The 'greening' of global project financing: the case of the Sakhalin-II offshore oil and gas project.(Author abstract)(Case study)

Introduction

Recently, Hayter et al. (2003) urged economic geographers to pay greater attention to the world's 'resource peripheries'. The logic for such a reorientation is two-fold. First, the resource sector is a crucial component of the global economy, worthy of study in its own right. Resource scarcity, of various types (Rees 1999; Klare 2001), is an increasingly dominant theme in the 'developed economies', while securing the benefits of relative resource abundance is a major challenge for many 'less developed resource rich economies' (Rosser 2006). Second, 'resource peripheries' provide insights into the global economy that cannot be derived from the experiences of the 'core' regions, and can therefore act as a catalyst for new forms of economic geography theorizing.

This article takes up the challenge to produce a more critical approach to resource geographies through the study of a particular resource periphery, Sakhalin in the Russian Far East, a particular resource sector, offshore oil and gas exploration and development, and a particular issue, namely, how the 'greening' of international financial institutions and major commercial banks provides environmental non-governmental organizations (ENGOs) a means to hold the global oil companies to account. The analysis highlights the four dimensions identified by Hayter et al. (2003) that set 'resource peripheries' apart from core regions: industrialism (the economic dimension), environmentalism (the environmental dimension), aboriginalism (the cultural dimension) and imperialism (the geopolitical dimension). The article also responds to Bridge's (2002) call to 'ground globalization'. Bridge (2002, 362) suggests 'researchers have been more interested in understanding and debating processes (original emphasis) of globalization than in relating these processes to specific outcomes or examining the significance of diverse outcomes for those who live with globalization as an everyday social reality' (see Dicken 2004).

The analysis embeds its theoretical concepts within the empirical account. There are already numerous reviews by geographers on globalization, scale politics, relational geographies and related issues, though much of this discussion fails to address the resource economy. However, two general comments about theoretical approach are important. First, this analysis is part of a longer-term study of the Sakhalin projects conceptualized in terms of scales, networks, and actors, notably Massey's (1994, 263) concept of 'Power Geometry' (Bradshaw 1998). Power geometry she defines as 'a way of thinking in terms of ever-shifting geometry of social/power relations, and it forces into view the real multiplicities of space-time' and as 'a complex web of relations, of domination and subordination, of solidarity and co-operation'. Most recently, Massey (2005, 101) has observed: 'Understanding of spaces as the constant open production of topologies of power points to the fact that different "places" will stand in contrasting relations to the global'. Although the concept is widely accepted, there are precious few attempts to map out power geometries and relationships within particular places (Latham 2002 is a notable exception). In my Sakhalin research I have used the concept as a way of thinking about the constantly changing social/power relations between the various actors, who gain legitimacy at particular scales, but who are constantly engaged in a dialogue across those scales.

Second, I deploy the concept of the network in a relational sense (Dicken et al. 2001, 91; Yeung 2005, 451). A large integrated oil and gas project such as Sakhalin-II is the focal point of numerous networks. The project itself is a hollow endeavour comprised of numerous contracts and subcontracts that combine to produce the necessary infrastructure to exploit and deliver to market hydrocarbon resources. The international oil companies (IOCs) see their ability to manage such large complex networks (project management) as major competitive advantages. This type of network is internal to the project, but it links many places across the globe. Indeed, the project is a key node in a variety of global networks that bring together state and non-state actors with local, regional, national and international origins and each with their own agenda. The current analysis focuses upon the network that emerged around the issue of project financing for Sakhalin-II.

This article results from an on-going analysis of the development of the Sakhalin oil and gas projects that has included eight visits to the island in the last ten years. During those visits, interviews were conducted with oil company representatives, the Governor of Sakhalin Oblast, members of the Sakhalin Oblast Administration and Oblast Duma, and the local ENGO, Sakhalin Environment Watch (SEW). This fieldwork has been supplemented by attendance at the Annual Sakhalin Oil and Gas Conference in London and most recently on Sakhalin itself, as well as the collection and analysis of company and NGO reports, the monitoring of websites, and the collation of material from the international and Russian print and electronic media. This activity has afforded unique insights into the issues surrounding the development of the Sakhalin projects, but has also required that I negotiate a relatively 'neutral' position between the various stakeholders. In the context of Sakhalin and the complexities of contemporary off and gas projects, I particularly emphasize the tactics employed by the ENGOs as a consequence of the changing attitudes of global financial institutions in relation to the environmental and social consequences of resource development, as well as the changing role of the Russian state in relation to the various actors who have tried to shape the future of the Sakhalin-II project.

The article is organized in the following manner. The first section considers the wider context of the 'greening' of global project financing and the policies that are now in place in relation to International Financial Institutions (IFIs) and the major commercial banks to assess the environmental and social impacts of major resource projects. The second section examines the evolution of the Sakhalin projects, with a particular focus on Sakhalin-II. The third section examines the global campaign that the ENGOs waged against the Sakhalin-II project that was stimulated by the possibility of financing from the European Bank for Reconstruction and Development (EBRD) and various Export Credit Agencies. The fourth section examines the conflict between SEIC and the Russian state, which eventually led to Gazprom gaining control over the project. The concluding section considers how the Sakhalin case highlights the complexities of resource peripheries and contributes to theorizing in economic geography.