The Guardian: Environmentalists back Putin over Shell’s energy permit

· Downing Street and US express concerns
· Report lists mounting problems of gas project

Terry Macalister
Monday September 25, 2006

Britain has raised concerns with Vladimir Putin, Russia’s president, over last week’s withdrawal of Shell’s permit to develop the $20bn (£10bn) Sakhalin-2 energy project, suggesting the move could spark a diplomatic row.

Approval by the Russian natural resources ministry for Shell’s liquefied natural gas project on Sakhalin island, in the far east of the country, was abruptly withdrawn last Monday on environmental grounds. A Downing Street spokesperson said yesterday: “The government is raising its concerns about the decision with the Russian government. Downing Street is following this very closely.”

The US state department is also concerned. The move, to halt work on the world’s largest LNG project, was widely interpreted as an attempt by Russia to wrest back control of its natural resources from western oil companies. It sparked harsh words from the European commission and Japan.

The authorities also targeted the US oil group ExxonMobil, which runs Sakhalin-1 on the island, late last week, saying they would not allow it to expand the project. Campaigners from the Bankwatch group, a network of environmental groups in 11 countries, say Russia was right to stop environmental and other abuses at Sakhalin which had been going on for far too long.

Fears have been expressed for the Pacific grey whale which swims in the waters around Sakhalin. Bankwatch also argues that Shell should receive no funding from the European Bank for Reconstruction and Development, on the grounds that it is breaking bank rules by presiding over rising levels of crime and HIV.

Greig Aitken, of Bankwatch, said: “Russian and international environmental organisations have, for several years, documented the same pattern of violations cited by the Russian government, as well as a range of others that all have a grim bearing on an island that depends on fishing for one third of its economy.

“If there is talk of Russia asset-grabbing as it carries out its right to, belatedly, defend its environment, it should not overshadow the asset-grabbing Shell is attempting in the form of billions of dollars of international taxpayers’ money for a project it has been unable to get right for the last three years.”

A report issued by Bankwatch today talks of mounting problems on Sakhalin. It says the arrival of 5,000, mainly male, construction workers has led to increased poverty for local communities, particularly women. “The gender-specific negative impacts, presented in the report, range from anxiety about the safety of children due to increased heavy traffic, to rising crime levels, sexual harassment and violence against women. Furthermore, it reveals trafficking of women and increased prostitution and HIV/Aids,” says Bankwatch.

The EBRD says in a newsletter: “The first priority in addressing social issues is that our projects do not adversely affect anyone, especially vulnerable groups.”

Bankwatch believes Russia has been wrongly characterised in the reports of the standoff with Shell. It notes that the government demanded that one of its own oil companies, Transneft, reroute a vital pipeline to avoid environmental degradation near Lake Baikal at a $1bn cost.

State-owned Gazprom is pushing Shell to sell it a 25% stake in Sakhalin-2 in return for some Siberian assets. The threat that Sakhalin-2 might be halted as a result of the permit being withdrawn was seen as a way of putting more pressure on Shell to sell. Shell would not comment.

http://business.guardian.co.uk/story/0,,1880102,00.html?gusrc=rss&feed=1

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