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IPS News Network: Dutch Bank Urged to Pass on Russian Oil Project

Dutch Bank Urged to Pass on Russian Oil Project
Emad Mekay

WASHINGTON, May 12 (IPS) – The giant Dutch bank ABN Amro, one of the world's largest financial institutions, is facing charges of “environmental hypocrisy” from green groups concerned over the bank's possible financing for a controversial Russian oil extraction project.

The accusations came on the eve of a ceremony in which ABN Amro was scheduled to accept the 2006 Gold Medal Award for “International Corporate Achievement in Sustainable Development” from the World Environment Centre, a Washington-based industry-backed organisation.

But three conservation groups, Rainforest Action Network, Pacific Environment and Sakhalin Environment Watch, ran a full-page advertisement in the Washington Post Thursday condemning the bank's bidding to fund the Sakhalin II oil and gas project , which they consider “one of the most environmentally and socially destructive projects in history”.

Sakhalin II is a 20-billion-dollar project that aims to extract oil and gas from beneath the coast of far eastern Russia's Sakhalin Island.

The oil giant Royal Dutch Shell is leading the investment on the island, which is estimated to have reserves of 45 billion barrels of equivalent oil and gas — the same amount of remaining reserves in the North Sea. The company is seeking up to five billion dollars in financing for the project.

Citing reluctance from other banks to fund the project for its potential environmental damage and a firestorm of criticism from green organisations, the groups called on AMN Amro not to fund the project.

Environmentalists say that the project will harm marine life and several endangered species, including the world's 100 remaining western grey whales, as well as the local fishing community and indigenous people in the fragile area.

They are worried about a planned pipeline that would span 21 active seismic faults and hundreds of wild salmon spawning habitats. The project will dump two million tonnes of dredging spoil into Aniva Bay, threatening a key fishery and the livelihoods of many Sakhalin islanders.

According to Banktrack, an international campaign network focusing on private investments, the project also lacks a comprehensive oil spill response plan, despite great risks due to the icy conditions in the area. A significant oil spill occurred in 2004 at the port of Kholmsk.

Ironically, the Amsterdam-based financial powerhouse has been a leading voice in the so-called “Equator Principles”, a set of guidelines on social and environmental practices in private bank lending modeled after safeguards adopted by the World Bank Group, a role that has won the bank the environmental award scheduled for delivery on Friday in Washington.

“While other banks are making tough decisions and centralising sustainability in their business operations, ABN Amro is forsaking its commitment to these (Equator) principles by bidding to fund this project,” said Ilyse Hogue of Rainforest Action Network.

Hogue said that for the bank to accept an environmental award while violating its commitments was environmental double-standards “at its worst”.

The groups criticised the World Environment Centre as an “industry-driven organisation” and labeled its award ceremonies “green-washing”.

They note that the centre gave environmental Gold Medals in the past to Dow Chemical, British Petroleum, DuPont, Exxon, and Royal Dutch Shell, which many independent environmentalists describe as the worst polluters in the industry.

But the Washington-based centre says that an independent jury cited ABN AMRO's work in helping to inspire, create and implement the Equator Principles for the award.

The episode comes amidst global concern over climate change and the role played by oil and gas projects in raising the earth's temperatures and damaging the world's ecosystems.

Public lenders like the World Bank and the Inter-American Development Bank, which lends to Latin American nations from its headquarters in Washington, and the European Bank for Reconstruction and Development (EBRD) have all come under fire for funding projects in the environmentally damaging extractive industries like oil, gas and mining.

The World Bank, the tone-setter among public lenders, in particular was criticised for snubbing recommendations from an independent study it had commissioned, the Extractive Industries Review, which urged the bank to withdraw its investments from oil and gas industries and re-channel the funds to renewable energy projects.

It is now the London-based EBRD that is poised to fund the Sakalin II project. EBRD says approval is pending the final review of the environmental assessment and could come as soon as this month.

EBRD's backing is likely to advance loans from other lenders including, the U.S. Ex-Im Bank and the Japanese Bank for International Cooperation. The private bank Credit Suisse is also involved in the project.

Meanwhile, environmental groups want ABN Amro and all other Equator banks to withdraw their support for Sakhalin II.

But despite concerns from green groups, public lenders and private banks are clamouring to fund oil and gas projects, prodded by energy-hungry countries such as the United States, Japan and members of the European Union, who are also major shareholders in public banks.

The United States, the main customer for the Sakhalin project, has been encouraging oil projects almost anywhere outside of the Arab Gulf as it tries to lessen its dependence on Middle Eastern oil, citing the region's instability and its population's anger at U.S. policies. (END/2006)

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