Turkish dam controversy tests government

Hasankeyf could soon be under water Keystone

A Swiss delegation travels to Turkey next week as the government ponders whether it should underwrite a controversial dam project for the second time.

This content was published on August 18, 2006

Export Credit Agency (ECA) officials will assess environmental and humanitarian objections to a proposed SFr310 million ($250 million) fund to allow Swiss firms to take part in building the Ilisu dam.

The State Secretariat for Economic Affairs (Seco) will decide in September if the state-backed insurance agency can guarantee the export risks of Alstom Switzerland, Maggia, Stucky and Colenco.

The proposed dam has provoked outrage in some quarters because it will flood an area of over 300 square kilometres, displacing around 55,000 people – mainly Kurds – in the southeastern province of Anatolia.

Environmental groups say it will cause untold damage to the region while other objectors fear a dispute with Turkey's neighbours Iran and Syria over water supply.

"The site visit is part of an evaluation process to assess the project's compliance with international standards and requirements and to exchange information with the relevant Turkish authorities regarding some open questions," Seco spokesman Eric Scheidegger told swissinfo.

"The open questions are of great concern, but there will be no black and white answer because there are a number of very complex issues. We have to balance these questions with economic considerations."

Such questions sparked the collapse of a former business consortium in 2002, that included Switzerland's biggest bank UBS, despite the government agreeing an SFr470 million export risk credit three years earlier.


The new consortium includes Austrian and German companies and the Swiss government's decision hinges on the response from its counterparts in the two countries, according to Scheidegger.

Alstom Switzerland boss Daniel Schafer said the company's involvement in the Ilisu dam project depended on getting export insurance.

"Without the export risk guarantee the financing will not come off and the consortium will not be able to realise this project. In this case the Turkish authorities will look for new partners," he told the German-speaking Bund newspaper.

Turkey made its intention of building the dam clear during a ceremony to lay the first foundation stone a week ago. The authorities say they have put aside $800 million (SFr994 million) to resettle inhabitants of the medieval town of Hasankeyf and surrounding areas.

But the Swiss non-governmental organisation, the Berne Declaration, says that is still not enough to help people rebuild their lives and businesses in the long term.

Spokeswoman Christine Eberlein believes the Swiss government may be fearful of souring relations with Turkey.

"Switzerland does not want to send out the wrong signals to the Turkish government. But Turkey has said no to Switzerland before so there is no reason why the Swiss cannot do the same," she told swissinfo.

"The Swiss companies are not going to pull out because they are reliant on this project – they desperately need this investment."

swissinfo, Matthew Allen

In brief

Swiss industrial giants Sulzer Hydro and ABB plus Switzerland's biggest bank UBS were part of an original consortium that was granted a SFr470 million export risk guarantee from the Swiss government in 1999.

However, that consortium fell apart in 2002 when several players, including UBS, pulled out following fierce criticism from environmental organisations and other pressure groups.

By this time Austrian company VA Tech had acquired Sulzer Hydro and ABB had sold its power generation business to French company Alstom.

A new consortium, including VA Tech, the Swiss branch of Alstom and other Swiss companies, then put together a new bid, asking the Swiss authorities to grant an export risk guarantee totalling SFr310 million along with other credits from Austria and Germany.

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Key facts

The Ilisu dam is part of a larger hydro-power project drawn up by the Turkish authorities in 1991. 22 dams and 19 power plants are planned on the Tigris and Euphrates rivers.
The Ilisu dam will be 135 metres high and 1,820 metres wide holding a reservoir of 10.4 billion cubic metres of water.

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Export Risk Guarantee (ERG)

ERG was founded in 1934 as an instrument to combat unemployment and promote the Swiss foreign trade.

Swiss exporters can obtain cover to safeguard against risks such as payment default for exports to countries with uncertain political or economic conditions.

It helps to ensure that Swiss enterprises can compete on international markets.

The practice came under fire in the 1990s when ERG was granted to Swiss companies involved in controversial dam projects; China's Three Gorges and Turkey's Ilisu.

The government revised the ERG law in 2004, expanding its scope.

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