Burning the Oil - Development and Inter-Ethnic Tension

"Sustainable Development" is a worn out cliché - but not where it matters the most: in developing countries. There, unconstrained "development" has led to inter-ethnic strife, environmental doom, and economic mayhem. In the post Cold War era, central governments have lost clout and authority to their provincial and regional counterparts, whether peacefully (devolution in many European and Latin American countries) - or less so (in Africa, for instance). As power shifts to municipalities and regional administrations, they begin to examine development projects more closely, prioritize them, and properly assess their opportunity costs. The multinationals, which hitherto enjoyed a free hand in large swathes of the third world, are unhappy.

The outcome of this tectonic shift is a series of unrequited conflicts from Indonesia to Morocco. The former is now a federation of 32 provinces, each with its own (often contradictory) laws, taxes, and licenses. They tend to ignore promises made by the central government - and the central government tends to live and let live. Some multinationals are in denial. They confront the local authorities and the authorities, in turn, legislate to prevent them from doing business (as in the case of Cemex, the Mexican cement company, described in "The Economist"). Others adapt, collaborate with the locals, establish foundations and endowments, invest in local infrastructure and in preserving the environment. Most crucially, bribes that once went exclusively to Jakarta-based officials, are now split with local politicians.

But sometimes the consequences are more serious than the reallocation of backhanders. When a corrupt central government colludes with multinationals against the indigenous population of an exploited region - all hell breaks loose.

Consider Nigeria and Morocco.

A. Nigeria

Nigeria is an explosive cocktail of more than 250 nations and languages with different (and often hostile) histories, cultures, enmities, and alliances. It is decrepit. Its people are destitute and unemployed, the crime rate is ghastly, the army and police are murderous (as are numerous civilian "vigilante" groups), the authorities powerless, corruption rampant, famines frequent.

Most of its oil (its only important export) is produced in the Niger Delta, home to the Ogoni and Ijaw ethnic minorities. The Ijaw are also actively suppressed (and massacred) in Bayelsa state.
When the Ogoni protested against the environmental ruination wrought by oil drilling - nine of them were hanged in 1995. But this brutality did little to quell their complaints, including the fact that almost none of the $7-10 billion in annual oil proceeds was re-invested in the region's economy. This largely economic conflict (brewing since 1993) has now, inevitably, become inter-ethnic and inter-religious. It is now an integral part of the national politics of a Nigeria fracturing along ethnic and religious (Christian vs. fundamentalist Islamist) fault lines.

Multinational oil firms in Nigeria have a strong interest to maintain a functioning political center, with law, order, and a respected, multi-ethnic police force. Yet, in their efforts to stabilize Nigeria, they shot themselves in both feet, repeatedly.

All previous regimes in Nigeria - civilian and military - enjoyed the tacit support (diplomatic and financial) of the big oil multinationals, among them Agip, Mobil, Chevron, Royal Dutch/Shell, and Elf Aquitaine (now Total-FinaElf). The oil companies maintain their own armies ("security") - including helicopters and heavy armor. They rarely openly intervene in local protests and conflicts. But their pronounced silence in the face of numerous massacres, unlawful detentions, murders, beatings, and other human rights abuses by the very army and police with whom they often share their equipment and manpower, forced Human Rights Watch to issue this unusual statement: "Multinational oil companies are complicit in abuses committed by the Nigerian military and police." Oil multinationals are also a major source of corruption in Nigeria.

Moreover, many observers conclude that the multinationals' claims to have bettered their ways by applying adequate environmental protection (against frequent oil spills and dumping of industrial waste), improving public health, observing human rights standards, and developing better relations with affected communities - are nothing but elaborate spin doctoring.
The creation of the dysfunctional "Niger Delta Development Commission" by the government in 2000 only enhanced this perception. Armed guards, employed by oil companies, continue to wound, or kill young protesters. NGO's impotently complained to the World Bank about the decision of its arm, the International Finance Corporation (IFC), to establish the Niger Delta Contractor Revolving Credit Facility in conjunction with Shell. The IFC did not bother to talk to a single local community about a scheme, which is supposed to provide Nigerian sub-contractors of Shell with credit intended to relieve poverty. Shell, of course, is utterly distrusted by the denizens of the Delta.

"Essential Action and Global Exchange" has issued a seminal report titled "Oil for Nothing - Multinational Corporations, Environmental Destruction, Death and Impunity in the Niger Delta" (January 2000). They describe gas flaring, acid rain, pipeline leaks, health problems, loss of biodiversity, loss of land and other resources, malnourishment, prostitution, rape, and fatherless children. Oil companies, says the report, refuse to compensate the locals, or clean up, break their promises, lie to the Western media, finance agents provocateurs to provoke protesters and break up peaceful demonstrations.

But this may be going too far. American oil firms and Royal Dutch/Shell have collaborated fully with NGO's since the public outcry following the execution of Ken Saro-Wiwa, a prominent Nigerian environmentalist and author in 1995 (though not so their Italian and French counterparts). Activists in the Niger Delta often resort to kidnapping, smashing oil installations, and even attacking off-shore rigs. Security guards are a necessity, not a luxury.

Shell alone has poured $200 million into the local economy, administered by its "development teams" in collaboration with recipient communities. "The Economist" reports that less than a third of the 408 projects have been a success. Micro-credit schemes run by women did best.

Some of the projects were the outcome of extortion by kidnappers - others dreamt up in corporate headquarters with little regard to local circumstances. But Shell is really trying hard.
The Nigerian government has asked the Supreme Court last year to rule how should off-shore oil revenues be divided between the federal authorities and the 36 states (only 6 of which, in the southeast, produce oil). The 1999 constitution calls for 13% of all onshore oil revenues to be allotted to the states. But it is mum about offshore oil (the bulk of Nigeria's production).

Northern states have already threatened to withhold agricultural produce from the south should the Supreme Court plump in favor of the oil producing states. Justice, in this case, may well provoke the disintegration of Nigeria.

B. Morocco

The ubiquitous Kofi Annan, Secretary General of the UN, is set to decide, by mid February, the fate of oil exploration off the disputed coast of Western Sahara. A US chemicals and oil exploration firm (Kerr-McGee), in conjunction with the French Total-FinaElf, have signed much derided reconnaissance agreements, pertaining to the disputed region, with Morocco in October last year.

Morocco has occupied West Sahara since 1975. It has moved hundreds of thousands of troops and civilians to the area in an effort to dilute the remaining autochthonous population. A fortified wall was constructed along the entire border and it was mined. Morocco persistently obstructs the implementation of a referendum about independence it agreed to with the Polisario in 1991. The original inhabitants of this region, the Sahrawis, have set up a government in exile in a tent city in Algeria. The Polisario, the Sahrawis freedom movement, is weakened by decades of warfare and diplomatic failure. The Sahrawi self-styled "president" wrote to UN envoy, James Baker III, and to President Bush, to warn them of the consequences of this "provocation". The Sahrawis also demanded from the EU to cancel the "illicit and illegal" contract between Total-FinaElf and Morocco.

The reconnaissance agreements are part of a concerted Moroccan policy to relieve the country of its wrenching dependence on oil imports. Morocco's annual oil bill is close to $1 billion. King Mohammed VI himself is behind this strategic move. In August last year, on his birthday, he announced a major discovery (since discredited) in Talsint, 100 km. (60 miles) from the Algerian border (he called it "God's gift to Morocco"). More than 10 exploration licenses have been granted last year alone - 25% of the total. The law has been modified to allow for a 10-year tax break and to limit the government's stake in new oil ventures to 25%.

But major finds are the exception in an otherwise disappointing quest which dates back to 1920. Spain and Morocco both claim the waters opposite Morocco's coast. The Moroccan government exchanged verbal blows with its Spanish counterpart after it granted prospecting licenses to a Spanish firm opposite the Moroccan coast.

As opposed to Morocco, Western Sahara is estimated to contain what the US Geological Survey of World Energy calls substantial gas and oil fields. "Upstream" reports that previous attempts to find oil, in the 1960's, in collaboration with Franco's Spanish government, floundered. Gulf Oil, WB Grace, Texaco, and Standard Oil withdrew as political tensions increased. Other, lesser, American firms developed tiny fields there. Later, in the late 70's both Shell and British Petroleum abandoned exploration, having reached the conclusion that extraction is justified only if oil prices climb to $40 a barrel.

The Sahrawis quote a UN resolution (A/res/46/64 dated December 11, 1991) which says that "the exploitation and plundering of colonial and non-self-governing territories by foreign economic interests, in violation of the relevant resolutions of the United Nations is a grave threat to the integrity and prosperity of those Territories."

Thus, once again, oil companies find themselves supporting an oppressive and brutal (but ostensibly "stable") regime against local communities with political and ethnic grievances. It seems to be a pattern. Oil companies cosied up to homicidal dictators in Burma, East Timor, Iran, Iraq and Nigeria, to mention but a few. As most Sahrawis are now in refugee camps in Algeria, they are unlikely to benefit from any potential find. Future oil revenues are likely to buttress Moroccan rule and enrich members of the Moroccan elite. The (undisputedly Moroccan) Talsint concession is co-owned, according to the BBC, by relatives of the King and the chief of police.

The politically incorrect Operations Manager of Lone Star, the joint American-Moroccan Talsint exploration company, is quoted by the BBC as wondering (about the internally displaced people of Talsint): "Why should the people of Talsint get more money in their pockets? It's just by chance they're living on top of what appears to be valuable oil and gas reserves."
Such sentiments go a long way towards explaining why oil firms are so hated and why they so often contribute to instability, abuses, and poverty, despite their best interests. Perhaps they better divert the millions they throw at local communities - to educating their staff. Sometimes, development is best begun at home.

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