Think of a recent bad UK infrastructure project. Got one? Who financed it? Any idea? If your project of choice was Heathrow Terminal Five, the M25 widening or London Underground Private-Public-Partnership, then a big part of the answer is the European Investment Bank (EIB) – the European Union’s house bank.

Founded in 1958, by the Treaty of Rome, this secretive bank celebrates its 50th anniversary this year. You may never have heard of it, but by loan volume, the EIB is bigger than the World Bank, approving €53.4 billion of loans in 2006 alone. Based in Luxembourg, with offices around Europe – including London – the vast majority of its investments take place within the EU, though increasingly it also invests elsewhere. The EIB already has one of the largest Southern portfolios of any of the IFIs (international financial institutions), and, under new mandates, is now entitled to loan much more in Africa, Latin America and Asia.

Unlike the World Bank, the EIB is not independent, rather is legally part of the EU, and therefore has legal obligations to adhere to EU development policies and political priorities. However, these are often contradictory. Every politician talks about climate change, but not one wants to make car driving or flying more costly. The transport sector makes up around a third of the EIB’s direct loans and in the last few years it has financed several of the most climate-bashing airport expansions in Europe, including Heathrow T5, Schiphol 5th runway (Amsterdam), Madrid Barajas Terminal 4, and Charles Gaulle-Roissy 3rd runway (Paris), as well as the near-doubling in capacity of Beijing Airport in China.

A 2007 report by CEE Bankwatch Network estimated that the total extra CO2 emissions caused by EIB airport expansion investments will likely top 45.15 million tonnes – more than the three highest emitting power stations in Europe combined. While the EIB may have invested huge amounts in public transport during the last few years, any resulting decrease in emissions will pale in comparison with the huge increases from expanding airports and roads. In late 2007, the EIB renewed its transport policy, and will start quantifying CO2 emissions from the projects it plans to finance. However it doesn’t say how it is planning to take emissions into account, and refuses to stop financing airport and motorway expansion.

Outside the EU, the situation gets even trickier. In the EU, the EIB is at least bound by European law, but outside the Union that obviously doesn’t apply. And the EIB stands alone among IFIs in having no binding environmental, social and human rights standards by which to evaluate the projects it backs. It says it uses the highest possible standards, but those who remember the disasters associated with earlier EIB ‘development’ projects like the Chad-Cameroon oil pipeline and the Lesotho Highlands water project will not be assured by such platitudes.

A scan of some of the likely EIB supported projects will hardly assuage those concerns. Take the Mopani copper mine in Zambia, where the Zambian government gets a woeful 0.6% of revenues and has tried unsuccessfully several times to kick out the Western consortium involved after repeated environmental problems ; the most recent a mass poisoning of the local water supply that saw 800 people hospitalised. Or the Tenke Fungurume project in the DRC, the world’s largest copper/colbalt mine, the dubious contract for which was signed during the civil war and which an independent commission recommended be torn up—so the president disbanded the commission. Perhaps you prefer the Gilgel Gibe dam in Ethiopia, whose contract was awarded without tender to the Italian firm Salini, which is now under criminal investigation by the anti-Mafia department of the Roman magistrates. Hardly development superstars, any of them—yet the EIB is the only funder that will consider any of these projects. All the other IFIs have refused to touch them.

What is most extraordinary about all these projects, even more than their respective deficiencies, is the EIB’s willingness to put public money into the hands of the people that need it least—huge Western corporations. The Tenke contractor, in the DRC, is Freeport McMoRan, the world’s largest mining corporation. The main player in Mopani, Zambia, is Glencore, infamous for a string of repellent deals with governments ranging from the South African apartheid regime to Iraq under Saddam’s oil for food program. Glencore was founded by Marc Rich, best known for being pardoned for tax evasion and illegal dealings with Iran by Bill Clinton as his last act as president. These are not organisations that need public subsidy; what they really desire is political risk insurance—a guarantee that if the project blows up in their face, they will still cash in fully.

More than any other IFI, the EIB is a public institution. It is a body of the European Union and can be held accountable as such. There is a growing tide of pressure on the EIB to reform, coming from the member states of the EU and the European Parliament as well as civil society. The newly formed Counter Balance: Challenging the European Investment Bank is a coalition of NGOs across Europe working to effect change in the EIB. To find out more, contact Desislava Stoyanova at

By Pippa Gallop (CEE Bankwatch Network) and Anders Lustgarten (Bretton Woods Project)