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The Guardian: European bank could scrap loan

Marianne Barriaux
Monday January 1, 2007

The European Bank for Reconstruction and Development may pull out of the Sakhalin-2 liquefied gas project in Russia in a further blow to a scheme already mired in controversy.

The bank, which invests in countries from central Europe to central Asia with the aim of building up market economies, had been in discussions with shareholders Shell, Mitsui and Mitsubishi about providing a $300m (£150m) loan for the $20bn project, with a further $300m coming from a loan syndicated to other financial institutions.

But Gazprom, the Russian state-owned energy giant, wrested control of the project less than two weeks ago when it negotiated a stake of 50% plus one share in the Sakhalin Energy Investment Company, forcing the other three groups to halve their own interests.

A spokesman for the EBRD said: “New developments make things more difficult, and, one could say, may make the bank less needed for the project.” He insisted that a final decision had not been reached.

The bank prefers to finance projects in the private sector, but Gazprom’s controlling stake effectively means the scheme now has a majority state interest since Gazprom is controlled by the Russian government. A spokesman for Shell refused to comment on the specifics, saying: “Gazprom is a valuable partner to the project and we will now determine the next steps and engage with lenders.”

The controversial deal with Gazprom, announced on December 21, came after Russian environmental regulators criticised the project in eastern Siberia. They threatened to stop the scheme and impose fines of up to $30bn on Shell and its two Japanese partners. The allegations were denied by Shell, which described some of them as “unsubstantiated attacks containing exaggerations and distortions”. After Gazprom finally took control of the project, the Russian president, Vladimir Putin, said the environmental concerns had been settled.

The EBRD’s planned loan is relatively small compared to the overall cost of the project. But its support is important from an environmental perspective, as it has studied the impact of the scheme.,,1980784,00.html and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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