January 30, 2003 Press Release
Delay of Pipeline Construction Pits Citigroup Against Pristine Forest
Environmental Requirements Stand in the Way of Financial Giant's Loan Guarantees
SAN FRANCISCO - January 30, 2003 - The suspended construction of parts of the OCP pipeline announced earlier this week are likely to prove costly to American financial giant, Citigroup (Citi), the bank guaranteeing the project's loans to the Ecuadorian government in excess of U.S. $200 million. Citi also provided credit for OCP Ltd.'s consortium member, Perez Companc.
Ecuador's newly elected Environment Minister Edgar Isch ordered work to stop temporarily on areas of the pipeline near the protected Mindo Nambillo cloud forest after trees, plants and habitats of local species were damaged by construction in breach of the project's license. Mr. Isch is demanding that OCP be held to the terms of its license in order to continue, a move that threatens to push the project's completion back past its deadline.
Citigroup has guaranteed the completion of the pipeline by the end of July 2003. Failure to meet the project's deadline will cost the OCP Ltd. $70,000 per day for the first week, increasing to as much as $2.93 million per day after 85 days. Should the OCP consortium abandon the project it will have to pay the Ecuadorian government $100 million. As the creditor to the Perez Companc and by guaranteeing the projects loans, these costs could dramatically affect Citi's bottom line.
The 298-mile pipeline is fraught with environmental problems and threatens to devastate the Mindo Nambillo cloud forest reserve, a rare environmental treasure. Just last year an independent report determined that the project did not meet the World Bank's environmental guidelines. The pipeline will raise Ecuador's ability to transport crude oil by 50,000 barrels per day.
Local communities and environmental groups across the world are intensely resisting the project. In Ecuador, several local citizens are currently awaiting trial for participating in the country's first ever tree-sit in protest of the pipeline. German Bank West LB, a second financial sponsor of the project, has come under fire in Europe for its participation.
"This should finally make it clear to Citigroup that banking on environmental destruction does not pay," said Ilyse Hogue, director of the Rainforest Action Network's Global Finance Campaign. "It is critical that we remain vigilant of Citigroup to prevent it from using its financial power to steamroll over environmental standards in an effort to meet the deadline that it recklessly guaranteed."
Citi's habit of pouring a steady stream of dollars and financial guidance into the world's most controversial projects such as the OCP pipeline has put the spotlight on the bank's glaring lack of environmental standards. Citi ranks as the top financier of destructive logging, mining and fossil fuel projects around the world. According to Bloomberg analytics, Citi's loans and corporate bond underwriting secured its position as the number one financier of both the coal industry and the fossil fuel industry in the year 2001.
In striking contrast, the financial industry's leading players in Europe have begun to put policies in place that address the environmental and social impacts of their investments. For example, top Dutch Bank, ABN AMRO, has policies prohibiting the financing of extractive industries that clear or degrade primary forests or operate on indigenous land.
Citi-funded projects span the globe, wiping out endangered forests and driving communities into poverty and homelessness. Citi has recently been criticized for financing the highly controversial Camisea gas project that threatens the Peruvian Amazon. Other Citi projects include the destruction of California's Headwaters Forests, the Chad-Cameroon pipeline, funding for palm oil plantations in critical orangutan habitat in Indonesia, and a pipeline through the Orinoco Delta in Venezuela.
Travel into the Amazon, especially ecotourism adventures in this area, benefit the local people and culture. Amazon tours generate important income that people can use to fight off environmental destruction.