Re: World Bank backs tariffs

[Michael Perelman <michael@xxxxxxxxxxxxxxxxx>]

This is wierd.  I suspect the WB fears a future threat to the repayment of
its loans -- but it seems to run counter to the presumed purity of its
free market rhetoric.  Does anybody know about this?  Mark?

Ian Murray wrote:

> [NYT]
> AUG 26, 2001
> World Bank Intervenes in Georgia's Deal on Fees for Caspian Gas
> Pipeline
> By DOUGLAS FRANTZ
>
> BAKU, Azerbaijan, Aug. 25 - In an unusually blunt approach, the World
> Bank has warned Georgia that it will lose all financial assistance if
> it does not negotiate higher tariffs on a proposed gas pipeline from
> the Caspian through Georgia to Turkey.
>
> The threat was made in a letter to President Eduard A. Shevardnadze of
> Georgia, which depends heavily on foreign assistance, from a senior
> official of the World Bank. The bank sent the sharply worded letter
> after it appeared that Mr. Shevardnadze was ignoring advice from bank
> officials that he seek higher fees.
>
> "This failure to heed the advice that has been provided will also call
> into question the justification for future support to Georgia from
> institutions such as the World Bank," Judy M. O'Connor, the bank's
> director for Georgia, wrote in the letter. A copy of the letter was
> provided to The New York Times by officials involved in the pipeline
> negotiations.
>
> Mr. Shevardnadze, who had postponed signing the pipeline agreement,
> responded to the letter by reopening negotiations on the transit fees.
> This will further delay approval of the pipeline agreement that
> negotiators worked out in July.
>
> Although the World Bank and other international lenders play important
> roles in Georgia and other developing countries, they have been
> criticized for becoming too involved in country decisions. The letter
> to Mr. Shevardnadze was considered an unusually strong example of how
> the bank sometimes expands its role.
>
> Nicholas van Praag, a spokesman for the World Bank, said that the
> warning had been intended to help Georgia negotiate a better deal for
> itself and that the tough language was because Georgia receives loans
> on extremely good terms.
>
> "If they don't take advantage of the opportunity to get what the
> country deserves, there is not much point in getting such favorable
> treatment," he said in a telephone interview on Thursday from
> Washington.
>
> The disagreement between Mr. Shevardnadze and World Bank officials
> centers on $20 million a year that Georgia would collect in transit
> fees from a proposed pipeline running from a big natural gas discovery
> in an offshore field in Azerbaijan through southern Georgia to Turkey.
> Azerbaijani officials want lower tariffs than the World Bank believes
> Georgia should get for carrying the natural gas across its territory.
>
> The pipeline is expected to follow the route of another proposed
> pipeline that would carry oil from the Azerbaijani capital, Baku, to
> the Turkish port of Ceyhan on the Mediterranean.
>
> The two pipelines would link the energy resources of the Caspian Sea
> with energy-starved Turkey and Western markets. They are considered
> important to economic prosperity and political stability in the
> Caucasus.
>
> Next week, the oil companies involved in the Baku-Ceyhan oil pipeline
> are scheduled to sign an agreement with the Azerbaijan government to
> spend $3 billion to expand oil production from the so-called Azeri
> field in the Caspian.
>
> Company officials said the investment made it more likely that the $3
> billion oil pipeline would be built because an existing pipeline to
> the Black Sea did not have the capacity to handle the increase in
> production from the new field.
>
> The oil companies, led by BP, will not make a final decision on the
> Baku-Ceyhan line until next year, when they have the results of a
> detailed engineering study now under way.
>
> The companies planned to begin construction on the gas pipeline first
> and then lay the oil line alongside it.

--

Michael Perelman
Economics Department
California State University
michael@xxxxxxxxxxxxxxxxx
Chico, CA 95929
530-898-5321
fax 530-898-5901