The BTC pipeline in Azerbaijan: Main shortcomings and violations found during BTC monitoring November 2003 March 2004

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1 НЕФТЧИЛЯРИН ЩЦГУГЛАРЫНЫ МЦДАФИЯ КОМИТЯСИ COMMITTEE for OIL WORKERS RIGHTS PROTECTION The BTC pipeline in Azerbaijan: Main shortcomings and violations found during BTC monitoring November 2003 March 2004 Committee for Oil Workers Rights Protection Baku May 2004

2 About the Committee for Oil Industry Workers Rights Protection COIWRP was established in 1996 to defend the social and constitutional rights of the oil workers in all of the companies operating in Azerbaijan. COIWRP is the only one independent oil workers trade union in the country. COIWRP requires all national and foreign oil companies to implement the Azerbaijani Labor Code and international labor standards, fights against corruption and bribery in the oil sector, defends oil workers whose rights are violated and provides them free legal support. COIWRP s 2,800 members economists as well as ordinary workers are all specialists in the oil industry. To implement its mission, the Committee conducts ongoing investigations and monitoring of the oil industry in Azerbaijan and presents its findings to the public. COIWRP is one of the founders of the Human Rights Resource Center in Azerbaijan. Contact details Committee for Oil Industry Workers Rights Protection 38 Shamsi Badalbeyli str., Baku City, Azerbaijan Tel / , Fax: / , wcc@online.az About the BTC project In 2003, construction began on the BTC pipeline, which stretches 1,780 km from the Azeri oil fields in Caspian Sea, alongside the Georgian capital of Tbilisi to the Turkish port of Ceyhan on the Mediterranean Sea. The BTC pipeline passes through 14 regions of Azerbaijan (an area of about 120 municipalities). The project, controversial from the beginning, has been supported by loans from the International Finance Corporation (IFC) of the World Bank Group and the EBRD, which means that public money has flowed into the pipeline s construction and the public has a right to know whether the funds are being spent according to international standards and the universal principles of business ethics. About BTC monitoring The first independent monitoring of the BTC pipeline project was carried out by a national organization between November 2003 and March Monitoring was enabled by financial support from the Open Society Institute Azerbaijan and the Global Greengrants Fund. The monitoring covered three districts in central Azerbaijan (Agdash, Ujar, Yevlakh) and three districts in the western part of the country (Tovuz, Agstafa, Shemkir). Monitoring was conducted in 65 villages affected by the pipeline, where interviews were held with about 700 local citizens, BTC pipeline construction workers as well as BTC Co. and BP Co. representatives. Pictures were taken at each problematic spot in the regions; all the interviews were taped. Monitoring focused on the following aspects: 1. Land acquisition and the compensation process 2. Community Investment Program implementation 3. Conditions of the local labor force

3 Note The information in this document provides an overview of the findings from the two monitoring reports compiled by the Committee for Oil Industry Workers Rights Protection. These comprehensive reports are available at:

4 The BTC pipeline in Azerbaijan: Main shortcomings and violations found during BTC monitoring November 2003 March Land compensation process A total of 4,150 landowners and 102 municipalities were compensated USD 14 million for use of their land during the three-year BTC construction period. As a part of the land compensation process, an information campaign and public discussions were (or should be) organized in the regions. After interviewing the local citizens, it is possible to say that the information activities were very weak and did not reflect many of the fundamental issues. Sometimes, consultations were merely formal or not made at all. The main problem is that landowners usually do not understand their land compensation contracts, which have already been signed. This indicates that nobody provided the landowners with any explanation or assistance while the contracts were being prepared. The contracts were written in the Latin alphabet, which, because it has only recently been introduced into Azerbaijan and cannot be read by older people, has caused considerable confusion. Many landowners signed their contracts without reading them. Principal legal violations and shortcomings: In some cases, the compensation the farmers received was less than what they could have earned by cultivating their land full time (in the high production areas of western Azerbaijan). These people were not compensated fully, which violates World Bank investment principles. In some cases, the amount of compensation was not calculated correctly. The farmers are able to plant various kinds of crops and reap two or three harvests a year, yet they were only compensated for one harvest or for only one kind of crop per year. In some cases, compensated land was incorrectly classified. Some lands in the high quality category (according to the State Land Act) were classified in the lower categories in the agreement. The damage sustained by some landowners is greater than the compensation they receive because the pipeline divides their land into two parts. They are compensated only for stripe on the line, but they are not able to cultivate or water the rest of their land and sometimes cultivation becomes much more expensive. Although there were land ownership disputes in many cases, land compensation was paid to one party without a court decision on ownership. In many cases, compensation was even paid to a person other than the owner of record or usufruct holder. In many districts, the boundaries of lands owned by different people were not marked in the field, which causes confusion about the BTC pipeline corridor, affected lands and fields able to be cultivated. In some places, more land is utilized within the BTC construction zone then landowners were compensated for, which violates the signed agreements with landowners. There was extensive bribery during the land compensation process. Bribes were received or even required by officials at the district executive authorities offices. It is not clear what will happen with the land now utilized for BTC construction after the three-year rental agreements expire. The land will very probably be damaged, and farmers will be obliged to abide by many restrictions while using the land for decades to come. No agreement exists on long-term compensation of the landowners for these restrictions. Municipalities received no compensation at all if the affected land in their ownership was larger than 400 hectares, thus undermining one of the most important sources of municipal revenue.

5 2. Community Investment Program The CIP was developed to improve the social and economic situation of the regions directly affected by BTC pipeline. The CIP is implemented by four U.S. NGOs Save the Children, International Medical Corps, FINCA and the International Rescue Committee in a four-kilometer corridor alongside the BTC. The project, which has been funded by USD 8 million, is to operate till the end of The CIP presupposes that the particular projects will be chosen, implemented and paid for with the participation of the local inhabitants. Realized projects should bring long-term benefits to the local communities. The areas covered by the CIP are populated mostly by villagers dependent on agriculture. Some of them have small businesses or work in government institutions (schools, banks, offices etc.). The infrastructure of the affected places is very poor (dangerous roads, poor water and energy supplies, no gas, hospitals and schools that have not been renovated in 50 years and have no basic equipment etc.), and unemployment is high. Although implementation of the CIP has only recently begun, some of the fundamental problems with this project have already appeared in the field. The main shortcomings are: The local people as well as many government officials are not aware of the CIP. Many of the people did not participate in any of the consultations to choose concrete projects or did not even hear about CIP. The SC and IMC focused primarily on organizing discussions and seminars and electing community representatives. The people are becoming angry because the international NGOs are only organizing seminars for them and there is no real improvement in their lives. In some places, community representatives are in name only and do not fulfill their responsibilities. The criteria for the selection of villages for CIP implementation are not understandable. There is a strong suspicion that villages were selected by government offices not because of the difficult living conditions, but because of local political objectives and corruption. The activities of the Foundation for International Community Assistance (FINCA) under the auspices of CIP can be described as more business than social investment. The micro-credits, provided by FINCA to the farmers and small businessmen are short-term and loaded by 48% p. a. interest. Agriculture needs long-term credits and is definitely not a high-income activity; FINCA credits could damage local farmers. 3. Employment According to the BTC Co. and project documentation, 70% of the BTC construction workers must be hired from the local population. It has been impossible so far to check this figure, and there are a number of serious labor problems. The principal shortcomings are: In some regions (Agdash, Ujar), no people have as yet been hired for BTC construction. As the job contracts are not available for inspection, it is impossible to assess whether they comply with national legislation. The salaries of (unskilled) workers are surprisingly low USD per month. Working hours are from 7 a.m. till 7 p.m., which means 12 hours a day. This practice violates the Azerbaijan Labor Code and international standards. Recruitment procedures are not transparent. There are many more job applicants than vacancies. People have to pass exams, but the manner in which their abilities are evaluated is not clear.

6 Some people complain that they were asked for bribes in order to get a job. Some concrete cases Zayam village, Shemkir District There are 114 plots in Zayam village, which is impacted by the BTC. Villagers say that the land compensation agreements were prepared in the Cyrillic alphabet at the beginning of the pipeline discussions. Later, when Firudin Yusif oglu Aliyev, the head of District Executive Authorities Office (DEAO), returned the agreements to the landowners, they were written in the Latin alphabet. At the first, there appeared no difference between the old and new agreements, but upon closer scrutiny it was determined that the maps of the affected plots and some of the landowners names had been altered. Municipality representative Emir Shahbaz Ismayilov had informed many people that their land would not be affected by the BTC and they could sell it to the municipality. During this time, people were threatened and coerced into selling their plots. Salman Neriman oglu Musayev, a carpenter, was told a special tax would be imposed on his business if he did not sell his plot. Many other people were intimidated in the same way into selling their plots. Of course, it later became clear that these plots were in the BTC construction corridor. The head of the District Executive Authorities Office told the cheated people that they could complain to whomever they wished. These people have been seeking legal recourse in the courts and at various ministries and government offices, but so far with no results. Jilovdarli village, Tovuz District The common lands of 130 families have been impacted. People say they were not informed beforehand and compensation is too low. For example, Vagif Maharramov got USD 2,000 for 14 acres of land, but as he had previously planted maize on this land, his income for three years would have been higher. Another villager, Arzuman Maharramov, said he planted onions in his fields and received only USD 800 for five acres of his land. His compensation was calculated at the same rate as cereals even though onions are more expensive. People in the village complain that the head of District Executive Authorities Office did not allow them to plant anything on the plots affected by the pipeline either this year or last year. As the BTC pipeline construction has not yet reached the village, people feel that they are more restricted than necessary. During discussions with the villagers, Gurban Rzayev, the head of DEAO, insulted and threatened a villager who was telling his story to the monitoring group. Mr. Rzayev came with policemen and demanded the monitoring group members leave the village immediately. As a result, it was impossible to continue monitoring in Jilovdarli. Poylu village, Agstafa District Save the Children NGO representatives came to the village and created the community. They promised to build a new transformer in the village, but there has been no news of this happening. The main problems in Poylu are drinking water (the people pay USD 4 for reservoir water) and an antiquated power system. CCIC Co. published a job announcement two months ago. Only one person from the village is currently employed on BTC pipeline construction; two other people applied in Baku and were told to wait. There are no BTC construction jobs for women, and nearly everybody in village is unemployed.

7 Conclusions It is of great concern that the local population has not yet been informed about the project, although the affected people should have been consulted several times in the past few years about the BTC (ESIA procedure, land compensation process, EBRD and IFC consultations). The monitoring process did not find a single person or municipality representative who had participated in any round of the consultations or felt they had any opportunity to express their comments or needs to the project. Local citizens only get information about the BTC pipeline project from television and newspapers, which provide only the most basic information. The monitoring process confirmed many violations of the law and international standards in the land compensation procedure. It is possible to say that a minimum of several hundred people were cheated or robbed by governmental officials owing to unclear ownership of the land, the lack of legal assistance and advice as well as intimidation, misinformation and corruption. These problems are so widespread that it will be necessary to screen the entire land compensation process again and remedy the violations. Although the Community Investment Program has only just started, it is already evident that a substantial part of its budget will be spent on administrative costs (including salaries, rents etc. of U.S. NGOs) and seminars, which the public considers useless. Since the mechanism for selecting villages for the CIP is not clear, there is considerable suspicion that selection was made by government offices on the basis of political objectives and corruption. It was found that the working conditions on BTC construction violate national law by compelling workers are to work 12 hours a day. The salaries of unskilled workers are surprisingly low. Hiring procedures are not clear, and many people report that they were asked for a bribe to get a job. BTC Co. and its subcontractors should pay much more attention to the local structures and support local farmers and enterprises by involving them in BTC pipeline construction (food and services). Although the rights of a substantial part of the people affected by the BTC pipeline have been violated, the people do not know their rights and have no idea how to seek recourse. They are not aware of the community liaison mechanism established by BTC Co. or of any other possible courses of action. Also, the fear of state-provoked violence prevents the people from complaining. After monitoring the implementation of the BTC pipeline project in the regions of Azerbaijan, it is possible to say the BTC project is having no positive impact on the population directly affected by it. The BTC project does not solve any concrete social and economic problems. On the contrary, it violates the rights of hundreds of landowners and municipalities along the line, violates national law and international standards and might even aggravate Azerbaijan s current problems (the level of corruption within the BTC project is of particular concern). Recommendations A new check of the compensations made under the BTC project, compare the real compensation amounts with the Land Acquisition Guide, and check the real ownership of the land. Screen the list of villages selected for the Community Investment Program. If some directly affected village is not on the list, it will be necessary to add it.

8 Ensure recruitment of local construction workers from all of the regions through which the BTC pipeline passes. Ensure that BTC Co. and all its subcontractors purchase local foodstuffs and use local enterprises and services.

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