"Oil firms secretly finance crooked regimes"

by Charlotte Denny, economics correspondent
Wednesday March 24, 2004
The Guardian

Major oil companies are still making secret payments to repressive regimes, one year after Tony Blair put his personal authority behind a British-led voluntary disclosure code for the industry, according to a new report from London-based lobby group Global Witness published today.

Corruption is flourishing in desperately poor countries such as Congo Brazzaville, Equatorial Guinea and Angola as the dividends from oil continue to be appropriated by rich and powerful elites.

"The voluntary approach will not work in the majority of countries where it is most needed," the report says. "Political and business elites currently have a vested interest in avoiding transparency."

The report examines three African countries where oil, far from proving a blessing to impoverished populations, has arguably made their lives worse by providing the funds to keep authoritarian regimes in power.

· In Congo Brazzaville, the petro-state most closely associated with the dirty dealings of the former French state oil company Elf Aquitaine, the government is entering into ever more tortuous deals with the oil industry to avoid financial scrutiny from the World Bank and International Monetary Fund and its own citizens.

·In Angola, where a quarter of the country's oil revenues are still unaccounted for each year, the state oil company, Sonagol, continues to receive secret signature bonuses from western oil companies which are hidden in offshore bank accounts.

· In Equatorial Guinea, one of the most criminalised states in the world, companies are lining up to do business with the brutal regime of President Obiang Nguema, who has hundreds of millions of dollars in a bank account just down the road from the headquarters of the IMF and World Bank in Washington.

Congo Brazzaville has been saddled with $6.4bn (£3.4bn) in overseas debts, as a legacy of Elf's strategy of influence peddling, bribery and obscure off-shore deals, despite being the fourth-largest oil producer in sub-Saharan Africa.

Global Witness says the tradition of secrecy surrounding oil income continues under the government of Denis Sassou-Nguesso, with about $250m in oil revenues unaccounted for each year. Despite promising to clean up the industry as a condition of receiving debt relief from the World Bank and the IMF, government accounts show lower than expected revenues from oil.

Taxes and signature bonuses from western companies including TotalFinaElf, Agip and Chevron appear as zero in Congo Brazzaville's accounts. Industry sources interviewed by the lobby group estimate that the companies are paying about 35% of total sales to the government, which last year should have netted it $800m in revenue instead of the $650m it recorded.

In Angola, a recent IMF transparency drive has confirmed accusations in a previ ous Global Witness report that up to $1.7bn a year went missing from the state coffers between 1997 and 2001.

The wholesale looting of Angola's oil reserves fuelled the vicious civil which finally ended in 2002.

Although the government of Jose Eduardo dos Santos has promised the IMF that oil revenues will be dealt with more transparently in future, Global Witness has evidence that it has recently started using complex special purpose vehicles based in tax havens to move oil money around and pay overseas business partners.

Almost none of the income from Sonagol, the state-owned oil company, touches Angolan soil, despite national laws requiring oil money to be managed by the central bank.

The most sorry case highlighted in the report is that of Equatorial Guinea, a country described by one French academic as a completely criminalised state.

On paper it ought to be one of the richest countries in Sub-Saharan Africa, with its 500,000-strong population sharing oil revenues of $500m last year. Instead it languishes third from bottom of the United Nations' human development index, while the oil revenues fund one of the continent's most repressive regimes. Most of the oil money appears to have ended up in an account at Riggs bank in Washington, which the LA Times reports is controlled di rectly by President Obiang.

The report says that western companies have made payments directly into the account.

"These scandals could not have happened if companies had been obliged to publish their payments to governments, and governments to publish their earnings," said Gavin Hayman of Global Witness.

"But leading countries and companies are doing next to nothing and revenues that should be used to reduce poverty are being wasted."

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