The oil and mining industries are facing a global epidemic of financial scandals, with billions of dollars in revenues unaccounted-for in some of the world’s poorest countries, according to a new report by Global Witness.
Based on extensive investigations, Time for Transparency focuses on five countries - Angola, Congo-Brazzaville, Equatorial Guinea, Kazakhstan and Nauru. It shows that secrecy about revenues paid to governments by oil and mining companies has abetted the disappearance of vast sums from the public purse. The result is entrenched poverty and instability, which can lead to failing states and war.
“These scandals could not have happened if companies had been obliged to publish their payments to governments, and governments to publish their earnings,” said Global Witness campaigner Gavin Hayman. “But leading countries and companies are doing next to nothing, and revenues that should be used to reduce poverty go on being misused or wasted.”
Time for Transparency reveals that:
· In Angola, where a quarter of oil revenues are unaccounted for each year, President Dos Santos has been keeping large sums of money in secret bank accounts abroad.
· While trying to undermine a rival, Kazakhstan’s President Nazarbayev inadvertently led investigators to $1 billion in state funds that he had placed in secret accounts abroad ‘in the interests of the country’.
· In troubled Equatorial Guinea, whose President Obiang says oil revenues are a ‘state secret’, controversy has arisen over payments by oil companies into an account in a private US bank. The same bank has handled the purchase of luxury homes for Obiang and his brother, an alleged torturer, which they insist were bought with their own money.
· After years of meddling in Congo Brazzaville by disgraced French oil company Elf, its successor Total has just agreed an opaque new financial deal with the government.
· Phosphate mining revenues on the tiny Pacific island of Nauru have been squandered and the country is becoming a bankrupt wasteland that faces extinction as a state.
The only serious international effort on revenue transparency, led by United Kingdom, has been so watered down by intransigent oil companies that it is unlikely to solve this global problem. The report calls instead for companies to be made to disclose their payments to states via laws, stock market rules and accounting standards. This would cost little, protect companies’ reputations and create fairer competition.
At the same time, the World Bank and IMF, other lenders, donors and export credit agencies should require transparency of oil, gas and mining revenues from governments that depend on them, as a condition of any financial support.
For further information, call Gavin Hayman, Sarah Wykes or Diarmid O’Sullivan on +44 (0)207 561 6361/6262/6363, +44 (0)7957 142 121 or +44 (0)7971 064433.
Editor’s notes:
(1) Global Witness focuses on the links between the exploitation of natural resources and the funding of conflict and corruption. It is non-partisan in all its countries of operation. Global Witness has been co-nominated for the 2003 Nobel Peace Prize for its leading work on ‘conflict diamonds’.
(2) Global Witness is one of the founder members of the Publish What You Pay campaign, which was launched in June 2002 and now has more than 190 members (see www.publishwhatyoupay.org). The coalition calls for stock market and international accounting rules to require oil, gas and mining companies to disclose their net payments to governments for resource access on a country-by-country basis. The coalition believes that revenue transparency is an essential condition for alleviating poverty, promoting just and equitable development, improving corporate social responsibility, and reducing corruption in many resource-rich developing countries.
(3) In addition to requiring companies to disclose their revenues, it is important to increase the transparency of government revenue streams from production sharing agreements and state-owned companies. Global Witness is calling for the imposition of appropriate conditionality on relevant bilateral and multilateral development assistance and loans, resource-backed loans from banks, and export credit agency funding.
(4) The UK Government has launched a purely voluntary initiative to encourage disclosure of revenues by companies and governments called the Extractive Industries Transparency Initiative. More information is available at: www.dfid.gov.uk. Whilst a useful first step, Time for Transparency shows that this voluntary approach will not work in the majority of countries where it is most needed because political and business elites have major vested interests in avoiding transparency and are prepared to retaliate against companies that declare revenues voluntarily.
(5) Transparency International’s Global Corruption Report 2004 will be published tomorrow (25 March 2004) at www.globalcorruptionreport.org. It also includes a focus on transparency of revenues and corruption in the oil sector.
Press Release / March 24, 2004