Politics of Poverty

Helping to end secret oil deals and corruption

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Oil rig under construction at the pier in Takoradi, Ghana. (Photo: Jeff Deutsch / Oxfam)

The IMF, the World Bank, and donors must better use their leverage to promote transparency in the oil sector.

Last week the IMF announced that it would be providing technical assistance to Equatorial Guinea, an oil-rich African country ruled since 1979 by one government – really, a family – that is notorious for its corruption, secrecy, and human rights abuses. Just last year, in fact, President Obiang’s son, Teodorin, was convicted by a French court of corruption and the court demanded the confiscation of assets including a $124 million mansion near the Champs-Élysées.

In announcing the so-called “staff monitored program,” the IMF disclosed that the government of Equatorial Guinea had shared all of its oil contracts – oil is the lifeblood of the regime – with the IMF as a prior condition for the program. Ordinary Equatoguineans – the vast majority of whom are very poor – have never seen these deals because they’ve never been publicly disclosed. And good luck asking questions – the country’s civil society is weak to non-existent and the government regularly jails activists, journalists, and even cartoonists.

Why should the IMF have access to contracts when the public doesn’t?

Good question. Around the world, citizens are kept in the dark about the terms of the deals their governments make to sell public resources under the ground – oil, gas, and minerals – to companies in order to boost revenues. That, though, is changing. Momentum for the new global norm on contract disclosure is growing as evidenced by Oxfam’s Contract Disclosure Survey (join us for the DC event on June 20th).  With public support of many governments and key oil and mining majors, in response to demands from citizens in resource rich countries, this is no longer a radical idea. Without full disclosure of oil and mining deals, citizens cannot hold governments to account for how the resources these deals generate are being used.

Are donors behind the curve?

While the IMF has stated support for contract transparency since 2005, and has sometimes used its leverage to get disclosure (see a 2006 debt relief deal with Congo-Brazzaville for example), over a decade of rhetorical support has often not translated into concrete results on the ground, including cases where they have leverage. Like Equatorial Guinea, neighbors such as Cameroon, Gabon, Congo-Brazzaville and Chad are also in economic distress with the collapse of global oil prices. Last year, the IMF inked bailout deals with Gabon ($642 million) and Cameroon ($666 million), both oil-rich, authoritarian regimes with poor human rights records. In both cases, the IMF failed to require disclosure of oil contracts as part of the package – a missed opportunity at a point of significant leverage. In Gabon, anti-corruption and transparency activists who’ve tried to bring more transparency to contracts and oil revenues, including those in the Publish What You Pay coalition, have been arrested and intimidated.

Beyond bailout programs, the IMF has increased its technical assistance to resource-rich countries through a multi-donor trust fund that helps countries, among other objectives, strike better deals with oil and mining companies. It’s not apparent, though, that the IMF is using this technical assistance as a tool to promote more contract transparency, which would certainly help towards addressing corruption – an issue commendably high on the IMF leadership’s agenda. In April, the IMF Executive Board adopted a new framework on governance and corruption and IMF Managing Director Christine Lagarde has rightly said implementation is key and that an IMF review of past work in the area found “that implementation was uneven.” Contract transparency in the oil sector is great place to get implementation of the new framework right.

The IMF is not alone. The World Bank also funds technical assistance projects with governments trying to better govern their oil, gas and mining resources. In Equatorial Guinea, the World Bank helped the government with the oil sector as far back as 1992 – yes, President Obiang was still the “big man” back then – and didn’t use their leverage then to get the oil contracts out either. More recently, the World Bank has implemented large technical assistance projects in places such as Ghana and Kenya, but has failed in both countries to require contract disclosure prior to giving assistance. While Ghana’s oil contracts are now all publicly available as of early 2018 – thanks to a concerted campaign from Ghanaian civil society groups such as the African Center for Energy Policy – Kenya’s oil deals remain shrouded in secrecy even as the country debates how to share oil revenues with local citizens. As my Oxfam colleague, Gilbert Makore, said in Kenya’s Daily Nation: as the “rightful owners of petroleum resources, it is important for citizens to know the conditions under which their resources are being traded and exploited.”

The World Bank’s private sector lending arm, the International Finance Corporation (IFC), has required contract disclosure since 2012 for oil, gas, and mining investments but compliance has been spotty. The IFC has invested in the Kenyan oil sector but the contracts remain undisclosed – despite the policy requirement and support from Tullow Oil and others. While donors may be lagging in practice, some oil companies are stepping up. Kosmos Energy, a US based company and a leader in the Oxfam’s Contract Disclosure Survey, has disclosed all of their oil contracts – even in Equatorial Guinea.

With donors pushing “domestic revenue mobilization” (DRM) – urging developing countries to increase government revenues to help meet their Sustainable Development Goals – we are going to see more “aid for DRM” and more technical assistance to resource-rich governments. Oxfam recently joined the Addis Tax Initiative (ATI) – a collective of donors and partner countries committed to improving DRM. As an ATI Supporting Organization, we’ll be watching so that ATI donors not only meet their quantity goals but do so in a way that engages citizens, promotes transparency, and reduces inequality.

I recently wrote about how donors trying to assist resource-rich countries were facing a “mid-life” crisis and recommended a twelve-step program. Using the leverage of technical assistance and other aid to increase transparency of oil deals – a key demand of civil society activists in resource-rich countries around the world – is the first step and a great way to start on the road to recovery.

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