EBRD Annual General Meeting in Kiev

Policy of public participation?

Advertizing ladies are distributing the newspaper "Emerging Markets", special edition for the annual general meeting (AGM) of the European Bank for Reconstruction and Development (EBRD) which is taking place from 9 to 12 May in Kiev. Behind them, above massive stairs leading up to it, rises the Ukraine palace, built as Lenin museum shortly before the changes, now a conference building and during these days a meeting point for three thousand investors, business consultants, business women and men, government representatives, three hundred journalists and a handful of representatives of Non-Governmental Organizations (NGOs).

Suddenly, from the underpass some thirty meters away from the stairs, a small group of young people climbs the stairs part of the way up to the conference building and starts to unroll a banner: "No completion of K2/R4!" At the same time, others have started distributing leaflets in which they inform about the role of the EBRD in this nuclear energy projects, the reactors Khmelnytsky 2 and Rivne 4 (see inset). It does not take even ten seconds and they are already surrounded by security people in civilian clothes who grab them and pull them down the stairs along with their banner. The activists manage for just a moment to unroll their banner once again, before they disappear one after the other in a jeep of the militia, the Ukrainian police, that had already arrived, under the eyes and the lenses of a dozen journalists. One of the activists who had "only" been distributing leaflets is still standing there, surrounded by journalists to whom she explains the aims of the group. The five people arrested are sentenced in an urgent procedure to 3ö5 prison terms. All of them start a hunger strike, as is usual after such arrests in Ukraine. A young woman goes on a thirst strike at first, then carries on with a hunger strike to the end of her 4 days term, after which she is released as the last of the five, and immediately gives an interview to the Ukrainian television. As the five were still in custody, Volodymir Horbulin, the Secretary General of the Ukrainian Council for Security and Defense, invented their release before the fact: Confronted with the arrests by three journalists who had been witnesses to the action, he explained on 11 May at a panel discussion on Chornobyl that all of the arrested were free again. A quick call to the police however confirmed that the five were still in custody and would be released only at the end of their prison terms.

The repression against activist groups like "Rainbow Keepers" and "Tigra Nigra" started even before the EBRD meeting. Maxim Butkevich, a student in the fifth year at the philosophical faculty of the State University in Kiev, was illegally questioned three times by the Ukrainian Security Service (USS, former Ukrainian KGB) between 5 and 6 May. The officer, who decided that the true aim of the activists was to damage the international image of Ukraine, threatened him in various ways. He said that since the main task of the Security Service during the AGM was to prevent any public demonstration against the policies of the bank, Maxim and his friends would be "localized" (i.e., preventively arrested) if they made any attempt at organizing actions. He would make sure that Maxim be expelled from the university shortly before his graduation, and that rumors be spread about his cooperation with the Security Services. The officer further asked how Maxim would react if he were to tell him that a person he cared for had been killed, raped or robbed. At another interrogation the officer changed his strategy and offered Maxim a job: He should use his contacts in the West in order to fulfill a mission in the service of the USD.

Activists explained that probably the Security Service people were under increased pressure and rather nervous after on the April 22nd Vadym Hetman, a top banker and the founder of the Ukrainian stock exchange, influential delegate to the "Verchovna Rada" (the Ukrainian parliament) and friend president Kutchmas, had been shot in the elevator of his apartment building.

Chornobyl as a means of pressure to receive money

Some months before, after an open letter of the "Rainbow Keepers" and other NGOs to the acting president of the EBRD, Charles Frank, had stirred some trouble, the Security Service had already tried to arrange an "informal meeting" with the activists. In the letter, which is based on material compiled by Volodymir Ussatenko, an energy consultant with the "Verchovna Rada" (engl. Supreme Council), the Ukrainian parliament, contained details on corruption and diversion of funds in connection with Chornobyl projects of the EBRD.

In August 1997 already the World Bank had withheld a US $ 317 loan to the Ukrainian energy sector after the Ukrainian government refused to raise the electricity price by about 20 % for households to compensate for the higher cost of delivering to households. Now, after the new information became public, the World Bank and the EBRD suspended their funding for 6 out of 13 nuclear safety projects.

The Ukrainian government however continues with its strategy of using the catastrophe in Chornobyl for the sake of obtaining international money. The Ukrainian Minister of Environmental Protection and Nuclear Safety, Yuri Kostenko, stated during a "public" panel discussion on the Chornobyl sarcophagus (which the Ukrainian organizers had set to a room where there was hardly space for thirty listeners and from where there was no means of broadcasting it to the TV screens in other buildings), that international financial assistance was "a prerequisite for reforms". The same Volodymir Horbulin who had spread lies about the arrests expressed himself more bluntly: "Without money we will not close Chornobyl."

The role of the NGOs

The EBRD was founded by the governments the G7 (the 7 richest countries in the world) and other states in 1991 to promote the transition of the planned economies in Eastern Europe and the former Soviet Union to market economies. The bank normally does not give out loans for more than 25 % of a project. Its weight as risk guarantee however makes the search for further investors considerably easier. Among other things, the EBRD plays a major role in some big projects which could have ecologically and socially far-reaching consequences: In the preliminary research in view of building a sarcophagus for the exploded reactor Chornobyl 4; in the completion of the soviet-designed nuclear reactors Khmelnytsky 2 and Rivne 4, also in Ukraine; in oil and gas projects in Sakhalin, in Georgia, Azerbaidjan, Armenia. This calls different NGOs onto the scene, which specialize in monitoring the correct application of environmental procedure standards by the bank. These procedures in turn were introduced into the bank's policies after years of NGO pressure. Representatives of different such NGOs, who are organized among themselves in the NGO network CEE Bankwatch, have met in Kiev for a seminar in the week before the EBRD meeting. They have exchanged information on concrete projects and campaigns, pass on their experience with contacts within the international financial institutions and looked for trends in the development of the policy of these institutions. Several people talked about the projects they had managed, often for periods of several years, and thus described possibilities and limits of lobbying work.

According to Antony Froggatt of Greenpeace International, in a campaign against a big project in which multilateral financial institutions as well as bilateral investment banks, government agencies and private investors and companies are involved, the best bet is usually to target the multilateral financial institutions like the World Bank or EBRD. This is because even if they are far from democratic, they offer points of attack on the level of the parliament of each of the countries involved. In the case of the Slovak nuclear reactor Mohovtse, which has (so far) been prevented, the enormous resistance of the Austrian population led the Austrian government to become an ally of the NGOs by opposing the financing of the project in all institutions. It is important however that the protest movements in different countries unite and coordinate their actions. Still according to Froggatt, there are two overlapping blocks of countries who each have a majority stake (of 59 % each) in the EBRD (and similarly in the World Bank) and can therefore get a project voted even against the opposition of others: the G7 states and the EU states. The EU does not act as a very homogenous block; the G7 however absolutely needs to be split if a campaign against a project is to have any chance of succeeding, since it often votes as a block. Once the EBRD or the World Bank have cancelled their participation in a project, other funding sources usually back out, too. Since the persons involved in a project, both at the EBRD and in the project sponsor company, have spent much energy and efforts on a project as time goes on and will fight harder and harder for it to go through, it is crucial for an NGO to get involved in a project as early as possible and try to stop it at an early stage.

The EBRD and the NGOs

NGO representatives regard their free access to the EBRD annual meeting as crucial, since it offers them a unique opportunity to present EBRD representatives with their concerns, including on the process of public participation. After in January credentials had been promised by EBRD for about 25 representatives of its member organizations to the NGO network CEE Bankwatch, about a week before the actual meeting suddenly bank officials were allowing only 15 persons in, among which there was not a single representative from NGOs of the former Soviet countries, including Ukraine. Contradictory reasons were given for this restriction, for instance, that there was not sufficient space for more than 15 NGO people (whereas there was space enough to accommodate about 3000 business and government representatives). Another reason given was that security people feared disruptions and protests by NGO representatives within the meeting's venue.

Since the NGOs thought they had some support within the bank staff, they opted for a negotiation strategy according to which they would demand in first step that they be able to designate the 15 people who would receive credentials. They succeeded in that, in negotiations with the EBRD Secretary General Antonio in Maria Costa, who however does not seem to belong to those people within the bank are most favorable to NGOs. After Charles Frank paid a visit to a party organized by the NGOs on the second evening of the summit, he promised, in this more relaxed atmosphere, to NGO representatives that all the NGO people would get credentials the next day. Thus all NGO representatives could participate in the dozen or so meetings with project directors and executive directors of the bank. To this end, the meetings of the first two days had been transferred from the EBRD venue to the office of the NGOs.

Despite a certain goodwill on the part of high-ranking EBRD people, both NGO representatives and journalists who had contacts with them, were hassled repeatedly by security staff. The bags of journalists who refused to send their camera through the X-ray check every time they entered the conference building (after having had some of their film destroyed by the frequent X-ray checks) were regularly searched demonstratively for up to fifteen minutes. A booklet written in Ukrainian detailing the corruption stories of the Chornobyl Mafia was confiscated repeatedly, until clear orders from above "legalized" it. It remains unclear to what extent EBRD people were hiding behind the Ukrainian security people, and in how far they were serious in their (hesitant) opening to the NGOs and other critical voices. Even on the last day of the meeting, two activists were arrested while painting banners in a park. These are still (on May 14th) being detained.

The local press was of great support, since it reported and commented on both the hesitant accreditation of NGO representatives and the arrests of activists.

Alain Kessi, Kiev

Inset on K2/R4:

In the period of 1991-1996 the energy consumption in Ukraine decreased by around 30 %, in 1997 by another 7 %, due to the collapse of the economic production. There is therefore no urgency to raise the energy production, as both NGO representatives and the international panel of experts conclude. The latter was commissioned by the EBRD to assess the economic viability of the K2/R4 project for the completion of the atomic reactors Khmelnytsky 2 and Rivne 4. In addition, the base load of the electrical net in Ukraine is covered at least to 2010, according to the report of the expert panel, which was published in February 1997. If action is required, it would be on the level of the peak load. This, however, cannot be solved by nuclear energy. The daily cyclic regulation required to accommodate the peak load is usually provided by hydroelectric power stations or gas turbines.

The energy sector in Ukraine offers numerous possibilities to save energy instead of producing more. A letter was played into the hands of Petr Hlobil, energy coordinator of CEE Bankwatch, sent by the president the World Bank Group, James Wolfensohn, and the then president of the EBRD, Jacques De Larosière, to the Ukrainian president Leonid Kutchma in January 1998. The two bank presidents outlined an energy efficiency program which would make K2/R4 unnecessary even if the remaining two reactors of Chornobyl are stopped by the year 2000.

One of the criteria of the EBRD, as also of the World Bank, is that the contractor be able to repay the loan (this is bound to be in contradiction with another principle: that no other source of financing can be found). The electricity sector in Ukraine has a high deficit. Though 63 % of the electricity bills of households are paid, companies pay no more than 16 %, with a downwards trend. The rest is paid through barter. Paul Siegelbaum, country director of the World Bank for Ukraine and Belarus, stated in August 1997 that to "go on lending to the generation companies in these circumstances · would be tantamount to endorsing the companies' losses." Experts of the EBRD have also expressed doubts that the project sponsor Enerhoatom would be able to generate sufficient income to repay the loans.

The current acting president the EBRD, Charles Frank, who was active in the private sector at General Electrics during long years, seems to be more favorable to the project: “If the project fulfills the Least-Cost criterion, the EBRD will finance it." Precisely this criterion however is not fulfilled by K2/R4, according to the report of the international panel of experts: "We conclude that K2/R4 are not economic. Completing these reactors would not represent the most productive use of $US 1 bn or more of EBRD/EU funds at this time."

Some international institutions were not happy with the unambiguous findings of the panel's report, and the US government commissioned a new study with Stone & Webster (S & W). Neither the terms of reference nor the full report were published. Only a report of results was made available. There is no way of finding out which input parameters S & W used to arrive at their results. In view of the great uncertainties in some of these parameters, due to the unstable political-economic situation in Ukraine, any result desired can be extracted from the model by variation of these parameters. Prof. John Surrey of the university of Sussex, the chairman of the international panel of experts: “The assumptions [in the S & W study] had to be heavily stacked in favour of the nuclear plants for the model to find a case for completing them."

The security measures are an essential point of criticism to the project. A new project report of the Ukrainian government which was presented at the EBRD summit confirms the worst fears of the NGOs. According to this report, the two reactors are scheduled to be put in operation within 36 months, while the implementation of the security measures is not to be completed until 74 months. Petr Hlobil comments: “If you buy a car, you would insist that the brakes work from the beginning." Even if all the improvements planned are actually implemented, fundamental design errors will hardly make it possible for the reactors to reach Western safety standards, which in turn are controversial themselves.

NGO representatives point out that the public participation process has not received sufficient attention. So-called "public" hearings on the project, as they are foreseen by the statutes of the EBRD, were set in remote areas not easily reachable. The deadlines for comments to the different phases of the project were set so short that it was impossible for either local or international NGOs to get well prepared. At an international level, the Ukrainian government has disregarded the ESPOO convention on transboundary environmental impact assessment, by failing to inform the neighboring countries and other potentially concerned states.

The Ukrainian president Leonid Kutchma seems to be quite touchy in his reaction to questions on K2/R4. A month ago, during a common press conference with the Bulgarian leader Petar Stoyanov in Sofia, he was asked by a NGO representative what the Ukrainian government intends to do after the negative conclusions of the international panel of experts under the chair of Prof. Surrey on K2/R4. He answered, obviously irritated, that he didn't know "your professor", but that the Ukrainian government would go ahead and complete the reactors even without EBRD funding, if necessary. Russia would then come to the rescue. Similarly irritated, he said at a ceremony commemorating the catastrophe in Chornobyl that Ukraine could not await an EBRD loan any longer and would therefore complete the reactors jointly with Russia. Tetyana Murza of the Ecoclub Rivne in Ukraine also reports that representatives of the Ukrainian company Enerhoatom which operates the reactors have announced publicly that they did not intend to pay attention to public opinion.


index of may 98 reportswww.agp.org