World Bank: U.S. Backs Off Third World Energy Plan

The Reagan administration recently announced that the U.S. government would not take part in a World Bank project to increase oil production in non-OPEC, developing countries.

Robert McNamara, president of the World Bank, last year proposed the idea of a Third World energy affiliate to the Bank, which would lend U.S. $25 billion over the next five years to Third World governments. The Carter Administration, like governments of most industrial countries, was supportive of the idea.

Not so Reagan. "At this time, the United States can neither support the creation of nor participate in a new energy lending institution affiliated with the World Bank," said Colbert King, U.S. executive director of the World Bank, at a meeting of the board of executive directors in late February.

King's statement gave no explanation for this decision, but he told Multinational Monitor the "primary factor" was "the policy review" currently underway within the Administration over the U.S.' proper role in multilateral institutions. The Reagan Administration is "taking into consideration the growth of institutions, the size of future replenishments, and the nature of U.S. interests."

Lack of support from the U.S. may doom the proposed energy affiliate. "In our eyes, it is difficult to see the discussion going very much further without U.S. support," says Frank Vibert, adviser to the senior vice president of the Bank.

The decision of the Reagan Administration may also have dire consequences for the West. One of the purposes of the World Bank's proposed affiliate would be to reduce the debt burden of Third World countries whose foreign debts have skyrocketed along with rising oil prices. The possibility of a Third World country defaulting poses increasing risks for Western banks (see Multinational Monitor, April, 1980).

Why would the Reagan Administration not endorse the World Bank proposal, if its design is to alleviate some of these pressures on the financial system? "There is some feeling among more conservative elements in the Administration that you shouldn't encourage government [energy] production at all," explains international oil economist Michael Tanzer. "They feel you should leave it to the oil companies."