The Price of Progress

Oil Execs Muscle U.S.-Backed Pipeline Through Environmental Treasure

 Tbilisi, Georgia—They closed the deal in the dead of night. At 3 a.m., after several days of intense, round-the-clock politicking, Georgia's environment minister, Nino Chkhobadze, was summoned to the office of the president. Two hours after she arrived, a $3 billion oil pipeline project that she had resisted, and that hung on her signature, won initial approval.

Exhausted and disappointed, Chkhobadze emerged into the waning November night, facing the glare of TV camera lights, squinting—some say, crying. Later, she would remark, "The pressure came above all from the company, and it was pressure not only directed toward me, but also toward the president."

The company in question is a consortium of 11 giants in the oil industry, headed by BP (formerly British Petroleum). For them, as for the U.S. government, gaining access to Georgia's rugged territory has been critical to making a decade-old dream a reality: the construction of a 1,094-mile underground pipeline from Azerbaijan to Turkey. American officials see the project as the first major step toward forming an "east-west energy corridor" designed to bypass the Middle East. Starting in 2005, the pipeline is expected to pour millions of barrels of landlocked Caspian Sea crude into world markets. But first it must be built, and the terrain is foreboding, with basalt mountains, desert sands, and earthquake faults. In Georgia, a stretch of roughly 10 miles would pass near an important nature reserve, close to prized mineral water springs.

New York's Russian Émigrés Prize Borjomi Water, which may be threatened by an oil pipeline.
photo: Cary Conover
New York's Russian Émigrés Prize Borjomi Water, which may be threatened by an oil pipeline.


Editor's note: Some call it money for nothing. Just for allowing a major oil pipeline to cross its territory, post-Soviet Georgia could haul in $65 million annually. But as Raffi Khatchadourian reports, there is no such thing as a risk-free route in a land of earthquakes and rebel insurgents. Must this impoverished nation gamble its ecology for its economy?

"Part One: Turkish Fishermen Threaten a Blockade"

"Part Two: The Blood of Massacred Turkish Kurds Holds a Fearful Lesson for Those Who Would Flee Iraq"

"Part Three: Pipeline Project Splits Georgian Village Into Winners and Losers"

"Part Four: America Builds an Army for Industry"

At times, the fate of the entire project has appeared to hinge on those 10 miles. Even today, with shipments of tubing piling up and surveyors marking land, the public institutions that would finance construction are debating whether to proceed. Some are expected to issue a decision within weeks.

The section in question would slice through a protected zone around Georgia's Borjomi-Kharagauli National Park, an ecological treasure on a par with America's most sacred preserves. According to the World Wildlife Fund, which opposes the plan, the area's rich biodiversity is "highly sensitive" to human interference. The sharp-tasting mineral water extracted from Borjomi's springs is so beloved throughout the former Soviet Union that émigrés have insisted on bringing it with them. In Brooklyn's Brighton Beach, bottles of the water are an easy find in most grocery stores. Borjomi water makes up 10 percent of all Georgian exports, the single largest outgoing commodity.

News that the pipeline would run a million barrels of oil daily near Borjomi's aquifer and around the national park has triggered dissent. In November, people protested in the streets of Tbilisi, the capital; local activists garnered support from the Dutch government and various international organizations. "We felt that change was possible," says Tinatin Ninua, a student organizer who gathered some friends and sent a petition to the World Bank Group, a possible funder. "A lot of people thought the route did not reflect the interests of the Georgian people."

As tensions rose late last year, a BP official, along with the head of Azerbaijan's state oil company, wrote to Eduard Shevardnadze, Georgia's president, pressing him to ensure that the government would accept the company's Environmental and Social Impact Assessment, or ESIA. Doing so would mean the Georgian government agreed the pipeline would not pose an unreasonable hazard.

"One of the most critical items we discussed during our private meeting was the urgency of obtaining approval of the ESIA before the end of November," reads the November 7 letter, which was leaked to a watchdog group. "Without this timely approval we cannot move forward with the construction phase and we will halt work . . . " The memo also points out that any delay would "immediately" hinder investment in a second pipeline, designed to carry natural gas across the region—an alarming prospect for Georgia, which is in desperate need of secure access to fuel. Weeks later, when authorization looked questionable, Shevardnadze himself stepped in, hauling his environmental minister into line. "It was easier to make a decision when I got involved as president," he told reporters. "It is in my interest that construction should start as soon as possible. I think nothing will interfere with this."

The tempest over the pipeline's potential environmental impact soon gave way to more immediate troubles. Recently, for instance, the biggest issue to rattle this small, mountainous country has been a proposal for raising the minimum wage—to approximately $55 per month. Many Georgians live without consistent electricity or regular heating or hot water. Woodstove pipes poke out of high-rise apartment windows, spewing black plumes. Unemployment is high. Refugees from stalemated wars crowd city hotels; rampant corruption and the policies that nurture it stymie economic development. Understandably, matters of the environment here can quickly start to seem abstract.

Yet if civic anger over the pipeline has died down, the issues have not gone away. Seventy percent of the project will be financed by public money—perhaps as much as $100 million of it from American taxpayers, according to one State Department official—and since a good portion of that money must serve the public interest, many potential lenders are moving cautiously. "It is an emotional issue in Georgia, and I think rightfully so," says Shahbaz Mavaddat, associate director of the International Finance Corporation, a member of the World Bank Group. "We have to be convinced that the Borjomi route is the only viable route and will comply with our policies."

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