Greenpeace asked the EBRD what its environmental principles are really worth

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Feature story - 28 February, 2014
Greenpeace along with an environmental organization Bellona and representatives of Ufa’s community have met with agents of European Bank for Reconstruction and Development, which is going to sponsor a scandalous project of the Kronospan company in Ufa.

Photo by Sergey Petuchov

Environmentalists and locals made a request to reconsider financing of Kronospan, taking into account numerous violations of Russian legislation committed by the company, including the Environmental Law, as well as ecological and investment risks of the project.

In July 2013, the EBRD and Kronospan company signed a loan agreement on the construction of a chipboard plant in the Republic of Bashkortostan. According to the agreement, the bank gives the company credit of €180 mln. The first part of the financing will go to the company’s account once all the necessary documents are provided.  It is worth to mention here that in the investment agreement between the company and the government of Republic there is not only chipboard, but also formaldehyde resins production wherein the restriction of investment and production is excluded.

In August 2013 the company began the construction without passing state expertise. Locals, getting news about the construction of dangerous plant from mass-media only, camped on the building site. A month and a half later, Gosstroynadzor (State Construction Supervision) banned the further construction, and during the following half a year the Office of Public Prosecutor found great number of violations of Russian legislation made by the company.

No principles

According to the banks’ representatives, Kronospan has not received funding yet. To perform the final procedure, all the permits are needed, and meanwhile the company has been passing the examination required by law.

Greenpeace drew the bank agents’ and EBRD’s environmental experts attention to the fact that the project in Ufa takes place with violations of the Russian legislation. Prosecutor's office of the Ufa region has already confirmed that the construction of the plant had started without an official permission of the Administration. Verification of general prosecutor defined that the government of the Republic included  Kronospan project into the list of priority investment projects and provided tax relief illegally. Besides, Ministry of Internal Affairs initiate criminal proceedings into the illegal acquisition of land for construction. Moreover, the construction is planned in a sanitary zone of water sources, where, in accordance with Russian legislation, any plant construction is forbidden.

Equipment components of JSC Kronoshpan Bashkortostan on a temporary customs control zone. The photo is made by Pavel Ksenofontov, the activist of the movement "Antikronoshpan"

Greenpeace pointed out that the realization of the Kronospan project is totally contrary to the stated principles of the bank's policy according which the projects financing by the EBRD should meet requirements provided by the national legislation. In addition, EBRD considers sustainable development as one of the fundamental aspects of rational business management, and the pursuit of economic growth and healthy environment as inextricably linked with each other.

Ecological risks

As it is said in the project applied for the state examination, Kronospan company plans to build only orchipboard production line, however, local activists doubt about too large area of leased land. Residents of nearby villages are afraid that after construction of the enterprise for production of a wood particleboard, the company, having protected with a high fence, will begin production of formaldehyde pitches. Results of the analysis of water tests around the similar project in Moscow region showed exceeding of formaldehyde in 5 thousand times.

Besides, in EIA there is no information about the risks and consequences of the possible accidents, and that is not less important – about sufficiency of the forces and resources to response, in case of, for example, fire in storage of sawdust or formaldehyde pitches. "Ufavodokanal" reported that couldn’t provide full requirements of plant for needs of fire extinguishing. So, in 2011 in Great Britain at the woodworking company Sonae, part which equipment is going to be used in Ufa, there was a fire which could not cope with more than a week. As result, there was enormous harm to human health in the surrounding areas, who now sue for compensation of harm.

Equipment components of JSC Kronoshpan Bashkortostan on a temporary customs control zone. The photo is made by Pavel Ksenofontov, the activist of the movement "Antikronoshpan"

In the light of all this the words of EBRD representatives that compliance to the highest European standards of ecological safety as the main condition of financing this project sound extremely unconvincing

Economic risks

Environmental experts and residents of Ufa at the meeting emphasized the fact that in addition to violations of the law and the promotion of corruption, the company «Kronospan» ignores public opinion, as well as underestimates the economic losses due to accidents. All this could lead to tightening of terms of project implementation or even its cancellation, and increase in cost of the project. In addition, activists of “AntiKronoshpan” made it clear that would not agree to this project, as it poses a threat to drinking water source of the entire city.

The Greenpeace appealed to the EBRD to recommend its client to provide actual interaction with public because by now company has not provided project documentation. To resolve social conflict in Ufa, the company has no other choice but to sit down at the negotiating table. In addition, according to environmental organizations and volunteers, the Bank should consider whether to fund the project that threatens the ecological well-being and social stability of the region.

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