EastMed pipeline depends on company whose founders participated in banking scheme that allegedly helped crash Cypriot economy

4th May 2021, London - The proposed EastMed pipeline depends on fossil gas extracted by a British-Israeli company whose founders participated in, and benefitted from, a banking scheme that allegedly helped crash the Cypriot economy.

Energean - founded and run by Mathios Rigas and Efstathios Topouzoglou - struck a deal with the owners of the EU-backed EastMed pipeline in 2020 to transport the gas they plan to extract from Israeli waters into Greece via EastMed. For now, no other company has promised to use the pipeline, meaning its success depends on Energean’s gas. Energean itself stands to benefit from the pipeline that would provide a crucial route to the European market for its gas. 

But Global Witness’s new investigation “Hot under the collar”today reveals both Rigas and Topouzoglou took loans from Cyprus’ second largest bank - Laiki - and used them to prop up the faltering business of the bank’s chairman. According to the bank’s administrators, this scheme - in which others also participated - helped cause the collapse of Laiki in 2013 and with it the Cypriot economy. This resulted in a €7 billion bailout, most of which came from EU taxpayers. 

Despite making ambitious climate pledges, the EU currently supports the EastMed pipeline, which would transport fossil gas into Europe. As a “Project of Common Interest”, the EU has already invested €36 million in the pipeline, and the project remains eligible for further subsidies from the EU and the European Investment Bank. The pipeline’s promoters have also relied on the EU’s political backing as it seeks private backers for the project.

Jonathan Gant, Senior Gas Campaigner at Global Witness, said:

“The Cypriot financial crisis saw thousands of people lose over €4 billion in savings and face years of austerity, to plug a gap caused by the financial recklessness of a few individuals. It is therefore baffling that the EU is backing the EastMed pipeline, which depends on and stands to benefit a company run by people involved in questionable investment schemes.”

“EastMed represents the unholiest of trinities - a huge carbon bomb, a major source of regional tensions and reliance on a company whose founders have a controversial track record. If it wasn’t already glaringly obvious it certainly should be now; EastMed should be stopped before building has begun and its backers, including the EU, should walk away.”

“If the EU continues to support the EastMed pipeline, not only will it call into serious question its climate credentials but will also show the EU is willing to to spend taxpayers’ money on a project that depends on a company with controversial founders.” 

In the wake of Laiki’s collapse, the bank’s administrators specifically pointed to the loans received by Rigas and Topouzoglou as “extremely dangerous;” an example of where Laiki had “unjustifiably grant[ed] loans to third parties” for the benefit of the bank’s chairman, its managers, and their friends.

Evidence also shows that, unlike the Cypriot economy, Energean emerged stronger from the country’s crisis. Loans received by Rigas and Topouzoglou from Laiki Bank were not just used to prop up a faltering business empire. They were also invested in companies that would become Energean, which in the year following the Laiki scheme saw their share capital more than double.

Responding to Global Witness’s findings, Rigas and Topouzoglou stated they had long track records as trusted businessmen and that there was nothing wrong with taking loans to invest in the business of Laiki’s Chairman. They also stated that they cannot be held accountable for the collapse of Laiki Bank or Cyprus’s financial crisis and that the EastMed pipeline was not dependent upon the company. Detailed responses can be found at globalwitness.org/EastMedNoMore

Global Witness is calling on the EU to end its support for this climate-wrecking fossil gas project, that is causing geo-political tensions and depends on a company whose founders have a controversial record. 

Countries on the pipeline’s route - Israel, Greece and especially Cyprus, whose economy was thrown into crisis by the Laiki Bank crash - should also abandon EastMed. Global Witness is also calling on the US, which declared support for the pipeline in its 2020 budget, to do the same.