European ECAs May Support Problematic Turkish Dam, Cite China Threat

by Heike Drillisch
Thursday, February 1, 2007

The Ilisu Dam, a highly controversial project proposed for the Tigris River in Southeast Turkey, recently got a boost from European governments. Austria, Germany, and Switzerland announced in recent months that they are willing to provide public financial guarantees to the project, if certain conditions are met. Their final decision is imminent. The guarantees will enable companies from those countries to participate in the dam’s construction. Concerns raised by NGOs about the project violating international standards have been blithely countered by the argument, “If we don’t build it, Chinese companies will – and their standards will be even lower.”

At 1,200 megawatts, the Ilisu hydropower project is Turkey’s largest dam project. Its location on the Tigris River 60 kilometers upstream from the border to Syria and Iraq has the potential to increase regional tensions between the three countries. Turkey has used existing dams on the Euphrates in the past to cut off downstream flows, and the Iraqi water minister has already voiced great concern over the Ilisu project. More than 55,000 people, mainly ethnic Kurds, will be affected by the project and are unlikely to receive adequate compensation. According to surveys conducted by the local “Initiative to Save Hasankeyf,” 80% of them oppose the project. After a decade-long civil war, Southeast Turkey still experiences repeated incidents of social upheaval and severe restriction of freedom of expression. In consequence, the lack of participation by project-affected people in project planning was negligent and in sharp violation of international standards.

In addition, the reservoir will flood hundreds of archaeological sites, including the antique town of Hasankeyf. The habitat of endangered species, like the huge Euphrates turtle, will be lost. Impacts on flora, fauna and the people dependent on the river will be felt far downstream of the dam.

The consortium provided an Environmental Impact Assessment and a Resettlement Action Plan for the project, but both reports were utterly flawed, and prompted extensive comments by non-governmental organisations and independent experts. Even the export credit agencies (ECAs) involved admit that the project does not meet international standards. They therefore negotiated additional conditions with the Turkish government and granted a preliminary approval for the project in December 2006. The 150 conditions are however being kept secret until the final ECA commitment is given, despite the relevant OECD recommendation demanding the publication of environmental information 30 days before a final decision.

It is obvious that the conditions will not solve the fundamental problems of the project. One of the most controversial aspects of the deal besides the irreversible destruction of cultural heritage is that the project is proceeding without relevant participation of the affected population, or proof that fair and meaningful consultations with neighboring states have been conducted. Also, the ECAs are willing to decide on financing for the dam without a comprehensive environmental impact assessment being in place, as key studies on flora and fauna will only be provided at a later stage – a procedure that would be unthinkable for a project in any of the three countries providing the guarantees.

The China Threat
In the meantime, Turkey is considering the deployment of 5,000 troops in the region and has issued an ultimatum that it would start a new tender if the ECAs do not give their final approval by the end of March. This is considered a blatant threat to award the contract to Chinese companies.

German ministers have stated already that the competition with China is a relevant factor in their decision. Big business is at stake: Turkey intends to build 500 more dams in coming years. Should Ilisu be “lost” to companies from other countries, future contracts could be in danger as well, at least as long as they need support by export credit agencies. This may explain the ECAs’ readiness to stay in a project that was totally flawed from the very beginning and had already failed to move forward in 2002 due to unresolved social and environmental problems.

Ironically, if ECA support is granted, the project will benefit from concessional repayment terms intended for renewable energy projects. These were agreed to by the Organisation for Economic Co-operation and Development (OECD) in May 2005 to promote the export of sustainable energy technologies. Hydropower projects were later included – under the condition that they fulfill all safeguard policies of the World Bank and explicitly recognize the value of the core values and strategic priorities of the World Commission on Dams report in this regard. Ilisu neither conforms with all World Bank safeguards nor with the WCD’s strategic priorities. Nonetheless, the preferred repayment terms will apply if the ECAs grant their support. By approving special benefits for such an obviously unsustainable project, the ECAs are gambling away the last credibility they have on environmental and developmental concerns.