Casualties of the oil stampede
Those behind human rights abuses and an alleged safety cover-up around the Caspian pipeline must be held to account
A huge new oil pipeline, opened a week ago but not fully operational till August, is set to become an environmental, political and economic timebomb. Over 1,000 miles long, it is a classic example of pretensions to corporate social responsibility claimed by the BP consortium being trampled all over by the stampede for oil.
The new Great Game is the competition for control of the world's few remaining big oilfields. Global oil production will probably peak in 2010-15, and for the last 40 years new annual discoveries of oil have been far short of the increase in annual demand. The end of Big Oil is in sight, and with it the oil-powered civilisation we've all grown accustomed to. The struggle to dominate remaining supplies is intense, nowhere more so than in the Caspian basin, with probably the largest remaining oil deposits after the Middle East.
Azerbaijan and Kazakhstan, bordering the Caspian, together hold oil reserves three times the size of America's. The route most favoured by the west to transport the oil out of the Caspian goes from Baku in Azerbaijan via Tbilisi in Georgia to the Mediterranean port of Ceyhan in Turkey. This BTC project costs around £2.4bn, with BP leading a consortium of 11 companies. Almost three-quarters of the funding comes from bank loans, with public bodies such as the World Bank providing £350m, including £56m from the British Export Credits Guarantee Department.
BP trumpeted that they had "established a new international benchmark in human rights and environmental standards". Perhaps, but not quite as they intended. The Georgian group Green Alternative has compiled a 220-page dossier alleging the project breaches World Bank guidelines on 173 counts, including failure to consider the danger of earthquakes. Georgia's environment minister said BP also forced his government to violate its own legislation and route the pipeline close to mineral springs in a national park. Human-rights cases related to the pipeline have been taken against the Turkish government to the European court of justice and European court of human rights. Other cases reported by NGOs include peasants being misinformed by the authorities about their legal rights - for example that if they went to court they would receive no compensation or that they could not challenge the compensation paid. Many other cases are reported of farmers receiving far less compensation than promised, and being threatened with violence if they refused to accept what was offered. Ferhat Kaya, a lawyer, was badly beaten in police custody, he believes, for trying to inform peasant landowners of their rights.
According to the NGO coalition Baku-Ceyhan Campaign, there are serious allegations of malfeasance by the authorities in the acquisition of land along the route, in particular the expropriation of land before compensation has been agreed - a violation of the rules of the International Finance Corporation (one of the main bank lenders). And when construction damaged many roads, drainage and irrigation systems, the Georgian government stopped the work, but then backed down after a meeting between the new pro-western president and Donald Rumsfeld.
However, redress is virtually impossible because the BTC consortium had already concluded an unprecedented agreement with the Turkish government that, according to Amnesty International, grants them a power over the corridor overriding all environmental, social, human rights or other laws. In effect it strips local people and workers of all civil rights - a frightening exclusion when Turkey lies in an earthquake zone or if the pipeline were attacked by terrorists.
BP is also now facing accusations of covering up safety problems that threaten a major spill. The 160,000 joints need to be coated to stop water getting in, or the pipes will corrode, leak and may even explode in sub-zero temperatures underground. Yet BP chose an untried coating for the joints that cracks when cold and does not stick to the plaster jacket of the steel pipeline. It is alleged that BP was aware the coating would not work because its own consultant, Derek Mortimore, told it so in November 2002. Instead of heeding his report, BP pressed ahead and, it is claimed, did not pass on Mortimore's warnings to the international funding bodies; it sacked him in January 2003.
The joints duly cracked in November 2003, and at least a quarter of the coated joints in the Georgian section alone have to be replaced. This issue is now subject to legal action - BP blames the contractors, who claim BP forced them to use a coating with no track record. BP suspended work on the project for 10 weeks, again without informing the World Bank, European Bank for Reconstruction and Development or ECGD of their problems before accepting the $2.6bn loan, which seems a violation of the loan agreement. BP refuses to release the results of its investigation into the procurement fraud allegations, which it says exonerates all those involved.
It is clear that the ECGD and other lenders did not undertake any extra due diligence to ensure the project's safety. The ECGD minister, on defective advice, told parliament in June 2004 that the problematic coating had been used on major pipelines. In fact it has no track record on plastic-coated pipelines such as the one in the BTC project.
The lessons of this appalling saga are many. First, we need an immediate independent audit of the BTC pipeline set up by the lenders' group. Second, a judicial inquiry is needed into the funders' supervision of the project. Third, we need two reforms to ensure multinational companies can be held to account over their disregard for environmental, social, civil and legal rights: they should be legally responsible for the actions of their agents or subsidiaries abroad, and action against a UK company abroad should be enforceable in UK courts. Where the government will not act, NGOs should be able to take proceedings to enforce rights and legal agreements, funded by the public purse where an overriding public interest warrants it
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