May 1997 · VOLUME 18 · NUMBER 5

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T H E    M O N O P O L Y    M A K E R S

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YAOUNDE, CAMEROON -- Exxon, Shell and the French oil company ELF have teamed up to launch Africa's largest oil development project ever.

The consortium plans to invest $3.5 billion to develop oil fields in southern Chad that are estimated to contain approximately 900 million barrels of recoverable oil reserves. The companies intend to pipe the oil through neighboring Cameroon to the Atlantic coast -- a 600-mile journey that traverses biodiverse forests and politically volatile lands. At the coast, the companies will load the crude on to tankers bound for Europe.

World Bank funding through both the International Development Association (IDA), the lending window for the poorest countries, and the International Finance Corporation (IFC), which lends directly to the private sector, will represent the foundation of the project's financial structure, according to a leaked Exxon document. Although the Bank's $370 million represents little more than 10 percent of overall project costs, Philippe Benoit, the World Bank official who leads project preparation, and his colleagues at the Bank say the oil consortium will not go forward without World Bank support. World Bank participation greatly reduces the political risks for the consortium; because maintaining good standing with the World Bank is a pre-condition for receiving aid and credit from many sources, Chad and Cameroon would be unlikely to interfere with the operations of a World Bank-backed project. The consortium also hopes that the World Bank's imprimatur will attract additional low-cost funding from export-credit agencies and commercial banks. The IFC plans to help the consortium raise about $1 billion in limited recourse debt (debt for which the liability of the parent company is limited).

While World Bank officials are heavily involved in project preparation, the Bank's Board of Directors has not yet approved funding of the controversial project. Critics say project approval would mock the Bank's stated mission of poverty alleviation, and signal that the Bank's new emphasis on cooperation with the private sector will amount to little more than a new corporate welfare program.

SECRETS AND LIES

"Watersheds, protected forest areas and biodiversity are severely threatened by the planned oil and pipeline project," says Louis Djomo, who coordinates the African Forest Action Network (AFAN), a network of 60 West and Central African non-governmental organizations. "We are especially worried about water pollution since the pipeline will cross several of our largest rivers, which are used by local communities for their daily needs." Ogoniland in neighboring Nigeria is a painful example of the devastation of villagers' lands and livelihoods as a result of oil pollution. Drinking water is polluted, fish have disappeared from the rivers and streams and crops have ceased to grow on large stretches of now-infertile land.

Oil consortium representatives insist these environmental dangers will be avoided. In a May 1997 letter to an environmental organization, Exxon emphasizes that it will conduct an environmental and social impact assessment before proceeding with the project. It also points to a World Bank-established Environmental Panel that will assess the project's performance -- though the Panel's reports will not be public.

The affected communities have little to rely on other than the consortium's goodwill. These communities will have difficulty speaking out about environmental and health impacts of the project, given the prevailing political climate in Chad and Cameroon. The U.S. State Department's Report on Human Rights says both governments have committed gross human rights abuses and show little respect for basic civil rights, including freedom of speech.

The oil consortium's actions have not engendered faith among local communities or environmentalists in Chad, Cameroon or the West. Outside of elite government circles, few people in Chad or Cameroon have any detailed information about the project.

"We only found out details about the project from our colleagues abroad," says Samuel Nguiffo, a forest expert and director of Environment and Development, a respected Cameroonian environmental organization. "Our government thinks that regular people cannot deal with information, only those in power can."

"In Chad, the oil issue is closely managed by a single family around President Deby," says a Chadian human rights activist who cannot be named. "Even the ministers have no updated information."

Secrecy pervades every aspect of the project. Exxon will not allow foreign journalists to film or photograph its base camp in southern Chad's remote Doba region. When German journalist Martin Zint contacted Exxon in Germany before embarking for southern Chad, he was told that there were only a couple of trucks at the project site. But when he arrived, Zint discovered an Exxon camp complete with buildings, infrastructure and equipment. "They did not let me visit the installations or take pictures," he says. "They seem to think that as long as there are no pictures, there will be no story."

The companies are tightly managing project information in the United States as well. Exxon has held numerous meetings with U.S. government officials from the U.S. Agency for International Development, the Environmental Protection Agency and especially the Treasury Department, which decides how the United States will cast its vote as a member of the World Bank's board of directors. But company officials have been reluctant to share information with administration officials. "It was odd. Exxon did not even want to release overheads to us, although we requested a copy" after an October 1996 company briefing, says a U.S. government official who does not wish to be named. Other officials at the meeting were surprised that Exxon did not release any written information on the project, not even a briefing paper or a one-page summary.

FUELING CIVIL STRIFE The political economies of Chad and Cameroon do not augur well for an equitable distribution of the oil revenues the countries may earn from the project. Until recently, the Swiss company Coteca controlled Chad's national treasury, according to the British Economist's Intelligence Unit Publications. Foreign donors insisted on the unusual arrangement to alleviate concerns that the country's president would use the treasury as his personal piggybank. The situation in Cameroon is little better, with the Economist Intelligence Unit reporting that the government suffers from a "historic lack of transparency in its recording of trade figures, especially for crude oil exports." Transparency International, an international coalition fighting corruption in international business transactions, ranks Cameroon among the world's top 10 most corrupt nations. Transparency International did not consider Chad because its international business dealings have been limited. Foreign investors have been put off by a vicious civil war that has consumed Chad for 30 years. The causes of the conflict are complex and can in part be traced back to arbitrary map-drawing in the late nineteenth century by France, the colonial power, which threw together populations that had little in common with each other. The war has pitted the largely Muslim North of the country against the Christians and animists who populate the southern agricultural center. Doba is the geographic heart of the southern rebellion against the North.

As the revenues from southern oil fields are pumped to the North, southern demands for greater autonomy are likely to escalate. These demands are likely to be met with greater repression, which could shatter the country's fragile peace.

"There is a lot of talk about the coming oil bonanza in N'Djamena, but Chadian human rights monitors fear that the oil will lead to an increase in repression and human rights violations in the South -- in short, that the Doba Basin will become the next Ogoniland," says Irene Mandeau, who heads Amnesty International's working group on Chad.

A tragic incident in Doba, first reported in 1994, may portend more widespread abuses to come. When Dingamtolem Ajikolmian, a local peasant, heard that an airplane was to land on a nearby field, he decided to take his children to witness what is a rare event in this remote region. He was shot to death in front of his children by the security forces protecting Exxon staff, according to Claudia and Martin Duppel, volunteers from Germany who lived in the Doba region for several years. Local villagers testified that Ajikolmian was a local resident, had never left the village and just wanted his children to see an airplane. But the military chief insisted that Ajikolmian was a rebel, thereby officially justifying the killing and closing the case.

The oil consortium denies any responsibility for the murder, and no compensation was ever paid to the victim's family. Exxon's German office wrote to journalist Zint in February 1997 that the company bore no responsibility for the incident since the shots were fired by a member of the Chadian security forces. The letter added that it was unclear what the man was doing on the airfield, and concludes that "it might have been a misunderstanding between the security forces and the villager, because of language problems."

Language differences may indeed exacerbate tensions in the Doba region. The Chadian security forces, which protect the oil consortium, are mainly recruited from the ethnic group of Chad's president, Idriss Deby. Most of these recruits are Arabic speakers from the North, who do not know the local languages of the South.

Local discontent appears on the rise, according to recent visitors to the area. In poor rural areas where the loss of a small patch of land or a fruit-bearing tree can endanger a family's survival, farmers have already lost houses and fields to prospecting work, construction of the base camp and other project activities. The farmers say they have received inadequate compensation. The fact that the oil consortium's Chadian government supporters are the traditional enemies of the region exacerbates the situation.

"The risk of renewed conflict is clear. All the seeds have been sown and all the ingredients are there to plunge us again into horror," explains the Chadian human rights activist.

Downstream from the oil fields, in Cameroon, political tensions also run high, though the manipulation of ELF and its allies appear likely to keep a lid on a potentially explosive situation. Le Floch-Prigent, the former head of ELF who is now facing corruption charges in French courts, told the French magazine L'Express that he had to "convince the Americans discreetly that the pipeline had to traverse the Francophone part of Cameroon." The French-speaking part of Cameroon is more controlled by allies of Cameroon's president Paul Biya, who has been able to hold on to power for the past 15 years as a result of French intervention and with ELF's support. The English-speaking part of the country, near the Nigerian border, is an opposition stronghold. The pipeline route reflects a French military logic, according to the French La Lettre du Continent. A good road will run along the pipeline, providing rapid access to French forces should France's political allies lose their grip on power.

"There is not going to be a solution on governance in the near future. People are desperate, but want to avoid civil war. The French are behind supporting the status quo," explains a Cameroonian scholar who prefers that his name not be used. "The regime decentralizes problems, but not resources, very effectively. Resources are to be completely controlled by the center. That is the politics of the pipeline." Under present political circumstances, the project will do little but prop up an unpopular and corrupt regime, which even the World Bank cites for insufficient commitment to alleviating poverty.

MIXED MESSAGES FROM THE BANK The World Bank acknowledges the risk that the oil project will contribute to civil unrest in Cameroon and especially Chad. "For any country to go forward there are risks" says Avi Hoffman, a senior investment officer in the IFC's Oil, Gas and Mining Department. "We have to take these risks if we want a positive outcome." "We see this as an important project for the countries to establish relations with the international community," explains Hoffman. "There will be developmental impact through the construction of roads, the creation of jobs and transfer of expertise."

This approach is diametrically opposed to the Bank's new professed approach to development. After 50 years in the development business, World Bank researchers have concluded that social sector investments provide the largest poverty alleviation benefits. A recent World Bank news release says, "All potential investment projects should be examined to determine if they might be carried out by the private sector, allowing reallocation of Bank funds to expand Bank support for the social sectors."

In the case of the Chad/Cameroon oil and pipeline project, money that could be invested in poverty programs is instead to be spent on corporate welfare. According to World Bank calculations, a basic Central African health care package -- including neo-natal care in a region with staggering child and maternal mortality rates -- would cost about $12 per year per person. The $370 million that the World Bank is investing in the pipeline, both through IDA and the IFC, could provide health care to Chad and Cameroon's combined 20 million population, with more than $100 million left over to fund educational programs in both countries.

"President Wolfensohn's speeches highlight that tackling poverty is our mission," says a World Bank staffer, who requests anonymity. "We should be tackling poverty in a direct fashion and not trying to do it through large multinational companies in the hope that something will trickle down to the poor. That trickle-down approach is discredited at this stage."

"What we need are small-scale programs that respond to local aspirations," says Samuel Nguiffo. "Real change involves decentralization, devolving power to the people at the base. Without this, the situation in Cameroon will always be a mess," he adds, voicing the view of many non-governmental organizations in the region.

If the World Bank is at all serious about President James Wolfensohn's call to create an institutional ethos with a "sense of humanity and social impact" at its core, it should find new partners for its work in Central Africa. Exxon, Shell and ELF are not in the business of devolving power, redistributing wealth or dismantling of corrupt and brutal governments.