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How secretive government agency funded BP pipeline blighted by human rights allegations
15th March, 2011
The Export Credit Guarantee Department is accused of underwriting unethical and carbon-intensive business deals in developing countries and operating with a lack of transparency - charges it denies.
Last week the UK government issued a press release confirming BP had contravened human rights regulations in relation to the controversial Baku-Tbilisi-Ceyhan oil pipeline from Azerbaijan to the Turkish coast. The announcement came after a long campaign by pressure groups for BP to be held to account for failing to investigate and respond to the complaints of villagers living alongside the pipeline. The ruling could set a new precedent for corporations to implement more robust environmental and human rights impact assessments.
The announcement is also something of a victory for pressure groups - including Amnesty International UK, Oxfam GB, Jubilee Debt Campaign, WWF UK and The Corner House - who have been demanding a reform of the UK's Export Credit Guarantee Department (ECGD), or what Jubilee Debt calls ‘The Department for Dodgy Deals’, for more than ten years.
Against the recommendations of local and international pressure groups in 2003 the ECGD announced they would be giving US$150million in export credits to UK contractors involved in the BTC pipeline. Platform and The Corner House allege the department gave substantially more than this but didn’t make this updated figure public.
The groups accuse the ECGD of underwriting carbon-intensive exports such as aerospace, defence and fossil fuel infrastructure in economically under-developed nations that contravene international agreements on environmental impact, corruption and human rights.
These criticisms form the basis of an early day motion put forward in July 2010 by the Jubilee Debt Campaign which has been signed to date by 116 MPs including Lib Dem MP Malcolm Bruce and Green party leader Caroline Lucas.
Director of Jubilee Debt Nick Dearden told the Ecologist: 'This long-awaited ruling underlines the need for urgent changes in the UK's export credits system. Without effective safeguards, projects like BP's one are bound to happen again. The department should be higher on environmentalists radars as the projects they support not only contravene human rights regulations but fly-in-the-face of government rhetoric about the environment and a sustainable economy.'
The ECGD was the world’s first Export Credit Agency (ECA). It was established after the First World War, in 1919, to help British exporters reestablish trade. Its main function is to offer insurance policies known as export credits to companies who can’t get cover on the private market; consequently many of the ventures it underwrites are in economically developing countries.
Most industrialised nations have at least one ECA that acts as an official branch of government. It’s not uncommon for ECA’s to underwrite projects even if international institutions such as the World Bank have deemed them too risk adverse or harmful to back.
The ECGD maintains that it operates to high standards. Business principles director David Allwood told the Ecologist that the department follows 'rigorous internationally recognised standards' on assessing the environmental, sustainability and human rights impacts of the business it underwrites, and insisted that it implements a thorough prior and post project evaluation process.
Campaigners disagree and charge that the ECGD procedures are inadequately thorough in both principle and execution.
Jubilee Debt last month released a report highlighting what it believes are ethically dubious ECGD exports underwritten between the mid-eighties to the present day. Case studies include the controversial £285million Turkwel Gorge Hydro-dam in Kenya that has reportedly underperformed and been referred to by the local press as 'the whitest of white elephants' and the sale of Hawk jets by British defence company Alvis (later taken over by BAE) to brutal Indonesian dictator General Suharto during his reign of terror in the nineties.
These deals are linked to civilian suffering, say campaigners, who believe the Kenyan and Indonesian governments may still be in debt to the ECGD for these projects today. 'Due to a lack of transparency it’s impossible to know exactly what these nations' debts to the ECGD are for,' Dearden explains. 'There needs to be a full debt audit and any unjust, toxic debts written off.'
Lack of transparency is a recurrent gripe with the department. Jan Willem van Gelder, Director of the Netherland’s based economic research body Profundo says although the ECGD is more transparent than most of its peers it is still 'fairly nontransparent'.
During the research of soon-to-be-published tome The Oil Road, about the BP-led Baku-Tbilisi-Cayhan oil pipeline, Platform Campaigner Mika Minio-Paluello, alongside WWF-UK and The Corner House, used the Freedom of Information Act to request internal documents and claim to have found alleged discrepancies, particularly with the more contentious oil and gas infrastructure projects, between publicly released figures and what the department actually paid out.
More controversially, in 2004 they uncovered a commitment to underwrite two British subcontractors working on the Sakhalin II oil and gas field in Russia’s far east for up to US$1 billion prior to environmental and social impact assessments being carried out - contravening the ECGD’s own policies. Minio-Paluello told the Ecologist: 'Billions in public money is being risked but without NGO attention the often dodgy circumstances surrounding these deals would never be unearthed.'
But could a lack of more contemporary examples in pressure groups' reports suggest that unscrupulous practices are a thing of the past? Minio-Paluello isn’t optimistic. 'I’d like to think so but it’s probably more to do with the fact it takes so long to access documents through the Freedom Of Information Act so malpractices don’t come to light until years after the event.'
There has, the campaigner acknowledges, been some departmental improvements such as more willing engagement with NGO’s and the publishing of annual reports. However he believes that 'past discoveries cast doubt over whether these reports reveal the full picture.'
Tackling bribery and corruption
A major cause for concern for campaign groups came in May 2010: after a public consultation with 238 British exporters and industry bodies and 24 campaign groups, including Jubilee Debt, Amnesty and WWF-UK, the ECGD replaced its unique Environmental, Sustainability and Human Rights (ESHR) rules known as the 'Business Principles' with the Organisation for Economic Co-Operation and Development’s (OECD) less rigorous guidelines known as the 'Common Approaches'.
The former code had different requirements on how businesses proved no corruption or bribery took place and unlike the OECD guidelines ruled that all projects, regardless of value or length of repayment term, were screened for ESHR impacts.
ECGD's David Allwood says that, having consulted with a wide range of interested parties, it was conceived to be 'inappropriate' to have different requirements to the ECAs that use the OECD code, and that the former model only exceeded these standards in just 'one or two areas.'
The Confederation of British Industry (CBI), which represents over 2,000 businesses including BAE, UK Coal and Rolls Royce, was one of the many industry bodies that supported the proposal. Matthew Fell, Head of Competitive Markets at CBI told the Ecologist: 'The old ECGD Business Principles put UK exporting companies at a competitive disadvantage compared to other OECD countries, hampering our export performance and putting UK jobs at risk.'
However, when asked by the Ecologist the CBI said they hadn’t conducted any statistical analysis that could back up this statement.
Pressure groups - with a combined membership of 1.5million - made representations against the proposal on the grounds that the UK should set global benchmarks for ethical practice as opposed to lowing existing standards. Alarm was expressed over the decision to no longer screen projects of a value under SDR 10million or where the repayment term was less than two years, a change that groups allege fails to safeguard against child and forced labour. Between 2009-2010 the ECGD allocated £21million worth of export credits to unscreened projects.
Analysis of the representations made to the ECGD about this matter reveals two polarised voices; staunch support from industry and strong opposition from monitoring groups and NGO’s.
The British Exporters Association (BExA) represents British exporters such as Airbus, BAE, BNP Paribas and Rolls Royce. They argue the ECGD’s decision to cease screening low value and short-term projects was justified. BexA Director Hugh Bailey said: 'There is strong international competition for overseas business. Whereas for large projects there can be several months between international tender, bidding, and contract award, the timescale is much shorter for smaller and short term contracts.'
But in a joint representation from six pressure groups, including Amnesty-UK, WWF-UK and The Corner House, the 2009 OECD member survey was referenced to show that contrary to industry and ECGD statements the new procedure fell short of standards adhered to by all of the UK’s major competitors, with 23 out of 29 international ECAs voluntarily choosing to screen all applications regardless of value or repayment period.
The groups also raised concerns that this 'slackening of standards' could influence the consultation the OECD is currently conducting on the Common Approaches, the results of which will drive a revised code to be announced sometime after June 2011. David Allwood responded by telling the Ecologist: 'We are working hard during this review to make standards more clear and where appropriate more stringent. But we are doing it on a multilateral level so exporters have a level playing field with those that they’re competing with.'
'Sunset' or 'sunrise' industries?
Despite the intense criticisms pressure groups have heaped on the ECGD they are - perhaps surprisingly - calling for the department to be reformed rather than scrapped. There is consensus that instead of courting what the Corner House call ‘sunset industries’ such as fossil fuels they should support ‘sunrise’ - green technology - industries that are a part of the £3.2trillion low carbon market referred to by David Cameron in November as growing at a rate of 4 per cent a year. This would mean a complete makeover of the ECGDs current portfolio of carbon intensive exporters.
Last year a report by Profundo found that between 2004-2009 the ECGD had supported more carbon intensive industries than any other EU Export Credit Agency (ECA). Between 2009-2010 89 per cent of ECGD export credits were for 166 aircraft deliveries on behalf of Airbus S.A.S, with a similar level of support expected for 2010-11.
David Allwood argues that the departments' remit is to support existing British exporters, whoever they may be, and as there are no international rules forbidding trade in aircrafts - or oil refineries, civil construction, wind farms or otherwise - they are all 'fair game' for any exporter from the UK.
Whether offering export credits to aerospace projects is converse to David Cameron’s post election pledge of making this 'the greenest government ever' is up for debate but - perhaps more worryingly - not in the spirit of the 2008 Climate Change Act that commits the UK economy to 80 per cent cuts in carbon emissions by 2050.
But it’s the apparent lack of joined-up-thinking between the remit of government departments and overarching party policy that concerns many campaigners. Nick Dearden said: 'We're calling for the government to introduce a more joined up industrial strategy which includes supporting new, green industries - the ECGD could play an important role in that.' Nick Hildyard of the Corner House advocates the ECGD should be tied into a Green Investment Bank so it can directly access exporters that will help the government fulfil it’s stated aim of turning the department into a 'champion' of British companies that develop and export innovative green technologies around the world.
The volume of support offered to Airbus for the last two years and the fact the departments' voluntary carbon accounting omits aircraft exports because they’re not classified as medium or high risk deals illustrates, campaigners argue, just how far the department needs to go ideologically before it becomes a government strong-arm in green-technology support.
Other than one venture with Chinook Sciences Ltd - to supply a steam turbine and boiler system for an aluminium recycling facility in Turkey - none of the exports the ECGB supported in 2010 fell into the green-technology sector. ECGD Communications director Steve Roberts-Mee told the Ecologist that the department would be 'delighted' to work with green technology businesses but concludes the sector is so nascent it’s not exporting to risk-adverse territories that would qualify companies for ECGD support.
But is this a slight underassessment of where the UK’s renewables sector is at today? Within the burgeoning marine renewables division no enterprise, including the UK’s oldest specialist, Marine Current Turbines, has an exportable product. However leading producers of small-scale wind turbines such as Proven and Ampair already ship to territories such as China, Iraq and the Antarctic. Companies such as Quiet Revolution, Gaia and Marlec - which fit Vince Cable’s announcement in February’s trade white paper of extending the ECGD’s remit to small and medium sized enterprises (SME’s) - are looking to expand their export markets in coming years into more risk-adverse territories.
Martin Paterson, public relations director of Gaia said: 'To build an this emerging sector it’s important government agencies support the manufacture and export of products in any way it can. We hope to be having conversations with the ECGD in the near future.'
David Shurman, managing director of Britain’s oldest small-scale wind manufacturer Ampair, says that several years ago he requested ECGD support for a multimillion-pound wind turbine project in France but was declined because they’re bound to not cover deals within the EU. He concedes the department acts in accordance to international guidelines but says in order for it to be realistically useful to the renewable energy sector it needs to 'both deal with smaller, higher risk projects outside the EU, and change its boundaries to support projects within the EU.'
Shurman also claims the inadequate government support of manufacturing for the last few decades is key to why Britain isn’t a heavier hitter in the global green technology sector. 'You can’t conjure up a manufacturing industry over night. It’s all well to talk about green jobs but you need long term manufacturing support to make that a reality and civil servants with experience working in the energy sector to sell those products abroad.'
Steve Roberts-Mee says over the next year the department will be making a concerted effort to connect to SME’s and the green technology businesses through road shows and conferences. In January ECGD representatives attended a Small Systems Strategy Group meeting held by green technology industry body Renewables-UK to introduce the sector to their products and services.
For campaigners and ECA monitoring groups this is a step in the right direction - albeit a small one. For now the groups are keeping a watchful eye on the outcome of the OECD Common Approaches consultation and how the promise to remove red-tape for SME’s doesn’t translate into what WWF-UK campaigner Margaret Ounsley describes as 'a bonfire of the safeguards that ensure environmental and human rights abuses don’t take place.'
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