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”.
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.
What is the Southern Gas Corridor?
BP calls it “arguably the global oil and gas industry’s most significant and ambitious undertaking yet”. It is a three part pipeline that, if completed, will carry gas from the Shah Deniz 2 oil field in Azerbaijan’s Caspian Sea through Georgia, Turkey, Greece, Albania into southern Italy.
- South Caucasus Pipeline (SCP) – Azerbaijan, Georgia
- Trans Anatolian Pipeline (Tanap) – Turkey
- Trans Adriatic Pipeline (Tap) – Greece, Albania, Italy
Ownership: At least 11 different companies are involved in the corporate ownership structures of the various sections. Major players include BP, Azerbaijan’s state oil company SOCAR, Turkish Petroleum, Petronas, Lukoil, Total and Snam.
Public finances: The European Investment Bank and Asian Development Bank are considering publicly-backed loans for the development. The European Bank for Reconstruction and Development, World Bank and Asian Infrastructure Investment Bank have already committed $500m, $800m and $600m.