Stricter controls needed to avoid transborder corruption and excessive environmental damage in investment projects in Russia
Update 1 February 2016: Further analysis of the case study on the oil and gas terminal on Taman peninsula (Russia) has led to the conclusion that ‘corruption’ is not a proper qualification for the issues described in this case study, and publishing it in a report under the overall heading of ‘transborder corruption’ is not appropriate. A new report file has therefor been uploaded excluding this case study. Allegations of disruption of environmental, agricultural and touristic values in the area and of problems in the interaction with the International Finance Corporation do remain a concern. The Netherlands Helsinki Committee is pursuing further analysis of these allegations and hopes to be able to interact about this with the company running the terminal and to provide a more complete account on these points.
Better safeguards are needed against international complicity in the use of opaque and improper procedures in realizing large scale extraction and industrial projects in Russia. These procedures, as well as the track record of Russian counterparts, give rise to suspicions of involvement in corruption from the side of international partners. In addition, the procedures applied pay insufficient attention to large-scale environmental damage and to the destruction of the livelihood of the local population.
These conclusions can be drawn from detailed case studies of two projects in Russia, on the oil and gas terminal on Taman peninsula and on copper and nickel mining in the Voronezh region. They are contained in a report by the Expert Group on Fighting Transborder Corruption of the EU-Russia Civil Society Forum. The report was presented at a Brussels seminar jointly organized between the Forum and the European Economic and Social Committee. The Expert Group is coordinated by the Netherlands Helsinki Committee.
The oil and gas terminal built between 2004 and 2012 on Taman peninsula on the Russian Black Sea coast was co-financed by the International Finance Corporation, a World Bank subsidiary. It was assigned category B by the IFC, which means a light procedure is applied for environmental and social impact evaluation. Despite requests by local activists that because of the potentially hazardous impact on population or environment it should go through a full category A procedure, the categorization was maintained. The construction led to major disruption of environmental, agricultural and touristic values in the area.
The decision to start development of copper and nickel mining near Voronezh in the south of Russia was announced just before the New Year holidays at the turn of 2011. A tender was issued, which was won by The Ural Mining and Metallurgic Company (UMGK) in May 2012. Prior to the development decision, an environmental assessment had been carried out, which still has not been made public. The company which had been commissioned by local authorities to do the assessment, had clear links to UMGK. UMGK is part of an extensive network of businesses in Russia and other European countries, with credible allegations against a substantial number of them for engagement in money laundering and other criminal activities.
Large scale protests erupted on social media and through public rallies, based on concerns over possible pollution of water resources, changes in water flows and the destruction of a large area of black earth. All available calculations show that the long-term agricultural value of the soil that will disappear is much higher than the expected gains from metal mining. The protest movement led to the temporary suspension of the pit development after protestors had occupied a drilling site and destroyed equipment. Leaders of the movement were imprisoned and put under pressure to give false statements on extortion of UMGK; they have now been in pre-trial detention for about 18 months.
The report states that “European governments and civil societies need to demand higher transparency, and to pass laws that make it impossible to use private or state capitals in corruption deals oversees”. Research by Transparency International shows that the OECD Anti-Bribery Convention of 1997 is not or hardly enforced by Russia and neither by a large number of EU member states.
Those that fail to investigate and prosecute foreign bribery include Spain, Belgium, Ireland, Poland, the Netherlands, Denmark, the Czech Republic, Luxembourg, the Slovak Republic, Greece, Slovenia, Bulgaria and Estonia. Latvia, Lithuania and Romania have not ratified the Convention at all.