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Hot on oil money's trail

Movement wants disclosure of payments to Africa, where many suffer despite a boom.

By Tom Knudson - Bee Staff Writer

Published Thursday, June 19, 2003

This story follows The Bee's special report, "State of Denial," published on April 27.

A Stanford University professor and an international relief agency have teamed up to call for full disclosure of payments oil companies make to sub-Saharan African nations, which supply 12 percent of America's oil imports.

In a report released this week -- as part of a growing worldwide movement called "Publish What You Pay" -- the two seek to hold multinational oil corporations and governments responsible for living conditions in Africa by reducing the waste and corruption that can accompany oil contracting.

"If we don't know what is paid to governments, we can't track what governments actually do with oil money," said Terry Lynn Karl, a Stanford political science professor and co-author of the report. "We have no way to hold them accountable. And their own citizens have no way to hold them accountable."

Africa's pain may seem a world away from California, but last year, Africa was California's fourth-largest source of foreign oil -- behind Iraq, Saudi Arabia and Ecuador, according to the U.S. Energy Information Administration.

In 2002, 21.5 million barrels of African crude -- worth approximately $578 million -- were delivered to the Golden State, up from 3.8 million in 2001.

California, like the rest of the United States, increasingly relies on such oil. Thirty percent of petroleum refined in California now comes from overseas, up from 6 percent in 1990.

An April special report in The Bee -- "State of Denial" -- examined poverty and pollution plaguing oil development in Ecuador's Amazon rain forest, the source of 27 million barrels of oil refined in California last year.

This month, staff members from the California Energy Commission and Air Resources Board joined forces in a report that urged this state to reduce its dependence on foreign oil.

"We can't continue this petroleum dependence," said Claudia Chandler, Energy Commission spokeswoman. "It's ruining our economy, not to mention what it's doing to other countries."

The report released Tuesday by Catholic Relief Services -- "Bottom of the Barrel: Africa's Oil Boom and the Poor" -- explores the relationship between oil development and poverty, civil war and human rights abuse in West African nations that are in the midst of an offshore oil boom.

"Oil production on the continent is set to double," the report says. "The United States will soon be importing 25 percent of its petroleum from the region. Over $50 billion, the largest investment in African history, will be spent on African oil fields by the end of the decade."

So far, though, the region remains one of the poorest and most conflict-ridden on earth.

"Petro-dollars have not helped ... reduce poverty," the report says. "In fact, in most cases, they have actually exacerbated it."

Karl, a senior fellow at Stanford's Institute for International Studies, said oil backfires on the poor because it concentrates political and economic power.

"It's very simple: There's too much money in oil," she said. "Everybody wants a piece of the action. And the most powerful get a piece of the action."

Just over 80 percent of African oil shipped to California last year came from Angola, which takes in an estimated $3 billion to $5 billion a year in oil revenues but remains mired in misery. Sixty-eight percent of Angola's 13 million people live in poverty. Two-thirds have no potable water. Average life expectancy is 45.

The report suggested much of Angola's oil wealth is siphoned into private coffers. The U.S. State Department agreed, in its 2002 "Angola Country Report on Human Rights Practices."

"The country's wealth continued to be concentrated in the hands of a small elite who often used government positions for massive personal enrichment, and corruption continued to be a common practice at all levels," the State Department reported. "An estimated 50 percent of state expenditures were not reflected in the official budget."

Angolan President Jose Eduardo dos Santos, in a speech last year marking the country's independence, said his country is working hard to tackle poverty and corruption.

The Catholic Relief Services report charged that in Angola, the Republic of Congo and elsewhere, oil money has paid for arms and helped fuel civil wars and domestic turmoil.

"There needs to be a way to channel the promised bonanza of oil revenue to break the cycle of poverty and violence," said Ken Hackett, executive director of Catholic Relief Services.

Tracking oil dollars is the objective of the "Publish What You Pay" movement, which seeks to compel oil companies to disclose all taxes, fees, royalties and other payments made to governments. Although the concept began with activist groups, it has gathered support from 10 major investment groups managing $600 billion in assets, and from British Prime Minister Tony Blair.

Karl said Blair's interest, an ongoing World Bank review of its role in oil development, and the debate over what to do with Iraqi oil revenue "make this an absolute opportune moment" to push for more accountability.

"People and governments rob in oil exporting countries because there is simply no reason not to," said Karl. "In Angola ... we can't even figure out how much money the government has actually received from oil companies."

Angola's largest oil producer and a major importer to California is ChevronTexaco, headquartered in San Ramon. This week, a company official agreed with the transparency concept in principle, but said such reporting must remain voluntary and should include reporting by governments as well.

"Transparency is one of the fundamental values which guides ChevronTexaco's business conduct," said Sam Laidlaw, the company's executive vice president for business development, speaking at a conference in London on Blair's transparency initiative.

But Laidlaw added that financial transparency, by itself, will not "lead to an end of corruption. Political will ... and public accountability are key."

Not long ago, British Petroleum -- another importer of African oil to California -- voluntarily revealed it paid a multimillion-dollar "signature bonus" to Angola's national oil company for exploration and drilling rights.

The disclosure was controversial.

"No other oil company followed suit and the local powers let it be known that they were displeased," The Economist magazine reported last month.

The solution, Stanford's Karl maintains, is mandatory reporting.

"All these companies must disclose what they do," she said. "If it's voluntary, some will do it and some won't. And those who won't will have a competitive advantage."




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