For the Ilisu Dam, a Lifeline Made in China?

Will the controversial Ilisu dam project in southeast Turkey, put on the shelf after European creditors withdrew their support due to a lack of environmental safeguards, be brought back to life with Chinese help?

From a blog post by Peter Bosshard, policy director for International Rivers:

Turkey is so indebted it cannot finance the dam from its own resources. Reliable sources have told us that the Turkish government is currently discussing support for the Ilisu Dam with China. For years, the Turkish and Chinese governments have strongly disagreed over the treatment of the Uighur population, which is ethnically Turkic, in China’s Xinjiang Province. Yet in June 2009, Turkey’s President visited China and signed several cooperation agreements, including in the energy sector.

Under a plan which is currently being discussed, Andritz Hydro, the main contractor for the Ilisu hydropower project, would manufacture the turbines for the project in China rather than in Austria. Sinosure, an insurance company set up and owned by the Chinese government, would insure the bank loans for the contract. In a new twist in its emerging role, China would thus not enable its own dam builders to go abroad, but would underwrite the exports of Western dam builders which have shifted part of their manufacturing base to China.

When Chinese companies and financiers started to go overseas around the turn of the century, they held that following social and environmental standards was up to their host governments. They consequently picked up several rogue projects that had been shunned by other financiers during this period. China Exim Bank provided more than $500 million in funding for the Merowe Dam in Sudan in 2003 after export credit agencies from Europe and Canada declined to get involved because of environmental and human rights concerns. Chinese companies are also building several dams in Burma which many other actors would not touch.

Projects like the Merowe Dam have created serious conflicts with the local populations, and have damaged the reputation of the involved Chinese companies. Starting in 2006, the Chinese government asked its companies to take environmental and community concerns more into account when investing abroad. In October 2007, China’s State Council for example stressed the importance of “paying attention to environmental resource protection, caring for and supporting the local community and people’s livelihood” in such projects. An integrated policy package with specific recommendations for Chinese foreign investors is currently under preparation. Such measures indicate that China is interested in being a responsible partner in international finance.

The Ilisu Project has become an international symbol of a substandard project. China is not bound by agreements of the OECD governments, but it helped establish the World Bank standards which the dam on the Tigris is violating. The independent panel of experts which documented the violation of these standards included a well-known Chinese resettlement specialist. So far, China has not yet received an official funding request from Turkey and has not yet had to take a decision on Ilisu. If Sinosure does approve support for the project, it will be a slap in the face of the European governments who have put the interests of the environment and local people before their own export interests. Chinese support for the Ilisu Dam would endanger the efforts of a coordinated approach among international funders on the environment, and could start a new environmental race to the bottom.

You can read his full post here. For more background on the Ilisu dam project, take a look these previous posts.