No public money for Nabucco - mega gas project a drain on clean energy, human rights and the environment, says Bankwatch

September 6, 2010

Budapest, Hungary -- Reacting to today's announcement by the Nabucco Consortium that international public banks are now officially commencing their appraisal of the EUR 7.9 billion (estimated) Nabucco gas pipeline project, watchdog group CEE Bankwatch Network called on the international financiers to reject what would be record European public finance for the project and instead to focus on the financing of clean energy in central and eastern Europe, particularly climate-friendly, job-boosting energy efficiency. [1]

As announced today, the Nabucco Consortium is seeking EUR 800 million from the International Finance Corporation (IFC), the World Bank's private lending arm, EUR 2 billion from the European Investment Bank, and EUR 1.2 billion from the European Bank for Reconstruction and Development (EBRD). In the case of the two European institutions, these would be unprecedented sums for one single fossil fuel project.

Piotr Trzaskowski, Bankwatch's Energy & Climate Coordinator, said: "Now that the gloves are off, and a mandate letter has been signed by the banks to start their official appraisal process, we would expect the terms of this mandate to be made fully available to the public, as it's clear that there is a wide range of hurdles to be cleared if the banks are to be able to satisfy their lending requirements and provide finance to Nabucco.

"Chief among these, in our view, are the controversial supply issues. There is a high probability that so-called European energy security via Nabucco will be reliant upon major gas supplies from Turkmenistan, an oppressive regime state that ranks alongside North Korea in widely-recognised human rights rankings.

"When it comes to the overall economic viability of the Nabucco project, deep scepticism has been levelled at the project from many quarters. Although they are supposed to be development institutions, as they insist repeatedly the bottom line for these public banks is 'project bankability'. With billions of public money on the line here, the public has a right to know the economics of this project, or is the banks' role simply to provide political cover at any price for an unconvincing project? We have seen corners being cut by both the EBRD and the IFC on the Baku-Ceyhan oil pipeline in the past." [2]

As would be expected from a 3,300 kilometre pipeline set to stretch from Turkey to Austria via Bulgaria, Romania and Hungary, sensitive environmental issues will have to be negotiated. In Hungary alone, the route of the Nabucco pipeline is set to cross European Union-protected Natura 2000 sites at 12 points, as well as crossing a national park.

Bankwatch is calling for the international public banks to desist from financing this fossil fuel project and instead to ramp up their financing of energy efficiency projects in central and eastern Europe, a region still blighted with shocking levels of energy wastage.

A study from the Central European University in June this year details the benefits for Hungary of a much bigger emphasis on energy efficiency over supply side measures via a strong retrofit programme in buildings. In January, for instance the peak month for imports, and the month of highest risk for energy security the energy savings to be achieved by 2030 would be equivalent to 59 percent of Hungary's gas imports reducing dependency on Russian gas. Up to 131,000 net jobs would be created by 2020, including losses in the energy supply sector. [3]

Piotr Trzaskowski concluded: "There are a million and one reasons for the EIB, the EBRD and the IFC not to back Nabucco, namely the urgent energy saving measures in the region's homes and businesses that can reduce CO2 emissions massively and create hundreds of thousands of jobs.

"The EIB is supposed to be the EU's financial powerhouse and it should follow EU climate commitments. Yet in 2009, in the 12 new EU member states of central and eastern Europe the EIB loaned a miserly EUR 190 million to energy efficiency, of which EUR 120 million went to construct new power plants fueled with gas or coal. In this context, a EUR 2 billion loan from the EIB for Nabucco is a highly unusual and downright risky way of approaching the climate maths."