GFMC: World Bank Loans Raise Ire of Russian Environmentalists

World Bank Loans Raise Ire of Russian Environmentalists

Press Release of Pacific Environment and Resources Center, 11 July 2000


In a strongly worded letter, 67 Russian and international environmental organizations criticized the World Bank’s loans to Russia, which have continued even after President Putin dissolved Russia’s State Committee on Ecology and the Russian Forest Service. The letter emphasizes the short-sightedness of the Bank’s lending policy and points out that the Bank approved a $60 million forestry loan to be administered by the Forest Service five days after that agency was dissolved on May 17, 2000. According to the letter, this loan to a non-existent agency is legally questionable.

The letter, to World Bank President James Wolfensohn, was released just after the World Bank announced that it is ready to release another $1 billion to Russia later this year. Many of Russia’s leading environmentalists, including Alexei Yablokov, an environmental advisor to former President Boris Yeltsin, and Aleksandr Nikitin, a former Navy officer who was imprisoned after speaking out about the dangers of Russia’s nuclear fleet, endorsed the letter. The Committee on Ecology and the Forest Service were axed by decree by Russian President Vladimir Putin on May 17. In a plan that is still unclear, their responsibilities are to be taken over by the Ministry of Natural Resources. This body oversees the extraction of underground resources such as oil and gold. Environmentalists are concerned that the Russian government is, as one analyst said, putting an alcoholic in charge of a vodka shop.

“In the absence of the State Committee on Ecology and the Forest Service,” the letter reads, “we do not believe World Bank Group projects that impact the environment in Russia can proceed in an environmentally, financially or legally sound way. We believe the most prudent action the World Bank Group can take is the cessation of these projects until these agencies and their original functions return intact.”

Aleksandr Arbachakov, director of Siberia’s Taiga Research and Protection Agency, said “President Putin is leading us down a path towards environmental harm that can impact countries beyond Russia and even the ecological balance of the planet. With the liquidation of these agencies, we have reasons to worry about our future and the future of our children.” David Gordon, Director of Programs at the Pacific Environment and Resources Center, said, “A few months ago, President Wolfensohn assured us that the Bank would conduct its operations in a democratic and environmentally sustainable manner. To continue with these loans would be to show blatant disregard for the environment and public health in Russia. It almost looks like a case of collusion between the Bank, the Putin regime, and the extractive industries.” Currently, the World Bank has over US$1 billion worth of projects in Russia that impact the environment. The projects are contingent upon a regulatory body for monitoring, enforcement, and protection from the projects’ environmental impacts. In many cases the World Bank works in direct partnership arrangements with some of the abolished agencies.

TEXT OF LETTER AND ITS SIGNATORIES FOLLOWS:
11 July 2000
RE: World Bank Group Response to Abolishment of Russia’s State Committee on Ecology and Forest Service
James Wolfensohn
President, World Bank Group
President Wolfensohn,

on May 17, President Vladimir Putin issued a decree liquidating the Russian State Committee on Ecology and the Federal Forest Service, transferring their remains to the Ministry of Natural Resources. With this action, the system of government independent environmental control in the area of natural resource use, which had been put together over decades, was destroyed. The creation of State Committee on Ecology was one of the largest achievements of democratic formations in Russia, starting in 1985. Its establishment complemented the ongoing activities of the Russian Forest Service, which had a proud history of over 200 years. However, with his liquidation of these agencies, President Putin gives practically full freedom to the unsustainable exploitation of our natural resources, which can potentially lead to ecological harm that can impact countries beyond Russia and even the ecological balance of the planet. With the liquidation of these agencies, we have justified reasons to worry about our future and the future of our children. In recent times, the World Bank Group has focused more of its activity on environmental problems in Russia. And this approach was beginning to bear fruit. Real opportunities for constructive cooperation between large business, government, and the public have appeared. For example, the World Bank has for years been developing a forest pilot project loan to improve the Russian Forest Service’s ability to achieve environmentally sound and sustainable forestry. Ironically, the World Bank approved this forest pilot project loan five days after President Putin abolished the Forest Service! Now, the legality of a loan intended for an abolished agency must be questioned. Indeed, since the breakup of the former Soviet Union, the World Bank has committed over a billion US dollars’ worth of projects in Russia that impact the environment. And, more projects are in the pipeline. The design of these projects relies on the existence of the State Committee on Ecology and the Forest Service for the specialized ecological monitoring, enforcement and protection functions that they provided. In many cases, World Bank Group projects were in direct partnership arrangements within the abolished agencies. And, these agencies provided the regulatory framework and permitting functions upon which the legal operations of the World Bank Group and other investors’ projects are based. These functions are now gone, and the future of Russia’s environment and its potential for sustainable development is in serious question.

In abolishing the State Committee on Ecology and Forest Service, President Putin proposes to subsume what remains of them under the Ministry of Natural Resources. It is widely known that this Ministry’s primary goal is the expansion of commercial activity and not the protection of the environment. Therefore, this rival agency has a fundamental and irreconcilable conflict of interest that prevents it from effectively fulfilling the responsibility of the abolished agencies. Moreover, the Ministry’s budget will not be expanded to a size needed to accomplish the abolished agencies’ work. The institutional result will be the loss of some of the Russian government’s finest environmental and forest management professionals and the subservience of their functions to a Ministry with a contrary mission.

The abolishment of these agencies puts the prospect of responsible foreign investment at significant risk. With these regulatory, permitting and enforcement functions gone, the legal basis of projects that relies on these functions is undermined, while illegal and unsustainable exploitation of Nature is allowed to flourish. This is of growing concern to responsible international foreign investors, as reflected in the June 7, 2000 edition of The Economist, “No place to be an ecologist.” As the President of the World’s largest public development finance institution, the capricious abolishment of these vital agencies must be of especially high concern for you. In the absence of the State Committee on Ecology Forest Service, we do not believe World Bank Group projects that impact the environment in Russia can proceed in an environmentally, financially or legally sound way. We believe the most prudent action the World Bank Group can take is the cessation of these projects until these agencies and their original functions return intact. We therefore urge you to issue an immediate moratorium on all new World Bank Group approvals for projects in Russia, and to suspend disbursements for all current Russia projects that impact the environment until the ramifications of these agencies’ abolishment is fully known and until these agencies and their original functions are fully restored. Representatives of our organizations would like to request a meeting with you at earliest possible convenience to discuss this issue further. Respectfully,

(67 signatures)


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