EU commission urged bank to support Azerbaijan gas pipeline

Gas pipeline

By Karl Mathiesen for Climate Home News

Letter from top officials to the president of the EIB said Europe’s commitment to the pipeline ‘must not wane’ and called for publicly-backed loans

Top European officials intervened in European Investment Bank (EIB) deliberations over a public loan to a huge pipeline project that will carry natural gas from Azerbaijan to Italy.

A letter, released under freedom of information laws, from the European Commission vice president Maroš Šefčovič and climate and energy commissioner Miguel Arias Cañete to the bank’s president Werner Hoyer made clear the importance of the project to the EU.

The bank is considering loans in excess of €2 billion to two sections of the pipeline, from Azerbaijan to western Turkey and from Greece to southern Italy. Much of the work constructing the Turkish section has already been completed.

The letter, dated 13 July 2017, said the project was “vital and irreplaceable” for the diversification of EU gas sources and security of supply. Almost a third of natural gas imports in Europe come from Russia – a reliance the union is keen to lessen.

“Europe’s commitment must therefore not wane,” Šefčovič and Cañete wrote, adding they hoped the EIB – and the European Bank for Reconstruction and Development (EBRD) – would give financial backing to the pipeline “thereby to exemplify that European Union patronage over the Southern Gas Corridor continues”.

The EBRD approved a $500m loan in October. The EIB, which gets public funding from EU member states, was expected to consider a loan application in October, but postponed the decision.

Loans to the pipeline from the EIB and EBRD would qualify as fossil fuel subsidies, said Shelagh Whitley, a leading researcher on the issue at the Overseas Development Institute.

On Friday, the commission published a report on energy in the EU that called on member states and the EIB to do more to reduce public subsidies for fossil fuels.

“The clean energy transition may be hindered by unfair competition if Member States continue to provide fossil fuel subsidies,” said the report. The EU has committed to ending such subsidies by 2025.

A spokeswoman told Climate Home News the commission was “committed to the objective of progressive phasing out of fossil fuel subsidies both at the worldwide as well as EU level”.

Xavier Sol, director of the NGO Counter Balance, called the pressure from the commission on the EIB “disturbing”.

“Given the numerous serious issues with the project, the EU should not push its financial arm to support a disastrous project but rather take a step back,” he said.

Counter Balance argues that the human rights records of one the major beneficiaries of the loans – the Azerbaijan government – should disqualify the project from public finance.

Concerns over human rights in Azerbaijan are shared by the commission, the spokeswoman said. The issue had been raised repeatedly, she said, including during a visit to Brussels by the president Ilham Aliyev.

“The EU will continue making use of all the instruments at its disposal to promote human rights, democracy and good governance,” she said.

The EIB was contacted for comment.

About the author

Byron Adonis Mutingwende