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A pipeline for the poor

by Sirocco Fri Apr 21st, 2006 at 01:12:32 PM EST

If you don't want your contemporary to get ahead, give him a loan. ~ Chadian proverb

Don't let a dog guard the ribs. ~ Chadian proverb

A central African country twice the size of France, its former colonial power, Chad is almost the epitome of obscurity. Until last week, its main claim to fame was having some 200,000 Darfur refugees on its soil.

But now there are other uninvited guests from Darfur to worry about. Reeling from last week's penetration of the capital by allegedly Sudan-backed rebels, President Ibriss Déby is busy stocking up on weapons. The delivery is financed by revenue from the oil which since 2003 has been flowing in a $4,2 billion, 1070 km pipeline linking Chad's southern oilfields to terminals in Cameroon, thus also marrying the world's largest multinational oil company, Exxon-Mobil, to the world's most corrupt regime. The World Bank, to its regret, was the matchmaker. It is a sordid story.

See also Oil or Democracy by play jurist


President Déby blames the World Bank for not being able to buy more hardware, the BBC reports:

"The only one responsible for our economic difficulties is the World Bank. The crisis was provoked by the World Bank turning off the tap to our finances."

The World Bank froze Chad's oil payments after the government reneged on an agreement to ensure oil revenues were not stolen were altered last year. [Sic]

The Bank, led by Paul Wolfowitz, also halted $124 million in loans. And rightly so. For what it should in fact be blamed for is to have enabled the pipeline project in the first place by financing it with credit guarantees and $200 million. In so doing it ignored the pre-lending assessment of its own commission: that the project would breed poverty, inequality, environmental degradation, and conflict.

The latter is familiar to Chad. Civil strife marked the three decades from independence to 1990, when Déby marched in from Sudan to oust the dictator Hissene Habré. Having since won two flawed elections and quelled one insurgency, he is to run again on May 3 after pushing through constitutional changes abolishing the two-term limit. His record so far?

Eighty percent of a population the size of Sweden's are illiterate. The same proportion get by on less than $1 a day. Or they do not: life expectancy is below 45 years and one in five dies before the age of five.

It's not just the President's fault, of course. Like many of the world's most impoverished countries, Chad is equatorial as well as land-locked; as if that were not enough, it is cursed with oil. By January the greasy stuff had earned Chad $399 million in gross direct revenues. It had also poisoned the ground water, ruined the hunting fields of pygmies, and destroyed agriculture in the Doba Basin — one of the desert country's few fertile areas, now morphing into a miniature Niger Delta. In addition, it has made the capital N'Djamena — among the sorriest in Africa — a more alluring prize for the rebels determined to seize it one of these days.

The statistics are telling. As Chad moved from an economy based only on cotton and cattle (2002 exports: $197 million) into the club of petroleum exporters, it moved down eight slots on the Human Development Index, to #173 out of 177. In 2004, Chad's GDP grew by 40 percent. This was the last year when the retired got their pensions and a year when the graft of taxes and customs skyrocketed, sending Chad to its current position at the bottom of Transparency International's Corruption Perceptions Index.

In other words, the project came off much as predicted, including by the World Bank's commission and by independent experts. Of the latter, Wolfowitz' predecessor James Wolfensohn (what's up with these names?) remarked upon making his decision: "I think it's important that we have a proper balance between the Berkeley mafia and the Chadians, and I for my part, am more interested in the Chadians."

That interest must have been slightly selective. Otherwise, he would have discovered a lot of Chadians — those organized in human rights- and other NGOs — who ever since the mid-90s had pleaded for halting the project until Chad's government became more accountable. The Chadians to whom he listened were effectively Déby and his shills, who vowed that the oil would serve the "interests of peace in Chad" and benefit the poor.

Whether it has done so is a matter of how 'peace' and 'the poor' are defined. For instance, are Exxon-Mobil, Petronas, and ChevronTexaco among the poor? If so, the pipeline has stricken a mighty blow for the downtrodden, with a consortium of the aforementioned getting nearly 80 percent of the gross total revenue. Counting taxes and royalties it amounts to a fifty-fifty split, which may sound innocuous but is, in fact, a rip-off of a newbie petrostate by wily mega-corporations. It would be a cold day in Hell when, say, Iran or Norway agreed to such a deal.

Meanwhile, in what was hailed as a model for development in Africa, the World Bank ensured that 80 percent of Chad's revenues be earmarked for education, health, infrastructure, rural development, and water management. Ten percent would be deposited in a future generations fund. The law also mandated that royalties go directly into an offshore account and an independent oversight committee — the Collège de Contrôle et de Surveillance des Ressources Pétrolières, or the Collège for short — monitor all spending. This is the arrangement which Chad formally scrapped in December 2005, drawing the World Bank's ire.

In reality, it was undermined long ago. This became clear in May 2004, when Thérèse Mékombé, vice-president of the Collège, blew the whistle at an anti-corruption conference in London. Mékombé, a women's rights campaigner, is one of the civil society representatives who in 1999 begged Wolfensohn for a two-year moratorium on the project. She now reported that the Collège was understaffed, underfunded, and kept in the dark both by the government and the consortium.

Discrepancies appared even before first oil, with $7,4 million in advance royalties embezzled and $4,5 million entrusted the President's son to buy attack helicopters from Taiwan. True, a handsome $48 million has since been allocated to building roads, but the railroadless country has few cars. The contractor is led by Déby's brother.

Investment in the energy sector might have been more useful. There is no national electricity grid; less than 2 percent of Chadians have access to electricity. The sole power supply is oil trucked in from Nigeria and, ironically, Cameroon. The fuel cost represents 90 percent of one of the highest electricity tariffs in the world. In a bid to dispense with the paradoxical import, a Sudanese company, Concorp International, was contracted to extend a 350 km pipeline from a small northern oilfield to N'djamena, the site of the only state power plant. Sadly, the pipeline turned out to be rubbish, to the dismay of the World Bank, which had paid for a brand new generator.

But Déby, if he survives, will get more cash to burn on bungled projects. Encouraged by soaring prices, ExxonMobil is developing five new fields which are safely outside any World Bank management system. A Chad with an oil sector-dominated economy would be a rentier state; one whose finances do not primarily rely on taxes. In such a state the government has less incentive to care about pesky annoyances like the population, unless it happens to be constrained by well-functioning democracy.

Chad, on its part, combines everything that is wrong with African statehood. It has a central government without monopoly on violence within its borders. The territory was demarcated by colonial powers with supreme indifference to socio-ethnic coherence, and harbors more than 200 ethnic groups plus a three-way religious split between Muslims, Christians and animists. Weak on democratic institutions, the state is strong on repression, nepotism, personalism, and corruption. Thus it is also plagued by endemic instability, occasionally spiking in open rebellion by the ruler's disaffected henchmen. These tend to operate from abroad, exploiting the porous borders. "Power comes from the east," they say in Chad.

If Chad is not atypical for sub-Sahara, it does not bode well that the latter is becoming a mainstay of world energy production. It now provides 12 percent of global oil and 18 percent of US oil imports. The US National Security Council estimates that the latter share will reach 25 percent by 2015, surpassing that of the notorious Persian Gulf. Meanwhile, China is plying the waters with increasing fervor.

Let's look at how this has turned out so far. Nigeria, Africa's major oil producer, has earned around $400 billion from oil since 1970. It was revealed last year that past rulers have misused or stolen nearly all of this, over $392 billion. An ongoing US investigation shows that even in Equatorial Guinea, where oil exploitation began just a decade ago, President Obiang — in power since 1979, when he toppled his uncle — has $700m stacked away in an overseas account. (In January he resorted to piracy against a UN ship to supplement his meager income.) Also in the trade is the Republic of Congo, the world's most indebted country. Last year, on a stay in New York to give a 15-minute speech in the UN and be entertained by a US oil corporation, President Sassou-Nguesso and his entourage spent a total of $295,000 at the Palace Hotel. Most of it was settled in $100 bills.

Thanks to everyone involved, and best of luck to Chad.

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Thanks Sirocco for yet another well written and well documented article.  

Chad, like Sudan, seems to be in a corner of the world that is not very well covered by the mainstream media.  A few weeks ago Norwegian TV aired a documentary about Chad and its oil adventure shedding some light on the murky businesses deals between the big oil companies and the Déby government, a very informative documentary indeed.
     

Bitsofnews.com Giving you the latest bits.

by Gjermund E Jansen (gjans1@hotmail.com) on Fri Apr 21st, 2006 at 01:25:23 PM EST
It directly inspired the above. Thank heaven for public service television!

The world's northernmost desert wind.
by Sirocco (sirocco2005ATgmail.com) on Fri Apr 21st, 2006 at 01:27:36 PM EST
[ Parent ]
Second that.

Bitsofnews.com Giving you the latest bits.
by Gjermund E Jansen (gjans1@hotmail.com) on Fri Apr 21st, 2006 at 01:35:54 PM EST
[ Parent ]
Chad is an... interesting place. It's biggest (only?) invention is the technical of Mogadishu vs. US fame.

(A technical is a Toyota landcruiser with a heavy machinegun or a grenade launcher mounted on the truck bed.)

They used them with great success against Libya's high tech army when it invaded in the 80's.

For more reading on the subject see:

http://www.exile.ru/2004-April-05/war_nerd.html

and

http://www.exile.ru/2006-January-27/2006_war_preview.html

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Fri Apr 21st, 2006 at 01:36:25 PM EST
Yeah, a convoy of such is Déby's preferred means of getting around his capital. Shops and stalls are closed down beforehand and anyone nearby is shot on sight. The rebels rely on them too. I didn't know they were a Chadian invention, though.

The world's northernmost desert wind.
by Sirocco (sirocco2005ATgmail.com) on Fri Apr 21st, 2006 at 01:51:54 PM EST
[ Parent ]
GABORONE, BOTSWANA -- More than 80 representatives from African and European nations have begun the final planning conference for exercise Africa Endeavor 06. From April 19-22, military representatives are finalizing communications interoperability tests to be conducted during the U.S.-led exercise, scheduled for July, in Pretoria, South Africa.


African nations in attendance at the Botswana conference include: Algeria, Angola, Benin, Botswana, Burkino Faso, Burundi, Cameroon, Cape Verde, Chad, Ghana, Lesotho, Malawi, Mali, Namibia, Niger, Senegal, South Africa, The Gambia, Uganda and Zambia. .......... Other participants in the four-day conference include the Economic Community of West African States, U.S. Marine Forces Europe, Combined Joint Task Force, U.S. Central Command and the Joint Interoperability Test Command (JITC), Fort Huachuca, Ariz.

The 'exercise' is organised and sponsered by EUCOM (US military European Command). Some European country's will particpate also.(selling equipment?)
The quotes above are from a press-release 19/04/06 by Eucom.(java-script driven window from their mainpage: link above).

Looks like the US and the EU are in Command and Control.... Sigh,.... same old story : we are helping, we fight terrorism and bring democracy and peace.

The struggle of man against tyranny is the struggle of memory against forgetting.(Kundera)

by Elco B (elcob at scarlet dot be) on Fri Apr 21st, 2006 at 02:29:31 PM EST
Having participated in the financing of that project, I can tell you that the presence of the WB was a good thing. The project was done to incomparably better standards than it would have been done otherwise (and it would have been done, make no mistake about that) - environmental, labor, etc... Even the dedicated fund, even if Chad is trying to cheat on it, is an important precedent for other oil producing countries around the world, and it was the WB's participation that made it possible.

I konw that the intent of a number of NGOs is to prevent such projects from happening altogether, but I'm not sure that it is by putting pressure on the WB (or commercial banks) to abandon such projects that that result will be obtained - all that will result is that projects get done by other, less scrupulous parties with much worse standards.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Fri Apr 21st, 2006 at 05:47:42 PM EST
According to the French documentary mentioned by Gjermund above, the project would not have been done without WB guarantees, because too risky in unstable southern Chad (historically the most war-torn part of a war-torn country). This is why Déby worked so hard to persuade James Wolfensohn in spite of WB conditions. He even went to the length of preventing the NGOs from travelling to the meet with Wolfensohn in 2000.

Many sources report the original consortium of Shell, Elf and Exxon to also have required WB participation. (Shell and Elf withdrew because of the risks).

Of course, I defer if you have first-hand information to the contrary.

But in any case, this project has been a disaster for the Doba Basin and a misadventure at best for Chad. The effects in Cameroon aren't wonderful either. One can defend WB participation on consequentialist grounds, but to me that's a bit like Blair's rationale for supporting Bush: it's going to happen anyway, so let's keep a finger on the steering wheel.

The world's northernmost desert wind.

by Sirocco (sirocco2005ATgmail.com) on Fri Apr 21st, 2006 at 06:39:06 PM EST
[ Parent ]
I'm very obviously partial in this, but you do have to take with a grain of salt what SOME of the NGOs are saying about such projects - and they tend to be the ones who communicate most about these projects.

While a number of NGOs have had perfectly respectable goals, others have the very clear and very specific goal to kill all oil projects (because we shouldn't be consuming oil), and will target all parties involved: shaming oil companies was the first step, but now it's moved to the financiers, who are basically asked not to finance any project anywhere that has to do with oil.

What banks have done, with the WB taking a major role in that, was to establish standards that would make these projects acceptable, and enforce these. (The idea is to have the best Western-level standards, i.e. usually the most stringent of EU, US and other international conventions) The big oil companies are playing along, as are some of the big NGOs.

Some NGOs are not, and are trying to demonize the oil sector altogether. Which is about as effective as blaming Colombia and Bolivia for drug consumption in the US...

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sat Apr 22nd, 2006 at 05:43:06 AM EST
[ Parent ]


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