Germany, Switzerland and Austria pull out of Turkish dam project

Jul 7, 2009, 8:22 GMT

Berlin - Germany, Austria and Switzerland on Tuesday cancelled financing for a controversial hydroelectric dam in south- east Turkey because of concerns it will harm the environment.

A statement released by the state-run credit agencies for the three countries said the decision followed the failure of Turkey to fulfill environmental standards for the 1.2-billion-euro (1.68 billion dollars) Ilisu Dam and hydro lake.

The institutions last year suspended their financing because the Turkish government had failed to fulfill the criteria by December 2008. They later gave Turkey a 180-day extension, which expired July 6.

The statement by Germany's Euler Hermes Kreditversicherung AG, Oesterreichische Kontrollbank AG and Schweizerische Exportrisikoversicherung said that while Turkey had made progress on meeting many of the standards, others were left unfulfilled.

The dam project is part of the Turkish government's plan to boost economic prosperity in the country's less-developed south-eastern region, long troubled by clashes between security forces and the outlawed Kurdish Workers Party (PKK).

The hydro lake is to have an area of more than 300 square kilometres. It would flood Hasankeyf, a city with archaeological remains of major scholarly importance, and force the relocation of 10,000 people.

Germany had originally guaranteed German exporters would be paid 190 million euros. Export credits can be used as a form of project finance.