Dear Director

We, the undersigned organizations, would like to draw your attention to the World Bank Group's practice of prioritizing the transit of oil in Georgia at the expense of the country's capacity to develop in an environmentally sustainable way. The Bank Group is investing millions of dollars to protect sensitive ecosystems while simultaneously investing tens-of-millions of dollars to promote oil transit policies and initiatives (The result is that oil transit projects are flaunting Georgia's law and [the country's] international commitments), that are undermining these very same ecosystems. The result is that oil transit projects are flaunting Georgia's law and international commitments. This is a contradiction that the Bank Group has a responsibility to help address. We appeal to you to use your voice and vote to reverse the Bank Group's practice of promoting oil projects and policies that do not adequately take into consideration the social and environmental implications of unrestricted oil development in the region. It is imperative that the Bank Group insist that the Georgian Government conduct the studies that we have outlined below and that the Government commit to developing Georgia's oil sector potential without undermining the already limited areas within the country that have been identified for protection.

Background

In 1995, the World Bank Group started collaborating with Georgia in an effort to mitigate the political risks of the "Early Oil Project", the first privately financed oil in the Caspian region and a major infrastructure investment. WBG involvement included: policy advice; an oil institution building project; and long-term financing from both the European Bank for Reconstruction and Development (EBRD) as well as the World Bank Group's private sector lending arm, the International Finance Corporation (IFC). This long-term financing was of a kind that had "not previously been made available to the region," and it served to both mitigate the risks associated with private sector investments as well as create a precedent for possible future Bank Group involvement.

Despite the commitments made by the IFC and EBRD that the project would use Best Available Technologies and Accepted International Environmental Standards, the reality has been completely different. The practice of discharging waste-waters into the sea and using toxic muds during offshore drilling is a serious environmental threat. Similarly, the construction of the Supsa Oil Terminal on the Black Sea Coast, which does not satisfy requirements of the MARPOL Convention (the International Convention for the Prevention of Pollution from Ships), suggests that the World Bank Group is not bringing significant "environmental additionality" to a project that would have been difficult to execute in the absence of Bank Group support.

The Bank Group considers the Caspian Sea's oil reserves to be at least as large as those in the North Sea, which currently supply about 8% of the world's oil. The Early Oil Project was designed as a "model for future financing in this region".

In an effort to mitigate the political risks posed by the Caspian oil and gas sector to private investors, the Bank Group pushed forward a range of institutional, policy and legal reforms.

The Georgia Energy Sector Adjustment Credit (ESAC) in 1999, laid the foundation for policy reforms associated with the transit of oil. In particular, laws were adopted providing for eminent domain procedures (compulsory purchase or easements in the public interest) and for environmental liability in the case of transportation of hazardous substances (including oil). In addition, Georgia ratified a number of important international treaties related to oil spills.

The World Bank has tried to pave the way for public support of a massive pipeline and other oil transit projects, which will pump oil from developments funded in the Caspian. The World Bank's "Georgia-Energy Transit Institution Building project" (March 13, 2001) clearly illustrates that this is the case.

The promotion of oil transit, combined with policy reforms and private sector risk mitigation has given rise to a situation in which the Georgian Government is supporting all oil related projects without calculating the cumulative environmental, economic and social impacts.

The Kolkhety Lowland case represents a clear example of how policies and strategies, defined by international financial institutions, are resulting in a Government agenda that is completely unsustainable.

Kolkhety Lowland

Kolkhety Lowland, located in the coastal zone of Georgia, is one of the unique ecological hot spots of the Black Sea. The Lowland includes Kolkhety National Park, Kolkhety Wetlands, Lake Paliastomi, and Kobuleti wetlands. The Kolkhety Wetlands (Churia, Nabada, Phichora-Paliastomi, Lake Paliastomi, surrounding territories and marine waters - totaling 55,5 thousand ha) was included in a list of the Wetlands of International Importance, under the Ramsar Convention, by Resolution 201 of the Georgian Parliament in 1996. The area provides a critical habitat for numerous species of migratory and wintering birds, as well as unique endemic and relict species. Unfortunately, over the last five years activities have been initiated that threaten attempts to protect and conserve the highly valuable biodiversity of the region.

In 1998, the World Bank and the Global Environmental Facility (GEF) approved an "Integrated Coastal Management" (ICZM) project. The project was designed to meet one of the objectives outlined in the Bank's Country Assistance Strategy (CAS) for Georgia: protecting the environment and supporting sustainable natural resource management. The project aims to strengthen the capacity of Georgian institutions to manage the coastal resources of the Black Sea through the development of testing and evaluation methods to effectively integrate environmental planning and management into economic development activities along the Black Sea coast. The project also aims to assist Georgia in meeting its international commitments under the Black Sea Environmental Program (BSEP) and to implement actions outlined in the Georgia Biodiversity Strategy/Action Plan. These priorities include conservation of biodiversity at sites of international significance on Georgia´s Black Sea coast, such as the Kolkhety and Kobuleti wetland Ramsar sites; restoration of degraded habitats and resources within the Black Sea Large Marine Ecosystem; and participation in regional efforts to manage and sustain public goods of a transnational character.

Several controversial projects (Baku-Supsa Oil Pipeline, Drainage of Kolkhety wetlands, Kulevi Oil Terminal) have already begun in the area of Kolkhety Lowland. These projects occurred in parallel with the Integrated Coastal Zone Management Program and the Establishment of Kolkhety National Park (already funded by WB, Tacis, GEF). Infrastructure investments appear set to continue with the expansion and rehabilitation of Batumi and Poti ports.

Given the small size of Kolkhety Lowland and the amount of the oil already transported through it, the area should be included as a high-risk area. However, Governmental officials and state companies are heavily lobbying for the construction of new ports rather than the reconstruction of existing facilities.

The trend has been towards implementing a growing number of new ports and controversial projects within the Kolkhety Lowland, either directly in, or nearby the Kolkhety National Park and Ramsar site territories.

According to the Presidential decree, 1081 (8 September, 1999) construction started on an Oil Products Terminal and harbor in the village of Kulevi (in the middle of the Ramsar Site and a strict marine reserve).

The construction of the Terminal was started despite various procedural violations, such as: (i) purchasing the territories without notifying the Ramsar Secretariat; (ii) failing to even attempt to prove that there is an "urgent national need" for the project (which is necessary due to the area's Ramsar status); (iii) failing to ratify changes to the existing Ramsar site boundaries in the Georgian Parliament and; (iv) failing to complete an EIA prior to initiating construction.

The site chosen for the construction of the terminal represents territory under Ramsar Convention protection, as well as territory in "multiple-use" zones of Kolkhety National Park and in the marine protected water area. The developer has privatized 100 ha for construction, 30 ha of which are from the wetlands.

The oil-transfer terminal, including 22 reservoirs with 100 000 tons of storage capacity each, will be constructed on this territory. The oil would be transported by rail, with three alternative routes proposed. According to the project Environmental Impact Assessment (EIA), the most viable route is Kolkhety-Kulevi, which means that the rail and its oil cargo would cross the Kolkhety National park.

Offshore Development and oil exploration into the National Park

According to the agreement signed with the Georgian Government, Anadarko Georgia is supposed to start offshore oil exploration in the Black Sea in June 2001. The company already expressed its opinion that, according to Article 46 of the law on the Creation and Management of Kolkhety National Park, it has rights for oil extraction in Kolkhety National Park.

Problem

Construction of the oil terminal and oil transit railway will undermine the laudable efforts to establish the National Park and will set a precedent for further violations of international agreements and commitments undertaken by the Georgian Government. Taking into consideration that the World Bank is supposed to be engaged in the development of the National Park System in Georgia, the precedent will set a negative attitude and result in a wide range of industrial activities in the National Parks.

Moreover, it seems strange to us that World Bank staff, who were responsible for supporting the establishment of the Kolkhety National Park, have been silent on these systematic efforts to undermine the park's protective status. To our knowledge, Bank staff have never openly expressed to the Government of Georgia the fact that construction of the Kulevi Terminal in its current location was fundamentally in contravention of Georgia's Ramsar commitments. Similarly, the Bank does not appear to have resisted proposals to construct railway facilities through the Kolkhety National park.

Conclusion

There is a need to develop a strategic and integrated study of the economic benefits associated with new projects, especially oil projects on the Georgian Black Sea Coast. The study should place priority on clarifying how many and what kind of ports and site-specific projects would be most beneficial for the local population (focusing on issues of employment, land ownership, environmental and social sustainability) and should also address which projects would be most beneficial for the state budget on the whole. The study would need to include a Strategic Environmental Impact Assessment for the whole Coastal Zone, including cumulative long-term impacts of proposed projects. Based on this study, it would be possible to prepare the State Plan for Coastal Zone development. The background material and resources necessary to implement this study already exist due to the on-going ICZM project and State Consultative Commission for ICZM. Additional funds could be found to ensure study preparation, as well as the work of the Commission.

We appeal to the World Bank Group to insist that the Government of Georgia:

• Stop any activities - including construction of the Kulevi Marine Oil Terminal and oil exploration - in the Kolkhety National Park area, Ramsar Sites and marine reserves.
• Develop a Strategic Environmental Impact Assessment for the Coastal Zone, including a full life cycle CO₂ assessment;

• Develop an Economic Assessment of Coastal Zone developments;

• Develop fiscal mechanisms for the Integrated Coastal Zone Management Commission to establish the supreme body for issuing economic activity licenses in the area. Without the ICZM Commission's permission, no economic development should go on in the coastal zone.

• Ensure fair public participation in decision-making processes.

Failure to move forward on the above mentioned points will ensure that the World Bank Group's legacy in Georgia is associated with the ecological destruction that results from the pursuit of oil profits without proper consideration for the social and environmental implications of policies and projects. We appeal to you to use your voice and vote within the World Bank Group to prevent the institution from being associated with this tragic legacy.

Sincerely Yours

Manana Kochladze,Green Alternative, Georgia
Merab Barbakadze, Environmental Law Club, Georgia
Sophia Sakhanberidze, Lika Todua, FOE Georgia
Anelia Stefanova, ZA ZEMIATA (For the Earth), Bulgaria
Petko Kovatchev, Centre for Environmental Information & Education, Bulgaria
Goran Cizmesija, Ecology Society for Nature Protection "Senjar - ZEUS", Croatia
Jasmin Sadikovic, Ecological association "Green Osijek", Croatia
Jagoda Munic, "Green Action", Croatia
Pavel Pribyl, Hnuti Duha, Czech Republic
Ales Kutak, Centrum pro dopravu a energetiku, Czech Republic
Ilya Trombitsky, BIOTICA Ecological Society, Moldova
Charles Lenchner, Friends of the Earth Middle East
Jen Kalafut, Center for Environmental Public Advocacy, Slovak Republic
Yury Urbansky, National Ecological Centre of Ukraine
Mirjana Bartula, Secretary, DEFYU - Danube Environmental Forum Yugoslavia
Lee Tan, Asia-Pacific Unit, Australian Conservation Foundation
Huub Scheele, Both ENDS, Netherlands
Petr Hlobil, CEE Bankwatch Network