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Copyright © 2003 Caspian Development Advisory Panel DC: 1117183-5

CASPIAN DEVELOPMENT ADVISORY PANEL

REPORT ON

TURKEY AND PROJECT-RELATED SECURITY AND HUMAN RIGHTS ISSUES IN

AZERBAIJAN, GEORGIA, AND TURKEY

(DECEMBER 2003)

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TABLE OF CONTENTS

I. Consolidated Executive Summary of Panel’s Work in 2003.....................................................1

TURKEY

II. Introduction.......................................................................................................................... 20

A. The Panel’s Work ..............................................................................................21

B. The Institutional Structure in Turkey..................................................................24

III. Economic Impact ................................................................................................................ 28

A. Anticipated Revenue Inflow and Management ...................................................30

B. Procurement, Employment, and SMEs...............................................................32

1. Procurement ........................................................................................... 33

2. Employment........................................................................................... 35

IV. Environmental Impact......................................................................................................... 38

A. Reduction in Tanker Traffic in the Turkish Straits..............................................40

B. Pipeline Routing and Related Issues...................................................................41

1. Erzurum Plain ........................................................................................ 42

2. Posof Wildlife Protection Area............................................................... 44

3. Sarikamis Forest..................................................................................... 44

4. Gas Supply Lines for Pump Stations....................................................... 45

C. Reinstatement ....................................................................................................47

D. Issues at the Ceyhan Terminal............................................................................48

1. Site Selection ......................................................................................... 48

2. Cumulative Impact in Gulf of Iskenderun............................................... 48

3. Oil Spill Response.................................................................................. 50

4. Double-Hull Tankers.............................................................................. 51

5. Discharge of Ballast Water ..................................................................... 53

6. Single Point Mooring System................................................................. 55

V. Social Impact ....................................................................................................................... 57

A. Land Acquisition and Its Challenges ..................................................................58

1. Overview of the Land Acquisition Process ............................................. 58

2. BOTAS’s Responsibility for Land Acquisition....................................... 59

3. The Complexity of Land Ownership in Turkey....................................... 59

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B. The Resettlement Action Plan............................................................................60

1. Initial Assessment .................................................................................. 60

2. Disclosure and Consultation................................................................... 61

3. Land Acquisition and Compensation ...................................................... 62

4. Monitoring Procedures ........................................................................... 68

C. Impact on Minorities..........................................................................................69

D. Cultural Heritage Management ..........................................................................71

VI. Investment Programs .......................................................................................................... 73

A. CIP ....................................................................................................................77

B. EIP ....................................................................................................................79

VII. The Role of BOTAS .......................................................................................................... 81

SECURITY AND HUMAN RIGHTS

VIII. Security and Human Rights in Azerbaijan, Georgia, and Turkey ...................................... 87

A. BP’s Human Rights Commitment and the Regional Context ..............................89

B. Legal Framework...............................................................................................94

C. Operational Framework .....................................................................................97

1. Security Plans and Protocols................................................................... 98

2. Host Country Coordination..................................................................... 99

3. Risk Assessment .................................................................................. 100

4. Physical Protections ............................................................................. 101

5. Guards and Security Forces .................................................................. 102

6. Hiring and Training of Project Personnel.............................................. 104

7. Sharing Information with State Security Forces.................................... 106

D. Implementation and Coordination of Human Rights Monitoring ......................107

APPENDICES........................................................................................................................112

APPENDIX A Key Security and Human Rights Elements of the Projects’ Legal Framework ......................................................................................................114

APPENDIX B List of Meetings and Consultations .....................................................120

APPENDIX C Panel Policy Recommendations ..........................................................129

APPENDIX D Terms of Reference ............................................................................143

APPENDIX E Biographies of Panel Members............................................................145

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LIST OF ABBREVIATIONS

ACG Azeri-Chirag-Gunashli offshore oil field

ATCA Alien Tort Claims Act

BTC BTC Pipeline Company

BTC pipeline Baku-Tbilisi-Ceyhan oil pipeline

CCPs Contractor Control Plans

CDAP Caspian Development Advisory Panel

CHMP Cultural Heritage Management Plan

CIP Community Investment Program

CIPPs Contractor Implementation Plans and Procedures

EBRD European Bank for Reconstruction and Development

ECHR European Court of Human Rights

EIA Environmental Impact Assessment

EIP Environmental Investment Program

EMMP Environmental Management and Monitoring Plan

ESIA Environmental and Social Impact Assessments

EU European Union

GTZ Deutsche Gesellschaft für Technische Zusammenarbeit GmbH

HGA Host Government Agreement

IBC International Blue Crescent Foundation

IFC International Finance Corporation

IGA Intergovernmental Agreement

IMO International Maritime Organization

Joint Statement Joint Statement on the Baku-Tbilisi-Ceyhan Pipeline Project

KPIs Key Performance Indicators

LSTK Lump Sum Turnkey Agreement

NGO Non-governmental organization

Panel Caspian Development Advisory Panel

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Partners Collective reference to companies participating in the BTC and/or SCP consortia

Project Baku-Tbilisi-Ceyhan pipeline

Projects Baku-Tbilisi-Ceyhan pipeline and South Caucasus pipeline

Project Participants Collective reference to companies participating in the BTC and/or SCP consortia

PSA Production Sharing Agreement

RAP Resettlement Action Plan

RDI Regional Development Initiative

RFP Request for Proposals

RUDF Rural Urban Development Foundation

SCP South Caucasus Pipeline

Security Protocol Protocol Relating to the Provision of Security for the East-West Energy Corridor

SMEs small- and medium-size enterprises

SMMP Social Management and Monitoring Plan

SPM Single Point Mooring System

SSC Supreme Security Committee

SSPS Special State Protection Service

SÜRKAL The Sustainable Rural and Urban Development Society

TUDAV Turkish Marine Institute

Voluntary Principles Voluntary Principles on Security and Human Rights

BP established the Caspian Development Advisory Panel (CDAP) as an independent external panel as part of its plan to ensure that the Baku-Tbilisi-Ceyhan (BTC) pipeline is a world class model project. CDAP's terms of reference include the provision of objective advice to the Company on the economic, social, and environmental impacts of the pipeline project in Azerbaijan, Georgia, and Turkey. The views, opinions, and recommendations expressed both in CDAP's Interim Report and in this Report are solely those of CDAP alone and are not necessarily shared by BP or its Partners in the pipeline project.

Consolidated Executive Summary of Panel’s Work in 2003

Section I.



1

This is the second report of the Caspian Development Advisory Panel (CDAP or

the Panel), which was commissioned by Lord John Browne, Group Chief Executive Officer of

BP, in January 2003 as an independent, external advisory body to provide Lord Browne and BP

with objective advice on the economic, environmental, and social impacts of the Baku-Tbilisi-

Ceyhan oil pipeline (BTC pipeline) and other related BP activities in Azerbaijan, Georgia, and

Turkey. The Panel’s Interim Report, which focused on Azerbaijan and Georgia, was released in

August 2003 and can be found at www.caspsea.com, together with BP’s response. This

Consolidated Executive Summary provides an overview of the Panel's key findings and

recommendations from its Interim Report on Azerbaijan and Georgia and from this Report on

Turkey and project-related security and human rights issues in Azerbaijan, Georgia, Turkey. In

a number of areas, this Consolidated Executive Summary also notes where progress has already

been made against earlier recommendations.1

Although the Panel is funded by BP, the company has honored its commitment to

give the Panel complete independence. The members of the Panel, which was established with a

three-year mandate, include Jan Leschly (chair), Stuart Eizenstat, Jim MacNeill, and Mohamed

Sahnoun.2 In its eleven months of work, the Panel has held meetings with government officials,

non-governmental organizations (NGOs), think tanks, academics, and other experts in London,

1 The recommendations from the Panel’s Interim Report, along with its recommendations in this Report, are summarized in Appendix C. 2 Biographies of each of the Panel members are included in Appendix E.


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Washington, D.C., Azerbaijan, Georgia, and Turkey. The Panel visited Azerbaijan and Georgia

in March 2003 and Turkey in September 2003.

BP is the lead investor in two upstream facilities to develop oil and gas resources

in the Caspian Sea as well as in two pipelines to export gas and oil to world markets through

Turkey (together the Projects). Specifically, BP and its Partners are developing the Azeri-

Chirag-Gunashli (ACG) oilfield and the Shah Deniz gas field off the Azerbaijan coast. In

addition, BP and its Partners are constructing the Baku-Tbilisi-Ceyhan (BTC) pipeline to

transport the oil developed at ACG to the Mediterranean port of Ceyhan and the South Caucasus

Pipeline (SCP) to transport the gas developed at Shah Deniz from Baku to the Turkish border

and national distribution system.3

In the Panel’s view, the development of the ACG and Shah Deniz fields, along

with the construction of the BTC and SCP pipelines, are projects of immense strategic

significance, both for the host countries and for the world at large. For Azerbaijan and Georgia,

the development of Caspian energy resources represents an opportunity to diversify their supply

sources, to accelerate economic development, and to reinforce nascent democratic institutions.

For Turkey, the Project provides access to an important and significant supply of natural gas and

establishes that country as the gateway to an important new East-West energy corridor. In

addition, the pipeline routing allows for the export of hydrocarbons through Turkey directly to

3 The companies participating in the BTC and/or SCP consortia are referred to collectively in this Report as Project Participants or Partners.


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the Mediterranean Sea, slowing the rate of growth of tanker traffic through the economically

vital and environmentally sensitive Turkish Straits.

In its Interim Report, the Panel highlighted the historic opportunities presented by

the Projects for the Azerbaijani and Georgian economies, but also highlighted certain risks to

those countries’ economies. In particular, oil and gas wealth can be a development “curse” if

revenues are coupled with (i) weak or underdeveloped governance structures, (ii) a lack of

transparency in government functions, (iii) underdeveloped civil societies, and (iv) broad

economic needs. For such countries, energy wealth has the potential to inhibit rather than

increase growth and development. Azerbaijan displays a number of the conditions that

frequently are associated with the oil and gas “curse,” and Georgia faces similar risks. Indeed, in

making the transition to market economies both countries share certain broader, related

challenges in attaining the potential economic benefits from the BP-led Caspian Projects. The

Project will have a proportionately smaller impact on the Turkish economy than on the

Azerbaijani and Georgian economies. Nevertheless, treasury revenues from transit and other

Project-related fees from BTC for Turkey are expected to be significant over the lifetime of the

Project.

The Panel also notes the potential incongruity of more than one million barrels of

oil and an equally significant amount of natural gas passing every day through or near villages

and towns along the pipeline corridor where some houses have no heat or electricity. In the

Panel’s view, such a dichotomy would be neither healthy nor sustainable over the long term. If

the host countries do not manage the anticipated economic gains for the benefit of their


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populations, BP and its Partners could be exposed to criticism, warranted or not, for having

failed to help the region capitalize on a historic opportunity while exporting resources and related

profits for the benefit of the Project Participants and consumers in industrialized nations.

The Panel fully recognizes that BP and virtually all of its Partners are private-

sector actors and that many of the benefits that are expected to flow from development of

Caspian oil and gas can only be secured through sovereign action by the governments of the host

countries. At the same time, the Projects will inevitably have a defining impact on the economic

and social development of the region, and BP and its Partners have appropriately recognized that

they are and will remain central actors in that process over the life of the Projects. In the Panel’s

view, BP and its Partners have the opportunity and the obligation to contribute positively to the

development of the region as a whole and to the communities along the pipeline corridor. A

positive contribution by BP is even more important given the recent political unrest in

Azerbaijan and Georgia. More specifically, it is the Panel’s view that the Caspian Projects

provide BP with an opportunity to develop a new model or template for large-scale, extractive-

industry investments by major, multinational enterprises in developing and transition countries.

In its two reports, the Panel offers a range of recommendations that it hopes will

assist BP in achieving this goal. This Executive Summary highlights and summarizes nine broad

areas that, in the Panel’s view, merit special consideration and attention. For example, with

respect to Project activities in Turkey and security and human rights issues across all three host

states, the Panel recommends in this Report that:


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• BP and BTC pursue a holistic, integrated, and regional approach for their supplemental investment programs in the region and commit to expanding funding for and extending the programs through the Projects’ lifetime;

• BP and BTC fund, through the Environmental Investment Program, a study of the cumulative impact of all of the commercial activities in the Gulf of Iskenderun on the coastal and marine environments and on those who rely on the Gulf for their living;

• BP, as BTC’s largest shareholder, urge other BTC shareholder companies to adopt BP’s policy of only utilizing double-hull tankers to load and transit crude oil at Ceyhan by January 1, 2008, and encourage Turkey to adopt EU standards for transit of crude oil;

• BP, as the largest shareholder in BTC, use all of its leverage, including stopping work on the Project if necessary, to ensure that BOTAS fulfills the commitments BP and BTC have made for the Project; and

• BP, building on its reputation as a leader in the promotion of human rights objectives, establish a mechanism for implementing, coordinating, and monitoring human rights commitments related to the Projects.

1. Encourage Sustainable Development via Creation of the Caspian Development Fund

In both of its Reports, the Panel discusses and offers a number of

recommendations for sustainable investment in the region through support by BP and others for

initiatives above and beyond the Projects. BP has taken and should continue to take concrete

steps to ensure that the benefits from the more than US$20 billion invested in the Projects are

shared widely and that average citizens in Azerbaijan, Georgia, and Turkey, particularly along

the pipeline routes, are able to see visible improvements in their lives as a result of the Projects.

If BP plays a role, together with the governments of the three host countries, in producing such

benefits, it will truly have developed a new model for large-scale, extractive industry

investments in developing and transition countries.


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BP should be commended for launching three separate investment programs in

which it and its Partners will invest tens of millions of dollars in community, environmental, and

social projects over the next few years. In addition, the EBRD announced recently that it would

cooperate with BP and its Partners to develop a longer-term initiative, which might include other

development agencies and/or NGOs, to be known as the Regional Development Initiative (RDI).

The RDI will focus on the creation of long-term jobs and sustainable economic development

after pipeline construction is complete. According to the EBRD’s recent announcement, the

EBRD and BP have each earmarked up to US$25 million in grants and loans for the initiative;

other members of the BTC consortium are expected to join with target funding overall of around

US$100 million.

In its Regional Review, BP articulated a rationale for such investments, and BP

and its Partners have already funded important projects through their Community Investment

Program and Environmental Investment Program. The Community Investment Program’s

grants, for example, seek to enhance community mobilization, strengthen healthcare, and expand

microfinance in Azerbaijan and Georgia. In Turkey, the Community and Environmental

Investment Programs seek to promote agriculture, develop entrepreneurship, empower

disadvantaged groups (e.g., women), build “quick impact” projects, and promote the physical

protection of various environmentally sensitive habitats and species. These programs are

important and should have a positive impact in the region.

In its Interim Report, the Panel recommended that BP significantly expand the

funding, scope, and time horizon of its supplemental investments in the region. The Panel,


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recognizing the need for an integrated, holistic, and regional approach, recommended that BP

create a vehicle that combines BP’s community, social, and environmental investment funds

going forward. The Panel also recommended that BP encourage other private sector entities and

public development agencies to contribute to such an initiative, which might take the form of a

Caspian Development Fund. Contributions by other parties would ensure that the Caspian

Development Fund enjoys broad-based support and leverages the resources and skills of

development agencies active in the region. The Caspian Development Fund could operate as a

vehicle to oversee all investments by BP in sustainable development in the three host countries

and serve as a repository for other donations and as a facilitator of public-private partnerships.

Following its site visit to Turkey, the Panel believes more strongly than ever that the approach it

outlined in its Interim Report could help maximize BP’s positive impact in the region and help

enable BP to create a new model for large-scale, extractive industry investments in developing

and transition countries.

In its Interim Report, the Panel recommended that BP announce a clear

commitment to investing in sustainable development in the Caspian region as a whole; that it

extend this commitment beyond the construction period to the full lifespan of the Caspian

Projects; and that BP identify a secure, dedicated, long-term funding stream — based, for

example, on the revenue generated per unit of oil and gas throughput and/or production over the

life of the Projects — sufficient to meet this commitment and to make a lasting impact on the

region. The Panel further recommended that BP try to leverage its investment by partnerships

with other international development institutions active in the region. The Panel also


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recommended that BP structure its investment in sustainable development with a view towards

building the infrastructure — both physical and human — that will sustain foreign direct

investment and domestic economic growth over the long term.

In addition, the Panel recommended that the Caspian Development Fund

prioritize and focus on sectors and skill sets that could produce the greatest sustainable impact.

These areas include agriculture and tourism, which, according to a number of experts, are the

non-energy related economic sectors most likely to produce economic growth in Azerbaijan and

Georgia, and policy reforms in the domestic energy and banking sectors. The Panel also

recommended that the Caspian Development Fund target projects that will expand access to

education, strengthen civil society, and enhance opportunities for and the capacity of small-and

medium-size enterprises in Azerbaijan and Georgia. These broad recommendations apply to

Turkey as well, and the Panel further recommends that supplemental investment in Turkey

continue to prioritize social goals such as health and education, particularly for women.

The recently announced RDI addresses a number of the Panel’s recommendations

with respect to supplemental investment, including the clarification of BP’s commitment to fund

sustainable development initiatives beyond the construction phase. The Panel awaits further

details on the RDI and will comment on the initiative in its next Report.

2. Comply with Project Standards In Turkey

The 1,076 kilometers of the BTC pipeline in Turkey will be designed and

constructed by BOTAS, the state-owned Turkish pipeline construction company, pursuant to the

Host Government Agreement and a US$1.3 billion Lump Sum Turnkey (LSTK) Agreement


9

between BTC and BOTAS and guaranteed by the government of Turkey. Whereas in Azerbaijan

and Georgia, BP and BTC are directly hiring and supervising contractors handling the

construction, BTC is one step removed in Turkey, with BOTAS serving as Managing Contractor.

This arrangement, coupled with a weak but evolving environmental and social compliance

culture in BOTAS and its contractors, raises questions for the Panel about whether the various

environmental and social commitments made in the Environmental Impact Assessment (EIA)

and health and safety commitments made in other project documents will be met. In particular,

the Panel heard concerns that BOTAS and its contractors might feel pressure to cut corners on

environmental, social, and technical standards to remain on schedule and/or under budget vis-à-

vis the LSTK Agreement and that BP and BTC personnel lacked the authority, short of stopping

work or exercising other severe contract remedies, to ensure that BOTAS and its contractors

meet BTC’s EIA commitments. The Panel recommends that BP and BTC work to ensure that

BOTAS and its contractors remain fully aware of and committed to fulfilling their obligations

under the various Project management plans. The Panel also encourages BP, through its leading

role in BTC, to use all of its leverage, including stoppage of work, if necessary, to ensure that

BOTAS fulfills the commitments BP, BTC and BOTAS have made in the EIAs.

3. Clarify the Governing Legal Regime

In its Interim Report, the Panel discussed the legal regime that BP and its Partners

in BTC and SCP had created with the three host governments to govern key standards by which

the pipelines are to be constructed and operated. This legal regime was established to provide

greater certainty for the investment by BP and its Partners given the stage of development of


10

various legal institutions in the host countries, particularly in Azerbaijan and Georgia.

Nevertheless, the governing legal regime has caused some controversy, particularly in the NGO

community. The Panel recommended in its Interim Report that BP work with the host

governments to clarify a number of critical issues in the legal regime. These included (i) the

extent to which host governments and third parties have access to local courts or local

administrative remedies to enforce environmental, health, safety, and other standards on Project-

related activities; (ii) the environmental, health, and safety standards that currently govern

Project-related activities, recognizing that the Projects have adopted a dynamic benchmark of

international and European Union (EU) practice; and (iii) how and by whom the environmental,

health and safety standards that will govern Project-related activities going forward are to be

determined.

In September 2003, after the Panel’s Interim Report was issued, BTC issued the

Citizen’s Guide to the BTC Project Agreements and the Human Rights Undertaking, both of

which clarify BTC’s interpretation of certain aspects of the Projects’ legal framework. The

Panel commends BTC for issuing these documents, which are consistent with key

recommendations in the Panel’s Interim Report on Azerbaijan and Georgia. The Citizen’s Guide

provides among other things a “plain-language summary” of the IGA and HGAs, which the

Panel recommended in its Interim Report as a means of clarifying particularly complex aspects

of the Projects’ legal framework. The Human Rights Undertaking, which is a legally binding

unilateral deed under English law and can only be modified or revoked with the express consent

of the beneficiaries (the governments of Azerbaijan, Georgia, and Turkey), addresses concerns


11

expressed in the Panel’s Interim Report about the possible effects of the Projects’ legal regime in

the area of human rights. Notably, through the Human Rights Undertaking, BTC confirmed that

the HGAs do not limit a host government’s ability to regulate the human rights, health, safety,

and environmental aspects of the Projects in accord with the standards agreed for the Projects,

including international labor and human rights treaties to which a host government is a party.

BTC also pledged in the Human Rights Undertaking that it will not exercise any rights it may

have under the HGAs to seek compensation for actions required by a host government to fulfill

its obligations under international human rights, environmental, and other treaties to which it is a

party.

The Panel recommends that BP and BTC (i) build on the publication of the

Human Rights Undertaking by more broadly distributing the document in the host countries in

local languages and (ii) remain engaged in discussions with the NGO community on longer-term

improvements in the human rights protections that could be included in the legal regime for

future projects. It is the Panel’s understanding that BTC, as a signatory to the Human Rights

Undertaking, will continue to be bound by the terms of the Human Rights Undertaking, a

unilateral deed under English law, regardless of any shifts in ownership within BTC, including

when and if SOCAR assumes majority ownership of BTC shares. Notwithstanding the Panel’s

understanding of BTC’s obligations under the unilateral deed, a number of NGOs have raised

concerns with and asked questions to the Panel about whether the Human Rights Undertaking

will bind BTC even when SOCAR increases its proportional ownership of BTC. The Panel

recommends that BP and BTC confirm in writing the Panel’s understanding that BTC will


12

continue to be bound by the Human Rights Undertaking in the future regardless of changes in

relative ownership stakes among the shareholders within BTC.

4. Protect Human Rights In Section VIII of this Report, the Panel discusses and offers detailed

recommendations to BP on ways that BP and BTC can better protect the human rights of the

people affected by the Projects, particularly recognizing that Azerbaijan, Georgia, and Turkey

have each experienced internal or external conflict in recent years. BP has made important

commitments to support human rights in the region both in various project agreements with the

host governments and the recently announced Human Rights Undertaking. In the Panel’s view,

however, the poor human right records of the host governments’ security and military forces

create a significant reputational risk for BP and BTC, in the event that the governments are

unwilling or unable to operationalize the robust human rights protections that have been

established in the Projects’ legal framework.

To help ensure that the human rights of those affected by the Projects are

protected, the Panel recommends that BP, BTC, and the Project Participants accelerate efforts to

operationalize the planned arrangements for the Projects’ security and the protection of human

rights and that, to the extent publication of these documents will not compromise the safety of

personnel and security of facilities, they make these more detailed security arrangements

transparent and accessible to the public. In addition, the Panel recommends that BP and its

Partners (i) create an independent ombudsman’s office in each country for the Projects, which

would be responsible, subject to local law, for hearing and investigating complaints about


13

alleged human right violations related to the Projects, and (ii) establish a human rights

coordinator or similar office that would serve as the Projects’ liaison with all interested parties

and report periodically on the results of the Projects’ monitoring efforts.

5. Improve Transparency and the Free Exchange of Ideas

It is the Panel’s view that BP can have an important and positive impact on

improving transparency and expanding the free exchange of ideas in the countries in which it has

invested. In addition to BP’s funding and supporting local NGOs, the Panel offered a number of

recommendations in its Interim Report on publishing data on revenues that will accrue from the

Projects to the governments of Azerbaijan and Georgia. Those recommendations are extended to

Turkey in this Report. The Panel also recommended a number of broader initiatives BP might

undertake to help the governments of Azerbaijan and Georgia link revenue management to

poverty reduction and other development objectives.

In the Panel’s view, the greater the transparency with which BP and its Partners

inform the public about the Project-related revenues that will accrue to the host governments, the

more accountable the governments will be about the expenditure of such funds. Transparency

will also enhance the dialogue and debate about the appropriate future uses of those revenues.

The Panel commends BP’s decision as operator to publish estimates of various Project-related

payments to the host governments, as well as the decision to publish, including in local

languages, the Production Sharing Agreements, Host Government Agreements, and the

Intergovernmental Agreement that govern all or part of the Projects. The Panel recommends that

BP take the next step with the “publish what you pay” principle by preparing and making


14

publicly available, in English and local languages, detailed and easily understood annual

statements of (i) the specific payments, by category and amount, that are made to the host

governments and their various agencies, and (ii) the overall estimated earnings, again by

category and amount, that the Projects generate for the host governments and their various

agencies, including revenue from the sale of the state’s share of oil and gas, transit fees, grants,

taxes and other receipts. Publishing detailed and easily understood annual statements of the

payments and earnings from the Projects would be a major step for BP and its Partners toward

creating a model for large-scale, extractive industry investments in developing countries.

Publication of this information would reinforce the broader, UK-US–led Extractive Industries

Transparency Initiative that BP has publicly supported and the government of Azerbaijan has

indicated an intention to join. This Initiative has urged companies operating in the extractive

industries and governments hosting such investments to be more open about the financial

elements of such projects, including through regular publication of project payments and

revenues in a standardized format.

6. Route Considerations; Expand Environmental Monitoring Activities

In its Interim Report, the Panel recommended a number of external monitoring

activities in the Borjomi and other regions where controversy exists surrounding the routing of

the pipeline. It is the Panel’s view that there were shortcomings in the process for selecting the

ten-kilometer corridor of interest in Georgia. In light of its concerns about the security of certain

routes, the government of Georgia took certain routes off of the table, as noted in the April 2002

BTC Project Environmental and Social Impact Assessment (ESIA) Disclosure document.


15

Neither BP nor the Panel is in a position to evaluate the security assessment made by the

government of Georgia. In the Panel’s view, however, the impression was created that the BTC

pipeline corridor was routed primarily on the basis of geotechnical, environmental, and social

criteria when, in fact, security considerations appear to have been a principal factor driving the

routing decision. If the overriding security constraints on corridor routing are accepted, in the

Panel’s view it is likely that the route that was ultimately selected would have been chosen even

with a more fulsome debate over the options.

BP and its Partners have pledged to implement a number of important mitigation

and oil spill prevention mechanisms in the Borjomi region to prevent environmental damage in

the unlikely event of an oil spill. The Panel recommended in its Interim Report that BP publish

and broadly communicate the mitigation measures it plans to put in place and seek input from the

community, the Georgia Academy of Sciences, and other experts on additional mitigation

initiatives that may be appropriate.

In addition, the Panel recommended in its Interim Report that BP support the

creation of a community monitoring mechanism to track the potential effects of the pipeline in

the Borjomi region. The monitoring panel presumably should consist of both experts and lay

persons from Borjomi and other regions, including Members of the Georgia Academy of

Sciences. The Panel also recommended that BP involve local government and citizens in its oil

spill response plan and develop a program to train and equip the local community in Borjomi to

respond to a potential oil spill.


16

The Panel is satisfied with the process through which BP and BTC identified the

route corridor in Turkey and is unaware of route-related controversies in Turkey as significant as

those that exist in Georgia.

7. Other Environmental Issues

In addition to routing issues, the Panel extensively reviewed BP and BTC’s plans

to minimize the Projects’ impact on the environment and mitigate environmental consequences

associated with the construction and operation of the Projects. The Panel’s overall impression is

that BP has made a serious and concerted effort to mitigate environmental damage associated

with the Projects. In addition, in the ESIAs for Azerbaijan and Georgia and the EIA for Turkey,

BP and BTC outlined in detail the evaluation of alternatives, mitigation plans, and environmental

risk assessments for the Projects.

The Panel offers a number of recommendations to BP on ways BP and BTC can

further enhance environmental protection in Azerbaijan, Georgia, and Turkey. For example, as

part of its ESIA and related monitoring processes, BTC is collecting a significant amount of

baseline environmental data, including data related to the Caspian Sea. The Panel recommended

in its Interim Report that BP and its Partners publish the baseline environmental and scientific

data they have collected to the relevant technical communities and the public at large.

Publication of such data will expand scientific knowledge of the environment in the region. The

Panel in its Interim Report also reviewed the Project Participants’ plans to decommission the oil

platforms, terminal facilities, pump stations, and pipelines. Notwithstanding the fact that

ownership of the Projects will ultimately transfer to SOCAR, BP will itself be judged by whether


17

the facilities are decommissioned, even if ownership has meanwhile passed to a third party. The

Panel recommended that when ownership of the various Project facilities change hands, BP

should do everything possible, including contractually binding SOCAR, to ensure that the

ultimate owner properly decommissions the facilities.

The Panel also comments on and offers recommendations to BP in this Report

related to the terminal at Ceyhan. The Panel recommends that BP fund, through the

Environmental Investment Program, a study of the cumulative impact of all of the commercial

activities in the Gulf of Iskenderun on the coastal and marine environment and on the livelihoods

of those directly dependent on the Gulf for their living.

In addition, the Panel discusses at some length the risks associated with the

transport of crude oil in single-hull tankers and notes that the EU has accelerated its phase-out of

single-hull tankers from transporting crude oil to and from ports in the EU and from anchoring

within the jurisdiction of EU Member States. The Panel recommends that BP, as BTC’s largest

shareholder, urge other BTC shareholders to adopt BP’s policy of only utilizing double-hull

tankers to load and transit crude oil at Ceyhan by January 1, 2008. At a minimum, BTC,

consistent with its commitment to adopt international standards in no event less stringent than

those generally applied within member states of the EU, should only allow double-hull tankers to

load and transit crude at Ceyhan by 2010, consistent with EU legislation. If the EU further

accelerates its timetable for the phase-out of single-hull tankers, the Panel recommends that BTC

adopt the new schedule. Finally, the Panel recommends that BP encourage Turkey to adopt EU

standards for transit of crude oil.


18

8. Monitor Social Impacts Ensuring that local communities should have an effective means of

communicating with BP and its Partners is essential to deal with the concerns and disputes that

inevitably arise during large-scale construction projects. Ongoing monitoring of social impacts

of the Projects, as well as the establishment of clear grievance procedures, are also important

elements of effective implementation of the EIA and the Resettlement Action Plan (RAP). The

Panel recognizes that BP already has established certain monitoring and grievance mechanisms

in cooperation with the construction contractors. In its Interim Report, the Panel recommended

that these monitoring mechanisms, both during and after construction, should directly involve

civil society including local community representatives. The Panel recommended that continued

vigilance is required from BTC to ensure that disputes are resolved in a timely, fair, and

satisfactory manner.

In this Report, the Panel identifies a number of issues arising out of the land

acquisition process in Turkey, including the use of an accelerated procedure for acquiring land

under Turkish law. The Panel recommends that BP and BTC remain attentive to fairness issues

associated with the land acquisition process in Turkey and continue monitoring the public use of

RAP Fund payments for communal lands as well as RAP Fund payments to informal individual

users and fisherman. The Panel plans to revisit these issues in the future.


19

9. Strengthen Support to SMEs

It is the Panel’s view that BP’s support for small- and medium-size enterprises

(SMEs) is critical for the development of the economies in the host countries. BP has taken a

number of important steps to help ensure that SMEs benefit through subcontracting opportunities

and through skills and technical development. For instance, as the Panel noted in its Interim

Report, BP and its Partners have established the Enterprise Center in Baku, through which local

suppliers can identify contracting opportunities with the Projects and work to understand better

the technical standards required by BP and its subcontractors. The Panel also offered a number

of recommendations to strengthen SMEs, which it extends to Turkey in this Report. For

example, these include (i) working with development organizations to provide technical

assistance and other programs that target banking functions potentially benefiting SMEs, (ii)

exploring opportunities to fund and/or support credit facilities that could be established by

regional development organizations for the benefit of SMEs, (iii) increasing efforts to use

nontechnical SMEs whenever possible to satisfy project needs, and (iv) identifying procurement

opportunities for SMEs outside of the energy sector. Significantly, a number of these initiatives

are already planned or underway.

* * * *

The Panel welcomes and invites comments on its two Reports from interested

parties and looks forward to working with BP, NGOs, government agencies, international

financial institutions, and other interested parties as the Panel continues its work on this

important initiative.

Introduction

20

Section II.

Introduction

Introduction

21

This is the Panel’s second Report on the Caspian Projects. The Panel’s Interim

Report, released in August 2003, focused on Azerbaijan and Georgia. This Report focuses on a

number of issues in Turkey, as well as security and human rights issues in all three countries.

A. The Panel’s Work

BP’s investments in the Caspian Projects come with concomitant responsibilities

to contribute to positive change in this important region of the world. The Panel continues to

subscribe to the view that the Caspian Projects provide BP with an opportunity to develop a new

model or template for large-scale, extractive-industry investments by major, multinational

enterprises in developing and transition countries. Through its Reports, the Panel seeks to

provide Lord Browne and BP with recommendations and suggestions to help BP move in that

direction and ensure that these investments will leave a positive, lasting legacy in the region.4

The Panel completed a productive site visit to Turkey in mid-September 2003,

meeting with key stakeholders in the Turkish government, affected communities, local and

international NGOs, and representatives of the international development community.5 The

Panel visited Ankara, Istanbul, Erzurum, Adana, and Ceyhan, meeting with government and

other officials as well as BP personnel and observing various sites along the construction

corridor. The Panel also met extensively with the in-country BP/BTC project team as well as

with both the leadership and line managers of BOTAS (the state-owned Turkish pipeline

4 A summary of the Panel’s recommendations in both Reports appears in Appendix C to this Report. 5 A full list of the parties consulted in connection with the Panel’s two Reports appears at Appendix B.

Introduction

22

construction company) and received briefings on the full range of project activities and issues.

In addition, the Panel met with a wide range of academic, media, and industry experts to discuss,

among other issues, land acquisition, environmental issues, and the impact of the Ceyhan

terminal on local fishing communities. As it did in the case of Azerbaijan and Georgia, the Panel

retained two consultants with expertise in environmental and social issues. 6 These experts

reviewed all of the EIA documentation, visited the field in mid-September 2003, and briefed the

Panel on their reviews and site visit. The Panel also benefited from a distinguished country

advisor who provided the Panel with important insights and guidance on a variety of issues and

helped the Panel develop its agenda during its site visit.7 A number of NGOs also advised the

Panel on its agenda for Turkey and on the key issues addressed in this Report.

This Report is organized in sections addressing the following topics:

• The economic impact of the Caspian Projects for Turkey, including revenue impacts;

• The environmental impacts of the BTC pipeline and associated facilities in Turkey as well as BP’s strategy to manage and mitigate any potential negative environmental consequences;

• The social impact of the BTC pipeline in Turkey, including BTC’s land acquisition process;

6 The Panel retained Professor Richard Fuggle of the Department of Environmental and Geographical Science, University of Cape Town on environmental issues, and Professor Daniel Bates of the Department of Social Anthropology, Hunter College of the City University of New York on social issues. 7 The Panel’s country advisory, Ilter Türkmen, served as Minister of Foreign Affairs and as Turkey’s Ambassador to Athens, Moscow, Paris, and the United Nations. He has also served in senior UN posts.

Introduction

23

• BP and BTC’s supplemental investment initiatives in Turkey;

• The unique challenges for BP raised by the Lump Sum Turnkey Agreement with BOTAS; and

• The potential impacts on human rights of pipeline security measures in Azerbaijan, Georgia, and Turkey.

Following the release of its Interim Report, the Panel briefed a variety of NGOs,

several US government agencies, the International Finance Corporation (IFC) of the World

Bank, and the European Bank for Reconstruction and Development (EBRD) on its work plan,

findings, and recommendations. In addition, in October 2003, the Panel gave the IFC and EBRD

an initial briefing on its observations on its Turkey site visit. Notes on the Panel’s IFC and

EBRD briefings can be found on the Panel’s website: www.caspsea.com. The Panel plans

similar briefings following the issuance of this Report.

The Panel’s mandate extends for three years. As a result, the Panel will continue

to pursue these and related issues through calendar year 2005. The Panel plans a site visit to the

region in the fall of 2004, and it will issue another report on BP’s progress on the Projects and

BP’s approach toward implementing the recommendations made in the Panel’s two Reports for

2003. The Panel welcomes comments and input on its work program and focus from interested

parties.

The Panel continues to receive input from a variety of sources through its website

(www.caspsea.com) and email address ([email protected]), allowing interested parties to

submit comments and information directly to the Panel, independent of BP. The Panel has

Introduction

24

maintained its policy of accepting invitations to meet with any and all interested groups,8 and has

consulted extensively with NGOs actively working on the Caspian Projects.

B. The Institutional Structure in Turkey

The Project in Turkey comprises 1,076 kilometers of the BTC pipeline as well as

associated facilities extending from the Georgian border to the Mediterranean coast ending at a

marine terminal at Ceyhan. This section of the pipeline is being designed and constructed by

BOTAS, the state-owned Turkish pipeline transportation company, pursuant to the Host

Government Agreement (HGA) and a US$1.3 billion Lump Sum Turnkey (LSTK) Agreement

between BTC and BOTAS, which is guaranteed by the government of Turkey.

In contrast to Azerbaijan and Georgia, where BTC directly manages all aspects of

pipeline construction, BOTAS performs the role of Managing Contractor in Turkey. Thus,

BOTAS’s responsibilities include, but are not limited to, the following: (i) design and

construction of the pipeline, pump stations, and terminal; (ii) management of subcontractors; (iii)

environmental planning, mitigation, management, remediation, and monitoring; and (iv)

coordination with the Turkish government on security and permitting issues. In addition, under

8 To assist in its work, the Panel maintains a Secretariat based in Washington, D.C. The Secretariat, which consists of Peter Flanagan, David Marchick, Elizabeth Snodgrass, and Karin Kizer of Covington & Burling, provides both substantive and logistical support and works with the Panel to facilitate meetings and otherwise fulfill the Panel’s mission. The Secretariat also held a number of independent meetings with government officials, NGOs, and other interested parties, conducted extensive research on Project-related activities, and provided recommendations to the Panel.

Introduction

25

the HGA, BOTAS is responsible for land acquisition and compensation activities for which a

lump sum of US$99 million was set.

In Azerbaijan and Georgia, BTC supervises contractors and subcontractors

handling the actual pipeline construction. In Turkey, however, BTC has an arms-length contract

with the government of Turkey and BOTAS for the delivery of its pipeline according to agreed

standards and specifications. In Azerbaijan and Georgia, BTC directly supervises contractors

and subcontractors’ work to implement the commitments articulated in the ESIAs for these two

countries, whereas in Turkey BOTAS has this responsibility. According to the Approved EIA

(October 2002) for Turkey:

BOTAS [is] responsible for implementing the provisions of the EMMP [Environmental Management and Monitoring Plan] and the SMMP [Social Management and Monitoring Plan] and supporting plans. Contractors will be responsible for the implementation of, and adherence to, all the mitigation measures outlined in the EIA the EMMP and the SMMP. BTC Co. will ensure that the management plans are implemented.9

Through its guarantee of the LSTK Agreement, the government of Turkey has

indirectly guaranteed up to US$300 million to assist BOTAS in meeting its environmental and

other obligations under the LSTK Agreement, in the event that BOTAS is not able to complete

its tasks within the US$1.3 billion budget. To the extent costs go beyond this US$300 million

buffer in satisfying commitments, including from the EIA, that are appropriately attributable to

the LSTK Agreement, the amounts generally will be withheld from transit fees and other

amounts owing to BOTAS (subject to a cap of 30 percent of the overall LSTK Agreement 9 Non-Technical Summary, Environmental Impact Assessment, Baku-Tblisi-Ceyhan Crude Oil Pipeline: Turkey (Sept. 2002) at 41.

Introduction

26

budget). BOTAS will separately be liable for monetary damages in the event the Project is not

completed on time.

As BTC has undertaken to “ensure that the management plans are

implemented,”10 and as also required by the Project Agreements, BTC and BOTAS have

published a number of documents to guide BOTAS and its contractors’ activities in order to

ensure compliance with the commitments made under the EIA. These documents include plans

covering, among other issues, environmental management, reinstatement, traffic management,

and oil spill response.11 BOTAS is also responsible for (i) communicating the EIA requirements

to its subcontractors; (ii) inspecting, monitoring, and reporting on compliance; and (iii)

overseeing the subcontractors’ development and execution of Contractor Implementation Plans

and Procedures (CIPPs).

BOTAS has established a “Directorate” in Ankara for planning and execution of

engineering, procurement and construction activities. BTC also has assigned delivery managers

and supervisors along the pipeline corridor and at the terminal to monitor BOTAS’s work and

help ensure compliance with the LSTK Agreement, including the EIA commitments.

The Panel spent a considerable amount of time before, during, and after its visit to

Turkey examining the BTC-BOTAS relationship. Specifically, the Panel met with BOTAS’s

Chairman as well as BOTAS delivery managers in several locations in Turkey, including those at

10 Id. 11 For a complete list of the various management plans, see BTC Project EIA, Turkey (Oct. 2002) at 17-1.

Introduction

27

the terminal in Ceyhan. In addition, the Panel discussed the BTC-BOTAS relationship with

senior BP and BTC executives as well as engineers and construction supervisors along the

pipeline route. The Panel also asked its consultants to review the issues associated with the

LSTK Agreement.

In the Panel’s view, the LSTK Agreement presents BP with perhaps the most

significant challenge it has in Turkey. The discussion in the following substantive sections of

this Report highlights a number of the elements of this challenge, and the Panel returns to this

topic in Section VII at the end of its discussion of Turkey in this Report.

Economic Impact

28

Section III.

Economic Impact

Economic Impact

29

Turkey has a much larger, more developed, and more diversified economy than

either Azerbaijan or Georgia; thus, the relative economic impact of the Project on the Turkish

economy is much less than it is in the other two countries. Nevertheless, the Project will

generate significant revenue for the Turkish government and create employment and

procurement opportunities for Turkish workers and businesses. Small- and medium-size

enterprises (SMEs) along the pipeline corridor should benefit from increased opportunities to sell

their goods and services to the Project. Moreover, the direct investment in Turkey is likely to

spur additional economic activity near the pipeline corridor.

The Project will also link Turkey more directly to international energy markets,

and in turn strengthen its ties to the global economy. Turkey will anchor the eastern portion of a

new energy network linking the Caspian region with the West, both through the export terminal

at Ceyhan and through linkages to existing or planned gas distribution pipelines. Over the longer

term, a successful Project could lead to additional direct foreign investment in Turkey in the

energy and other sectors, as foreign investors gain confidence in Turkey as a place to invest.12

As in the case of Azerbaijan and Georgia, BP can take and in many respects is

already taking steps to help ensure that these economic impacts are sustainable, including (i)

supporting transparency with respect to the transit and other fees generated by the Project and (ii)

monitoring the procurement and employment efforts by BOTAS and its contractors to help

ensure that SMEs and workers living near the pipeline benefit directly from jobs and other

economic opportunities that the Project creates. In contrast to Azerbaijan and Georgia, however, 12 See Baku-Tbilisi-Ceyhan Summary of Project Benefits (Apr. 2003) at F-4.

Economic Impact

30

there appears to be less of a need for BP and its Partners to help develop the domestic energy

market in Turkey, as the Turkish delivery mechanisms are relatively more efficient and reliable.

A. Anticipated Revenue Inflow and Management

Turkey will receive significant revenue over the Project’s lifetime according to

current BTC estimates. For example, BOTAS will receive more than US$1.3 billion by 2005 for

constructing the pipeline under the LSTK Agreement. In addition, as a participating minority

shareholder in developing the ACG fields, TPAO Turkish Petroleum, Turkey’s state-owned oil

company, will likely receive an estimated US$1 billion from the sale of oil under the ACG

Production Sharing Agreement (PSA).13 Once the Project is operational, the Turkish

government will receive an estimated US$1.2 billion to US$1.8 billion in pipeline transit fees,14

while BOTAS will receive an estimated US$70 million annually in operating fees for its role as

operator in Turkey. In terms of annual receipts, the government of Turkey and BOTAS are

expected to receive up to US$200 million in transit and operating fees for the first 16 years of the

Project’s operation and as much as US$290 million in such fees over the next 24 years of the

pipeline’s operation.15

13 IFC: Summary of Project Information—Principal Economic Benefits (Attach. 2), available at http://www.ifc.org/btc. TPAO is a PSA financing party and holds a 6.75 percent interest in the consortium developing the ACG oil fields. See id. 14 Baku-Tbilisi-Ceyhan Summary of Project Benefits (Apr. 2003) at F-7. The Project’s estimates assume that Turkey will receive on average 28 cents a barrel and that the price of oil will range from US$16 to US$25 per barrel. See id. 15 Id.

Economic Impact

31

In contrast to Azerbaijan, where the revenues generated from production and

transit fees for both the BTC and SCP Projects will substantially increase the government’s

receipts, the additional revenues generated by the Projects will account for only a minor portion

of the Turkish government’s overall budget. Given that Turkish government revenues in 2001

(the last year for which such figures are available) exceeded US$44 billion, the roughly US$200-

290 million in annual fees will likely only have a small impact on Turkey’s fiscal outlook.

Nevertheless, the billions of dollars generated from production, transit, and

operating fees, as well as the significant construction-related income, represent a significant

inward flow of investment and income for Turkey. How the Turkish government uses these

funds is important for the development of the country. The Panel’s observations on transparency

in its Interim Report on Azerbaijan and Georgia hold true for the Turkish government and

BOTAS as well.16 BP’s decision to publish estimates of various Project-related payments to the

host governments will contribute to an open dialogue about the terms governing the resource-

development activities in Turkey. It should contribute to wider public awareness of the financial

earnings that Turkey will receive as well as dialogue about how these earnings should be used.

The Panel recommends that BP and its Partners continue and extend their commitment to

“publish what you pay” in Turkey by preparing and making publicly available detailed and

easily understood annual statements of (i) the specific payments — by category and amount —

that are made to the Turkish government, its agencies, and BOTAS and (ii) the overall

16 See Interim Report at 39.

Economic Impact

32

estimated earnings — again by category and amount — that the projects generate for the

Turkish government, its agencies, and BOTAS.

B. Procurement, Employment, and SMEs

The Project will directly stimulate the local economies along the pipeline corridor

through BOTAS’s and its contractors’ purchases of local goods and services, including

construction materials (e.g., sand, concrete, other building materials), logistics, equipment

maintenance, engineering design, telecommunications, waste management, scaffolding, and

inspection services.17 The Project is also expected to use local contractors for road and bridge

construction, quayside repairs, equipment rental, materials, digital business services, security,

medical services, environmental services, and maintenance.18 The Project should also bring

indirect procurement and employment opportunities into other sectors of the local economy (e.g.,

food supply).

In contrast to Azerbaijan and Georgia, where BTC is the Project’s managing

contractor and can adopt measures to help ensure that local SMEs and workers benefit directly

from the Project, in Turkey BTC must work through BOTAS to pursue these objectives. In other

words, in Turkey BTC cannot directly ensure that these opportunities translate into benefits for

local SMEs and workers. During its site visit, the Panel gained the impression that some

community officials were not aware that BTC was at least one step removed from the hiring and

procurement processes and simply assumed that BTC was fully responsible for pipeline

17 Baku-Tbilisi-Ceyhan Summary of Project Benefits at F-9. 18 Id. at F-8.

Economic Impact

33

procurement and employment decisions. Thus, the LSTK Agreement with BOTAS creates

reputational risks for BTC. These reputational considerations are perhaps most pressing in the

communities along the pipeline, whose positive disposition towards the Project will be critical to

assuring the long-term safety and security of the pipeline.

1. Procurement

As the managing contractor, BOTAS and its Engineering, Procurement, and

Construction (EPC) contractors are responsible for all procurement for the Project in Turkey,

including procurement from SMEs in the local communities.19 BP and its Partners have

requested that BOTAS and its contractors implement a strategy for maximizing local

procurement.20 BTC will also hire local independent organizations to monitor and evaluate the

procurement process for both BOTAS and its contractors against criteria for transparency,

fairness, and objectivity.21 Independent of its plans under the EIA to monitor BOTAS’s

performance in hiring SMEs for subcontracts, BTC also plans (i) to document procurement

activities; (ii) to provide support to local SMEs; and (iii) to share examples of “good practice”

within the BTC Project. These efforts should help reduce, but cannot eliminate, the reputational

risk that BP faces if BOTAS does not live up to the local procurement objectives set forth in the

EIA.

19 BTC Project EIA: Turkey Final EIA Appendix C8 — Social Management and Monitoring Plans (Oct. 2002) at C8-50. 20 Id. at C8-52. 21 Id. at C8-54.

Economic Impact

34

In its Interim Report on Azerbaijan and Georgia, the Panel highlighted the

importance of targeting procurement opportunities for all SMEs along the pipeline corridor,

building SME capacity (through initiatives such as the Enterprise Center in Baku), and making

affordable credit available to SMEs so that they can take advantage of Project-related

procurement opportunities.22 Although some Turkish SMEs are relatively more developed than

in the other two host countries, Turkish SMEs can still benefit from similar efforts. SMEs in

poorer, rural areas such as Northeast Turkey could particularly benefit from capacity-building

efforts. BTC plans to support SMEs by (i) developing a program to support business

associations, (ii) establishing a microcredit program to provide financing for SMEs, and (iii)

creating a program to monitor procurement from SMEs by the Project. A number of these

initiatives are being pursued in cooperation with the IFC, which has also identified SME

development as a priority and committed itself to carry out additional activities to support SME

development. To supplement these activities, BTC is exploring the possibility of partnerships

with other development agencies, such as Germany’s Deutsche Gesellschaft für Technische

Zusammenarbeit GmbH (GTZ), to develop additional opportunities for SMEs along the pipeline

corridor. BTC will initially target such activities in the Northeast sector of the pipeline route in

Turkey.

The Panel commends BP and its Partners for developing a strategy to promote

capacity-building and to provide access to procurement opportunities for SMEs in Turkey.

BTC’s strategy is consistent with a number of the Panel’s recommendations concerning support 22 See Interim Report at 42-45.

Economic Impact

35

for SMEs from its Interim Report, including partnering with the IFC and GTZ, as well as

identifying procurement opportunities for technical and nontechnical SMEs. To help ensure that

these efforts are sustainable and foster the development of SMEs over the long term, it is

important that SMEs be given the opportunity and skills not only to compete successfully, but

also to have access to the financing needed to do so. The Panel recommends that BP and its

Partners continue to give priority to the establishment of a microfinancing program in Turkey

to expand credit opportunities for SMEs. The Panel also recommends that BP and its

Partners continue to work with the IFC and other appropriate regional development

organizations, such as GTZ, to evaluate the credit needs of SMEs and to provide technical

assistance to meet these needs.

Finally, for SME development to be sustainable, local SMEs must be given a

genuine opportunity to compete for Project contracts. The Panel heard criticism that BOTAS

and its contractors may be hiring a disproportionate share of SMEs from larger cities for their

contracts instead of also sourcing SME contracts from local villages and towns. The Panel

recommends that BP and its Partners, to the extent they are not already doing so, track the

number of SMEs from local communities that are competing for contracts, as well as those

that are eventually awarded the contracts, and encourage BOTAS to contract through local

sources.

2. Employment

The Project will create some temporary and permanent employment in Turkey.

Current projections estimate that the Project will create 5,000 jobs at the peak of construction in

Economic Impact

36

Turkey during the 32-month construction period and another 350 jobs during operations.23

Under the LSTK Agreement, BOTAS and its EPC contractors are responsible for hiring workers

for the Project in Turkey and for ensuring that the employment targets set by the Turkey EIA for

the Project are met. One key target is maximizing the number of local and Turkish workers hired

by the Project, giving priority to those workers from communities directly affected by the

Project.24 BOTAS is required to bind its EPC contractors and any contractor with more than 50

employees to these objectives.25 The Project is also likely to have a positive employment effect

for local communities, as the influx of workers to the pipeline corridor creates demand for local

goods and services.26

As the Panel observed in its Interim Report, BP and its Partners have taken a

number of steps to increase local, Project-related employment and enhance the skill sets of a

portion of the region’s workforce.27 These measures should also benefit workers in Turkey. For

example, those hired by the Project are required to receive training for their positions, including

training in the Project’s health, safety, and environmental standards. Skilled workers will also

receive training as applicable.

As in the case of Azerbaijan and Georgia, however, the Panel is concerned that

expectations of long-term employment may be unreasonably high and may pose a reputational 23 Baku-Tbilisi-Ceyhan Summary of Pipeline Benefits at F-8. 24 BTC Project EIA: Turkey Final EIA Appendix C8 — Social Management and Monitoring Plans (Oct. 2002) at C8-38. 25 See id. at C8-44. 26 Baku-Tbilisi-Ceyhan Summary of Pipeline Benefits at F-8. 27 See Interim Report at 46-47.

Economic Impact

37

risk for BTC in Turkey. The Panel reiterates the recommendation made in its Interim Report

that BP and its Partners work with BOTAS to publish employment estimates that are

consistent, realistic, and communicated to the public in an understandable manner. BP

should also work to ensure that communities along the pipeline corridor fully understand that

the higher levels of employment during the construction period will be of short duration and

that employment during the operation period, while longer-term, will be minimal.

Local government officials in one community informed the Panel that they did not

have sufficient access to information on Project-related local hiring efforts or adequate contact

with BTC officials responsible for such efforts. This frustration is another illustration of the

confusion surrounding the role of BP and BTC in Turkey. Even though BOTAS is responsible

under the LSTK Agreement for hiring workers for the Project in Turkey and is expected to work

with the local communities to identify applicants,28 local officials assume that BP and its

Partners have the final say on hiring matters. In the Panel’s view, this confusion about BP’s role

puts the company’s reputation at risk. The Panel recommends that BP and its Partners

encourage BOTAS to improve coordination with local government officials regarding hiring

in their communities.

28 BTC Project EIA: Turkey Final EIA Appendix C8 — Social Management and Monitoring Plans (Oct. 2002) at C8-42-43.

Environmental Impact

38

Section IV.



39

The Panel reviewed in detail the key environmental issues associated with the

BTC pipeline in Turkey. It also reviewed a wide range of Project documents; surveyed various

construction areas along the pipeline; met with and received input from a variety of

environmental NGOs both in Washington and Turkey; retained a highly respected environmental

scientist to advise the Panel; and met with Turkish government officials, BOTAS personnel, and

representatives from a range of multilateral organizations in Turkey.

The Panel has been and continues to be favorably impressed by BP’s commitment

to and strategy for minimizing and mitigating environmental damage. These commitments have

been embraced throughout the company, including, perhaps most importantly, at the field

supervisor level. BP and BTC have documented specific environmental objectives and

committed to implementation plans to meet these objectives. As it did in its Interim Report on

Azerbaijan and Georgia, the Panel will comment on a number of discrete environmental issues

that, in the Panel’s view, warrant emphasis or merit additional attention by BP.

As discussed more fully below in Section VII, it is the Panel’s view that one of

BP and BTC’s most significant challenges to meet its environmental goals will be ensuring that

BOTAS and its contractors comply with the commitments required by the EIA and other project

documents. This challenge is particularly acute in Turkey because, with BOTAS serving as the

managing contractor for the pipeline, BP is one step removed from directly supervising

construction activities. In the Panel’s view, the government of Turkey and BOTAS have mixed

incentives regarding to pipeline construction. On the one hand, the Government’s evident desire

to meet all the requirements for entry into the EU strongly favors an all-out effort to ensure full


40

compliance with the commitments it has assumed. In addition, the Government of Turkey sees

an opportunity to become an international oil and gas player. On the other hand, the pressure to

complete the Project on schedule and on budget, coupled with a weak if evolving environmental

and social compliance culture in BOTAS and its contractors, may give rise to pressures to ignore

standards and cut corners. In fact, in meetings with the Panel, key senior Turkish government

officials demonstrated little appreciation of the need for such standards. Instead, they voiced

complaints about BP’s insistence on maintaining its environmental, health, and safety standards

and suggested that a relaxation of these standards would better enable BOTAS to complete

construction on time and under budget. The Panel left these meetings with serious questions

about the political commitment by the responsible Turkish government ministries to ensure that

the pipeline is constructed and operated in compliance with the environmental, health, and safety

standards stipulated in the various Project agreements, including the EIA for Turkey.

A. Reduction in Tanker Traffic in the Turkish Straits

The BTC pipeline will significantly reduce the rate of growth of tanker traffic in

the highly congested waterway between the Black and the Mediterranean seas. The waterway

linking these two seas is 316 kilometers long and is divided into three distinct sections

(collectively the Turkish Straits). The narrow (0.7–3 km wide) 31-kilometer long Bosphorous

Straits - also known as the Istanbul Straits - joins the Black Sea to the Sea of Marmara and

bisects the historic city of Istanbul, which has a population of over 10 million people. The Sea of

Marmara lies between Istanbul and the Dardanelles, a 60-kilometer long strait with a width as

narrow as 1.5 kilometers. These straits carry a large volume of shipping, including tankers


41

transporting oil from the Baku-Supsa pipeline as well as oil from various locations in Russia.

While the BTC pipeline will not reduce the amount of oil transported from these sources, the

development of the pipeline ensures that additional oil extracted from the ACG oil fields near

Baku will not be transported through the Turkish Straits. Although an absolute reduction of

tanker traffic through the Turkish Straits would be desirable, the fact that the BTC pipeline will

reduce the growth in tanker traffic is a significant positive development in and of itself for the

environment and economy of the entire region as well as for the economic and social well-being

of the citizens of Istanbul, Turkey’s most important tourist destination.29

B. Pipeline Routing and Related Issues

In its Interim Report on Azerbaijan and Georgia, the Panel discussed at length the

process BP and BTC undertook to develop and refine the pipeline corridor. The Panel’s

discussion identified certain shortcomings in the route selection process in Georgia. The Panel is

satisfied with the process through which BP, BTC, and BOTAS identified the route corridor in

Turkey and is unaware of route-related controversies in Turkey as significant as those that exist

in Georgia. During its consultations with NGOs, the Panel did not hear any significant concerns

related to the evaluation of alternatives or the disclosure process BTC undertook in selecting the

29 During its visit to Istanbul, the Panel discussed the impact of tanker traffic in the Turkish Straits with a number of academics, representatives of the Turkish Pilots Association, and environmental NGOs. During its visit, the Panel traveled via boat through the Turkish Straits and observed a number of oil tankers — including one 150,000 ton tanker — navigating the narrow straits. The visit reinforced the Panel’s awareness of the significant risk of environmental damage and loss of life that would be associated with additional tanker accidents in the straits.


42

pipeline corridor in Turkey. A number of NGOs and other organizations, however, raised

specific concerns with the Panel about the environmental impact of certain sections of the

pipeline corridor, including the routing through the Erzurum Plain and the Sarikamis and Posof

forests. To investigate these issues further, the Panel visited the Erzurum Plain in Northeast

Turkey, and the Panel’s consultant visited the Sarikamis and Posof forests.

1. Erzurum Plain

The vast wetlands that formerly existed on the Erzurum Plain have been

devastated by the construction of drainage channels for agricultural purposes. The plain is now

used for pastureland and is crossed by roads, power lines, and a gas pipeline. Human settlement

is encroaching onto the plain both from the city of Erzurum and from villages on its periphery.

While some areas of natural wetlands remain, an important wetland seen on the Panel’s visit

appeared to owe its existence to unplanned human activities associated, most likely, with the

construction of the natural gas pipeline or the electric power lines in the area. Specifically, it

appears that tracks and roadways across the wetlands, created when the natural gas pipeline was

constructed, have formed barriers that have prevented free drainage to the drainage canals. The

small remnants of remaining wetlands continue to serve as an important habitat for birds.

The Panel is satisfied that construction of the pipeline across the Erzurum Plain

will not in itself exacerbate the plight of the wetlands and bird areas near Erzurum, provided that

the post-construction reinstatement of the Erzurum Plain is handled properly. This will require

foresight, planning, and care in development. If reinstatement of the BTC pipeline were simply

to rectify the surface compaction caused when the power lines and natural gas pipeline were


43

constructed, it is possible that the agricultural drainage canals would again function effectively

(thereby allowing water to exit the area) and the remnant wetland areas could disappear

completely. If, however, reinstatement of the BTC pipeline were designed to impede drainage

further, the wetlands and bird habitat could grow. Although this may be deemed favorable by

some, it would most probably place the BTC project at cross-purposes with the agricultural

authorities that have constructed the Erzurum Plain drainage system. The Panel commends BP

and BTC for exploring ways to restore the original water flows to the natural wetlands. At the

same time, even if BP and BTC restore water flows to the wetlands, a significant portion of the

water flow will likely exit the wetlands through the drainage canals.

To preserve the wetland habitats and important bird areas of the Erzurum Plain, it

is far more important in the Panel’s view that a comprehensive management plan for the entire

plain be developed than it is for the BTC pipeline to be rerouted to avoid specific localities that

are of local and transient significance. The Panel recommends that funds from the

Environmental Investment Program, or other funds available for pipeline reinstatement, be

used to convene a meeting of all parties involved in the active modification of the Erzurum

Plain to develop a common vision for its long-term future. The Panel also recommends that

the Environmental Investment Program support the development of a long-term management

plan for the plain that balances environmental and agricultural interests, taking into account

the views of local authorities, citizens, and affected individuals.


44

2. Posof Wildlife Protection Area

A number of NGOs have raised concerns about the impact of the BTC pipeline on

the Posof Wildlife Protection Area. In the Panel’s view, some visual impact can be expected as a

result of tree loss in this area. The environmental impact, however, has apparently been reduced

by re-routing the pipeline to avoid dense forest and to reduce significant habitat fragmentation.

As a result, the visual and habitat impact in this area should not be particularly severe. The

existing route passes through an area of sparse, patchy forest. A reforestation and replanting

program is planned, using species appropriate to and characteristic of the area.

Despite these efforts to minimize the impact of the pipeline in the Posof Wildlife

Protected Area, the Panel is concerned that the impact of clearing the pipeline right-of-way is

likely to be greater than estimated in the EIA. The Panel plans to revisit this issue in its next

report and will review construction and reinstatement efforts during its next visit to the region.

The Panel commends BP and BTC for initiating a study, through the

Environmental Investment Program, of the black grouse population in Northeast Turkey with a

view to formulating a long-term management plan. The Panel recommends that the study of

the black grouse be extended to include western Georgia because the black grouse’s habitat

extends beyond the Turkish border into Georgia.

3. Sarikamis Forest

The Sarikamis forest in Northeast Turkey is another sensitive area for both flora

and fauna. This forest reputedly supports populations of large mammals including the nationally


45

threatened Eurasian brown bear, roe deer, and globally threatened wild goat. The pipeline will

cross the western edge of the forest through an existing narrow clearing situated in a small valley

through the forest. Re-routing to the west is not feasible because a significant gorge is located

approximately 500 meters to the north and west of the corridor. A route to the east would

increase the damage to the forest. The Panel is consequently satisfied with BTC’s approach to

minimizing environmental damage in this area as well as BTC’s analysis of the best practicable

route.

4. Gas Supply Lines for Pump Stations

Four intermediate pump stations along the Turkish section of the pipeline route

will be built to ensure the required flow of oil through the pipeline, each of which will be

powered by natural gas. The SCP will not be operational by the time the BTC pipeline comes on

line, however, and it is likely that the gas needed to power the pumps will have to be supplied

from the existing national gas distribution system. The length of some of the supply lines could

exceed 200 kilometers. The width of the right-of-way required would vary from 16 to 24 meters,

depending on the pipe diameter. BOTAS’s strategy and routing plans for these gas supply lines

had not been finalized as of the time of preparation of this Report.

In the Panel’s view, BTC should use its influence with BOTAS to ensure that

these supply lines are constructed according to the high environmental standards that govern the

construction of the BTC pipeline, including a commitment to reinstatement. In addition, there

should be a public disclosure and consultation process for the routing of the gas supply lines to

the pump stations. The Panel recommends that BP, through its role in BTC, use its influence


46

with BOTAS to press for an appropriate public disclosure and consultation process for

selecting the route of the gas supply lines to the pump stations. In addition, the Panel

recommends that the range of environmental standards and commitments made for the BTC

pipeline, including those concerning reinstatement, be implemented for the gas supply lines to

the pump stations.


47

C. Reinstatement

The Panel spent a significant amount of time reviewing BTC’s reinstatement

plans, talking with BP, BTC, and BOTAS officials, and evaluating the anticipated scope of the

effort through onsite visits. BP and BOTAS agreed upon the laudable goal of ensuring “no

damage to property or the environment.”30 Given BOTAS’s role, the Panel is concerned that it

will be difficult for BP to meet its “no damage” objective in Turkey. The Panel was concerned

when it was informed that one of the contractors retained by BOTAS had handled the

construction for a previous natural gas pipeline for which environmental reinstatement was

incomplete. The Panel saw first-hand one segment of the pipeline near Erzurum where it was

evident that reinstatement efforts had been minimal. Large rocks created through blasting were

simply dumped to the side of the pipeline corridor, scarring the otherwise pristine landscape for

miles. The Panel understands that BP, BTC and BOTAS have committed to reinstate portions of

the natural gas pipeline corridor that intersect with or overlap the BTC pipeline corridor together

with portions of the natural gas pipeline corridor where the integrity of the BTC corridor could

be impacted.

Reinstatement in other areas along the BTC pipeline will present an even bigger

challenge. Incomplete reinstatement will threaten not only important environmental and

economic resources in Turkey but also damage the reputation of BP, BTC, and other involved

organizations (including BTC’s lenders). The Panel recommends that BP and BTC encourage 30 See BOTAS HS&E Commitment Statement, Non-Technical Summary, Environmental Impact Assessment (Sept. 2002) at 9.


48

the senior management of BOTAS to give a much higher priority to the complete

reinstatement of the land surface. In addition, the Panel recommends that BP regularly

consult with environmental NGOs on BOTAS’s reinstatement efforts and invite NGOs to

review and inspect the reinstatement efforts along the pipeline route. The Panel intends to

follow-up on this reinstatement issue in its future reports.

D. Issues at the Ceyhan Terminal

1. Site Selection

BTC undertook a thorough process, including the preparation of an analysis of

alternatives,31 to select the site for the terminal at Ceyhan. In its analysis, BTC considered,

among other factors, ground conditions, land acquisition requirements, and the terminal’s

potential impact on sensitive environmental areas, including wetlands. In addition, the site

selected will enable BTC to utilize a gravity feed system to load oil tankers, an approach with

significant environmental benefits. It is the Panel’s view that selection of the site at Ceyhan was

a sound decision, particularly given the fact that additional land acquisition from individuals was

not required.

2. Cumulative Impact in Gulf of Iskenderun

The terminal at Ceyhan is located on the north end of the Gulf of Iskenderun

adjacent to an existing terminal operated by BOTAS to offload oil from a pipeline transporting

31 BTC Project EIA, Turkey, Final EIA, Project Development and Evaluation of Alternatives (Oct. 2002) at 2-29.


49

crude oil from Iraq. A number of other commercial activities are located in the vicinity of the

new BTC terminal and jetty, including (i) a fertilizer factory and loading jetty, (ii) a coal plant

and related offloading facilities, and (iii) a coal-fired power station. The EIA describes the Gulf

of Iskenderun as one of the Mediterranean sea’s most productive areas for fishing.32 The EIA

also includes a comprehensive assessment of various risks to the environment, including the

impact from oil spills on fish and fishing areas, salt marshes, the Yumurtalik Lagoon, waterfowl,

sea turtles, and sea mammals, including the monk seal. The Panel is satisfied with the approach

taken by BTC as well as the analysis in the EIA. However, the analysis and plans to mitigate

environmental risk relate only to the marginal increase in environmental risk associated with the

development of the BTC pipeline and the terminal at Ceyhan; they do not focus on the

cumulative impact of all of the activities in the Gulf of Iskenderun.

In addition, the Panel has heard concerns and complaints from a number of NGOs

about the fact that fishing will be barred in a portion of the Gulf of Iskenderun. The Panel notes

that a number of studies in various parts of the world have demonstrated that creating “no-take”

sections of coastline and ocean can actually increase fish stocks in neighboring areas.33 The

32 BTC Project EIA, Turkey, Final EIA, Marine Terminal-Accidental Events and Incidents (Oct. 2002) at 14-32. 33 See, e.g., Marine Reserves Found to Boost Nearby Fishing Grounds (Dec. 4, 2001), available at http://news.nationalgeographic.com/news/2001/12/1204_TVmarinereserves.html; “No Take” Marine Reserves, available at http://www.marine-reserves.org.nz/; Report: Marine Reserves Key to Preserving Ocean Ecosystems (Jan. 14, 2003), available at http://www.pewoceans.org/oceanfacts/2003/01/13/fact_31395.asp; John Whitfield, Europe Votes for Marine Reserves (July 1, 2003) available at http://www.nature.com/nsu/030630/030630-2.html; Fiona R. Gell & Callum M. Roberts, The Fishery Effects of Marine Reserves and Fishery Closures, available at http://www.worldwildlife.org/oceans/fishery_effects.pdf.


50

Panel recommends that BP fund, through the Environmental Investment Program, a study of

the cumulative impact of all of the commercial activities in the Gulf of Iskenderun on the

coastal and marine environment and on the livelihoods of those directly dependent on the Gulf

for their living. In particular, the Panel recommends that changes in fish stocks in the Gulf of

Iskenderun be monitored and tracked.

3. Oil Spill Response

The Panel is satisfied with BTC’s risk assessment and oil spill response planning

as outlined in Section 14.3 of the EIA and Section 5.9.1 of the Supplemental Lenders

Information Packet for Turkey. The Panel understands that oil spill response planning will be

ongoing; BTC and BOTAS will continue to update and refine their planning and preparation up

to and during the operational phase of the pipeline. The Panel notes that BTC did not originally

include in the EIA a risk analysis of the growing tanker traffic in the shipping lanes near the Gulf

of Iskenderun. BP and BTC have informed the Panel that they have subsequently analyzed this

important issue.

The Panel recognizes that BTC’s operation at Ceyhan and its reputation could

potentially be harmed by an oil spill at the nearby BOTAS terminal for the Iraq-Turkey pipeline.

It is therefore in BP’s interest to encourage BOTAS, which also operates the nearby terminal, to

develop a similarly comprehensive oil spill response plan for the terminal handling oil from the

Iraq-Turkey pipeline. The Panel recommends that BP work with BOTAS and encourage

BOTAS to develop, implement, and publish a comprehensive oil spill response plan for the

terminal handling oil from the Iraq-Turkey pipeline. The Panel also recommends that the oil


51

spill response plan for the two terminals at Ceyhan be coordinated and integrated since a spill

at one facility will impact the operations at the other.

4. Double-Hull Tankers

The Panel discussed the issue of double-hull tankers at length with BP, BTC, and

BOTAS officials, as well as a number of environmental NGOs and academics. BP personnel

informed the panel of BP’s internal policy to use double-hull tankers for the transport of crude

oil subsequent to January 1, 2008, two years ahead of requirements established by EU

legislation. The Panel was unable to determine the policy that will be utilized at the Ceyhan

terminal, although the Panel is aware that BP’s comprehensive ship-vetting policy will be

utilized at the terminal. The Panel recognizes that approximately two years remain before the

first oil is delivered through the pipeline and therefore is not concerned that a policy has not yet

been developed. It is essential, however, that such a policy be in place well in advance of the

first oil being shipped in 2005.

In various project agreements, BTC has agreed to comply with “international

standards and practices within the Petroleum industry which shall in no event be less stringent

than those generally applied within member states of the [EU].”34 In the Interim Report on

Azerbaijan and Georgia, the Panel commended BP and BTC for committing to such high

standards, particularly those generally applied in the EU.

34 IGA at art. IV.


52

In February 2002, the EU adopted a regulation accelerating the phase-out of

single-hull oil tankers and phasing in the use of double-hull (or equivalent design) tankers.35 In

July 2003, responding in part to the disastrous November 2002 oil spill off the coast of Spain, the

EU further accelerated the phase-out of single-hull tankers.36 Effective October 21, 2003, single-

hull tankers carrying heavy grade oil were barred from transporting oil to and from ports in the

EU and from anchoring within the jurisdiction of EU Member States. The regulations also phase

out, over the next seven years, the use of single-hull tankers carrying products other than heavy

grade oil depending on the age of the vessel and whether they comply with various other industry

standards. Single-hull tankers carrying most other types of crude oil, including the lighter grade

crude oil that will be exported through the BTC pipeline, will be banned within the EU in 2010.

Importantly, in the July 2003 regulation, the EU acknowledged that “[i]t is essential to persuade

third countries, particularly candidate countries and countries which are neighbours of the EU, to

undertake to stop the use of single-hull oil tankers.”37 One of Turkey’s top priorities is to

become a Member State of the EU.

Recognizing that BTC has agreed to standards no less stringent than generally

applied in Member States of the EU and that the EU has phased out use of single-hull tankers for

heavy grade oil, it is the Panel’s view that adoption of EU standards on double-hull tankers at

35 Regulation (EC) No. 417/2002 of the European Parliament and of the Council of 18 February 2002, 2002 O.J. (L64) 1. 36 Regulation (EC) No. 1726-2003 of the European Parliament and the Council of 22 July 2003, 2003 O.J. (L249) 1. 37 Regulation (EC) No. 1726-2003 at Whereas clause No. 12, 2003 (O.J. (L249) 1, 2.


53

Ceyhan would be consistent with the Panel’s recommendation of making BTC a model or

template for large-scale, extractive industry investments by major, multinational enterprises in

developing and transition countries. In addition, recognizing that accession to the EU is a high

priority for Turkey, the Panel believes it would be desirable for Turkey to adopt EU standards in

this area. The Panel recommends that BP, as BTC’s largest shareholder, urge other BTC

shareholders to adopt BP’s policy of only utilizing double-hull tankers to load and transit

crude oil at Ceyhan by January 1, 2008. At a minimum, BTC, consistent with its commitment

to adopt international standards in no event less stringent than those generally applied within

member states of the EU, should only allow double-hull tankers to load and transit crude at

Ceyhan by 2010, consistent with EU legislation. If the EU further accelerates its timetable for

the phase-out of single-hull tankers, the Panel recommends that BTC adopt the new schedule.

Finally, the Panel recommends that BP encourage Turkey to adopt EU standards for transit of

crude oil.

5. Discharge of Ballast Water

The Panel found BTC’s approach to discharge of ballast water somewhat

confusing and less precise than would be desirable. The United Nations’ International Maritime

Organization (IMO) has stated that the discharge of “ballast water or sediment into the waters of

port states . . . may result in the establishment of harmful aquatic organisms and pathogens which


54

may pose threats to indigenous human, animal and plant life, and the marine environment.”38

The EIA states that “[t]here is no requirement for the treatment of ballast water, as only vessels

with segregated ballast will be loaded at the jetty. Ballast water, therefore, will not be

contaminated with oil and can be discharged directly to sea without treatment.” 39 While BTC’s

policy avoids discharge of water contaminated with oil at the jetty, it does not fully address the

environmental impact on discharging untreated ballast water into the marine environment.

Adding to the confusion is the statement in the Supplementary Lenders Information Pack that

“BTC tankers intending to discharge ballast water will … require a certificate to discharge

ballast at the BTC Marine Terminal.”40

The Panel notes that the IMO has developed Guidelines for the Control and

Management of Ships’ Ballast Water, which are intended as a tool to help minimize the risks

associated with ballast water discharge.41 Management and control measures recommended by

the guidelines include:

38 The IMO Guidelines, Resolution A.868(20), Guidelines for the Control and Management of Ships’ Ballast Water to Minimize the Transfer of Harmful Aquatic Organisms and Pathogens (Nov. 27, 1997) at sec. 1.1 (“IMO Guidelines”) available at http://globallast.imo.org/index.asp?page=resolution.htm&menu=true. 39 BTC Project EIA, Turkey, Final EIA, The Marine Terminal (Oct. 2002) at sec. 9.4.13.5. 40 Supplementary Lenders Information Pack (Turkey) at sec. 5.8.1.5. 41 See IMO Guidelines.


55

• Regular cleaning of ballast tanks and removing sediments that accumulate in tanks;

• Avoiding unnecessary discharge of ballast; and

• Undertaking ballast water management procedures, including:

• Exchanging ballast water at sea, replacing it with open ocean water;

• Eliminating and minimizing release of ballast water; and

• Discharging to onshore reception and treatment facilities.

The IMO also recommends designs for ballast water and sediment management

options in new ships. These IMO guidelines may be taken to represent current best practice in

the handling of ballast water. At the same time, the Panel notes the IFC’s view that “onshore

disposal of ballast water presents a number of technical difficulties and thus is not widely

accepted as international best practice.”42 The Panel recommends that BP consult with the

IMO to determine international best practice for ballast discharge and treatment. Once this

determination is made, the Panel recommends that BP consult with the IFC and NGOs and

use its influence with BOTAS to press for adoption of IMO standards for discharge of ballast

water, including the possible development of onshore reception and treatment facilities.

6. Single Point Mooring System

A number of NGOs have expressed concern that BTC’s decision to utilize a jetty

instead of a Single Point Mooring System (SPM) for loading oil to tankers at Ceyhan was made

without an adequate evaluation of alternatives and in contrast to best environmental practices

42 BTC Pipeline and ACG Phase 1 Projects, Environmental and Social Documentation, IFC Response to submissions received during the 120-day Public Comment Period (Oct. 27, 2003) at 41.


56

that support the use of SPMs. The Panel notes that BTC conducted an analysis of the

alternatives, including the advantages and disadvantages of a jetty versus an SPM, and reported

on this analysis in the BTC Project EIA.43 The Panel understands that, while an SPM may be

appropriate for areas with high seas and severe weather conditions, these conditions do not exist

at Ceyhan because the weather and seas in the Gulf of Iskenderun are relatively calm. In

addition, to achieve the required loading rates, two SPMs would have been needed, further

reducing the area available to fishermen. Finally, BTC concluded in its analysis of alternatives

that BOTAS does not have any experience with SPMs and that use of SPMs could create a

greater risk of oil spills due to shipping lane activity interfering with SPMs.44 The Panel is

satisfied with BTC’s approach to this analysis.

43 See BTC Project EIA, Turkey, Final EIA, Project Development and Evaluation of Alternatives (Oct. 2002) at sec. 2.4.2.1 and fig. 2.3. 44 See BTC Pipeline and ACG Phase 1 Projects at 41-42.

Social Impact

57

Section V.

Social Impact

Social Impact

58

The most direct social impact of the Project in Turkey will be along the pipeline

corridor and around Above Ground Installations (AGIs), where people and communities will

experience disruption caused by construction, most significantly the temporary or permanent loss

of access to land required for construction of the pipeline and other facilities. In addition, a

small group of fishermen will suffer some loss of income due to reduced access to fishing areas

in the vicinity of the Ceyhan terminal. Accordingly, the principal focus of this section will be on

the process BP and its Partners have developed to identify and to compensate affected

individuals and communities for these losses. Because pipeline construction may also disturb

sites of historical or archaeological interest, BTC has developed a comprehensive cultural

heritage management plan, which will be discussed briefly in the final sub-section below.

A. Land Acquisition and Its Challenges

1. Overview of the Land Acquisition Process

As in Georgia and Azerbaijan, during the 32-month construction period for the

BTC pipeline, landowners and users, including tenants on private or state land and those with

shared rights to communal land, will temporarily lose access to property along the construction

corridor. Due to the transient nature of pipeline construction, however, the disturbance is

typically minimal. The Project will also permanently acquire an 8-meter corridor along the

1,076-kilometer Turkish section of the pipeline route as well as land for pumping stations, the

Ceyhan marine terminal, and access roads. The pipeline corridor passes by 293 villages and

more than 12,800 individual parcels of land, the majority of which are privately owned and the

remainder of which are owned by the Turkish Ministry of Forests or other state authorities, such

Social Impact

59

as the Treasury. As many as 60,000 individual owners will be affected by these temporary and

permanent land acquisitions.45 According to the initial RAP survey, approximately 20 percent of

the owners of these parcels are absentees.46

In accordance with World Bank guidelines, a detailed Resettlement Action Plan

(RAP) has been developed to address economic displacement along the pipeline corridor,

although no households will actually be required to relocate due to the Project.

2. BOTAS’s Responsibility for Land Acquisition

Primary responsibility for land acquisition lies with BOTAS and specifically with

the Designated State Authority (DSA) within BOTAS. BTC is responsible for monitoring and

retains overall responsibility under the RAP for the land acquisition and resettlement processes.

As discussed in Section VII, BP and BTC have strong interests, both because of reputational

risks and because of obligations under Turkish law and project financing obligations (e.g., World

Bank Operational Directive 4.30), in closely monitoring and influencing the land acquisition

process undertaken by BOTAS.

3. The Complexity of Land Ownership in Turkey

The land acquisition process is further complicated by the complexity of land

ownership under Turkish law. In Turkey, land may be held by private owners in one of two

ways: (i) by registration of the ownership and the issuance of a deed reflecting title to the land

45 RAP-Turkey Internal Monitoring Report (July 2003) at 7. 46 BTC Project Resettlement Action Plan, Turkey, Final Report, Executive Summary (“RAP-Turkey Final Report”) (Nov. 2002) at 5.

Social Impact

60

(registered ownership) or (ii) by customary use and occupation of land (customary ownership).

Appropriately, the RAP provides for compensation for both categories of owners.

Of the private lands to be acquired along the right-of-way, BOTAS has identified

2,748 parcels subject to customary ownership and 6,358 registered parcels.47 Determination of

the ownership of registered lands is complicated by factors such as multiple ownership,

out-of-date deeds, and conflicting customary and registered ownership claims. Additionally,

villages typically have usage rights on common lands (particularly on pasture lands), although

the legal owner of the land is a State agency such as the Treasury.

B. The Resettlement Action Plan

The major components of the RAP, discussed in turn below, are (i) initial

assessment, (ii) disclosure and consultation, (iii) land acquisition and compensation, and (iv)

monitoring procedures.

1. Initial Assessment

Any undertaking such as the RAP is only as good as the social and economic data

upon which it is based. The data collected and presented in the RAP for Turkey appear to meet,

if not exceed, professional standards for the collection of such data. In the Panel’s view, the

RAP for Turkey contains a competent baseline study of socioeconomic conditions in affected

areas.

47 RAP-Turkey Internal Monitoring Report (July 2003) at 7.

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61

2. Disclosure and Consultation

Over the course of more than two and a half years beginning in 2000, BTC

engaged in consultation with and disclosure to stakeholders along the pipeline route in Turkey on

environmental and social issues, including land acquisition. The Panel understands that all

affected villages within a two-kilometer radius of the pipeline corridor and those within five

kilometers of construction camps and permanent installations have been the subject of disclosure

and consultation.48 According to BTC, and as confirmed by the IFC, representatives of the

BOTAS land acquisition team supported by the local NGO Rural Urban Development

Foundation (RUDF) have visited every one of the affected parcels at least once.49 The Panel

understands that BTC’s efforts to consult with the substantial proportion of owners that are

absentees included multiple mailings and public announcements.50

Some international NGOs have expressed concern about the adequacy of the

consultation and disclosure efforts. The Panel did not hear, however, from local stakeholders,

including NGOs and communities, that this was a major concern. In responding to NGO

concerns, the IFC has documented “[e]xtensive consultation. . . over a long period of time” and

“a robust process of on-going consultation . . . that will continue throughout construction and

48 See IFC Response to submissions received during the 120-day Public Comment Period (“IFC Response”) (Oct. 27, 2003) at 18. The consultation radius was ten kilometers in the case of the Ceyhan jetty. 49 Id. 50 RAP-Turkey, Internal Monitoring Report (Apr. 2003) at 20.

Social Impact

62

operation of the pipeline.”51 The Panel intends to make the adequacy of completed and ongoing

consultation and disclosure a continuing focus of its follow-up work.

3. Land Acquisition and Compensation

Pursuant to the RAP, land within an 8-meter pipeline corridor will be acquired in

exchange for negotiated or court-ordered compensation. In addition, access rights to a wider

right-of-way (14-20 meters wide) will be temporarily acquired by the Project during the

construction period. Landowners will be compensated for this temporary deprivation with the

equivalent of three-years’ capitalized net income from both the land and any income-producing

assets located on the land. After construction, the original owners and users of this land will be

able to use the land once again, subject to limited restrictions, free of charge. Landowners and

users will also be compensated for the permanent loss of other assets at replacement or market

value, and they will be compensated for any lost income that results from post-construction use

restrictions under Turkish Expropriation Law. A commission of BOTAS experts developed an

initial valuation to be used as the basis for negotiations with landowners. This valuation was

reviewed by RUDF, a Turkish NGO. In the event BOTAS and a landowner cannot reach

agreement, the courts appoint independent experts to determine valuation. All court costs,

including the costs of any appeal, are paid by BOTAS and not by land owners. The Panel

understands that absentee landowners — in this context, people who have registered title deeds

or who are heirs of a deceased person but who live outside of their villages — are fully eligible

for compensation under Turkish Expropriation Law. 51 IFC Response at 20.

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63

a) The RAP Fund

The RAP envisions compensation to individuals and communities that would not

ordinarily be entitled to compensation under Turkish law but for whom compensation is required

under World Bank guidelines. These potential beneficiaries include communities that use

publicly owned forestlands and pastures, tenants (without tenancy agreements),52 squatters on

public or private land, and fishermen. A RAP Fund has been established to make payments to

these categories of affected individuals and communities.53 Given that the RAP Fund is

administered by BTC, it is one of the few aspects of the land acquisition process over which

BTC has direct control.

In the case of communal lands, RAP Fund payments are being made at the village

level. The Panel commends BP and BTC for taking important steps to track the use of

communal payments for public purposes by, for example, performing a follow-up survey of

many of the villages that received common land payments. The Panel recommends that BP and

BTC continue and expand these efforts to enhance transparency and accountability for the

use of communal payments.

52 BTC has indicated that, according to Turkish law, tenants who have a tenancy agreement with the landowner are paid for crops. The same applies to other assets if the tenants can demonstrate an ownership interest. Land value, however, is paid to the landowner. Where tenants cannot prove their tenancy agreement, they are compensated though the RAP Fund. 53 The Panel understands that BTC currently estimates that the RAP Fund will total more than US$3 million, an amount which will be offset against the US$99 million the Project Participants are to pay to Turkey for land acquisition under the LSTK Agreement.

Social Impact

64

b) Fishing Areas in the Vicinity of Ceyhan Terminal

The RAP Fund will also be used to restore incomes reduced by restrictions on

fishing in the vicinity of the Ceyhan terminal. Those affected include 38 full-time and 4 part-

time licensed fishermen (plus crews) in Golovasi, a village near the Ceyhan terminal, which will

no longer be able to access some fishing areas in the vicinity of the terminal during the

operations phase. Fishermen are deemed under Turkish law to be using a public resource, so in

the past the State has not compensated for newly imposed fishing restrictions. Nevertheless, the

RAP envisions compensating the affected community.54 An impact assessment focusing on the

likely income loss for the affected fishermen was completed at BTC’s request by the Turkish

Marine Institute (TUDAV), as was an extensive household income survey and an analysis of

various alternative means of compensating this community by a group at Ankara University.

The Panel understands that alternatives to cash compensation, such as alternative skills training,

employment opportunities at the terminal, or support for alternative livelihoods,55 are the focus

of this analysis, which is the basis for ongoing compensation planning. The Panel recommends

that BP work with BOTAS and the affected community to finalize and formalize this

compensation regime as quickly as possible.

c) BOTAS’s Use of Article 27

Perhaps the most debated aspect of land acquisition in Turkey has been BOTAS’s

decision to utilize Article 27 of the reformed code for its land acquisition along the pipeline 54 See, e.g., RAP-Turkey Internal Monitoring Report (Apr. 2003) at 18. 55 BTC Project: Resettlement Action Plan, Turkey, Final Report, Annex 7.2 Draft Guide to Compensation for Fishermen (GCF) (May 2003) at 14-15.

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right-of-way.56 Article 27 is an expedited alternative to the ordinary process for the exercise of

eminent domain, set forth in Article 10 of the reformed code. The utilization of Article 27

requires the approval of the Turkish Council of Ministers, which BOTAS has obtained. Contrary

to the suggestion of some international NGOs, this approval is not the equivalent of a declaration

of national emergency; the Panel understands that Article 27 is also available in other

circumstances in which expedited proceedings are appropriate.

The chief difference between the Article 10 and Article 27 processes is the speed

at which expropriation takes place: Article 10 provides for significant periods of time for owners

to be identified, for negotiations to occur, and for appeals of expropriation decisions to be

lodged. By contrast, under Article 27, courts are required to make property valuation decisions

within seven days, and the expropriation is effective immediately upon deposit of the appraised

amount in a trust for the owner or owners, even if the valuation is appealed. Expropriation under

Article 27 can take place within as little as two weeks from the time the property owner is

notified.

The November 2002 RAP Final Report indicated that BOTAS would pursue land

acquisition under Article 10 and would use Article 27 only exceptionally.57 But as the land

acquisition process got underway, BOTAS quickly determined that the complexities of multiple,

56 BOTAS acquires the land either by concluding an agreement with the landowners or through the courts in the case of non-agreement on price or non-attendance at negotiation meetings conducted in the villages. The exercise of eminent domain by BOTAS was authorized by the Turkish Ministry of Energy and Natural Resources in March 2002. 57 See RAP-Turkey Final Report, ch. 5; RAP-Turkey Internal Monitoring Report (July 2003) at 11-12.

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often absent, part-owners of the majority of parcels along the pipeline corridor made use of

Article 10 procedures impracticable. On average, each of the more than 6,300 privately owned

registered parcels of land along the pipeline right-of-way has six owners. Further, out-of-date

titles make identifying and notifying multiple owners of registered parcels very difficult.

BOTAS used Article 27 to acquire slightly less than half of the privately owned parcels along the

first 331 kilometers of right-of-way. This trend of much greater-than-anticipated reliance on

Article 27 has broadly continued as the land acquisition process moves towards completion. The

mid-stream procedural change from Article 10 to Article 27 has caused uncertainty and led to

criticism that might have been avoided if the complexities of land tenure had been identified at

an early enough stage that the utilization of Article 27 procedures could have been made part of

the disclosure and consultation process. BOTAS has attempted to address disclosure and

consultation through a mailing to landowners explaining Article 27 procedures and by explaining

the Article 27 procedures at village meetings conducted in every settlement along the route.

Responding to concerns expressed by some international NGOs and others about

the use of Article 27, BTC and BOTAS have modified the Article 27 process to provide, among

other safeguards, more time for identification and notification of landowners to and valuation of

private parcels based on market surveys. Following the acquisition, owners can receive their

share of compensation as soon as they complete the title deed registration process, even if

absentee part-owners have yet to come forward. After acquisition, owners retain the right to

appeal the valuation.

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The modification of the Article 27 process to give landowners more rights and

more time than they would have under the standard Article 27 process is a positive development

in the Panel’s view. The Panel commends BTC and BOTAS for their responsiveness to the

concerns of international NGOs (as well as the World Bank resettlement guidelines) and notes

that this adjustment is a good example of the positive impact civil society has had on the

Projects. To date the Panel is not aware of undervaluation or other unfairness that has resulted

from the modified Article 27 process; in fact, there is every indication that payments are

generally well above replacement or market values.58 Moreover, the Panel’s concerns on this

score are tempered by the fact that access to much of the affected land will be restored to the

original owners, at no cost, after the construction period. The continued implementation of the

Article 27 modifications is, however, an important follow-up item for the Panel and for BP and

BTC. The Panel intends to revisit this issue in the future. The Panel recommends that BP and

BTC pay particular attention to continued implementation by BOTAS of the modified Article

27 process to ensure that land is justly acquired on the basis of adequate compensation.

d) Return of Land or Access to Land

As in Georgia and Azerbaijan, BTC plans to return much of the land that has been

acquired along the pipeline route to its original owners after construction is complete, although

58 The August 2003 report of the Expert Panel established as a monitoring mechanism under the RAP (discussed below) concluded not only that there is no practical alternative to using Article 27 procedures, but also that the fundamental right of fair valuation and the right to appeal that valuation are preserved under the process that is being used. See Baku-Tbilisi-Çeyhan Pipeline Project (BTC), Report of Social And Resettlement Action Plan Monitoring Panel (“SRAP Report”) (Aug. 2003) at D-9-D-11.

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the land will be subject to some use restrictions.59 Although use restrictions are explained in the

RAP and the Guide to Land Acquision and Compensation distributed as part of the land

negotiations, there is still some uncertainty, at least among affected landowners, regarding the

precise legal mechanism that will be used for returning the land to use by its original owners

subject to the necessary restrictions.60 BTC is responsible for returning land to its owners. To

that end, BTC has started preparations to disclose definitive strategies for the return of use rights

to former owners and users, and it has indicated that it will organize an awareness campaign

about the use restrictions applying to the permanent and temporary corridors and their

surroundings during signing of the so-called exit protocols with the affected landowners/users.

The Panel recommends that BP work with BTC to quickly clarify and communicate to affected

individuals the mechanism for the return of land or access to land and for imposing post-

construction use restrictions.

4. Monitoring Procedures

The RAP also provides for both internal and external monitoring of the land

acquisition process, over and above monitoring that is provided for under the EIA for the

Project.61 Internal monitoring is performed by two groups: (i) Ankara University (contracted

through EDUSER) monitors all compensation for parcels subject to customary ownership,

59 RAP-Turkey Final Report at 2. 60 See SRAP Report at D-8. 61 For example, BTC has retained environmental and social experts to act as LTO Assurance Advisors in the field. They regularly participate in community meetings and are charged with following up on issues and grievances that arise.

Social Impact

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payments to informal users of land, payments for communal lands, and compensation of

fishermen; and (ii) RUDF monitors compensation for registered parcels and other aspects of the

land acquisition process. External monitoring is provided by a three-person panel of experts,

each of whom is an internationally recognized development expert. Two of these monitors made

one visit to the region earlier this year and in August 2003 produced a thorough report on

implementation of the Social and Resettlement Action Plan. The Panel commends BP and

BOTAS for putting multiple levels of monitoring in place.

C. Impact on Minorities

The position of minorities, particularly Kurdish speakers, in Turkey has long been

an issue of international concern unrelated to the development of the pipeline. Certain NGOs

have expressed concern that the BTC pipeline disproportionately impacts, or will worsen the

situation of, minority populations in Turkey, and that Kurdish-speakers and women in particular

will be harmed by the Project.62 Some international NGOs have also claimed that BTC and

BOTAS disclosure and consultation efforts excluded Kurdish speakers. Information presented to

the Panel indicates that community liaison personnel and land acquisition and negotiation teams

have included Kurdish speakers, particularly when visiting communities with households of

Kurdish origin, and that Turkish is widely read and understood along the pipeline route. The

Panel further understands that the IFC has considered this issue and found no indication that the

62 See Campagna per la Riforma della Banca Mondiale et al., Second International Fact-Finding Mission Baku-Tbilisi-Ceyhan Pipeline-Turkey Sector, March 16th-24th, 2003, Human Rights and Environment Report (May 6, 2003).

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Project has unduly disadvantaged Kurdish speakers or any other minority group.63 The Panel

intends to continue following this important issue closely.

Some international NGOs have also expressed concern that women were

effectively excluded from the disclosure and consultation process because culturally appropriate

methods and settings for consultation involving women were not utilized. In responding to these

concerns, the IFC has noted that women have been included among community liaison personnel

and on land acquisition teams. The IFC has also noted that BTC held separate, women-only

sessions designed precisely to address the fact that, in some areas in Turkey, women might feel

constrained from expressing their concerns in a mixed-gender group.64 In addition, the Panel has

heard the view that efforts to identify all landowners as part of the land acquisition process may

have helped to clarify the legal rights of women to land in areas where this might traditionally

have been obscured. As with the issue of the Kurdish-speaking minority, the Panel intends to

follow this important issue closely.

The Panel recommends that BP work with BOTAS and the other Project

Participants to ensure that ongoing consultations, grievance procedures, and land acquisition

activities remain open and accessible to Kurdish speakers and women along the pipeline

corridor.

63 IFC Response at 17-18. 64 See, e.g., IFC Response at 20.

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D. Cultural Heritage Management

Discovery and preservation of important historical sites is one of the greatest

unanticipated benefits of the Projects in Turkey, particularly because of the effective

implementation of the comprehensive Cultural Heritage Management Plan (CHMP) that BTC

has developed for the Project. The CHMP identifies more than 170 sites of potential historical or

archaeological interest within the vicinity of the pipeline right-of-way in Turkey and selects

twelve for excavation by qualified professionals. The Panel visited one of these sites, where

professional, academic archaeologists were supervising extensive excavation under the auspices

of the CHMP, and was particularly struck by the unique contribution the Project is making to the

exploration and preservation of the cultural heritage of Turkey. The Panel recommends that BP

facilitate the publication of the results of these excavations, and that it consider other ways,

such as an exhibition about the archaeological work done along the pipeline corridor, to

amplify this positive impact of the Project in the region.

The objective of the CHMP in Turkey is to avoid impacts on sites of significant

cultural value, by routing the pipeline around them when possible, rather than just mitigating

such impacts. The Panel understands that the international consensus is to avoid

archaeologically sensitive areas whenever possible. The Panel recommends that BP use its

influence with BOTAS to see that the policy of avoiding important cultural heritage sites is

followed.

Perhaps the biggest challenge in cultural heritage management is the management

of chance finds and the on-the-spot decision of how to avoid or mitigate any negative impact on

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cultural heritage. This is an area where the attenuated relationship between BP and BTC,

BOTAS, and the contractors handling construction might present a challenge. In fact, however,

BTC has reported to the Panel on two chance finds, one at Selim-Hasbey village and the other in

Lot C near Gökdere, that have led to excavation work. During the course of the excavation work

at Selim-Hasbey, various architectural remains and small gold ornamental objects dating from

the Iron Age have been unearthed. These excavations suggest that there are effective monitoring

mechanisms in place to identify and record these finds.

Investment Programs

73

Section VI.

Investment Programs

Investment Programs

74

The Community Investment Program (CIP) and the Environmental Investment

Program (EIP), both of which are funded by BP and BTC, were discussed in the Panel’s Interim

Report.65 BTC is also developing a broader program with the EBRD to fund social investment in

Azerbaijan and Georgia, although details on this investment program have yet to be released.66

In its Interim Report, the Panel observed that BP’s supplemental investment program could

potentially distinguish the Caspian Projects from other large-scale investments in extractive

industries and could help ensure that average citizens in Azerbaijan, Georgia, and Turkey,

particularly along the pipeline routes, are able to see visible improvements in their lives as a

result of the Projects. The Panel further observed that if BP plays such a role, in coordination

with the host country governments and international development organizations, BP will have

developed a new model for large-scale, extractive industry investments in developing and

transition countries.67

65 See Interim Report at 95-97. 66 The EBRD recently announced that it would join BP and its Partners to establish a Regional Development Initiative (RDI) following the Projects’ construction (i.e., in 2005). The RDI seeks to promote sustainable development in the region by fostering private sector growth through credit to SMEs and investments in other initiatives (e.g., training programs) during the operations phase of the pipeline. The EBRD recently announced that it plans to commit up to US$25 million in grants and loans to the RDI over the first ten years of the Projects’ operations. BP has also reportedly pledged to contribute US$25 million. Contributions from BP’s Partners are expected to bring total funding to the RDI to US$100 million. See EBRD Release, EBRD Board approves BTC pipeline financing (Nov. 11, 2003). Because details about the RDI are still under discussion, the Panel will reserve its comments on the RDI for its next report, once details on the program have been made available. 67 See Interim Report at 10.

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To promote these objectives, the Panel recommended in its Interim Report that

BP merge its current investment activities into a single program, such as a Caspian Development

Fund, that could “oversee all investment in sustainable development in the three countries.”68

The Panel also recommended that BP take a number of specific additional steps, including:

• Significantly expand the funding, scope, and time horizon of its supplemental investments in the region;

• Identify a secure, dedicated, long-term funding stream sufficient to meet this commitment and to make a lasting impact on the region;

• Create a vehicle that combines BP’s community, social, and environmental investment funds;

• Encourage other private sector entities and public development agencies to contribute to such an initiative;

• Structure its investment in sustainable development with a view towards building the infrastructure, both physical and human, that will sustain foreign direct investment and domestic economic growth over the long term; and

• Prioritize and focus on sectors and skill sets that could produce the greatest sustainable impact.

In its response to the Panel’s Interim Report, BP “acknowledge[d] that the

programmes currently underway are designed for the construction period only and agree[d] that a

further initiative is required to cover the operations phase.”69 The recently announced RDI

addresses a number of the Panel’s recommendations, including by clarifying BP’s commitment

to fund sustainable development initiatives beyond the construction phase. Following its site

visit to Turkey, the Panel believes more strongly than ever that the holistic, integrated, and

68 Interim Report at 98. 69 BP Response to CDAP Interim Report (Aug. 2003) at 3. The Panel has been informed by BP that these initiatives will extend into 2006.

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76

regional approach to supplemental investment outlined in its Interim Report is needed to

maximize the impact of BTC’s investment programs.70 The Panel reiterates its

recommendation that BP and its Partners (i) outline a specific long-term vision for

community, environmental, and social investment in Azerbaijan, Georgia, and Turkey and (ii)

expand the funding, scope, and time horizon of this initiative.

In its Interim Report, the Panel noted that Azerbaijan and Georgia could benefit

from greater participation by civil society in government and community affairs, increased

educational and training opportunities, and expanded economic opportunities in areas such as

agriculture and tourism.71 Although Turkey has a higher GDP per capita than the other two host

countries, Turkey could also benefit, particularly in the poorer, rural areas, from concerted social

spending that has a long-term sustainable impact. Two specific areas of concentration that were

mentioned to the Panel are health and education, particularly for women. The Panel

recommends that BP and its Partners continue to incorporate social goals, such as women’s

education, in its investment programs in Turkey both during and after construction.

CIP and EIP grant recipients in Turkey were announced late this past summer,

and the Panel met with some of these groups. The Panel reviewed the projects funded through

the CIP and EIP to date and was favorably impressed with them but, as discussed below, also

believed that their current operations could be strengthened.

70 See Interim Report at 98. 71 Id. at 99-101.

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A. CIP

BTC issued a Request for Proposals (RFP) for the CIP’s first tranche of US$4

million in December 2002, after undertaking a needs analysis using data from the EIA and the

RAP and by conducting focus group meetings with a range of stakeholders including NGOs,

state ministries, and international development organizations. After evaluating a large number of

proposals, BTC funded four projects in North East Anatolia, the poorest section of the BTC

pipeline corridor in Turkey. The RFP process successfully targeted Turkish organizations. Two

national NGOs, one private company in partnership with an NGO, and one university group were

awarded grants under the first RFP for the following integrated projects combining agriculture,

animal husbandry, employment creation, capacity building, and infrastructure:

• Ardahan Sustainable Rural Development Project: Managed by the Turkish NGO International Blue Crescent Foundation (IBC), this project will promote agriculture (e.g., animal husbandry, dairy and fruit processing), address community social issues (e.g., isolation of disadvantaged groups), and fund “quick impact” projects (e.g., sewage systems).72

• Kars Sustainable Rural Development Project: The Sustainable Rural and Urban Development Society (SÜRKAL) will manage the project, which will promote agriculture (e.g., animal husbandry, agricultural methods), address social issues (e.g., community problem-solving and empowerment of women), and fund “quick impact” projects (e.g., water supply and sewage systems).

• Erzurum Sustainable Rural Development Project: Ataturk University’s Project Coordination Unit will work with local stakeholders to implement the project, which will promote agriculture, aquaculture, and eco-tourism, develop entrepreneurship, empower disadvantaged groups (e.g., women), and build “quick impact” projects (e.g., irrigation), among other aims.

72 The project in Ardahan was operational when the Panel and its consultant visited the region. The Panel’s consultants also visited the project at Posof and reported that one “quick impact” project, which would bring water to all of the homes in one village, was almost completed.

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• Erzincan & Gümüshane Sustainable Rural Development Project: This rural development project will be implemented by PAR Consulting, with support from the Rural and Urban Development Foundation (RUDF). The project will promote agriculture (e.g., livestock and bee-keeping), provide capacity-building training to the community, offer dental health for children, and build “quick impact” infrastructure projects to be selected by the villages.

Another US$3 million will be available in December 2003 with the launch of the

second RFP for CIP projects in the five provinces in the central and southern sections of the

pipeline route. The bulk of the remaining US$2 million will be awarded for ongoing activities in

the Northeast, and a small amount will be kept for contingencies. The Panel commends BTC for

its strong support through the CIP for Turkish organizations. This approach of supporting local

organizations is consistent with the recommendations made by the Panel in its Interim Report, in

which the Panel expressed concern about the CIP’s implementation process in Azerbaijan and

Georgia, which tended to favor international NGOs.

During its site visit to Turkey the Panel met with some of the grant recipients,

who expressed concern that the funding period (i.e., three years) was too short for the projects to

have a sustainable impact. A number of organizations with whom the Panel met also expressed

concern that the amounts of money committed to date, at least relative to the size of the targeted

populations, might not be large enough to have a durable impact. Consistent with the broader

vision outlined above, the Panel recommends that for future CIP awards BP and its Partners

(i) consider increasing the size of the grants to individual projects, where consistent with

longer-term project objectives and the managerial capacity of the grantees, to enable them to

have a broader and more lasting impact; (ii) allow projects that currently receive funding to be

eligible for renewed funds well into the future, subject to periodic evaluation of their

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79

performance; and (iii) merge the CIP activities with the Caspian Development Fund (or the

RDI) at the earliest possible stage once the construction phase of the pipeline is complete.

B. EIP

BTC issued an RFP for EIP projects in February 2003. The first tranche allocated

US$1.5 million for five projects designed to protect biodiversity, important bird and plant areas,

and endangered species along the pipeline:

• Sea Turtle Hatcheries Program (Gulf of Iskenderun): This project will be carried out by the Ecological Research Society and will focus on the sea turtle population living along the beaches at Sugozu and near the terminal at Ceyhan. The Dortyol beach (east of the terminal) and the Yurmurtalik beach (west of the terminal) will also be surveyed periodically.

• Education and Research on Monk Seals (Gulf of Iskenderun): This project, which seeks to develop baseline data on the monk seal community in the Gulf of Iskenderun, will be carried out by the Middle East Technical University Institute of Marine Sciences and will encompass the coastline between Karatas (Adana) and the Turkey-Syria border.

• Black Grouse Habitat Investigation, Monitoring & Conservation: This project is designed to improve the conservation status of the Caucasian black grouse in Northeast Turkey. Doga Dernigi, Birdlife International, and the Royal Society for the Protection of Birds (UK) will lead the study.

• Identification of Important Bird Areas: This project will establish a baseline for conserving Important Bird Areas along the pipeline corridor and will also be carried out by Doga Dernigi, Birdlife International, and the Royal Society for the Protection of Birds (UK).

• Identification of Important Plant Areas: Istanbul University Research and Aid Foundation will coordinate the work of a number of NGOs involved in plant conservation in the pipeline corridor.

These projects, which reflect priorities developed by BTC, aim to create public awareness about

biodiversity, while promoting community involvement and environmental education in Turkey.

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The Panel met a number of EIP grantees during its visit to Turkey and was

favorably impressed with their dedication to the biodiversity objectives and their capacity to

pursue these objectives. The Panel notes, however, that these projects are not linked

thematically or operationally to any of the CIP initiatives. In the Panel’s view, the separation of

the EIP from the CIP potentially limits the effectiveness of both programs although the Panel

recognizes that EIP and CIP staffs work closely together. A connection between environmental

management and development of sustainable rural livelihoods will not be fully achieved if the

environmental investment agenda and the community investment agenda remain on separate

paths. The Panel recommends that BP and BTC explore merging the EIP and CIP

disbursements to help ensure that environmental, social, and economic investments are

consistent with and mutually supportive of each other and of broader development activities at

the local level.

Finally, in the Panel’s view, the RFP process for the EIP seems unduly complex.

In the first round, BTC circulated lengthy proposals requesting extensive documentation from

the applicants. Although Turkish NGOs ultimately benefited from the project awards, the

complexity of the current procedures and the assumptions about the applicants’ organizational

structures and governance could be a practical barrier to broader involvement by Turkish NGOs

going forward. The Panel recommends that BP and its Partners explore ways to simplify the

RFP process in Turkey, while maintaining its current transparency and quality, in order to

facilitate participation by Turkish NGOs.

The Role of BOTAS

81

Section VII.

The Role of BOTAS

The Role of BOTAS

82

As discussed in the preceding sections of this Report, BOTAS and the

government of Turkey have undertaken significant responsibility pursuant to the LSTK

Agreement and the Project’s overall legal framework for delivering the key elements of the BTC

pipeline in Turkey. In the case of BOTAS, these responsibilities include, most notably, the

following:

• Land acquisition and compensation;

• Design and construction of the pipeline, pump stations, and Ceyhan terminal;

• Selection, management, and audits of contractors;

• Achievement of local procurement and employment objectives;

• Environmental planning, mitigation, management, remediation, and monitoring;

• Protection of sites of significant cultural heritage value affected by the Project;

• Operation of the BTC facilities in Turkey, including the marine terminal at Ceyhan; and

• Coordination with the Turkish government on security issues.

In the Panel’s view, BOTAS’s central role under the HGA and the LSTK

Agreement presents BP with perhaps the most significant challenge it has in Turkey. The

challenge has many facets, as illustrated by the examples cited in earlier sections on the

economic, environmental, and social dimensions of the Project in Turkey. BP, BTC, the

government of Turkey, and BOTAS individually and collectively have strong commercial and

economic incentives to complete construction on time and within budget. At the same time, BP

and BTC will ultimately be held responsible for the environmental, social, and technical

The Role of BOTAS

83

commitments made to the International Financial Institutions, other lenders, and the public as

outlined in the EIAs. In the Panel’s view, BP and BTC’s willingness to commit to a high level

of environmental, social, and safety standards — in accordance with international practices and

not less stringent than those applied in Member States of the EU — helps distinguish this Project

from other major infrastructure projects in the petroleum industry. At the same time, BP and

BTC’s performance will be judged by whether the high standards they have established for the

Project are in fact realized.

In the Panel’s view, the environmental, social, and technical vision and goals

outlined in the various Project documents seem to have been embraced throughout BTC

including, perhaps most importantly, by the engineers and construction managers in the field.

These same field supervisors, however, expressed frustration that, although they formally have a

range of contractual tools at their disposal to influence BOTAS, in practice they feel constrained

against taking steps to ensure that BOTAS and its contractors meet the technical, environmental,

and other standards set out in the EIAs and other documents. BTC’s delivery managers also

expressed concern about their limited influence on BOTAS’s choice of contractors, including

one that was involved in an earlier natural gas pipeline project in Turkey that had incomplete

environmental reinstatement.73 They described their job as one of “encouraging” and “cajoling”

BOTAS and its contractors on various issues rather than “directing” BOTAS or its contractors.

73 As previously stated, the Panel will revisit the environmental reinstatement issue in the future.

The Role of BOTAS

84

As one delivery manager stated, “we have the knowledge and the experience but we can’t use it

directly.”

The Panel also heard concerns in the field that BOTAS and its contractors might

feel pressure to cut corners on environmental, social, and technical standards to remain on

schedule and under budget vis-à-vis the LSTK Agreement. These sentiments were reinforced by

the Panel’s own meetings with a number of senior officials in key government ministries, some

of whom openly expressed their view that the environmental and other standards in the LSTK

Agreement and EIA were too stringent and should be relaxed. The Panel’s field observations

only reinforced its concerns that these views may be manifested on the ground. The Panel has

the clear impression that BP and BTC’s delivery managers have limited authority, short of severe

steps such as assuming responsibility for certain tasks from BOTAS or stopping work, to ensure

that construction and related activities are performed to the standards outlined in the EIAs.

Given the existence of the LSTK Agreement, the Panel makes the following

observations and recommendations:

First, as mentioned above, the government of Turkey, BOTAS, and its contractors

have strong financial incentives to remain on schedule and under budget. At the same time, in

the Panel’s view, the government of Turkey has the added incentive of using this Project to

demonstrate to the EU and the international community that it is fully capable of hosting and

participating in investments that meet or exceed the most stringent international environmental,

social, technical, and human rights standards. Nevertheless, given BP’s leading role in BTC, the

International Financial Institutions, lenders and the international community will ultimately hold

The Role of BOTAS

85

BP responsible for any failures to meet the governing standards, even if it is not performing the

actual work. The Panel encourages BP, through its leading role in BTC, to use its leverage,

including (if necessary) stoppage of work, to ensure that BOTAS fulfills the commitments BP

and BTC have made in the EIA.

Second, the Panel heard concerns that contractors may not be fully aware of, nor

have digested and embraced the various environmental, social, and technical management plans.

Indeed, on a number of occasions, when the Panel’s consultants asked contractors for copies of

their environmental work plans or KPIs, they were unable to produce them at the construction

site. In addition, questions were raised about the financial ability of BOTAS’s contractors to

fulfill their obligations, and specifically whether they have allocated sufficient funds to meet

their environmental commitments, including reinstatement. These concerns were heightened by

the fact that BTC has limited control over the subcontractors. As noted, the Panel met with a

number of senior government officials who are in key positions to direct BOTAS. Rather than

reassure, these conversations left the Panel with deep concerns about the level of awareness and

commitment needed to ensure that BOTAS and its contractors would receive the direction and

funds required to ensure that the environmental, social, and technical management plans would

be fully implemented. The Panel recommends that BP and BTC continue working to ensure

that BOTAS and its contractors remain fully aware of and committed to fulfilling their

obligations under the various Project management plans.

The Role of BOTAS

86

Third, in future reports, the Panel plans to revisit the unique management

structure in Turkey and the implications of this structure for issues such as environmental

reinstatement.

Security and Human Rights in Azerbaijan, Georgia, and Turkey

87

Section VIII.



88

Securing the pipeline is important not only to protect the investment and physical

assets of BP and its Partners, but also to realize the Projects’ strategic benefits to the host

governments, the region, and the world at large. Responsibility for pipeline security rests with

the three host governments, and they have undertaken to carry out this responsibility in a manner

fully consistent with key international human rights standards. BP and its Partners have also

committed to uphold international human rights standards and to work with the host

governments to ensure that the security measures adopted to protect the Projects comply with

such standards. BP and its Partners’ reputations are at stake, as is the reputation of the host

governments.

Security measures are by no means the only Project-related activities potentially

affecting the human rights of residents along the pipeline corridor. The Projects’ land

acquisition process implicates the rights of those who are affected by economic resettlement to

be adequately compensated for their property. Likewise, those who lose economic opportunities

because of the Projects have a right to adequate compensation. The Projects create new risks to

the region’s environment, some of which, if not appropriately mitigated, could harm the health of

local residents. The Projects might also give rise to social issues, such as gender equity in

compensation, and the exercise of such civil and political rights as the right to protest. The Panel

has already addressed many of these issues in its Interim Report on Azerbaijan and Georgia and

in the preceding sections of this Report. This section is more directly focused on the potential

impacts of the security arrangements on the civil and political human rights of affected


89

populations. The Panel postponed the discussion of these issues until it completed its site visit to

Turkey and had a more complete picture of the security measures being planned.

A. BP’s Human Rights Commitment and the Regional Context

Although governments have the primary responsibility for protecting human

rights, BP has been at the forefront of companies that are developing policies and practices to

ensure that their activities respect human rights. BP is also a signatory to the Human Rights

Principles of the UN Global Compact and the Voluntary Principles on Security and Human

Rights (discussed further below), both of which encourage companies to promote human rights

in countries where they conduct business. In the Panel’s view, BP’s efforts to protect and

support the human rights of the people affected by the Projects will be an important measure of

BP’s success in achieving its goal of making the Projects a model or template for large-scale,

extractive-industry investments by major, multinational enterprises in developing and transition

countries.

Achieving these objectives will not be an easy task. Each of the three host

countries — Azerbaijan, Georgia, and Turkey — has been involved in regional or internal

conflict at one time or another in the past decade. The pipeline routes in Azerbaijan, Georgia,

and Turkey bypass those areas of conflict where the risk of human rights violations are

potentially magnified by simmering tensions. In the Panel’s view, BP and its Partners are to be

commended for selecting a pipeline route that avoids areas of greatest tension.

The already fragile human rights situation in each host country heightens the risk

of potential human rights violations. Sharply worded reports from international NGOs such as


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Amnesty International74 and Human Rights Watch,75 as well as annual reports from the US State

Department76 and periodic reports from the Council of Europe77 document dozens of instances of

violations of human rights in the three host countries. Recent developments in each of the host

countries highlight the fragility of the region’s political stability as well as the political risk

facing the Projects. The Azerbaijan government arrested almost 200 opposition leaders and their

supporters and detained the main opposition candidate in response to protests of the Presidential

election of October 15, 2003. This election has been widely condemned by the international

community. Similarly, Georgian opposition leaders and their supporters called for the

resignation of President Eduard Shevardnadze following the outcome of the November 2, 2003,

parliamentary elections in Georgia in response to reports of widespread irregularities and

accusations of fraud. On November 23, 2003, President Shevardnadze resigned, relieving the

immediate pressure from the protest but creating an uncertain environment. Terrorist bombers

recently struck two synagogues, the British consulate, and a bank building in Istanbul, killing

74 See Amnesty International Report 2003 – Azerbaijan, available at http://www.amnesty.org; Amnesty International Report 2003 – Georgia, available at http://www.amnesty.org; Amnesty International Report 2003 – Turkey, available at http://www.amnesty.org 75 See Human Rights Watch, World Report 2003: Events of 2002, at 308-13 (Azerbaijan), 329-35 (Georgia), 365-71 (Turkey). 76 See U.S. Department of State, Azerbaijan: Country Reports on Human Rights Practices – 2002 (Mar. 2003); U.S. Department of State, Georgia: Country Reports on Human Rights Practices – 2002 (Mar. 2003); U.S. Department of State, Turkey: Country Reports on Human Rights Practices – 2002 (Mar. 2003). All U.S. Department of State Human Rights reports are available at http://www.state.gov/g/drl/hr/c1470.htm. 77 See, e.g., Council of Europe, Parliamentary Assembly, Res. 1305 (2002): Honouring of obligations and commitments by Azerbaijan (listing human rights commitments made by Azerbaijan and noting need for “substantial measures” to improve human rights), available at http://assembly.coe.int/Documents/AdoptedTest/ta02/ERES1305.htm.


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dozens and injuring hundreds. These developments could lead to pressure to tighten security in

the host countries.

In the Panel’s view, one of the areas of greatest concern is the documented human

rights abuses by certain of the state security forces that have been assigned by the host

governments to provide pipeline security. For example, the Gendarmerie in Turkey has

repeatedly been accused of human rights violations. According to the US State Department in its

most recent Report on Human Rights in Turkey, the Gendarmerie has recently been implicated in

(i) allegations of torture and abuse of detainees during incommunicado interrogations, (ii)

arbitrary arrests and detentions, (iii) one suspicious death, and (iv) intimidation of Turkish

villagers during local elections.78 Some of these alleged human rights violations occurred in

Southeast Turkey, where the Kurdish population is concentrated.79

Likewise, allegations have recently been reported by the US State Department and

international NGOs that the Georgian security forces have either committed or have been

implicated in serious human rights abuses.80 Some human rights groups are also concerned that

regional human rights issues, such as trafficking in persons, may be exacerbated by the Projects’

presence.81

78 See U.S. Department of State, Turkey: Country Reports on Human Rights Practices – 2002, available at http://www.state.gov/g/drl/rls/hrrpt/2002/18396pf.htm. 79 Id. 80 See Georgia: Country Reports on Human Rights Practices – 2002 (Mar. 2003), available at http://www.state.gov /g/drl/rls/hrrpt/2002/; Human Rights Watch, World Report 2003 at 329-30. 81 See, e.g., Amnesty International, Human Rights on the Line: The Baku-Tbilisi-Ceyhan pipeline project (2003) at 22-23.


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Measures formally exist to remedy human rights violation in each country. For

instance, each country has some form of “ombudsman” charged with investigating allegations of

government abuses, although these institutions are new and, to the Panel’s knowledge, largely

untested.82 Citizens in all three countries can also petition the European Court of Human Rights

(“ECHR”), although Turkey’s compliance with ECHR awards has been sporadic.83

Apart from domestic remedies, Turkey’s desire to join the EU has attracted

broader scrutiny of the country’s human rights practices. Turkey recently adopted important

reforms, including prohibiting torture, banning the death penalty, permitting broadcasts in

Kurdish and other languages, and reducing the role of the military-dominated National Security

Council.84 During the Panel’s visit, the Panel was very impressed by Turkish Foreign Minister

Abdullah Gül’s straightforward recognition of the problems and his clear realization that

enacting these reforms was only the first step toward realizing long-term change. As Turkey

continues to make progress in its accession negotiations with the EU, the eyes of the world will

be focused on its government’s actions, including its conduct of security for the pipeline.

82 The Panel met with the Human Rights Ombudsman in Azerbaijan earlier this year at a time when the office was in the formative stage. 83 Turkey’s record on complying with ECHR orders is still weak; the Council of Europe recently criticized Turkey for failing to comply with approximately 40 ECHR judgments issued against the Turkish security forces for human rights violations since 1996. See U.S. Department of State, Turkey: Country Reports on Human Rights Practices – 2002, available at http://www.state.gov/g/drl/rls/hrrpt/2002/18396pf.htm. 84 See “A revolution of sorts,” The Economist (July 31, 2003), available at http://www.economist.com.


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The significant international scrutiny of the Projects, which is in part due to

BTC’s request for loans and guarantees from the International Financial Institutions, should have

a positive influence on the human rights situation in the three countries. Although the IFC and

the EBRD have voted to approve financing for the Projects, both institutions will monitor on a

quarterly basis BTC’s progress toward achieving the social and environmental commitments it

made as a condition of their financing.

In the Panel’s view, the poor human rights records of the host governments’

security and military forces create a significant reputational risk for BP and BTC in the event that

the governments are unwilling or unable to operationalize the robust human rights protections

that have been established in the Projects’ legal framework. Efforts to initiate legal action in the

United States or elsewhere could magnify these risks should the host governments’ security or

military forces commit human rights abuses in the name of ensuring the security of the Projects.

In recent years, human rights advocates have sought with increasing frequency to

hold multinational corporations liable for human rights abuses by the governments of countries

in which they invest. Invoking a US law known as the Alien Tort Claims Act (ATCA), these

lawsuits often center on claims that the multinational corporation knew of, facilitated, or was

complicit in human rights violations that domestic security forces committed in furtherance of an

investment project. Citizens of some host countries have also brought ATCA lawsuits seeking to

hold multinational corporations in the extractive industries liable for environmental and health-

related injuries allegedly traceable to companies’ cross-border investments. These and other

claims under the ATCA have thus far generally not succeeded against multinational corporate


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defendants. But the legal landscape remains uncertain. Regardless of how this is resolved,

multinational corporations — including BP and its field staff — must ensure that they have in

place adequate measures to help avoid altogether human rights violations by security forces in

the countries where they operate, as well as appropriate safeguards to avoid complicity with

conduct that could threaten human rights.

BP has made important commitments to support human rights in the region

through various project agreements with the host governments and the recently announced

Human Rights Undertaking. The Panel commends BP’s efforts and its commitment in the area

of human rights but recognizes that these commitments represent only a first step. Achieving

them will require continuing leadership by senior BP and BTC officials, the commitment of

resources, and a comprehensive monitoring and reporting structure focused on how these

commitments are being met on the ground.

B. Legal Framework

The Projects’ legal framework allocates responsibility for security between and

among the host governments and Project Participants and commits these parties to abide by key

international human rights standards in carrying out their security-related responsibilities. This

legal framework is a complicated architecture of interrelated and mutually reinforcing

multilateral agreements, bilateral agreements between the investors and the host governments,

environmental protection plans (such as the ESIAs), security-related protocols, and various joint

and unilateral undertakings by the Caspian investors. The main security- and human rights-


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related elements of the Projects’ legal framework are described in Appendix A to this Report.

Specifically, Appendix A describes relevant features of the following instruments:

• The Intergovernmental Agreement (IGA), through which the host states formally agree to ensure the safety and security of Project personnel, facilities, assets, and in-transit petroleum;

• The Host Government Agreements (HGAs), which bind the individual states in contractual agreements with the Project Participants and expand upon the IGA’s security commitments;

• The Joint Statement on the Baku-Tbilisi-Ceyhan Pipeline Project (Joint Statement), which was executed in May 2003 and responds to NGO concerns about the potential impact of the Projects’ legal framework on the autonomy and policy-making discretion of the host states;

• The Protocol Relating to the Provision of Security for the East-West Energy Corridor (Security Protocol), which was executed in July 2003 and formally commits the host governments to a cooperative security scheme;

• The Voluntary Principles on Security and Human Rights (Voluntary Principles), which are nonbinding international security norms that emerged from talks in 2000 between the governments of the United Kingdom and United States, companies in the extractive and energy sectors, and NGOs on the interaction between security operations and respect for human rights; they are referenced in both the Joint Statement and the Security Protocol; and

• The BTC Human Rights Undertaking, which was executed by BTC as a legally binding unilateral deed under English law in September 2003 and clarifies BTC’s construction of aspects of the Projects’ legal framework.

The Panel commends BTC for issuing the legally binding Human Rights

Undertaking as well as the plain-language Citizen’s Guide to the BTC Project Agreement, which

was released at the same time. Both are consistent with the Panel’s recommendations in its

Interim Report on Azerbaijan and Georgia. The Citizen’s Guide provides among other things the

“plain-language summary” of the IGA and HGAs that the Panel recommended as a means of


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clarifying particularly complex aspects of the Projects’ legal framework. The Human Rights

Undertaking, which binds BTC as an entity and can only be modified or revoked with the

express consent of the beneficiaries (the governments of Azerbaijan, Georgia, and Turkey),

similarly addresses key concerns expressed in the Panel’s Interim Report concerning the possible

effects of the Projects’ legal regime in the area of human rights. It is the Panel’s understanding

that BTC, as a signatory to the Human Rights Undertaking, will continue to be bound by the

terms of the Human Rights Undertaking, a unilateral deed under English law, regardless of any

shifts in ownership within BTC, including when and if SOCAR assumes majority ownership of

BTC shares. Notwithstanding the Panel’s understanding of BTC’s obligations under the

unilateral deed, a number of NGOs have raised concerns with and asked questions to the Panel

about whether the Human Rights Undertaking will bind BTC even when SOCAR increases its

proportional ownership of BTC. The Panel recommends that BP and BTC confirm in writing

the Panel’s understanding that BTC will continue to be bound by the Human Rights

Undertaking in the future regardless of changes in relative ownership stakes among the

shareholders within BTC.

Amnesty International has called on BTC to make the Human Rights Undertaking

“known to people—especially to lawyers who could represent third parties injured by the

project.”85 Amnesty International has also called on BP to incorporate formal human rights

safeguards, as outlined in the Human Rights Undertaking, in the legal regime for future projects,

85 See Amnesty International, Human Rights on the Line: the Baku-Tbilisi-Ceyhan Pipeline Project – Update as of October 8, 2003.


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rather than correcting any perceived omission in an “after-the-fact” measure.86 The Panel

endorses Amnesty International’s suggestions and recommends that BP and BTC (i) build on

the publication of the Human Rights Undertaking by more broadly distributing the document

in the host countries in local languages and (ii) remain engaged in discussions with the NGO

community on longer-term improvements in the human rights protections that could be

included in the legal regime for future projects.

C. Operational Framework

In the Panel’s view, the legal framework for the Projects — particularly as

clarified and supplemented by the Human Rights Undertaking and Joint Statement — provides

robust legal safeguards against human rights abuses in connection with the agreed security

arrangements. The Project Participants and host governments have committed themselves to

upholding a broad set of international human rights standards in the operation and protection of

the Projects. The Panel commends BP and the Project Participants for undertaking and

organizing these important steps. In the Panel’s view, the next step is for the host governments

to put, and for the Project Participants to continue putting, these legal commitments into practice

86 Significantly, Amnesty has also stated: “There are a number of issues of concern to Amnesty International not within the remit of the Deed Poll [Human Rights Undertaking]. It is not intended to address a number of Amnesty International’s concerns such as fair compensation and legal assistance for the land acquisition process, legal assistance for those seeking compensation or damages against the BTC consortium, monitoring and reporting mechanisms for human rights violations in the vicinity of the pipeline, and the impact of security arrangements for protecting the pipeline.” Id.


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to ensure that the safeguards have practical meaning for the communities in which the Projects

operate.

1. Security Plans and Protocols

In the Joint Statement, the host governments and BTC pledged:

“promptly to conclude one or more protocols to the IGA and HGAs stating that all pipeline security operations must be conducted in accordance with the International Norms [a range of key international human rights norms], and set forth specific requirements and limitations in respect thereof.” 87

Since releasing the Joint Statement, the host governments have separately released the Security

Protocol discussed in Appendix A, which provides greater detail on the scope of their human

rights commitments and planned cooperation (in areas such as risk assessment, information

gathering and sharing, employee screening, and compliance monitoring). The Security Protocol

also calls for the establishment of a Joint Pipeline Security Commission to facilitate and

implement the three governments’ cooperation in the area of security and protection for human

rights.

With the exception of a short “Security Concept” paper, however, which pre-dates

the Joint Statement and provides a high-level overview of certain security-related features of

Project operations (noted below), neither the Project Participants, the host governments, nor the

87 Joint Statement on the Baku-Tbilisi-Ceyhan Pipeline Project (May 16, 2003), at ¶6. The following human rights principles or norms are specifically referenced in the Joint Statement: “the Universal Declaration of Human Rights, the United Nations Basic Principles on the use of Force and Firearms by Law Enforcement Officials, United Nations Code of Conduct for Law Enforcement Officials, the European Convention on Human Rights, and the Voluntary Principles on Security and Human Rights.”


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so-called Joint Pipeline Security Commission have publicly released any detailed operating plans

or protocols for Project security and the protection of human rights. Especially in light of the

continued progress with Project construction, the Panel recommends that BP and the Project

Participants accelerate efforts to operationalize the planned arrangements for Project security

and the protection of human rights, and that, to the extent publication of these documents will

not compromise the safety of people or the security of the facilities, they make these more

detailed security arrangements — including the anticipated role and function of the Joint

Pipeline Security Commission — transparent and accessible to the public.

2. Host Country Coordination

In each of the three host countries, BP and the Project Participants have identified

and are working with a host government liaison on security planning. In Georgia, the

Interagency Coordinating Commission within the Georgian National Security Council

coordinates all plans for the security of pipelines (including the operational Baku-Supsa pipeline

that pre-dates BTC). In Azerbaijan, the Pipeline Security Committee manages all aspects of state

pipeline protection including armed response. And in Turkey pipeline security is coordinated by

the Supreme Security Committee (SSC), an inter-agency body formed in 2000 consisting of

representatives from all key state authorities (e.g., the Ministry of Foreign Affairs, the Ministry

of Internal Affairs, the Gendarmerie, the General Staff, the Ministry of Energy, and BOTAS).

BP and BTC personnel are engaged in security-related planning efforts with their

counterparts in the host governments. For instance, the BTC Security Manager for Turkey

regularly contributes to the SSC’s efforts with respect to the pipeline. The Panel met with the


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SSC during its site visit to Turkey and received a briefing on the SSC’s efforts to implement the

government’s security-related commitments. This briefing included a high-level summary of the

guidance that has been and will be provided to the Turkish Gendarmerie on its role in securing

the pipeline and to the BOTAS contractors in carrying out their responsibilities. During this

meeting, the Panel raised the importance of ensuring that the security arrangements for the

Project fully respect, both on paper and in practice, the human rights of the affected populations.

The Panel also mentioned its very positive meeting with Turkish Deputy Prime Minister Gül and

his forthright recognition of the problems and commitment to implement the recent reforms. In

contrast, the SSC conveyed neither the same straightforward recognition of the issues nor a sense

of active engagement to operationalize Turkey’s Project-related human rights commitments.

The Panel recommends that BP, BTC, and the Project Participants remain actively engaged

with the SSC and the other host country coordinating entities to help ensure thorough

implementation of security obligations with due respect for human rights. This should include

human rights training of the forces actually responsible for ensuring Project security.

Additionally, to the extent that the coordinating entities in Azerbaijan and Georgia do not

already represent an inter-agency perspective, as appears to be the case with the SSC, the

Panel recommends that BP and BTC ensure that their contributions to the security-planning

effort and related human rights safeguards reach the key ministries in those countries.

3. Risk Assessment

Consistent with the Voluntary Principles, the Panel understands that BTC has

been preparing monthly assessments of security-related risks along the pipeline corridor in


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Azerbaijan, Georgia, and Turkey. These assessments rate, for each country, (i) the immediacy of

the threat posed by a range of identified risks; (ii) identify specific mitigation measures that are

planned or underway; and (iii) assess the level of Project preparedness vis-à-vis each risk

category. The Panel also understands that substantially unedited versions of these risk

assessments are regularly shared with the NGO community in the host countries.

The Panel commends BP and BTC for their efforts both to develop a threat-and

mitigation-tracking mechanism and to share these assessments on a regular basis with the NGO

community. In the Panel’s view, broader public awareness of these risk assessments in the host

countries would help reinforce the transparency and effectiveness of the overall security regime

for the Projects and the Project-level engagement with civil society in the host communities.

The Panel recommends that BP and BTC distribute the risk assessments more broadly to

community leaders and local government officials in the host countries, especially along the

pipeline corridor. The Panel also recommends that BP and BTC post these risk assessments

on the Project website on a regular basis, provided doing so does not compromise the safety of

people or the security of facilities.

4. Physical Protections

BP and BTC have announced or briefed the Panel on a number of planned

physical security measures along the corridor of the pipelines, at the above-ground pump

stations, and at the Sangachal and Ceyhan terminals. These steps include surveillance measures,

reinforcement, lighting, and operational redundancies, to name a few.


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The Panel was favorably impressed with BP and BTC’s overall approach to the

physical protections that are or will be built into the above-ground facilities and pipeline route,

although the Panel lacks the technical expertise to offer any specific assessment of the adequacy

of these measures. The Panel recommends that, in designing and implementing physical

safeguards for the Projects, BP and BTC carefully consider the potential impact of the

physical protections on the local communities in the host countries and identify, wherever

possible, any positive social impacts that might be generated for local communities. In the

Panel’s view, the delivery of such positive social impacts will not only improve the welfare of

communities affected by the Projects but also potentially reinforce community support for the

physical security safeguards that are planned. For example, the Panel recommends that BP and

BTC explore possible benefits for nearby communities in connection with plans to supply

extra lighting and power for the above-ground pump stations through onsite generators and

other energy sources.

5. Guards and Security Forces

The Projects’ facilities and pipeline corridor will be also be guarded by a variety

of private and public security forces. Unarmed private guards from the local communities will

protect the above-ground facilities (e.g., pump stations, terminals). During the construction

phase, these guards have been hired by the principal contractors in Azerbaijan and Georgia and

by BOTAS’s EPC contractors in Turkey.88 Comparable arrangements for the operations phase

88 Under Turkish law, the facilities have also been designated private security zones.


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of the Projects have reportedly not yet been finalized. The Panel commends BP and BTC for

requiring Project contractors to utilize local security guards wherever possible in the planning

effort for protection of the above-ground facilities. As BP and BTC have recognized, the use of

local security guards will potentially strengthen the sense of community “ownership” of the

project. The Panel recommends that the use of local security personnel be sustained and even

expanded, to the extent possible, throughout the operations phase of the Projects, so that the

local communities can play an appropriate role in the execution of security planning and

retain a sense of ownership of the Projects through participation in measures to assure their

safety and security.

Local armed government forces will have responsibility for patrolling and

securing the pipeline route. In Turkey, the Gendarmerie — the force under joint control of the

Interior Ministry and the Turkish military — will have responsibility for the security of the route.

Gendarmerie security efforts will be carried out initially through both fixed and mobile units, all

of which will be exclusively devoted to Project security (and not to the security of villages, etc.).

The fixed and mobile units will report in the first instance to the local Gendarmerie and then to

the general command for the district or province, as needed. The BTC Project Directorate of

BOTAS has agreed to a protocol with the Gendarmerie addressing the allocation of security-

related responsibilities, including the obligation of the Gendarmerie to provide community

relations and human rights training to the assigned units.

In Azerbaijan, the Pipeline Security Division of the Special State Protection

Service will provide day-to-day armed protection for the pipeline corridor, reinforced as required


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by other Azerbaijani state forces. The same force has had general security responsibility for the

Baku-Supsa oil pipeline.

In Georgia, as in Azerbaijan, the Special State Protection Service provides armed

pipeline protection and response, reinforced as required by other Georgian state forces. The

same security service has had general security responsibility for the Georgian portion of the

Baku-Supsa oil pipeline.

The Panel recognizes and supports the effort to identify and deploy forces in the

host countries with a principal focus on the security of the Projects and related assets, rather than

the stability and security of the local communities that are affected by the Projects. In the

Panel’s view, this separation of security-related responsibilities should help reduce the risk of

“militarizing” the pipeline corridor and nearby communities. Moreover, the clear separation of

security responsibilities should help reduce the risk that state forces might, in the name of

maintaining order in communities near the pipeline, fail to respect the human rights of Project-

affected populations. As discussed more fully below, it is the Panel’s view that the potential

benefits of this separation can only be ensured and verified through a robust monitoring program.

6. Hiring and Training of Project Personnel

As noted, the host governments and Project Participants have committed to

screening employees to ensure that those “credibly” implicated in human rights abuses are

precluded from participating in pipeline security.89 In its Security Concept paper, BTC has

89 See, e.g., Security Protocol (July 23, 2003) at art. 14.


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separately indicated that all “employees and contractors, including guards, will be investigated

for criminal links, including human rights abuses, before employment.”90 The mechanisms for

screening Project personnel have not been publicly defined. In the Panel’s view, an open

discussion of the standards and procedures that will be employed to help ensure that parties

previously associated with human rights abuses are excluded from Project operations could

strengthen public confidence in the overall effort, particularly among vulnerable populations

along the pipeline corridor. To the extent consistent with safety and security concerns, the

Panel recommends that BP and BTC publicly provide additional detail regarding the

mechanism(s) that will be employed for screening Project personnel, and also that it define

with reasonable specificity what constitutes a “credible” implication in prior human rights

abuses (and who will establish and apply the standard). The Panel recommends that BP and

BTC urge the host governments to take the same steps.

In the area of training, the Project Participants have committed to undertaking a

security orientation, including briefings on “local culture and traditions,” for “all those associated

with the projects.”91 The content of these security and human rights orientations has not been

released publicly or opened for discussion. In the Panel’s view, an open and inclusive approach

to developing and distributing a human rights training curriculum for the Projects could also

reinforce and strengthen public confidence in the efforts to safeguard the interests of the affected

communities. To the extent consistent with safety and security concerns, the Panel

90 Security Concept at 1.3. 91 Id. at 1.4 See also Security Protocol, at ch. 1.


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recommends that BP and BTC publish additional detail regarding the substance and progress

of any planned training activities that relate to human rights, and that it post the curriculum

materials on the Project website and solicit public input on the overall effort. If not already in

place or planned, the Panel recommends that BP and BTC undertake a comprehensive human

rights training program for both managers and field personnel, including training on the

commitments it has undertaken, in order to lower the risk that Project employees and/or

contractors will unintentionally aid or abet human rights violations. To the extent consistent

with safety and security concerns, the Panel recommends that BP and BTC involve national

and international NGOs in the training effort, so that Project personnel can benefit from a

range of perspectives on “local culture and traditions,” as well as the human rights situation,

in the host countries.

7. Sharing Information with State Security Forces

The Project Participants have pledged to collect and disseminate information

regarding security risks with due regard for human rights.92 For instance, information will be

passed on to the security forces, or acted on when received from security forces, only when the

information discloses a “clear risk” to the Projects.93 Written details of information passed to

security forces will be preserved, and individual names will not be exchanged with the security

forces unless required by law. Such measures are fully consistent with the Voluntary Principles

92 See Security Concept at 1.2 93 Id.


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and, in the Panel’s view, are critically important to protect the human rights of potentially

vulnerable populations in the host countries.

In the Panel’s view, particularly in light of the human rights track records of the

state security forces that will have principal responsibility for safeguarding the Projects, it is

important that the communities impacted by the Projects have confidence regarding the

information-gathering and -sharing practices of the Project Participants vis-à-vis the host

governments. For that reason, it is also important that the operational commitments of the

Project Participants be as clear and transparent as possible to the host communities. The Panel

recommends that BP and BTC establish and make public specific guidelines for what

constitutes a “clear risk” to Project assets or personnel. The Panel also recommends that BP

and BTC define the specific mechanism of risk assessment and identify the personnel or

bodies responsible for assessing risk.

D. Implementation and Coordination of Human Rights Monitoring

Under the terms of the Security Protocol, the Voluntary Principles, and the

Security Concept, the host governments and Project Participants have pledged to record, report,

and investigate allegations of human rights abuses. For instance, the Security Concept provides

that the “projects will record and report human rights allegations from the community and

influence as much as possible, the ethical behaviour of local forces.” It also provides that

“security performance will be periodically audited by external assessors, including non-security


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professionals.” Both human rights groups94 and the international business community95 have

recognized the importance of such measures to implementing human rights commitments.

In the Panel’s view, human rights monitoring and reporting are the most

important elements of operationalizing the host governments’ and Project Participants’

human rights commitments. The success of the Projects from a human rights perspective will

necessarily depend on a suitable monitoring program that (i) establishes a credible, accessible,

and independent point of contact for individuals who may be the victim of human rights

abuses and (ii) creates a reliable mechanism for regular, on-the-ground oversight of

compliance by the host governments and their security forces with existing legal commitments.

BP, as a matter of corporate policy, already monitors its promotion and protection

of human rights in the countries in which it operates. BP reports on its progress in an annual

94 For example, Amnesty International proposed the establishment of an independent “supervisory committee” for human rights that would monitor and report on the Projects’ internal compliance measures; address grievances about human rights abuses; and intervene, if necessary, to halt the Projects’ construction and operation. See Amnesty International, Human Rights on the Line, art. 6.3 at 28. Similar recommendations were made in Panel discussions with other NGOs. 95 See Amnesty International and the Prince of Wales International Business Leaders Forum, Human rights: is it any of your business? at 11 (Apr. 2000) (recommending that companies using state or private security forces to protect their operations overseas (i) assign senior management responsibility for implementing human rights strategy, (ii) establish mechanisms of internal and independent monitoring and reporting on the company’s compliance with its human rights commitments, and (iii) raise human rights concerns with government authorities). The International Business Leaders Forum, an international educational charity, was established in 1990 to promote “responsible business practices internationally that benefit business and society, and which help to achieve social, economic and environmentally sustainable development, particularly in new and emerging market economies.” Int’l Business Leaders Forum, available at http://www.iblf.org/csr/csrwebassist.nsf/content/f1a2a3.html. BP is a member. Id.


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Environmental and Social Report, which it makes available to the public on its website.96 BP

has also hired an independent auditor, Ernst & Young, to review its objectives for progress

toward supporting human rights and to evaluate this progress at a general level.97 BP will use

this approach to monitor its activities in the Caspian region.98

BP and BTC have already begun to take the first steps in formulating an approach

to human rights monitoring for the Projects. For instance, BP has consulted the NGO

community, including Amnesty International, on the human rights risks associated with the

Projects’ security arrangements and the possible approaches to monitoring. It has retained a

human rights advisor with broad experience in operationalizing the sorts of commitments

outlined in the Voluntary Principles. It has a strong team in place in the field to implement and

follow up on the various Project-related human rights commitments. BP and its Partners, in

collaboration with the IFC and EBRD, have already established Community Liaison Officers

(CLOs) on the ground in each region as a way to foster communication between the Projects and

local communities. And BP and BTC remain subject to the EBRD and IFC’s ESIA/EIA

implementation requirements as well as host country regulation. BP’s willingness to solicit

public input from CDAP on the full range of the Projects’ activities, including in the area of

human rights, represents another layer of verification.

96 See BP, Environmental and Social Review 2002, available at http://www.bp.com. 97 See id. 98 See id. at 17-18.


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The Panel understands that BP is still developing the specific details of a

monitoring plan focused on security and human rights. The details of this plan have not yet been

made public. While the Panel appreciates the sensitivity of these plans, the construction phase is

well underway and the monitoring arrangements need to be finalized. The Panel recommends

that BP make a preliminary monitoring plan available for public comment and review soon,

given that construction-phase security measures are already in place.

In addition to the internal monitoring plan that BTC is currently developing, it is

the Panel’s view that BP and its Partners should establish (i) a point of contact for victims of

alleged human rights abuses and (ii) a liaison with interested parties to report on the Projects’

performance regarding its human rights commitments. The Projects’ CLOs are responsible for

responding to and reporting on community concerns on a variety of issues related to the Projects,

including environmental mitigation, land use restrictions, and safety.99 They are not responsible,

however, for monitoring the Projects’ human rights performance. In the Panel’s view, they

should not be given this responsibility in view of their already broad mandate for community

relations and the importance of the human rights commitments made by BP and its Partners, in

conjunction with the three host governments. The Panel recommends that BP and its Partners

establish a monitoring mechanism, such as an “ombudsman’s office,” in each of the host

countries that, subject to local law, would (i) serve as a point of contact in each country for

99 See BTC Project ESIA: Azerbaijan Final ESIA Statement Section 14 – Management and Monitoring at 14-12-13 (Dec. 2002); BTC Project ESIA: Georgia Final ESIA Section 14 – Management at 14-12-13 (Nov. 2002); BTC Project EIA: Turkey Final EIA Appendix C8 – Social Management and Monitoring Plans at C8-3-4 (Oct. 2002).


111

people alleging Project-related human rights violations, (ii) confidentially investigate such

allegations, and (iii) make recommendations to BTC on how to address the allegations. The

Panel also recommends that BP and its Partners establish a “human rights coordinator” or

similar office that would (i) coordinate the Projects’ internal monitoring, including reports by

the three country ombudsmen, and (ii) report on the Projects’ internal monitoring processes to

interested parties, including the local communities, local and international NGOs, and the

three host governments, subject to safety and security considerations.

Each country ombudsman office could be available to receive allegations of

Project-related human rights violations in its host country, determine their prima facie validity,

investigate them, and make recommendations to BTC on how to remedy the situation (including

whether and how to follow up with appropriate in-country authorities) and avoid similar

problems in the future. The three country offices could also compile records and reports of their

investigations, but should make it clear to people lodging complaints that their identity will be

treated confidentially and will not be revealed to the local authorities. The offices should each

be given sufficient autonomy within and funding from BTC to ensure that they are neutral and

independent. Each of the three country ombudsmen should have direct access to BTC

management at the highest level. The ombudsmen could also disseminate information to local

communities in their respective countries about the Projects’ human rights policies generally and

the mechanisms through which allegations of human rights in the security context can be made.

The activity of the ombudsmen’s offices could be coordinated centrally through

the “human rights coordinator” or similar office, which could interface with BTC management


112

and serve as the liaison between the Projects and other interested parties, such as local

government representatives, national officials in the three host countries, and national and

international NGOs. The human rights coordinator could receive the reports of the ombudsmen,

review the results of the Projects’ internal monitoring processes, and publish its own periodic

reports documenting the Projects’ human rights compliance. As BP and its Partners did with the

environmental and social commitments required for financing from the International Financial

Institutions, all of the human rights coordinator’s reports and other information should be made

available in local languages.

The creation of an ombudsman office is a common practice for private companies

and, when coupled with a human rights coordinator for the Projects, could help further

operationalize the monitoring commitments included in the Voluntary Principles and related

documents. Such an office would give people in the local communities an avenue for reporting

potential human rights violations and could enhance confidence in these communities that BP

and its Partners consider their human rights commitments to be a high priority. It would also

demonstrate how other large-scale projects in the extractive industries could meet similar

monitoring challenges for human rights and security commitments in the future, once again

making the Projects a model for others to follow.

APPENDICES

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APPENDICES

APPENDICES

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APPENDIX A

Key Security and Human Rights Elements of the Projects’ Legal Framework

A. The Intergovernmental Agreement

Signed by the Presidents of Azerbaijan, Georgia, and Turkey, the Intergovernmental Agreement (IGA) establishes only the basic parameters of the security framework for the Projects. In the IGA, the host states agree to ensure the safety and security of project personnel, facilities, assets, and in-transit petroleum.100 The host states further pledge either to use state security forces or to obtain the services of other security forces to satisfy their commitment under the IGA.101

B. The Host Government Agreements

The Host Government Agreements (HGAs) bind the individual states in contractual agreements with the Project Participants and expand upon the IGA’s security commitments. Among other areas, the HGAs define the security-related guarantees provided by the host states to the Projects and Project Participants. The language outlining the security framework is similar in each of the three HGAs with a few important differences. The following table summarizes a number of important security- and human rights-related provisions in the HGAs, including notable differences between the documents:

100 IGA art. III, cl. 2 (“Each State shall ensure the safety and security of all personnel within its Territory associated with the MEP Project, the Facilities, all other assets of Project Investors with its Territory associated with the MEP Project, and all Petroleum in transit within its Territory with respect to the MEP Project[.]”). 101 Id. (“[W]ithout limiting the foregoing, each State shall use the security forces of that State, and/or make provision for such security personnel and services, as may be necessary to satisfy this [security] obligation[.]”).

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COMPARATIVE PROVISIONS IN THE HOST GOVERNMENT AGREEMENTS

PROVISION AZERBAIJAN GEORGIA TURKEY Affirmative Duty State authorities shall ensure

“safety” and “security” of Rights to Land, Facilities, All Persons involved in Project Activities. Triggered “commencing with initial Project activities.” Art. 11.1

State authorities shall “take all reasonable and prudent measures determined by the State Authorities to safeguard and secure the Rights to Land, the Facilities and all Persons within the Territory involved in Project Activities.” Triggered “commencing with initial Project activities.” Art. 11.1 (emphasis added)

State authorities shall ensure “safety” and “security” of Rights to Land, Facilities, All Persons involved in Project Activities Triggered “commencing with initial Project activities.” Art. 12.1

Threat Response Protect the Rights to Land, Facilities, and Persons from all loss or damage resulting from:

Civil War Sabotage

Vandalism Blockade

Revolution Riot

Insurrection Civil Disturbance

Terrorism Kidnapping

Commercial Extortion Organized Crime

Other Destructive Events

Art. 11.1

Provide protection for the Rights to Land, Facilities, and Persons from all loss or damage resulting from:

Civil War Sabotage

Vandalism Blockade

Revolution Riot




Similar Destructive Events

Art. 11.1

Protect the Rights to Land, Facilities, and Persons from all loss or damage resulting from:

Civil War Sabotage

Vandalism Blockade

Revolution Riot




Other Destructive Events

Art. 12.1 Enforcement To avoid or mitigate harm, the

State authorities shall on request by and in consultation with MEP participants, exert their “Best Endeavors” to enforce forum law related to threatened and/or actual instances of loss or damage. Art. 11.2

State authorities shall, on “reasonable request by and in consultation with the MEP participants” take “all reasonable and prudent measures” determined by the State to protect Rights to Land, Facilities, and Persons and enforce forum law related to threatened and/or actual instances of loss or damage. Art. 11.2

To avoid or mitigate harm, the State authorities shall on request by and in consultation with MEP participants, exert their “Best Endeavors” to enforce forum law related to threatened and/or actual instances of loss or damage. Art. 12.2

Personnel Security forces of State to provide security (Art. 11.3)

Security forces of State to provide security (Art. 11.3)

Security forces of State to provide security (Art. 12.3)

Cost Borne solely by State, without reimbursement obligation by participants (Art. 11.3)

Borne solely by State, without reimbursement obligation by participants (Art. 11.3)

Borne solely by State, without reimbursement obligation by participants (Art. 11.3)

Liability State is solely liable for conduct of security forces.

State is solely liable for conduct of security forces.

State is solely liable for conduct of security forces.

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Under the terms of the HGAs, as summarized above, Azerbaijan and Turkey have pledged to “ensure the safety and security of the Rights to Land, the Facilities and all Persons within the Territory involved in Project Activities” (emphasis added). By contrast, Georgia has undertaken a lesser obligation to “take all reasonable and prudent measures determined by the State Authorities to safeguard and secure the Rights to Land, the Facilities and all Persons within the Territory involved in Project Activities,” and then only upon a reasonable request by the Project Participants (emphasis added). The difference is potentially quite significant, since the host governments have pledged through the HGAs to compensate Project Participants for all loss or damage resulting from the failure of the states to meet their security obligations.

In order to “avoid or mitigate harm,” both Azerbaijan and Turkey have pledged to “exert their Best Endeavors” to enforce forum law on request of the Project Participants (emphasis added). By contrast, Georgia pledged in its HGA to respond to “reasonable request[s]” by Project Participants by taking measures determined by the government to be reasonable and prudent to enforce forum law. Again, Azerbaijan and Turkey have contracted to an exacting standard, which presumably requires them to respond to all security-related requests made by Project Participants. Azerbaijan and Turkey are also charged with the more onerous standard of employing their “Best Endeavors” to enforce forum law.

Under the HGAs, the host governments commit to provide protection against a wide range of specific threats, such as Insurrection, Civil Disturbance, Terrorism, and Similar Destructive Events. Under the HGAs, the host governments bear sole liability for conduct on the part of state security forces in protecting Project-related assets and activities, and the Project Participants are expressly relieved of any associated liability (financial or otherwise).

C. Joint Statement on the Baku-Tbilisi-Ceyhan Pipeline Project

In May 2003, responding to NGO concerns about the potential impact of the Projects’ legal framework on the autonomy and policy-making discretion of the host states, the Project Participants and host governments issued a Joint Statement addressing, among other issues, security and human rights issues.102 The Joint Statement is notable in three respects:

• First, the parties reject any interpretation of the IGA and HGAs that would call on the host governments and their security forces to breach international human rights norms or fail to enforce such norms;

• Second, the parties formally commit to the goal of promoting respect for and compliance

with human rights principles, including those set forth in the Universal Declaration of Human Rights, the United Nations Basic Principles on the Use of Force and Firearms by Law Enforcement Officials, the United Nations Code of Conduct for Law Enforcement Officials, the European Convention on Human Rights, and, in a manner consistent with

102 Joint Statement, supra note 87, at ¶ 6.

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national legislation, the Voluntary Principles on Security and Human Rights (discussed below); and

• Third, the parties agreed to draft protocols to the IGA and HGAs requiring that security

operations conform to international human rights norms and providing requirements and limitations for such operations.

D. Protocol Relating to Provision of Security for East-West Energy Corridor

On July 23, 2003, the governments of Azerbaijan, Georgia, and Turkey executed a Protocol Relating to the Provision of Security for the East-West Energy Corridor (Security Protocol). The Protocol formally commits the host governments to a cooperative security scheme. Under its terms, the governments will join in identifying and classifying perceived security risks. The parties to the Protocol further pledge to share information regarding accidental or illegal behavior “directly impacting” the Projects. The Protocol provides for cooperation in the mutual training of security units and exchange of information regarding methods of threat response. The host governments also agreed to form a Joint Pipeline Security Commission to review cooperative efforts and identify and rectify deficiencies.

Building on the Joint Statement and the framework provisions of the IGA and HGAs, the Protocol further details the host governments’ human rights commitments related to Project security. Specifically, the governments affirmatively pledged to fulfill their security obligations in accordance with national laws and the principles and obligations set forth in the various international agreements cited in the Joint Statement, as well as the United Nations Convention Against Torture and Other Cruel Inhuman or Degrading Treatment or Punishment and the European Convention for the Prevention of Torture and Inhuman or Degrading Treatment or Punishment. Furthermore, the host governments agreed to implement the Voluntary Principles on Security and Human Rights within the framework of international agreements and national legislation. In addition, the governments pledged to screen security forces to preclude participation by individuals “credibly implicated” in human rights abuses or crimes and further committed to pursue “credible allegations” on human rights abuses. Finally, the governments agreed to monitor security forces for human rights abuses under the framework of national regulations and international commitments.

E. Voluntary Principles on Security and Human Rights

As noted, both the Joint Statement and the Security Protocol commit the host states to implement the Voluntary Principles on Security and Human Rights within the framework of international agreements and national legislation. BP is a founding member of the Voluntary Principles, which were drafted as non-binding norms in 2000 following talks between the governments of the United Kingdom and United States, companies in the extractive and energy sectors and NGOs on the interaction between security operations and respect for human rights. The guidelines outlined in the Voluntary Principles are broad, but they are organized around three basic categories: risk assessment, relations with public security, and relations with private security:

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• Risk Assessment: The Voluntary Principles appropriately note the importance of identifying and analyzing the security-related risks that are present in an operating environment (including with respect to the potential for violence, the human rights records of state and private security forces, and the respect for the rule of law);

• Relations with Public Security: The Voluntary Principles call on companies to engage in

meaningful dialogue with communities in which they operate concerning the impact of security operations, and, to the extent possible in light of safety concerns, to be transparent with respect to security arrangements. Moreover, companies adhering to the recommendations are encouraged to hold regular, structured meetings with state security officials to discuss human rights and to take all appropriate measures to promote the observance of such rights. The Voluntary Principles call on companies to take an active role in protecting human rights. For instance, companies are encouraged to use their influence with host governments to (1) exclude from security arrangements individuals credibly linked to human rights abuses; (2) ensure that the use of force is limited and proportional; and (3) discourage security forces from impeding on individual rights of assembly and expression. The Voluntary Principles also strongly encourage companies to record and report allegations of human rights abuses, protect informants, and press for the resolution of investigations.

• Relations with Private Security: The Voluntary Principles also establish a set of

guidelines for interacting with private security forces in circumstances where a host government is unable or unwilling to provide adequate security to protect a company’s personnel or assets. These guidelines address, for instance, the importance of ensuring that private security forces observe not only applicable international and local law but also the policies of the contracting company with respect to ethical conduct and human rights. The Voluntary Principles also address the use of force; monitoring, recording and reporting any abuses by private security; transparency in security planning; and the safeguards that investing companies can adopt (in contracts and operating procedures) to help ensure that private security forces fulfill their obligations in conformity with applicable human rights norms.

F. BTC Human Rights Undertaking

The final element of the Projects’ legal framework that warrants particular emphasis is the BTC Human Rights Undertaking, which was executed by BTC as a legally binding unilateral deed under English law on September 22, 2003. It was released together with the Citizen’s Guide to the BTC Project Agreements and emerged from BP’s discussions with a number of NGOs, including Amnesty International. In the area of security and human rights, the Human Rights Undertaking is significant in at least four respects:

• Dynamic nature of Project standards: BTC acknowledged that the standards that apply to Project activities are dynamic and will evolve together with the highest of applicable (1) EU standards; (2) World Bank group standards; and (3) international labor and human rights treaties;

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• Host government regulation: BTC clarified the rights of the host governments to regulate

Project activities, confirming that the HGAs do not limit a host government’s ability to regulate the human rights, health, safety, and environmental aspects of the Project in accord with the standards agreed upon for the Project, including international labor and human rights treaties to which a host government is a party;

• Limits on Economic Equilibrium: BTC has provided important clarifications regarding

the scope of the “economic equilibrium” provision of the HGA, including an express pledge that BTC will not use this provision to seek compensation for actions required by a host government to fulfill its obligations under international human rights, environmental, and other treaties to which it is a party; and

• Local Relief: BTC recognized that the arbitration provisions of the HGAs do not

preclude private individuals from suing BTC in their domestic courts for claims or remedies relating to loss or damage that these individuals may have suffered as a result of any breach by BTC of the applicable human rights, health, safety, or environmental standards.

APPENDICES

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APPENDIX B

List of Meetings and Consultations

Government Officials - Azerbaijan Vagif Akhundov, Head, State Protection Services Farhad Aliyev, Minister of Economic Development Yagub Aliyev, Executive Power, Garadag and Gobustan Districts Huseyn Bagirov, Minister of Environment and Natural Resources Rasim Dadashev, Chairman, Oil and Chemistry Department, Cabinet of Ministers Niyazi Hajiyev, State Protection Services Nazim Imanov, Member, Azerbaijani Parliament Garib Mamedov, Chairman, State Committee on Land and Mapping Asya Manafova, Chairperson, Natural Resources, Energy and Ecology Commission,

Azerbaijani Parliament Aydin Mirzazade, First Vice Chairman, Social Policy Commission, Azerbaijani Parliament Arif Rahimzada, First Deputy Speaker, Azerbaijani Parliament Artur Rasizada, Prime Minister Sattar Safarov, Chairman, Economic Policy Commission, Azerbaijani Parliament Elmira Suleimanova, Human Rights Ombudsman

Government Officials - Georgia Levan Ambarcumov, Local Representative, Tsikhisdjvari Sakrebulo Omaz Chkheidze, Head of the Department of Tourism of Borjomi Administration Nino Ckhobadze, Minister of Protection of Environment and Natural Resources Roman Gotsiridze, Head of Budget Office, Parliament of Georgia Nodar Grigalashvili, Member of Parliament, Borjomi Region Zaza Jokhadze, Governor of Borjomi Lasha Kopaliani, Head of Economic Service of Borjomi Governor’s Office Tedo Melikidze, Head of Organizational Department of Borjomi Administration Teimuraz Mosiashvili, Governor of the Samtskhe-Javakheti Region Eduard Shevardnadze, President of Georgia (former)

Government Officials - Turkey Nilgün Açikalin, Head of Transit Petroleum Department, Ministry of Energy and Natural

Resources Hakki Akil, Minister Plenipotentiary, Deputy Director General for Energy, Water and

Environment, Ministry of Foreign Affairs Bogan Can, General Staff Sami Demirbilek, Deputy Undersecretary, Ministry of Energy and

Natural Resources Izamettin Eker, Division Chief of Projects, Ministry of Environment and Forestry Berris Ekinci, Energy Department, Ministry of Foreign Affairs Hakan Erdogan, Representative, Ardahan Chamber of Agriculture

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Mustafa Erkayiran, Subgovernor of Ilica Abdullah Gül, Deputy Prime Minister, Minister of Foreign Affairs Mehmet Hilmi Güler, Minister of Energy and Natural Resources Alev Kiliç, Ambassador, Deputy Undersecretary, Ministry of Foreign Affairs Mustafa Malay, Governor of Erzurum Reha A. Muratoglu, Manager, Project Coordination Division, Ministry of Energy and Natural

Resources Nurullah Öztürk, Ministry of Internal Affairs Hasan Sildak, Subgovernor of Kars-Selim Osman Tepe, Minister of Environment and Forestry Yavuz Tezcan, Representative, Ceyhan Chamber of Agriculture Rauf Tunca, National Intelligence Organization Abdurrahman Uluirmak, Head of Foreign Relations EU, Ministry of Environment and Forestry Ali Ünal, Village Head, Adana-Ceyhan-Karatepe Village Abdurrahman Yilmaz, Judge, Kars-Selim District Yavuz Yilmaz, Representative, Ardahan Bar Selman Yurdaer, Subgovernor of Ceyhan

Government Officials - United Kingdom Tamsin Ayliffe, Humanitarian Specialist, Department for International Development Linda Duffield, Director, Wider Europe, Foreign & Commonwealth Office David Fitton, Deputy Head of Mission, UK Embassy (Turkey) Chris Innes-Hopkins, UK Embassy (Turkey) Jessica Irvine, Head, Europe and Central Asia Department, Department for

International Development Rurik Marsden, EBRD Department, Department for International Development Andrew Tucker, UK Ambassador to Azerbaijan Sir Peter Westmacott, UK Ambassador to Turkey

Government Officials - United States Sanjeev Aggarwal, Senior Environmental Impact Analyst, Overseas Private

Investment Corporation Peter S. Argo, Director, Office of Energy & Environment, Agency for International

Development Jeffrey Baker, Department of the Treasury Anna M. Borg, Deputy Assistant Secretary, Bureau of Economic and Business Affairs,

Department of State Matthew J. Bryza, Director for the Aegean, Caucasus, and Central Asia, National

Security Council Bud Coote, Directorate of Intelligence, Central Intelligence Agency Brian B. Cox, Director, Office of Russia, Eastern Europe and Central Asia, Department of

the Treasury Abigail M. Demopulos, International Economist, Office of Multilateral Development Banks,

Department of the Treasury

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122

Virginia Dondy Green, Vice President for Investment Policy, Overseas Private Investment Corporation

Kurt Donnelly, US Embassy (Turkey) Eric S. Edelman, US Ambassador to Turkey Michael Farbman, Caucasus Mission Director, Agency for International Development Katharina Gollner-Sweet, Office of Southern Europe, Department of State Eric F. Green, Special Assistant, Caspian Basin Energy Diplomacy, Department of State Marc Grossman, Undersecretary for Political Affairs, Department of State Jeff Hawkins, Kazakhstan Desk Officer, Department of State Harvey A. Himberg, Deputy Vice President, Investment Policy, Director, Environmental Affairs,

Overseas Private Investment Corporation Robert F. Ichord, Jr., Chief, Energy and Infrastructure, Agency for International Development Basil Kiwan, Investment Insurance Officer, Overseas Private Investment Corporation Keith Kozloff, Senior Environmental Advisor, Office of International Development Policy,

Department of the Treasury Bryan H. Kurtz, Special Projects Coordinator, Agency for International Development Alan Larson, Undersecretary for Economic, Business and Agricultural Affairs, Department

of State Nancy Lee, Deputy Assistant Secretary, Eurasia and Latin America, Department of the Treasury Jules Leichter, International Economist, Office of Middle East and South Asian Nations,

Department of the Treasury Steven R. Mann, Senior Advisor, Caspian Basin Energy Diplomacy, Caspian Coordinator,

Department of State Anthony Marcus, Deputy Director, Office of Russia, Eastern Europe and Central Asia,

Department of the Treasury Richard Miles, US Ambassador to Georgia C. Marshall Mills, Acting Director, Office of Middle East and South Asian Nations, Department

of the Treasury Geoffrey Minott, Economist, Agency for International Development Andrew S. Natsios, Administrator, Agency for International Development Ambassador W. Robert Pearson, US Ambassador to Turkey (former) Troy E. Pederson, International Economist, Office of International Energy and Commodity

Policy, Department of State Mark Schlagenhauf, Global Oil and Gas Advisor, Agency for International Development William Schuerch, Deputy Assistant Secretary, Multilateral Development Banks & Special

Development Institutions, Department of the Treasury Wendy Silverman, Bureau of Democracy, Human Rights and Labor, Department of State David Smith, Land Reform Specialist, Agency for International Development James C. Williams, Director, Insurance, Overseas Private Investment Corporation Ross Wilson, US Ambassador to Azerbaijan Peter Wisner, International Economist, Department of the Treasury

State-Owned Enterprises Natik A. Aliev, President, State Oil Company of Azerbaijan Republic

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Mehmet Takiyyüddin Bilgiç, Chairman of the Board and General Manager, BOTAS, Petroleum Pipeline Corporation

Giorgi Chanturia, President, Ambassador/Special Advisor to the President of Georgia, Georgian International Oil Corporation

Mustafa Dogrü, BOTAS, Petroleum Pipeline Corporation Duygu Dörtok, Community Relations Supervisor, Azizli Camp, BOTAS, Petroleum Pipeline

Corporation Ayhan Ertürk, Defense Secretary, BOTAS, Petroleum Pipeline Corporation Arife Günbey, Community Relations Manager, BOTAS, Petroleum Pipeline Corporation Murat Kalkanli, Delivery Manager (BTC Terminal), BOTAS, Petroleum Pipeline Corporation Bernhard Krohn, Deputy Head, Designated State Authority, BOTAS, Petroleum Pipeline

Corporation Coskun Sayman, BOTAS, Petroleum Pipeline Corporation Alper Sezener, Community Relations Supervisor (CRS), Ceyhan Terminal, BOTAS, Petroleum

Pipeline Corporation Samir Sharifov, Executive Director, State Oil Fund of Azerbaijan Republic Caner Toksöz, Legal Counsel, BOTAS, Petroleum Pipeline Corporation David Tvalabeishvili, Manager, Strategic Planning, Georgian International Oil Corporation Ali Yildiz, Andirin Camp Supervisor, BOTAS, Petroleum Pipeline Corporation

International Financial Institutions Anna Akhalkatsi, International Finance Corporation Ronald Anderson, Chief Environmental Specialist, International Finance Corporation Clive Armstrong, Economist, International Finance Corporation John Balafoutis, Assistant to the President, World Bank Marie-Héléne P. Bricknell, Country Manager, Turkey Country Unit, Europe and Central Asia

Region, World Bank - Ankara Office William Bulmer, Manager, Environmental and Social Department, International

Finance Corporation Hyun-Chan Cho, Investment Officer, Oil, Gas, Mining & Chemicals Department, International

Finance Corporation Alistair Clark, Director, Evaluation, Operational and Environmental Support - Environment

Department, European Bank for Reconstruction and Development Donna Dowsett-Coirolo, Director, South Caucasus Country Unit, Europe and Central Asia

Region, World Bank Nikolay Hadjiyski, Resident Representative (Georgia), European Bank for Reconstruction and

Development Assaad Jabre, Vice President, Operations, International Finance Corporation Rashad Kaldany, Director, Oil, Gas, Mining & Chemicals Department, International

Finance Corporation Jean Lemierre, President, European Bank for Reconstruction and Development Jean-Patrick Marquet, Principal Banker, Natural Resources, European Bank for Reconstruction

and Development Keith Martin, Advisor to the Executive Vice President, Multilateral Investment Guarantee

Agency, World Bank

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Shahbaz Mavaddat, Associate Director, Small and Medium Enterprises Department, International Finance Corporation

Mariam Megvinetuhutsesi, Associate Banker, European Bank for Reconstruction and Development

Patricia Miller, Senior Environmental Specialist, Environment and Social Development Department - Investment Support Group, International Finance Corporation

Shawn Miller, Social Development Specialist (Azerbaijan & Georgia), Environmental and Social Development Department, International Finance Corporation

Farzin Mirmotahari, SME Program Officer, International Finance Corporation Danielle Montgomery, Senior Investment Office, Oil, Gas & Chemical Department, International

Finance Corporation James Sayle Moose, Lead Economist, Energy Sector, Europe and Central Asia Region, World

Bank Thomas Moser, Head of Office (Baku), Regional Representative, Natural Resources, European

Bank for Reconstruction and Development John Odling-Smee, Director, European II Department, International Monetary Fund Charlotte Philipps, Senior Banker, Natural Resources, European Bank for Reconstruction

and Development Ted Pollett, Social Development Specialist (Turkey), Environmental and Social Development

Department, International Finance Corporation Peter Reiniger, Business Group Director, Energy, European Bank for Reconstruction

and Development Bert van Selm, Economist, International Monetary Fund Mark Sullivan, US Executive Director, European Bank for Reconstruction and Development Felicia Swanson, Investment Officer, International Finance Corporation Yasmin Tayyab, Civil Society Coordinator, Corporate Relations, International

Finance Corporation John Wakeman-Linn, Deputy Division Chief, International Monetary Fund Peter Woicke, Managing Director, World Bank and Executive Vice President, International

Finance Corporation James Wolfensohn, President, World Bank

Individuals, Media and Other Stakeholders 525 (Rashad Mejid) Alat Municipality (Sharafaddin Gadirov) Ankara University (Hasan Atar, Tayfun Atay, Erdemir Gündogmus, Harun Tanrivemis) Azadliq (Rovshan Hajiyev, Gunduz Tahirli) Borjomi-Kharagauli National Park (Levan Chumburidze) Borjomi Media (Ketevan Gazaevi, Valerian Lomadze, Alexi Nozadze) Borjomi Region (Prondos Abeladze, Amiran Gogaladze, Marina Jabakhidze, Ketevan

Khachidze, Zurab Koburidze, Z. Kurdadze, Liana Lomidze, Otar Magradze, Chaduneli Nugzar, Tanguli Ortoidze)

Çukurova University (Dursun Avsar) Ekho (Shahin Abbasov, Dilber Hanin, Rauf Talyshinsky) Gazi University (Yücel Senyurt)

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Green Party (George Gachechiladze) Hürriyet (Zeynep Gögüs) Hydrology Expert (Telman Zeynalov) IBS Research & Consultancy (Veronica Gündüzlü) Istanbul Bilgi University (Alan Duben, Serdar Katipoglu, Nilüfer Oral, Gareth M. Winrow) Istanbul University (Neriman Özhatay) Musavat Party (Isa Gambar) Suleyman Onatra (local business representative) Sangachal Terminal Expansion (Reykhan Abdullayeva, Bayram Aliyev, Huseyn Babayev,

Shahyar Babayev, Shakir Bakhish Shahbazov, Hagigat Baylarova, Ibish Gahramanov, Sardar Hajiyev, Minara Hasanova, Ibragim Ibragimov, Fagan Mammadov, Azizkhanim Mammadova, Akhmad Mekhdiyev, Bakhtiyar Najafov, Nugay Najafov, Mubariz Novruzov, Baybala Soltanov)

Sangachal Terminal Expansion Project (Mamed Kuliyev) Sharg News Agency (Kamalya Mustafayeva) State University of Tbilisi, Georgia (Zaal Kikodze) Turan Information Agency (Gasan Guliyev, Ilham Shaban) Turan News Agency (Mehman Aliyev) Yeni Musavat Newspaper (Vusal Gasimili) Zerkalo (Elchin I. Shikhlinsky)

Multilateral Institutions Urkhan K. Alakbarov, National Coordinator, Human Development Reports, Azerbaijan, United

Nations Development Programme Simon Mordue, EU Representative of the European Commission to Turkey, Head of Financial

Co-operation Department, European Union Jakob Simonsen, UN Resident Coordinator in Turkey and UNDP Resident Representative,

United Nations

NGOs/Think Tanks Amnesty International (Ville Forsman, Andrea Shemberg) Association for the Protection of Landowners’ Rights (Jaba Ebanoidze, David Giorgadze) Atatürkist Concept Association, Ardahan (Çetin Demirci) Azerbaijan Academy of Sciences (Arif Abbasov) Azerbaijan Green Movement (Farida Huseinova) Azerbaijan National Academy of Sciences (Akif A. Ali-Zadeh, Elchin H. Sultanov) Azerbaijan Society for the Protection of Animals (A. Garayev, G. Rahimov) Bank Information Center (Karen Decker, David Hunter, Graham Saul) Black Sea and Central Asian Countries Research Center (KORA), Middle East Technical

University (Ayse Ayata) Care International (Marie Cadrin) Caspian Environmental Laboratory (B. Roddie) Catholic Relief Services (Gloria Peterson-Ayigah) Caucasus Environmental NGO Network (Nana Janashia)

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CEE Bankwatch Network (Manana Kochladze) Center for Archaeological Studies (Irine Gambaschidze, Vakhtang Licheli) Center for International Environmental Law (Ayse Kadayifci, Daniel B. Magraw, Jr., Heidi

Neuhoff, Marcos Orellana, Anne Perrault) Centre for Independent Social Research (J. Eyvazov) Citizens International (Thomas Stephens, John Bruce Wells) Clean Energy Foundation (Demir Inan) Crude Accountability (Megan Lee, Kate Watters) Ecological Research Society (EKAD) (Ali Fuat Canpolat) Ecological Society “Ruzgar” (Islam Mustafaev) Entrepreneurship Development Foundation (Sabit A. Bagirov) Environmental Information, Education and Public Awareness, NIBS (Samir Isayev) Environmental Foundation of Turkey (Engin Ural) Fish Research Institute of Azerbaijan Republic (Fikret Jafarov) Foundation to Develop and Beautify Ardahan Villages (Ahmet Pekmez) Friends of the Earth (Steve Herz, Nick Rau, Carol Welch) Georgia Academy of Sciences (G. Buachidze, Erekle Gamkrelidze) Global Fairness Initiative (Steven Bennett) Gölovasi Fishing Cooperative (Metin Göregen) Greenpeace Mediterranean Turkey (Melda Keskin) Helsinki Citizens’ Assembly (Arzu Abdullayeva) Human Rights Watch (Elizabeth Andersen, Arvind Ganesan, Jonathan Sugden) International Blue Crescent Relief and Development Foundation (Turgay Tengirsenk) International Maritime Pilots' Association (Cahit Istikbal) International Medical Corps (Adam Sirois) International Rescue Committee (Pamela F. Husain) KA.DER (Association for Supporting & Training Women Candidates) (Selma Acuner) Kurdish Human Rights Project (Anders Lustgarten) Mazlumder (Organization of Human Rights and Solidarity for Oppressed People)

(Ayhan Bilgen, Yilmaz Ensaroglu) Mercy Corps (Steve Power) Nature Association (Doga Dernegi) (Bahtiyar Kurt) Nature Warriors (Zafer Murat Çetintas, Züleyha Sahin) NGO Association for Development and Environmental Research (L. Guluzada) Noah’s Ark Centre for the Recovery of Endangered Species (Irakli Macharashvili) Open Society Institute (Farda Asadov, Svetlana Tsalik) Organization for the Protection of Human Rights and Prisoners’ Rights (Zaal Zerekidze) Platform (Greg Muttitt) Save the Children (Tryggve Nelke) Second ECA NGO Working Group on the World Bank (Keti Dgebuadze) Social Assessment, LLC (Ayse Kudat) Society for Democratic Reforms (Razi Nurullayev) Society of Peace with Nature (Fagri Türjtuknaz, Yüksel Üstün, Saime Üzümkesici) Sustainable Rural & Urban Development Association (Sürkal) (Rahmi Demir, Ahmet Saltik,

Leyla Sen)

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The Caucasian Institute for Peace, Democracy and Development (Ghia Nodia) The Corner House (Nicholas Hildyard) The Eurasia Foundation (Margo Squire) The National NGO Forum of Azerbaijan (Azay A. Guliev) The Rural and Urban Development Foundation (Firat Bas, Mümtaz Bayram, Berrin Çaylak) The Turkish Foundation for Combating Soil Erosion, for Reforestation and the Protection of

Natural Habitats (TEMA) (Halil Akyürek, Mehmet Bal, Ümit Gürses) Transparency International (Rena Safaraliyeva, Miguel Schloss) TURÇEK (Turkish Environmental Protection Society) (Aydin Atici, Mehmet Özerhun) US-Caucasus Institute (Zurab Qarumidze) World Vision (Michael McIntyre, Ulfat Mehtiyev) World Wide Fund for Nature (Francis A. Grant-Suttie, Gernant Magnin, Kakha Tolordava, Clive

Montgomery Wicks, Nugzar Zazanashvili) Young Lawyers Association (Besarion Abashidze)

Private Sector AES (Ignacio Iribarra, Galyn Alnuyazov) Asymmetric Associates (Robert Corzine) Atkins Design Environment & Engineering (David Shilston) Azerkorpu (Alamdar Galandarov) Bakond (Elkhan Sadikhov) BMG2 (Aftandin Geydarov) Cambridge Energy Research Associates (Thane Gustafson, Katherine Hardin, Matthew J. Sagers,

Daniel Yergin) Canub Sahaya Tikinti (Halis Zohrabov) Dzelkva, Ltd. (D. Kikodze, M. Tavartkiladze) Encotec (Faik Rzayev) Georgian Glass & Mineral Water Co. N.V. (Badri Japaridze, Mamuka Khazaradze, Zaza

Kikvidze) Global Pipeline Consulting (R. Michael Cowgill) KhazarDenizNeftGasTikinti (Nadir Amiraslanov) Konteks (Uriy Kasimov) MCG (Emin Aliyev) MiniMax (Ibragim Baharov) PA Consulting Group (Dean White) PAR Consulting (Bülent Özgün, Alper Selçuk) Piper Rudnick LLP (Gary J. Klein, Senator George Mitchell, Sara A. Robinson) Rem Services (Afrail Shirinov) Rovshan Oguz (Vidadi Abdullayev) Salford (Peter Nagle)

Country Advisors to the Panel Marco Borsotti, United Nations Development Programme (Azerbaijan) Alexander Rondeli, Georgian Foundation for Strategic and International Studies

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Ilter Turkmen, Turkish-Greek Forum and Turkish-Armenian Reconciliation Commission

Consultants to the Panel Daniel Bates, Hunter College of the City University of New York Richard Fuggle, University of Cape Town

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APPENDIX C

Panel Policy Recommendations

This section provides a summary of the Panel’s recommendations both from the Interim Report on Azerbaijan and Georgia (IR) and this second Report on Turkey and Project-Related Security and Human Rights Issues in Azerbaijan, Georgia, and Turkey (SR). In a number of areas, progress has already been made against earlier recommendations.

Legal Recommendations

Clarification of Legal Standards and Remedies; Human Rights Concerns

§ BP, working with its Partners, the Implementation Commission and others as appropriate:

o Clarify the extent to which host governments retain access to local courts or local administrative remedies to enforce environmental, health, safety, and other standards on project activities, including the interaction of the “economic equilibrium” provision with evolving national standards. (IR 27)

o Clarify and confirm that third parties adversely affected by project activities have full access to local courts, even for claims relating to environmental, health, and safety issues that are addressed in the HGAs and other project agreements. (IR 27)

o Further clarify the scope and content of environmental, health, and safety standards that currently govern project activities. (IR 27)

o Clarify how and by whom the environmental, health, and safety standards that will govern project activities going forward are to be determined, as international standards and best practices within the petroleum pipeline industry and standards generally applied in the member states of the European Union (or, with respect to Georgia, the Netherlands, and Austria as applicable) evolve from time to time. (IR 27)

o Consider from time to time applying to the Project any appropriate national standards that are more stringent than international petroleum pipeline industry standards or those generally applied in the member states of the European Union, without this giving rise to a claim for compensation under the economic equilibrium provision. (IR 27-28)

§ BP release a statement about the SCP pipeline, similar in form to the Joint Statement on the BTC pipeline, reconfirming the parties’ commitment to promoting respect for and compliance with human rights principles set forth in a number of international

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human rights agreements. (IR 28)

§ BP work with its project partners, the host governments, Amnesty International, other NGOs and others as appropriate to develop a document specifying and formalizing the project partners’ and host countries’ human rights commitments. (IR 28)

§ BP work with Amnesty International and other NGOs to implement steps that would facilitate respect for and protection of human rights by (a) promoting compliance with international human rights standards through its contracts with contractors and security personnel and by working with local authorities to ensure that personnel assigned to protect the pipeline are appropriately screened; (b) publishing and making accessible to the general population security contracts/protocols (with the exception of operational details that could endanger people’s lives); and (c) making clear to security personnel that human rights violations will not be tolerated and that the BTC consortium engage with security authorities and civil society in a systematic and ongoing dialogue to resolve conflicts and grievances that may arise from the policing of the pipeline. (IR 28-29)

Economic/Transparency Recommendations

Overall:

Anticipated Income Flows and Management § BP and its Partners continue and extend their commitment to “publish what you pay”

by preparing and making publicly available detailed and easily understood annual statements of (a) the specific payments – by category and amount – that are made to the host governments and their various agencies, and (b) the overall estimated earnings – again by category and amount – that the projects generate for the host governments and their various agencies, including revenue from the sale of the state’s share of oil and gas, transit fees, grants, taxes and other receipts. (IR 39; SR 31-32)

§ BP maintain sustained and vigilant application through all levels of project implementation of the strong project-related anti-corruption policies that have been adopted. (IR 41)

Procurement, Employment and Small- and Medium-Size Enterprises

§ BP and its Partners, in order to address barriers to SME credit in the region, (a) search for opportunities to partner with or support regional development organizations such as the IFC, EBRD and USAID in technical assistance and other programs that target banking functions potentially benefiting SMEs, such as credit analysis; (b) explore opportunities to fund and/or support credit facilities that could be established by regional development actors specifically for the benefit of SMEs supplying goods and services to the projects; and (c) work with local banks to encourage the acceptance of Project-related contracts as collateral for loans. (IR 44)

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§ BP increase its efforts to use non-technical SMEs whenever possible to satisfy project needs that do not require special training or skills and encourage its partners to do the same. (IR 45)

§ BP and its Partners ensure that employment estimates are consistent, realistic and effectively communicated to the public. BP should also work to ensure that communities along the pipeline corridor fully understand that the significant, construction-related employment will not be sustained over time. (IR 47)

Azerbaijan:

Anticipated Income Flows and Management § BP encourage the government of Azerbaijan, in cooperation with the Parliament, to

develop and adopt an oil fund law that would formalize the general arrangements under existing Presidential decrees and establish binding expenditure policies and priorities for the Fund that are more closely aligned with existing poverty-reduction strategies. (IR 35-36)

§ BP consider partnering with one of the international or regional development agencies to provide technical assistance to aid the operations of SOFAZ in areas such as forecasting, investment management, and project appraisal. (IR 36)


§ BP expand Enterprise Center activities to ensure that project contractors and subcontractors alike fully utilize the Center in support of local procurement activities. (IR 45)

§ BP and its Partners examine whether the Enterprise Center could usefully play a larger role in identifying and supporting specific SME procurement opportunities outside the energy sector, recognizing that any such efforts would need to be undertaken incrementally to avoid diluting the Enterprise Center’s core strength. (IR 45)

Domestic Access to Energy § BP analyze the potential effectiveness of gas storage in Azerbaijan and, as

appropriate, consider offering, with its Project Partners, technical and managerial assistance to Azerbaijan in support of reasonable efforts to refurbish the country’s domestic gas storage facilities at Garadag and Galmaz. (IR 54)

Georgia:

Anticipated Income Flows and Management

§ BP encourage the government of Georgia to develop and implement transparent and predictable mechanisms for tracking and utilizing transit-fee revenues in the context of the overall budget. (IR 38)

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§ BP encourage the government of Georgia and its state-owned energy companies to support the EITI and the adoption of the EITI principles in the context of BTC and SCP operations. (IR 40)


§ BP and its Partners, in tandem with overall efforts to improve access to capital for regional SMEs, specifically increase efforts to identify and promote local procurement opportunities in Georgia, perhaps partnering with ongoing SME-related initiatives organized by the regional development agencies. (IR 44)

Domestic Access to Energy § BP continue to play an active role in the Resource Planning Working Group,

including provision of technical assistance that has been organized and undertaken through that Group. (IR 50)

Turkey:

Procurement, Employment, and SMEs

§ BP and its Partners continue to give priority to the establishment of a microfinancing program in Turkey to expand credit opportunities for SMEs. (SR 35)

§ BP and its Partners continue to work with the IFC and other appropriate regional development organizations, such as GTZ, to evaluate the credit needs of SMEs and to provide technical assistance to meet these needs. (SR 35)

§ BP and its Partners, to the extent they are not already doing so, track the number of SMEs from local communities that are competing for contracts, as well as those that are eventually awarded the contracts, and encourage BOTAS to contract through local sources. (SR 35)

§ BP and its Partners work with BOTAS to publish employment estimates that are consistent, realistic, and communicated to the public in an understandable manner. BP should also work to ensure that communities along the pipeline corridor fully understand that the higher levels of employment during the construction period will be of short duration and that employment during the operation period, while longer-term, will be minimal. (SR 37)

§ BP and its Partners encourage BOTAS to improve coordination with local government officials regarding hiring in their communities. (SR 37)

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Environmental Recommendations

Overall:

Decommissioning/Abandonment (Onshore Facilities) § BP pay close attention to existing and future international standards regarding the

removal of buried portions of pipeline, if it should prove necessary for the operators to remove them. (IR 77)

§ BP should not regard the transfer of ownership as terminating BP’s interest in the ultimate disposition of the BTC and SCP pipelines. Moreover, BP should make every effort, including in the agreements formally transferring ownership, to ensure that the pipelines are eventually decommissioned in line with the best international standards. (IR 77)

Azerbaijan:

§ BP continue to take steps to help mitigate further environmental degradation in Azerbaijan and in the Caspian Sea. (IR 57)

§ BP continue to monitor the environmental impact of the drill cuttings discharge program and consult on its findings and assessment, on a regular basis, with officials from the Ministry of Environment in Azerbaijan. (IR 59)

§ BP continue to revisit frequently the issue of drill cuttings discharges in light of evolving global best practices and commit to handling discharges in line with these changing best practices. BP should also explore long-term options for permanent disposal of cuttings temporarily stored onshore. (IR 59)

§ BP and its Partners in AIOC explore whether there are practical options to reduce the time it would take to halt the release of oil due to a blowout. (IR 60)

§ BP and AIOC work closely with concerned governments in pursuit of a transboundary oil spill response plan. (IR 61)

§ BP supplement the existing ESIAs with a risk assessment and proposed mitigation measures associated with an additional supply of oil if a decision is made to transport non-ACG oil through BTC. (IR 61)

§ BP monitor the Spur-thighed Tortoise Rescue and Awareness Program closely and publish data and results produced by it. BP should also continue work on and implement the Semi-Desert Habitat Compensation Program to reclaim and rehabilitate land on a one-to-one or better basis to compensate for the amount of semi-desert habitat lost as a result of terminal construction. (IR 62)

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§ BP and its Partners publish the baseline environmental and scientific data they have collected on the Caspian and its environs to the relevant technical communities and the public at large. (IR 63)

Decommissioning/Abandonment (Offshore Facilities)

§ BP, to the extent it is not already doing so, respect the provision in the 1989 IMO Guidelines that all new offshore structures be designed and constructed so as to make feasible their entire removal upon abandonment. (IR 75)

§ BP ensure that its decision-making process with regard to decommissioning is subject to public scrutiny well in advance of the deadline stipulated in the PSA for preparation of an abandonment plan. (IR 75)

§ BP should do everything possible when ownership of the offshore facilities changes hands, including contractually binding SOCAR, to ensure that the ultimate owner properly decommissions the facilities. (IR 76)

§ BP must make every effort to ensure that decommissioning, when carried out by third parties such as SOCAR, does in fact accord with best international practice. (IR 76)

§ BP and its Partners clarify its commitment to decommission the project facilities, publish an estimate of the ultimate costs and demonstrate that the project partners are contributing sufficient funds well in advance of termination of the facilities’ use to cover decommissioning costs. (IR 76)

Decommissioning/Abandonment (Onshore Facilities)

§ BP’s construction decisions relating to the terminal at Sangachal should be designed to facilitate its eventual total removal. (IR 77-78)

Georgia:

§ BP and GGMW engage in good faith discussions with the aim of reaching a mutual understanding on issues in dispute regarding the BTC pipeline route through the Borjomi region. (IR 66)

§ BP publish and disclose all of the additional work performed for the Ministry of Environment pursuant to the Ministry’s granting of the original environmental permit. (IR 69)

§ BP and its Partners promptly complete the “ongoing activities” required in accordance with the agreed timetable, including submission of the required reports in Georgian. BP should redouble its efforts to improve relations and cooperation with the Ministry of the Environment. (IR 70)

§ BP and its Partners publish and widely disseminate the findings of the geotechnical studies that were conducted as well as the approaches BTC will undertake to avoid and mitigate environmental damage in landslide prone areas. (IR 71)

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§ BP support and fund the creation of a community monitoring council to track the potential effects of the pipeline in the Borjomi region, taking into consideration the successful experience of such councils in Alaska. This community monitoring council should have broad-based representation, including local citizens and leaders in the Borjomi region, prominent persons from other regions in Georgia and experts from the Georgia Academy of Sciences. (IR 71-72)

§ BP involve local government and citizens in its oil spill response plan and develop a program to train and equip the local community in Borjomi to respond to an oil spill. (IR 72)

Turkey:

§ BP use funds from the Environmental Investment Program, or other funds available for pipeline reinstatement, to convene a meeting of all parties involved in the active modification of the Erzurum Plain to develop a common vision for its long-term future. BP should also use the Environmental Investment Program to support the development of a long-term management plan for the Erzurum Plain that balances environmental and agricultural interests, taking into account the views of local authorities, citizens, and affected individuals. (SR 43)

§ BP extend the study of the black grouse initiated through the Environmental Investment Program to include western Georgia. (SR 44)

§ BP, through its role in BTC, use its influence with BOTAS to press for an appropriate public disclosure and consultation process for selecting the route of the gas supply lines to the pump stations. In addition, the range of environmental standards and commitments made for the BTC pipeline, including those concerning reinstatement, should be implemented for the gas supply lines to the pump stations. (SR 45-46)

§ BP and BTC encourage the senior management of BOTAS to give a much higher priority to the complete reinstatement of the land surface. BP should also regularly consult with environmental NGOs on BOTAS’s reinstatement efforts and invite NGOs to review and inspect the reinstatement efforts along the pipeline route. (SR 47-48)

§ BP fund, through the Environmental Investment Program, a study of the cumulative impact of all of the commercial activities in the Gulf of Iskenderun on the coastal and marine environment and on the livelihoods of those directly dependent on the Gulf for their living. In particular, changes in fish stock in the Gulf should be monitored and tracked. (SR 49-50)

§ BP work with BOTAS and encourage BOTAS to develop, implement, and publish a comprehensive oil spill response plan for the terminal handling oil from the Iraq-Turkey pipeline. The oil spill response plan for the two terminals at Ceyhan should be coordinated and integrated since a spill at one facility will impact the operations at the other. (SR 50-51)

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§ BP, as BTC’s largest shareholder, urge other BTC shareholders to adopt BP’s policy of only utilizing double-hull tankers to load and transit crude oil at Ceyhan by January 1, 2008. At minimum, BTC, consistent with its commitment to adopt international standards in no event less strict than those generally applied within member states of the EU, should only allow double-hull tankers to load and transit crude at Ceyhan by 2010, consistent with EU legislation. If the EU further accelerates its timetable for the phase out of single-hull tankers, BTC should adopt the new schedule. And BP should encourage Turkey to adopt EU standards for transit of crude oil. (SR 53)

§ BP consult with the IMO to determine international best practice for ballast discharge and treatment. Once this determination is made, BP should also consult with the IFC and NGOs and use its influence with BOTAS to press for adoption of IMO standards for discharge of ballast water, including the possible development of onshore reception and treatment facilities. (SR 55)

Social Recommendations

Azerbaijan and Georgia:

General Issues

§ BP investigate complaints about the land acquisition process and work with CLEE and APLR to ensure that NGOs have enough time and resources to review documentation and properly advise land owners during the final stages of the land acquisition process. (IR 85)

§ BP and its Partners make special arrangements to communicate with and explain the compensation process to persons who are unable to read the contracts as they are currently drafted. (IR 85)

§ BP take steps, in cooperation with international financial institutions, to support targeted reforms that would enhance confidence in the banking system in Azerbaijan and Georgia. (IR 86)

§ BP work with appropriate NGOs and, where possible, local officials to develop ways to ensure adequate security for individuals receiving compensation. (IR 86)

§ BP establish formal mechanisms that directly involve civil society, individuals, and local community representatives in monitoring RAP implementation. (IR 88)

§ BP establish an external monitoring panel as promptly as possible in accordance with RAP procedures. (IR 89)

§ BP remain engaged in the process of monitoring grievances that arise from pipeline construction and communicate with community liaisons on a regular basis to ensure that all disputes are resolved in a timely, fair and satisfactory manner. BP and its Partners should publicize the existence of the community liaison teams and disseminate their contact information widely so that the teams are an effective

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outreach tool. (IR 90)

Azerbaijan:

Cultural Heritage Management Planning

§ BP review its CHM procedures in Azerbaijan to ensure that there is adequate time to plan and implement mitigation measures for unexpected finds. BP should ensure that the archeologists responsible for monitoring day-to-day construction are in regular contact with either the relevant government oversight body or a designated advisory body. (IR 91)

§ BP closely monitor the Gobustan area post-construction, both to avoid harm arising from additional traffic in the area, and to measure the progress of the habitat restoration and rescue plans. BP should work with the Ministry of Culture and Azerbaijani authorities to create an effective plan for protecting the Gobustan petroglyphs closest to access roads built for pipeline construction. (IR 92)

Georgia:

Land Acquisition, Economic Displacement and Compensation

§ BP make compensation payments for communal lands in a way that will ensure that the affected villagers who are losing their grazing rights benefit directly from compensation funds. (IR 87)

§ BP work with Georgian authorities to establish post-construction land restitution procedures as soon as possible. (IR 88)

§ BP publish its commitment to return land once construction is completed assuming BP can maintain use rights when it returns title to the original owner. BP should provide this statement in writing in local languages to all land owners, along with the purchase agreements and other documentation. (IR 88)

Turkey:

The Resettlement Action Plan

§ BP and BTC continue and expand efforts to enhance transparency and accountability for the use of communal payments. (SR 63)

§ BP work with BOTAS and the community affected by the restrictions on fishing in the vicinity of the Ceyhan terminal to finalize and formalize a compensation regime as quickly as possible. (SR 64)

§ BP and BTC pay particular attention to continued implementation by BOTAS of the modified Article 27 process to ensure that land is justly acquired on the basis of adequate compensation. (SR 67)

§ BP work with BTC to quickly clarify and communicate to affected individuals the mechanism for the return of land or access to land and for imposing post-construction

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use restrictions. (SR 68)

Impact on Minorities

§ BP work with BOTAS and the other Project Participants to ensure that ongoing consultations, grievance procedures, and land acquisition activities remain open and accessible to Kurdish speakers and women along the pipeline corridor. (SR 70)

Cultural Heritage Management

§ BP facilitate the publication of the results of the CHMP excavations and consider other ways, such as an exhibition about the archaeological work done along the pipeline corridor, to amplify this positive impact of the Project in the region. (SR 71)

§ BP use its influence with BOTAS to see that the policy of avoiding important cultural heritage sites is followed. (SR 71)

Sustainable Investment Recommendations

Overall:

§ BP create a vehicle, such as a Caspian Development Fund, from which all investment program monies would come going forward — whether directed at communities along the pipeline, at enhancing biodiversity and other environmental priorities, or at broader social development objectives. (IR 98)

§ BP announce a clear commitment to investing in sustainable development in the Caspian region as a whole, extend this commitment beyond the construction period and to the full lifespan of the Caspian Projects, and identify a secure, dedicated, long-term funding stream — based, for example, on the revenue generated per unit of oil and gas throughput and/or production over the life of the Projects — sufficient to meet this commitment and to make a lasting impact on the region. (IR 99)

§ BP try to leverage its investment through partnerships with other international development institutions active in the region. (IR 99)

§ BP direct significant investments from the Caspian Development Fund at building and strengthening civil society in the region. These investments should build cross-sector capacity in civil society and create space in which civil society can operate. (IR 99)

§ BP focus its investment on in-country, cross-sector capacity-building in civil society through initiatives that improve technical proficiency. (IR 99-100)

§ BP’s sustainable development investment should emphasize investment in education and skills development. (IR 100-101)

§ BP, in cooperation with the host governments, other donors and development agencies, structure its investment in sustainable development with a view towards

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building reliable and well-functioning energy and banking sectors in Azerbaijan and Georgia, which are essential preconditions for the effective functioning of the domestic economy and for attracting additional foreign direct investment. (IR 101)

§ BP and its Partners (i) outline a specific long-term vision for community, environmental, and social investment in Azerbaijan, Georgia, and Turkey and (ii) expand the funding, scope, and time horizon of this initiative, thereby utilizing a “holistic, integrated, and regional” approach to supplemental investment needed to maximize the impact of BTC’s investment programs. (SR 75-76)

Turkey:

§ BP and its Partners continue to incorporate social goals, such as women’s education, for its investment programs in Turkey, both during and after construction. (SR 76)

Community Investment Program

§ For future CIP awards, BP and its Partners (i) consider increasing the size of the grants to individual projects, where consistent with longer-term project objectives and the managerial capacity of the grantees, to enable them to have a broader and more lasting impact; (ii) allow projects that currently receive funding to be eligible for renewed funds well into the future, subject to periodic evaluation of their performance; and (iii) merge the CIP activities with the Caspian Development Fund (or the RDI) at the earliest possible stage once the construction phase of the pipeline is complete. (SR 78-79)

Environmental Investment Program

§ BP and its Partners explore ways to simplify the RFP process in Turkey, while maintaining its current transparency and quality, in order to facilitate participation by Turkish NGOs. (SR 80)

Role of BOTAS Recommendations (Turkey)

§ BP, through its leading role in BTC, use its leverage, including (if necessary) stoppage of work, to ensure that BOTAS fulfills the commitments BP and BTC have made in the EIA. (SR 85)

§ BP and BTC continue working to ensure that BOTAS and its contractors remain fully aware of and committed to fulfilling their obligations under the various Project management plans. (SR 85)

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Security and Human Rights Recommendations

Overall:

Legal Framework

§ BP work with its Partners to ensure that the individual shareholders of BTC (including SOCAR) or future owners of the pipeline are bound by the obligations of the Human Rights Undertaking. Specifically, BP and its Partners should ensure that the Human Rights Undertaking is inextricably tied to other rights and obligations associated with the ownership or operation of the BTC pipeline and related facilities. (SR 96)

§ BP and BTC, in line with Amnesty International’s suggestions, (i) build on the publication of the Human Rights Undertaking by more broadly distributing the document in the host countries in local languages and (ii) remain engaged in discussions with the NGO community on longer-term improvements in the human rights protections that could be included in the legal regime for future projects. (SR 97)

Operational Framework

§ BP and the Project Participants accelerate efforts to operationalize the planned arrangements for Project security and the protection of human rights and, to the extent publication of these documents will not compromise security, make these more detailed security arrangements — including the anticipated role and function of the Joint Pipeline Security Commission — transparent and accessible to the public. (SR 99)

§ BP, BTC, and the Project Participants remain actively engaged with the SSC and the other host country coordinating entities to help ensure thorough implementation of security obligations with due respect for human rights, including through human rights training of the forces actually responsible for ensuring Project security. To the extent that the coordinating entities in Azerbaijan and Georgia do not already represent an inter-agency perspective, as appears to be the case with the SSC, BP and BTC should ensure that their contributions to the security-planning effort and related human rights safeguards reach the key ministries in those countries. (SR 100)

§ BP and BTC distribute the risk assessments more broadly to community leaders and local government officials in the host countries, especially along the pipeline corridor. BP and BTC should also post these risk assessments on the Project website on a regular basis, provided doing so does not compromise the safety of people or the security of facilities. (SR 101)

§ BP and BTC carefully consider the potential impact on the local communities in the host countries and identify, wherever possible, any positive social impacts that might be generated for local communities when designing and implementing physical safeguards for the Projects. For example, BP and BTC should explore possible benefits for nearby communities in connection with plans to supply extra lighting and

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power for above-ground pump stations through on-site generators and other energy sources. (SR 101-102)

§ BP sustain and even expand the use of local security personnel, to the extent possible, throughout the operations phase of the Projects, so that the local communities can play an appropriate role in the execution of the security planning and retain a sense of ownership of the Projects through participation in measures to assure their safety and security. (SR 103)

§ BP and BTC, to the extent consistent with safety and security concerns, publicly provide additional detail regarding the mechanism(s) that will be employed for screening Project personnel, including by defining with reasonable specificity what constitutes a “credible” implication in prior human rights abuses (and who will establish and apply the standard), and urge the host governments to take the same steps. (SR 105)

§ BP and BTC, to the extent consistent with safety and security concerns, publish additional detail regarding the substance and progress of any planned training activities that relate to human rights, post the curriculum materials on the Project website, and solicit public input on the overall effort. (SR 105)

§ BP and BTC undertake a comprehensive human rights training program for managers and field personnel, if not already in place or planned, including training on the commitments they have undertaken, in order to lower the risk that Project employees and/or contractors will unintentionally aid or abet human rights violations. BP and BTC should involve national and international NGOs in the training effort, to the extent consistent with safety and security concerns, so that Project personnel can benefit from a range of perspectives on “local culture and traditions,” as well as the human rights situation, in the host countries. (SR 105-106)

§ BP and BTC establish and make public specific guidelines for what constitutes a “clear risk” to Project assets or personnel, define the specific mechanism of risk assessment, and identify the personnel or bodies responsible for assessing risk. (SR 107)

Monitoring

§ BP recognize that the success of the Projects from a human rights perspective will necessarily depend on a suitable monitoring program that (i) establishes a credible, accessible, and independent point of contact for individuals who may be the victim of human rights abuses and (ii) creates a reliable mechanism for regular, on-the-ground oversight of compliance by the host governments and their security forces with existing legal commitments. (SR 108)

§ BP make a preliminary monitoring plan available for public comment and review soon, given that construction-phase security measures are already in place. (SR 109)

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§ BP and its Partners establish a monitoring mechanism, such as an “ombudsman’s office” in each of the host countries, that, subject to local law, would (i) serve as a point of contact in each country for people alleging Project-related human rights violations, (ii) confidentially investigate such allegations, and (iii) make recommendations to BTC on how to address the allegations. BP and its Partners should also establish a “human rights coordinator” or similar office that would (i) coordinate the Projects’ internal monitoring, including reports by the three country ombudsmen, and (ii) report on the Projects’ internal monitoring process to interested parties, including the local communities, local and international NGOs, and the three host governments, subject to safety and security considerations. (SR 110)

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APPENDIX D

Terms of Reference

Establishment of Panel BP has established an independent external panel, the Caspian Development Advisory Panel (CDAP), as part of its plan to ensure that the Baku-Tbilisi-Ceyhan (BTC) pipeline is a world class model project. The Panel, which has a three-year remit, will commence its work in early 2003, and will provide objective advice to the company on the economic, social, and environmental impacts of the pipeline project in Azerbaijan, Georgia, and Turkey, generally, and in areas closest to the 1,760-kilometer pipeline in particular. While the primary focus will be on the BTC pipeline, the Panel will have an opportunity to look at other related BP activities and plans in the region. This will include the Azeri-Chirag-Gunashli (ACG) oilfield and the Shah Deniz gas field developments, including the Baku-Tbilisi-Erzurum Gas Export Pipeline, which will run parallel to BTC through Azerbaijan and Georgia. (BTC, ACG, and Shah Deniz are all BP operated.) Principal tasks will include, but not be confined to the following:

• Assess BP’s plans to manage the environmental, social, and economic impacts of the projects in Azerbaijan, Georgia, and Turkey, both at the route level and, more generally, at the regional level. Make recommendations for improvement.

• Examine the application of BP’s policies regarding the projects and critically appraise the impact of the projects.

• Advise on the appropriate focus of social and community activities to enable BP and its partners to make a positive difference to the economies and societies of Azerbaijan, Georgia, and Turkey.

The Panel’s role will be an advisory one, and it will have no executive authority or responsibility in relation to the Project. The Panel will be funded by the BP Group. It will be assisted by local representatives in each country and have its own Secretariat based at the Washington, D.C. law firm of Covington & Burling. The Panel has established a website (www.caspsea.com) and an e-mail address [email protected]. The Panel requests that any interested party submit information to the Secretariat for the Panel’s review. The Panel will report to the BP Group Chief Executive. Liaison between BP and the Panel shall normally be through a senior BP representative nominated by the BP Group Chief Executive.

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Membership The Panel shall have 4 members (including a Chairman) who shall be appointed by the BP Group Chief Executive but who shall otherwise have no ongoing direct connection with BP. The Panel will be chaired by Jan Leschly (Chairman & CEO, Care Capital and former CEO of SmithKline Beecham). The other members are Stuart Eizenstat, former US Ambassador to the EU, Under Secretary of Commerce, Under Secretary of State, and Deputy Secretary of the Treasury, currently a partner with Covington & Burling; Jim MacNeill, Canadian diplomat and policy adviser on environment, energy and sustainable development, former Secretary General of the World Commission on Environment and Development (the Brundtland Commission), and former Chairman of the World Bank’s Independent Inspection Panel; and Mohamed Sahnoun, former ambassador and adviser to the President of Algeria, Special Envoy of the Secretary General of the UN, and member of the Brundtland Commission. Timetable Panel Members shall meet formally as a group at least twice a year and in addition will make at least one visit of around one week in length to the Project area each year. The Panel may, in agreement with BP, call upon national and international experts and consultants to advise the Members on matters relating to the evaluation and review of the Project. Reports The Panel shall aim to issue its first substantive report by the end of 2003. Additional reports shall be issued at least annually thereafter. The substantive reports and findings of the Panel will be made available to the public, after they have been presented to the BP Group Chief Executive and BP has prepared its response. Funding The Panel shall be funded by BP independently from the Project.

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APPENDIX E

Biographies of Panel Members

JAN LESCHLY (CDAP CHAIRMAN) Before founding Care Capital, Mr. Jan Leschly was Chief Executive of SmithKline Beecham PLC (“SB”) from 1994 to 2000. He joined SB as Chairman of the Worldwide Pharmaceutical business in 1990 and was elected to the Board of Directors in 1990. Before joining SB, Mr. Leschly served as President and COO, Squibb Corporation. He joined Squibb in 1979 as Vice President, Commercial Development and in 1984 he was elected Group Vice President and a Member of the Board of Directors with responsibility for the Worldwide Pharmaceuticals Products Group. Prior to this he worked for seven years with Novo Nordisk, where he served as Executive Vice President and President of the Pharmaceutical Division. Mr. Leschly is a member of the Boards of Directors of the American Express Company, Viacom Inc., and the Maersk Group and serves on the International Advisory Board of DaimlerChrysler AG. He is a Member of the Business Council and the Emory University Goizueta Business School Dean’s Advisory Council. Born in Denmark, Mr. Leschly received a Master of Science in Pharmacy from the Copenhagen College of Pharmacy and a B.S. in Business Administration from the Copenhagen School of Economics and Business Administration.

STUART EIZENSTAT Mr. Stuart Eizenstat served as US Ambassador to the European Union from 1993 to 1996. He also has served as US Deputy Secretary of the Treasury, Under Secretary of State for Economic, Business and Agricultural Affairs and Under Secretary of Commerce for International Trade. He received the highest departmental awards for his service from Secretary of State Warren Christopher, Secretary of State Madeline Albright, and Secretary of the Treasury Lawrence Summers. From 1977 to 1981 he was President Jimmy Carter’s Chief Domestic Policy Adviser and Executive Director of the White House Domestic Policy Staff. Mr. Eizenstat has practiced law for twenty years in Atlanta and Washington, and he joined the law firm Covington & Burling as a partner in 2001. During the Clinton Administration, Mr. Eizenstat had a prominent role in the development of key international initiatives, including the negotiation of the Transatlantic Agenda with the European Union, the development of the Transatlantic Business Dialogue among European and US CEOs, the negotiation of agreements with the European Union regarding the Helms-Burton Act and the Iran-Libya Sanctions Act, the negotiation of the Japan Port Agreement, and the negotiation of the Kyoto Protocol on global warming. Mr. Eizenstat also was the Administration’s leader on Holocaust-era issues as Special Representative of the President and Secretary of State, and he

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successfully helped negotiate major agreements with the Swiss, Germans, Austrians, and French. He has received the highest awards for his work from the Department of State and Treasury. He has been awarded the Knight Commander’s Cross from the Federal Republic of Germany and the Legion of Honor from the Government of France. He is the author of “Imperfect Justice: Looted Assets, Slave Labor, and the Unfinished Business of World War II” (Public Affairs 2003). He received his J.D. from Harvard University. Prior to entering law school, he earned an A.B., cum laude and Phi Beta Kappa, in political science from the University of North Carolina at Chapel Hill.

JIM MACNEILL Mr. Jim MacNeill enjoys nearly four decades of experience as a policy advisor to leaders of governments, industry, and international organizations in the fields of energy, natural resources, management, environment, and sustainable development. Until recently Chairman of the World Bank’s Independent Inspection Panel in Washington, D.C., he is now a member of several boards including the Woods Hole Research Center, Woods Hole, Mass., the Wuppertal Institute on Climate and Energy Policy, Germany, and Chairman Emeritus, the International Institute for Sustainable Development (IISD), Canada. He also serves on the Jury of the Volvo Environment Prize, Sweden. From 1983-87, Mr. MacNeill was Secretary General of the World Commission on Environment and Development (the Brundtland Commission) and lead author of the Commission’s world-acclaimed report, “Our Common Future.” He served for seven years as Director of Environment for the Organization for Economic Cooperation and Development and was the Canadian Ambassador and Commissioner General responsible for the UN Conference on Human Settlements in Vancouver in 1976. He was a founding member of the Japanese Institute for Global Environmental Strategies and the China Council. Earlier, he was a Deputy Minister (Permanent Secretary) in the Government of Canada. Mr. MacNeill holds a graduate diploma in economics and political science from the University of Stockholm and bachelor degrees in science (math and physics) and mechanical engineering from Saskatchewan University. He is the author of many books and articles and the recipient of a number of honorary degrees and awards, national and international, including the Order of Canada, his country’s highest honor.

MOHAMED SAHNOUN On 20 January 2003, Secretary-General Kofi Annan extended the appointment of Mr. Mohamed Sahnoun, a national of Algeria, as his Special Adviser to follow developments in the Horn of Africa region. Previously, Mr. Sahnoun served as: Special Adviser to the Director-General of the United Nations Scientific and Cultural Organization (UNESCO) for the Culture of Peace Programme; Special envoy of the Secretary General on the Ethiopian/Eritrean conflict (1998-1999); and Joint Representative of the UN and the OAU in the Great Lakes region (1997). He is

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also a member of the Board of the University for Peace, member of the Special Advisory Group of the War-torn Societies Project, member of the Board of International Crisis Group, and Co-Chair of the International Commission on Intervention and State Sovereignty. Mr. Sahnoun was Special Representative of the Secretary-General of the United Nations to Somalia in 1992. In 1993, he was appointed Special Representative of the OAU in the Congo. In 1994 he was first a fellow at the US Institute of Peace in Washington, DC and then a Pearson fellow with the International Development Research Centre in Ottawa, Canada. He was a member of the World Commission on Environment and Development (the Brundtland Commission) in the 1980s, as well as Senior Adviser to the Secretary-General of the United Nations Conference on Environment and Development (UNCED). During his career, Mr. Sahnoun has been Adviser to the President of Algeria on diplomatic affairs. From 1964 to 1973, Mr. Sahnoun was Deputy Secretary-General of the OAU, and in 1973, he was appointed Deputy Secretary-General of the League of Arab States in charge of the Arab-Africa dialogue. He served as Algeria’s Ambassador to Morocco and Secretary to the Maghreb Union (1989-1990); Ambassador to the United States (1984-1989); Chief of Algeria’s Mission to the United Nations (1982-1984); Ambassador to France (1979-1982); and Ambassador to the Federal Republic of Germany (1975-1979). Mr. Sahnoun studied first at the Sorbonne University, in Paris, and then at New York University, where he received his Bachelor of Arts and Master of Arts degrees in political science.

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