Austria Acknowledges Ilisu Failure

The ancient town of Hasankeyf would be flooded by the Ilisu Dam
The ancient town of Hasankeyf would be flooded by the Ilisu Dam
The Austrian foreign minister just announced that his country will pull out of the Ilisu Dam in Turkey. Even though the foreign minister is not in charge of his country’s export credit agency, this most likely spells the end of the European funding for the ill-fated project. The Austrian, German and Swiss export credit agencies will meet in Vienna tomorrow to coordinate their positions. If they follow through on the minister’s announcement, it will be the first time export credit agencies are abandoning a destructive dam project for social and environmental reasons. We hope the Ilisu experience will cause international dam financiers to be more cautious in the future. At the same time, we will try to ensure that other funders do not take up the tab.

As you have read earlier on this blog, the German, Austrian and Swiss export credit agencies sent an Environmental Failure Notice regarding Ilisu to the Turkish government after protracted conflicts on October 8, 2008. They announced that they would pull out of the project unless the dam authorities brought it in line with the 153 social, environmental and cultural conditions which the export credit agencies had negotiated in 2007. The deadline for doing so was December 12 – tomorrow.

Even though it was clear that the Turkish government was not willing to fulfill the social and environmental conditions, there were persistent rumors particularly from Austria and Switzerland that the export credit agencies hesitated to acknowledge the failure of the project, and might simply suspend their guarantees. In an interview with the Austrian public television network ORF, the Austrian foreign minister and the director of the Austrian export credit agency OeKB today laid these rumors to rest.

Here is the transcript of the relevant parts of the ORF interview (translated from German):

ORF: “Mr. Foreign Minister Spindelegger, is it correct that the OeKB will pull out and bring the project to an end or at least the involvement of the Austrian company?”

Minister: “From my point of view this is correct. If one has defined the conditions - more than 150 Terms of Reference have been defined - and they are not fulfilled, it cannot be financed.”

ORF: “What does that mean for the relationship between Austria and Turkey?”

Minister: “I think we have to deal with it very professionally on the cross-national level. But it is the way it is: pacta sunt servanda - when contracts have been signed, one has to fulfill them.”

ORF: “The opponents of Ilisu say that Turkey does not fulfill the requirements. Is that your position, too?”

OeKB director Rudolf Scholten: “We see this the same way.”

“These are unexpectedly clear words which we and the people in Hasankeyf have been awaiting for such a long time,” said Ulrich Eichelmann, a representative of ECA Watch Austria and old friend of International Rivers. “This is a major break-through in our campaign.” It would indeed be a huge loss of face if the export credit agencies refused to pull out of the project after this public acknowledgment.

In the case of the Yusufeli Dam, the Turkish government had threatened to turn to Chinese dam builders and financiers if the French export credit agency COFACE attached environmental conditions to its funding which the government considered too onerous. We have so far not seen similar threats in the case of the Ilisu Dam. The Turkish government has done business with the same small group of European companies and financiers in its hydropower sector for more than thirty years, and has only developed two relatively small projects with Chinese companies. It will think twice before switching partners. Still, after the public embarrassment over the Ilisu Dam, the risk is real.

The Chinese government has made repeated announcements about the need of Chinese foreign investors to comply more strictly with social and environmental guidelines. Taking up the Ilisu Dam after the dam authorities have failed to comply with their own social and environmental conditions in full public view would discredit such commitments. We will make sure the Chinese government and other interested parties in China are aware of this risk. For now we congratulate the Austrian and Turkish anti-Ilisu campaigners for their fantastic break-through.

Peter Bosshard is the policy director of International Rivers. His blog, Wet, Wild and Wonky, appears at