Crude Accountability, together with Public Association for Assistance to Free Economy (Azerbaijan) and Azerbaijan-based activist Rasul Jafarov filed a complaint to the European Bank for Reconstruction and Development (EBRD) regarding the Bank’s loans for the development and expansion of the Shah Deniz gas field in Azerbaijan.
The complaint, submitted to the EBRD’s Project Compliance Mechanism, focuses on procedural concerns in the project approval process, due diligence towards affected communities, and transparency of project-related information. It covers the EBRD Shah Deniz II and Shah Deniz II extension loans to Lukoil Overseas Shah Deniz (LOSD), amounting up to USD 600 million. The Shah Deniz gas field is the starting point for the Southern Gas Corridor, a series of mega-pipelines designed to bring Caspian gas to Western Europe.
Based on document analysis, field work, and engagement with EBRD officials, Crude Accountability and partners found evidence that the EBRD and LOSD have not implemented all of the EBRD’s social, environmental and information disclosure requirements. Local communities have not been adequately informed or consulted with during the project development, and are suffering from widespread health-related issues they believe are linked to the project site. The four affected villages are severely economically depressed, with some lacking paved roads, basic sanitation and heating in schools. With natural gas taken right from under them to be exported to Europe, villagers are left without any opportunities or basic services. “We are left forever. Forgotten. No one cares about the current situation here, and about our problems,” said one young man from an impacted village.
The process by which EBRD approved the Shah Deniz II loan is also very concerning. According to an independent audit commissioned by the EBRD, the project client, LOSD, has little influence over project outcomes. British Petroleum is the project operator for the Shah Deniz gas field, and makes all of the decisions, while LOSD is a minority shareholder. EBRD approved the Shah Deniz II project 3 months before that audit was finalized and subsequently disclosed. Further, Social and Environmental Management Plans for this project have never been released. While the EBRD staff maintain that this was an officially approved derogation from policy, it is not included in the list of derogations for that year. We are deeply concerned about the integrity of the Social and Environmental Management Plans, as these documents underpin the entire social and environmental risk management and benefit sharing system for the project. According to EBRD policy, these plans should be publically disclosed.
We believe the EBRD approved the Shah Deniz II loan and its extension without adequate assessment and mitigation of the social and environmental risks. As the starting point of the Southern Gas Corridor, Shah Deniz II is a highly politically motivated project.
“Given the high degree of corruption and human rights violations in Azerbaijan, international financial institutions, including the EBRD, should not invest in the hydrocarbons sector in Azerbaijan until the governance situation improves. Impacted communities neglected by this project deserve and are entitled to consultation, healthy air, soil and food, access to jobs and basic infrastructure. We hope that this complaint raises their issues, and the risks involved in doing business in Azerbaijan,” said Sonia Zilberman of Crude Accountability.
More information on the complaint can be found here:
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