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Banking on Disaster

08.25.2000 | POLITICS

Over the past few years, large corporations have had to clean up their act. Or rather, they have had to appear to be cleaning up their act. The only people who have really been cleaning up are their PR agencies.

The World Bank, like the international companies and military dictators which it subsidizes, is doing its best to appear more benign. During the 1980s, it attracted international criticism for projects which were massively destructive to the environment and which hurt local people.

Over the past six years, the money which the organization spends on the environment has plummeted. A US government white paper has shown that the World Bank's spending on the environment dropped from 3.6% of its overall budget in 1994 to just 1.02% in 1998. It dropped by a further 32.7% the following year.

To understand how little the World Bank has really changed, one has only to look at the recently approved Chad-Cameroon oil pipeline project. The Environmental Assessment for the project runs to an excruciating 19 volumes, yet still leaves many important questions unanswered.

The World Bank has presented the project as an opportunity to help one of the poorest countries in the world. Yet a closer look shows that its most likely result will be an environmental mess and a huge subsidy for three large oil companies. The largest of these, Exxon, has revenues of around $130b a year, about 26 times greater than that of Chad.

The total cost of the project will be $3.7b, most of which will be borne by the companies concerned, Exxon, Chevron and Petronas. The World Bank has only contributed $193m; however, the oil companies would not have been able to raise the rest of this without the World Bank's backing. The money will be used to develop 300 oil wells in Chad, build a 1070km (650 mile) pipeline through Cameroon to the Atlantic Ocean, and set up an off-shore terminal facility.

Chad stands to gain about $2b in oil revenues over the next 25 years, while Cameroon will get about a quarter of this figure. There is no doubt that this money is badly needed: social indicators in Chad are among the lowest in Sub-Saharan Africa. Per capita income is just $230 a year, life expectancy at birth is 49 years, and access to safe water is limited to about one fourth of the population. Cameroon's per capita income is ten times greater, but still only one fifteenth that of the US.

The World Bank claims that the main justification of the project is that the oil money will help to raise the standard of living of average Chadians:

"With increased revenues, the government would be in a position to target poverty through increased investment in social services and infrastructure. For neighboring Cameroon, with dwindling off-shore petroleum reserves, the project would generate important revenues for priority expenditures and help to attract more foreign investment." However, it is dishonest of the World Bank to claim that this project will actually help poor people in Chad and Cameroon, since in both cases, the government will end up controlling much of the money directly. Chad's track record is so bad that for several years, foreign donors did not trust the President to handle foreign aid honestly, and insisted that the country's treasury be run by a Swiss company.

Direct revenues from the project in Chad will go into an off-show escrow account. However, only 4.5% of this money will go towards development programs for the oil producing region. All the indirect revenues (taxes, customs duties and fees), including profits from future oil field development will go directly to the government. Although a committee will theoretically supervise this, half the people on the committee will be appointed by the government itself.

According to Peter Rosenblum, Associate Director of Harvard Law School Human Rights Program:

"Oil will not lead to development in Chad without real participation, real transparency, and real oversight, none of which currently exists." In Cameroon, the situation is little better. According to Transparency International, a non-profit corruption watchdog, Cameroon is the most corrupt nation in the world, and most of its own oil wealth has long since disappeared into the off-shore bank accounts of the criminals who run the country. In 1995 the World Bank itself admitted that the government had little commitment to reducing poverty. In any case, the $60m a year that the country will get from fees for the pipeline is largely earmarked to pay off foreign debts, much of which is owed to the World Bank itself.

An essential part of World Bank lending procedures is consultation with local people and NGOs. However, according to "Voices from Chad", August 1999, the public "consultations" that the World Bank held were nothing of the kind.

"They resembled a political party's meetings where only propaganda is presented. The oil exploitation was depicted as something positive, with no mention of environmental risks or the rights of local populations. Pretty video films were shown to distract the population, the majority of which are illiterate and do not understand what is happening." Thus the World Bank's claim that its Environmental Assessment was based on consultation with, and with the approval of, the public, is hollow.

One of the most basic problems is that in both Chad and Cameroon there is little scope for individuals who oppose the project to make their voices heard. Amnesty International reports that unarmed civilians have been massacred in the oil-producing region over the past couple of years. Even the US State Department, which normally feels quite comfortable dealing with dictatorships, has qualms about the Chad government.

Nor are the oil companies themselves being particularly open. Exxon has refused journalists (including a German television crew) access to its facilities in Chad, while an Exxon guard shot dead a peasant who got too close.

One final hope might have been that the project would at least provide employment. About 2,000 people will be needed to build the oil wells and about 800 people will be working in Chad on the pipeline. However, once the oil fields have been developed, only 400 to 500 people will be needed to keep the operation going. There will therefore be a short-term unsustainable boom in the area, followed by almost no long-term job creation.

Given that the oil companies will be the main beneficiaries of the project, one might expect that they would be willing to play their part in reducing the environmental damage which it creates. However, the chances of this happening are fairly slim. Exxon, the largest player, has a poor environmental track record (most glaringly in the case of the Exxon Valdez disaster, and the way in which this was handled). The company's attitudes can be seen in the following quote from its CEO:

"Poor developing countries cannot afford environmental protection. If they insist on such measures, foreign investment might go elsewhere." (Wall Street Journal, October 14, 1997). The project will create three main environmental problems, none of which has been properly addressed.

First, construction into virgin forest will put increasing pressure on the non-human population. Chimpanzees and other large mammals are already being wiped out in this region because of the demand for "bushmeat". There are only 120,000 chimpanzees and 50,000 gorillas left. According to Jane Goodall, all three species could be extinct in the wild within the next twenty years. As workers move in, it is inevitable that more of these animals will die.

The World Bank's Environmental Assessment recommends that oil company employees should be banned from hunting for bushmeat while they are on the job, or while they are working or living in company housing. However, typically it is not company employees but local people who do the hunting. Company employees provide the market, while the company itself provides access roads and vehicles.

A second danger is leakage from the pipeline. Although a leak-detection system will be put in place, up to 8,000 litres of oil could leak out into the forest per day without even being detected. Because the pipeline is underground, leaks will be difficult to find and to repair. A major leak could have repercussions which go way beyond the immediate environment, since the pipeline crosses seventeen major rivers and runs close to the Sanaga, one of the most important river systems in West Africa.

The third area of concern is the danger of a major spill. Oil spills in the Nigerian pipeline are quite common, since people drill into the pipeline to steal oil.

Similar projects in the US are required to have a proper plan for dealing with an emergency oil spill. However, the Cameroon pipeline does not have one, in direct violation of the World Bank's own regulations. According to the US-based Environmental Defense Fund (EDF), there is a clear need for such a plan:

"Responding to a major oil spill is a complex and massive undertaking requiring numerous ships and equipment, effective institutions, and trained personnel... Chad and Cameroon are poor countries with limited resources to respond to a major oil spill." The Environmental Assessment includes an outline of such a plan; however, this is seriously flawed: for example, it suggests using chemical dispersants on an oil spill, despite the fact that the oil that will be produced is much too viscous for these to work. Indeed, the fact that mechanical methods will have to be used to clean up any oil spill highlights the need for a proper assessment of Cameroon's capacity to actually do this.

Quite apart from the ecological consequences of a major spill, the issue is of critical importance to Cameroon's economy. According to a recent study by the University of Warwick in the UK, the value of the renewable resources along the Atlantic coastline which would be put at risk by a major spill are 27 times greater per capita than the money which Cameroon is getting in fees from the oil consortium.

When a spill does happen, it is unlikely that anyone will be properly compensated. The track record of oil companies in the region is appalling. In 1994, Shell had to close its operations in Ogoniland because of violent protests against its operations. Nine community leaders who organised the struggle were subsequently executed by a military court. More recently, villagers in Delta State, Nigeria, have had to use violence to demand compensation from Mobil Oil, following a series of major oil spills which have not been properly dealt with. According to a local villager:

"Life has been unbearable. The oil spills which occur often damage the little farmlands we have. Our vast water resources are daily polluted... so bad is the pollution that in some of the rivers and ponds you can hardly get a living organism." The Environmental Defense Fund believes that the decision to convert a single-hulled oil tanker into the main floating storage and offloading vessel is a further mistake. This is the same kind of vessel as the Exxon Valdez, which damaged Alaska in 1989.

Either deliberately or through massive negligence, the World Bank has set this project up in such a way that the only people who have any realistic chance of gaining anything from it are the oil companies, the Bank itself, and the criminals who run Chad and Cameroon.

About the Author
Dr. Paul Kail has a Ph.D. in neuroscience from Cambridge University and is founder and Director of the Animal Consciousness Foundation, which can be reached via
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