freedom of expression and assembly: The Bank Information Center reported: “On
Saturday, May 20, [2005] five days before the “opening” ceremony of the BTC pipeline, even though the
Georgian section of the pipeline is still incomplete, the Azerbaijan authorities in Baku demonstrated their
willingness to cancel opposition to the project. Demonstrators were not allowed to uphold their
constitutional right to demonstrate as police broke up a peaceful action in Baku, on the grounds that it
would have been ‘inexpedient’ before the arrival of the western dignitaries including the US Energy
Secretary, scheduled to attend the opening ceremony. Police rounded up some 30 opposition members
ahead of the protest in what the opposition alleged was an attempt to derail the rally and arrested another
45 during the rally itself as they doled out severe beatings to dozens of pro-democracy protestors. For
Azerbaijan, wracked by corruption and poverty, the pipeline has been a useful political tool with officials
lauding it as the answer to all of the country’s financial problems. But the crackdown on the opposition
has highlighted concerns that the awaited benefits will never trickle down to the general population in an
atmosphere of general unaccountability.” 12
In 2003, the Aliyev government was passed from father to son in elections that were widely regarded as
fraudulent, and opposition leaders were put on trial for instigating the protests and violence that followed.
In Georgia, while many have welcomed the democratic process that led to the election of President
Saakashvili, corruption, torture, and ongoing tensions continue to plague the country. With a long history
of outlawing any manifestation of a Kurdish identity, Turkey has been involved in over 300 judgments
before the European Court of Human Rights, many for torture, disappearances, and extrajudicial killings.
In Turkey, local human rights defenders and international allies documenting abuses related to the BTC
pipeline have regularly been harassed. Nick Hildyard recalled that he and a colleague had been detained
twice in one night. In a more extreme case, a local human rights defender, Ferhat Kaya, was arrested
and allegedly tortured in May 2004, in relationship to his efforts to document abuses related to land
expropriation; the police officers involved were acquitted.
Lack of participation and access to information: The majority of project-affected persons were not
adequately consulted about the pipeline project nor were they informed of their rights or the potential
impacts of the pipeline. As detailed above, women and ethnic minorities were particularly excluded from
consultations that did take place. When demands for participation have occurred, they have often been
suppressed. In the Review of the Environmental Impact Assessment for the Baku-Tbilisi-Ceyhan Oil
Pipeline, NGOs identified 48 violations of IFC and EBRD Operational Policies related to Consultation,
noting that less than 2 percent of affected persons were consulted during a two-month process and that
few had basic project information while many had been misinformed about their rights and the potential
benefits and harms of the project.13
Denial of legal remedy in domestic courts: The Host Government Agreements do not require
exhaustion of local remedies, undermining the right to effective protection and remedies under national
courts. The HGA trumps domestic law, but does not mention international or regional human rights
standards. Under the HGA, disputes will be settled through arbitration before the World Bank-affiliated
International Centre for the Settlement of Investment Disputes (ICSID). Under pressure from civil society,
BP and the companies in the consortium have signed a statement affirming the right of affected third
parties to sue for damages in local courts. However the statement does not form part of the project
12
BIC Press Release, BTC Pipeline Opening Followed with Violence, 24 May 2005, at:
http://www.bicusa.org/bicusa/issues/europe_and_central_asia/2127.php.
13 Amis de la Terre, et al, “Review of the Environmental Impact Assessment for the Baku-Tbilisi-Ceyhan oil pipeline
(Turkey Section),” October 2003, p.6, http://www.halifaxinitiative.org/updir/BTCSumm.doc.
Human Rights and ECA Projects 4
agreements and, as UK campaigners have argued, merely adds to the legal confusion that the Host
Government Agreements have created.
Destruction of rights to an adequate standard of living: Under Article 4.1 of the HGA with Turkey, the
government has agreed to provide water of ‘sufficient quantity and quality’ without cost to the Consortium.
However, there are already water shortages along the pipeline route in many areas. In Georgia, the
pipeline runs through Borjomi-Kharagali National Park. A leak or spill could devastate the Borjomi
mineral water plant, which accounts for 10 percent of the country’s exports.
Destruction of cultural sites: In Turkey, the pipeline is built through an unexplored archaeological site
north of Ardahan. In Azerbaijan, the pipeline crosses the Gobustan Archaeological Preserve, with ruins
from the 8th century BCE. In October 2003, civil society groups identified 29 full or partial violations of the
IFC Guidelines on cultural heritage, in their Review of the Environmental Impact Assessment of the BTC
Oil Pipeline.14
Campaign Strategies and Tools
A significant part of the campaigning on the BTC Pipeline has been coordinated and undertaken by the
Baku Ceyhan Campaign, including UK-based groups: The Corner House, Friends of the Earth England,
Wales and Northern Ireland, Ilisu Dam Campaign, The Kurdish Human Rights Project, PLATFORM; and
international partners: Association Green Alternative (Georgia), Bank Information Center (USA),
Campagna per la Riforma della Banca Mondiale (Italy), CEE Bankwatch Network (Czech Republic /
Central & Eastern Europe), Friends of the Earth International (Netherlands / international), Friends of the
Earth USA.15 In Azerbaijan, the Centre for Civic Initiatives has been central to campaigning, and
Amnesty International and the World Wildlife Fund have also taken up aspects of the case. In his
presentation, Nick Hildyard outlined the goals of the campaign as:
 Increasing the political space for affected communities by ensuring that local groups were central
to the campaign and that governments were aware of international support;
 Providing an international platform for local groups to address funders and the wider public, via
lobbying tours, fact-finding missions, and reverse fact finding missions;
 Advocating ‘no public or private financing unless the project meets international standards and
law,’ as opposed to ‘no pipeline’
 Holding public and private financial institutions accountable, and forcing institutions to correct
institutional failures.
Several different strategies were utilized to emphasize that there should be no funding unless the project
meets international human rights and environmental standards. The Campaign repeatedly highlighted
the BTC Consortium’s failure to meet standards, emphasizing the monitoring and fact-finding missions of
local groups, undertaking a detailed analysis of the project’s environmental impact assessment (EIA) with
the assistance of lawyers, and publicizing the concerns of whistleblowers. The Campaign ensured that
these failures received attention and publicity through organizing public meetings, undertaking direct
action, meeting with financial fund managers and shareholders, engaging the Executive Directors at the
World Bank, and utilizing the various accountability mechanisms outlined below.
In working to strengthen accountability, the Campaign prioritized hard law over the compliance
mechanisms of international financial institutions. In one case, Georgian groups submitted a complaint to
IFC Compliance Advisor Ombudsman (CAO), but the results were minimal. In turning to hard law, thirtyeight applications were made to the European Court of Human Rights by Turkish villagers affected by the
BTC Pipeline. These applications alleged violations of the European Convention on Human Rights,
including Article 1 of Protocol 1 (right to peaceful enjoyment of property), Article 8 (right to respect for
family and private life), Article 13 (right to effective remedy), and Article 14 (non-discrimination).16
14
Ibid. Amis de la Terre, p. 9.
www.bakuceyhan.org.uk
16 In November 2005, the European Court of Human Rights rejected the majority of cases without explanation.
However, several cases are still pending.
15
Human Rights and ECA Projects 5
The Kurdish Human Rights Project and The Corner House, together with an affected landowner living in
Europe, also lodged an application with the Court of First Instance of the European Court of Justice
against the European Commission, due to its failure to adequately investigate the BTC legal agreements,
particularly the stabilization clauses of the Host Government Agreements (HGAs), which violate Turkey’s
EU Accession Partnership under the acquis communitaires.17 Although still awaiting a judgment on
standing, this case could ultimately undermine funding from European ECAs and the EBRD. The British
ECA ECGD has already been pressured with possible judicial review to examine the HGAs, and ECAs, in
general, have been pressured to put much stronger conditions on their support than the IFC and EBRD.
Multiple OECD complaints were also filed with National Contact Points in 2003, citing violations of the
non-binding OECD Guidelines for Multinational Enterprises. While all complaints have been accepted as
eligible, responses have been slow from BP and other parties, and National Contact Points lack
investigative powers, in addition to being government officers with potential conflicts of interest. Despite
these limitations, one complaint resulted in the first field visit by the UK National Contact Point, and a
dialogue process was set to begin in October 2005. In addition to sending letters to all eleven oil
companies involved in the project, highlighting liability issues, the Campaign is now exploring the legal
liabilities of the companies, as well as banks and other financial institutions, should a leak occur in the
pipeline. While company directors are theoretically liable, they are well-protected from personal liability.
As a final example of efforts to enforce accountability, Green Alternative, based in Georgia, has utilized
domestic courts to challenge the routing of the pipeline through the Borjomi-Kharagauli National Park and
the Tsalka region. After much pressure from the BTC Consortium, former President Shevardnadze gave
clearance in violation of Georgia’s environmental laws. In response, Green Alternatives has argued that
the decision violated rights to access to information and participation guaranteed by the Georgian
Constitution, as well as the Aarhus Convention and the Host Government Agreement. 18 This case began
in January 2004, and the Georgian government ordered a temporary halt to construction in the Borjomi
region in July 2004, due to lack of full environmental certification.
“European Commission Taken to Court over Baku-Ceyhan Pipeline,” Press Release from Corner House and
Kurdish Human Rights Project, 7 January 2004, at http://www.bakuceyhan.org.uk/press_releases/EC_court.htm.
18 “BTC Pipeline Court Case in Tbilisi, Georgia, on January 20,” BankWatch Media Advisory, 15 January 2004, at
http://www.bankwatch.org/press/2004/press01.html.
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Human Rights and ECA Projects 6