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Kulevi Oil Terminal, Georgia

The World Bank Group claims that it has begun to integrate specific environmental objectives into its operations, involving efforts to proactively finance environmentally beneficial projects such as wind farms and national parks, or to attach environment-related conditions to its standard policy prescriptions. However, World Bank standards are far too weak and in practice it is all too willing to compromise its otherwise laudable environmental objectives. Unfortunately, the World Bank remains committed to the environment only so far as it is politically expedient to do so.

The case of the privately-funded Kulevi Oil Terminal in Georgia, within the Kolkheti Ramsar site and part of the Kolkheti National Park, is a test for the World Bank’s rhetoric.

The World Bank Group is heavily involved in the development of the Caspian Sea region, where corporations and revenue-hungry governments are scrambling to tap into the area’s substantial oil reserves. These developments are taking place at a number of different levels, most notably through oil sector reforms that the World Bank is promoting at the national level and the direct support that it is providing to private sector corporations involved in oil exploration and transit.

In 1998, the World Bank approved a USD 4.4 million loan to Georgia Integrated Coastal Management Project (GICMP). The two main components of the GICMP project were the establishment of the Kolkheti National Park and the development of the State Consultative Commission on Integrated Coastal Zone Management which was intended to integrate development with environmental management.

In 2000 the construction of the Kulevi oil terminal started without regard for Georgian national, international, or World Bank agreements. One of the Caspian region’s many oil projects, the Kulevi Oil Terminal will consist of 16 tanks with a capacity of 22,000 cubic metres, each serviced by a railway that will transport up to 10 million tons of oil in phase 1 and up to 35 million tons of oil in phase 2 through the National Park. In its final phase, 100,000-150,000 ton tankers will transport the oil through the National Park marine reserve out of the Black Sea.

CEE Bankwatch Network and local and international NGOs have been petitioning the World Bank Group to call for a stop to all oil-related construction in Kolkheti National Park, Ramsar sites, and marine reserves; to develop Strategic Environmental Impact and Economic Assessments for the Coastal Zone; and to ensure fair public participation in the decision-making processes. In response to reports from CEE Bankwatch Network, the World Bank sent a mission to investigate the project and issued a report in September 2001, substantiating most of Bankwatch’s claims but failing to call for a halt to the Kulevi Oil Terminal construction.

While the World Bank’s own assessment claimed that the development of the oil terminal was a threat to the success of the National Park and other aspects of the World Bank’s own project,, the Bank however refused to call for a halt to the terminal’s construction. Rather than openly declare its opposition to the terminal, the World Bank proposed a series of measures designed to limit the project’s destructive potential.

In late 2002, the construction of the Kulevi Terminal stopped, reportedly as a result of insufficient finances. However, in 2004 the Georgian oligarch Badri Patarkastshvili secured funding for the continuation of the project. In addition, the entire marine area of the Kolkheti National Park lies within areas licensed out to oil and gas companies, and offshore explorations in the area could be further intensified.

The Kulevi Oil Terminal case raises a number of questions about the World Bank’s overall commitment to the environment. How environmentally destructive does a project have to be before the World Bank is willing to publicly declare its opposition? If the World Bank is prepared to restrain itself while its project objectives are fundamentally compromised, what does this tell us about its willingness to defend environmental objectives in other aspects of its work? What message does this send to governments and corporations involved in oil exploitation throughout the Caspian Sea region? Can the World Bank credibly claim to be a source of “knowledge” and analysis on environmental issues if it cannot publicly state its opposition to obviously destructive projects?

These questions illustrate how the case of the Kolkheti National Park has broader implications for the work of the World Bank Group throughout the Caspian Sea region.