BTC pipeline inflaming conflict, say groups
ECGD did not assess human rights impacts of conflict risks

first published 26 August 2008

The route of the BTC pipeline from Armenia through Georgia to Turkey passes in or near seven existing conflict zones, including South Ossetia and Armenia. The Corner House raised this issue with the UK’s export credit agency, ECGD, the National Audit Office and the Environmental Audit Committee of the UK Parliament.

The ensuing correspondence with ECGD indicates that its Business Principles Unit, which assessed the project’s potential social and environmental impacts and carried out overall ‘due diligence’ before ECGD provided financial support, never assessed the risks of existing conflicts along the pipeline’s route, of the pipeline exacerbating and causing conflict, or of the human rights impacts of increased conflict.

In addition, it did not assess the financial risks attendant on the pipeline's environmental and social impacts.


On 6 August 2008, the BTC pipeline company informed the project's lenders about a fire in the Turkish section of the pipeline, which resulted in the pipeline being shut down. The Kurdistan Workers Party (PKK) subsequently claimed responsibility for the explosion, while groups in South Ossetia and Abkazia also made threats to the pipeline.

Prompted by this pipeline explosion and the war that broke out two days later between Russia and Georgia over South Ossetia, The Corner House wrote on 26 August 2008 to the UK's export credit agency, ECGD, "raising serious concerns over the quality of ECGD's due diligence" before it decided to provide financial support to the BTC project back in December 2003.

Before and after ECGD's decision to fund the pipeline, national and international NGOs had repeatedly warned of the high risks posed by conflicts in the region to the project -- and the strong possibility that the project itself would exacerbate such conflicts. The letter declared "ECGD's support for the project has contributed to the general destabilisation of the region."

The letter concluded by outlining the:

"urgent need for ECGD to reassure the public that the risks of conflict were adequately assessed prior to support for the BTC project being approved and that taxpayers' money was not put at unjustified risk."

The Corner House also wrote to the National Audit Office (which scrutinises public spending on behalf of the UK Parliament) to ask that it investigate the quality of ECGD's due diligence before it provided financial support for the project, in particular to assess:

  • whether the risks of conflict were adequately assessed by ECGD or not;
  • whether the premiums that ECGD charges the BTC Co for its financial support realistically reflect the risks of conflict in the region or not; and
  • whether the terms of ECGD's contracts for the BTC project adequately protect the UK taxpayer or not.

The Corner House (together with Kurdish Human Rights Project, PLATFORM, CEE Bankwatch Network and Friends of the Earth) also submitted a Memorandum to an Inquiry on the "Export Credits Guarantee Department and Sustainable Development" held by the Environmental Audit Committee of the UK Parliament, detailing their concerns and grave disquiet. (The Environmental Audit Committee considers the extent to which the policies and programmes of UK government departments and non-departmental public bodies contribute to environmental protection and sustainable development.)1

ECGD replied on 23 September 2008 with details of the information it had received about the fire and explosion on the pipeline, and again on 22 December 2008, stating that "we have no doubt that all material risks were adequately assessed prior to support for the BTC project being approved by ECGD". (p.2.).

The Corner House wrote back to ECGD on 3 January 2009, asking for evidence of this statement. ECGD replied on 30 January, stating that it was aware of the conflict issues and referred to a paper submitted to its Underwriting Committee that approved ECGD support for the BTC project. (This paper, however, which was not disclosed until August 2009 after an Information Tribunal, indicates that ECGD did not consider the risks that the pipeline would increase conflict in the region.) 

1 The Committee published a report of its Inquiry on 20 October 2008 (PDF version ), concluding that there was "room for improvement" in incorporating sustainable development into ECGD's decision-making. The Committee recommended that ECGD "identify areas where its environmental standards could be tightened" and apply "more rigorous standards . . . across its portfolio, including to aerospace exports."

The Committee also said that:

"ECGD must improve the transparency of its assessment processes and increase the level of disclosure of project information. It is important that the department does more to attract renewable energy and other projects that support sustainable development."

In addition, the Committee noted that:

"The ECGD's approach to sustainable development is all the more important because of its ability to influence and raise standards internationally. A bolder approach from the ECGD on sustainable development issues and transparency will be vital in improving the performance of Export Credit Agencies in general."