Environmental organizations today condemned the Japan Bank for International Cooperation (JBIC) and four private banks’ June 16 decision to provide approximately 5.3 billion dollars in financing for the problematic Sakhalin II oil and gas project in the Russian Far East.[1]

JBIC (the Japan government’s official export credit agency), Bank of Tokyo-Mitsubishi UFJ (Japan), Mizuho Corporate Bank Ltd (Japan), Sumitomo Mitsui Bank Corp (Japan) and BNP Paribas (France) have severely violated their environmental policies by financing Sakhalin II, according to the groups.

"We are indignant that JBIC and the other Japanese and French banks financed Sakhalin II. We stand in solidarity with Russian and international environmental organizations in condemning our government bank’s decision to finance a project that so severely violates their environmental standards.” said Naomi Kanzaki, Development Finance and Environment Program Director, Friends of the Earth, Japan.

The Japanese and French banks’ decision to finance Sakhalin II comes despite severe violations of these banks’ environmental and social policies that have been documented over several years by a diverse array of professional experts appointed by Sakhalin Energy, public and private banks, international and Russian scientific institutions, and Russian government authorities.

On June 11, 2008, seventeen environmental groups sent the banks involved a fourteen-page letter citing a litany of these examples of violations.

“The broad range of experts that have documented environmental damage and policy violations represent a growing consensus that Sakhalin II is an environmental and social failure,” said Dmitry Lisitsyn, Chairman of the Sakhalin Island-based Sakhalin Environment Watch.

The environmental groups’ letter was accompanied by a graphic photo report of a fact finding mission completed in early June.

The environmental groups stress that financing by JBIC and other banks for Sakhalin II conflicts with decisions against financing by the broader international banking community:

“Sakhalin II never achieved environmental clearances from the European Bank for Reconstruction and Development, UK Export Credit Guarantee Department and the US Export-Import Bank. The project’s fundamental environmental and social shortcomings contributed to the ultimate unwillingness of these public banks to finance the project.” (from the June 11 letter)

“These five banks have severely compromised the larger international banking community’s efforts to maintain minimal environmental and social policies of public and private banks world-wide,” said Doug Norlen, Policy Director, Pacific Environment.

“It is decisions like these that contribute to a deep cynicism about sustainable banking. If threatening an endangered whale population with extinction is considered responsible banking, then one starts to wonder what reckless banking looks like,” said Johan Frijns, Coordinator of BankTrack, the NGO network on private bank reform.

“This is tragic news for the environmental and social credibility of JBIC and the private banks involved. But its even worse news for Sakhalin’s environment and impacted communities that are victimized by these banks’ decision,” said Kanzaki.

Notes: [1] Sakhalin II is operated by Sakhalin Energy Investment Company, Ltd, which is comprised of Gazprom, Royal Dutch Shell, Mitsubishi and Mitsui. .