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Home Publications Op-Eds & Columns World Bank Oil Pipeline Project: Much Pain, No Gain

World Bank Oil Pipeline Project: Much Pain, No Gain

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Mark Weisbrot
Knight-Ridder/Tribune Media Services, June 5, 2000

This week the World Bank is scheduled to decide whether to go ahead with the largest construction project in Sub-Saharan Africa: the proposed Chad-Cameroon oil and pipeline project. The $3.7 billion venture includes 300 oil wells and a 650-mile pipeline through southern Chad and Cameroon.

The controversy surrounding this project has been framed as a classic trade-off between environmental protection and economic growth, in two very poor countries. Chad's annual income is about $240 per person. They need that oil money, we are told.

On closer inspection, however, the trade-off disappears. The reality is a project that is not only environmentally unsound, but one that will not contribute significantly to the economies of either nation.

The reason why this deal won't produce much economic growth is simple. When a country has a foreign debt that is much larger than it can ever pay-- the situation of most of Sub-Saharan Africa-- then additional foreign exchange earnings do not necessarily help the national economy. Instead, they end up paying off debt that would otherwise not have been paid.

In the case of Cameroon, the country's foreign debt is already more than 25 times the money that it is expected to earn over the life of the project. Chad, whose land holds the oil, is not as deeply in debt as Cameroon. But it still owes enough to eat up most of its potential oil earnings.

This illustrates how futile it is for heavily indebted countries to pursue a strategy of "export-led growth." Until these un-payable debts are cancelled, these countries are simply squandering their natural resources to maintain a perpetual state of indentured servitude. They have "sold their soul to the company store."

To add insult to injury, Chad will receive a surprisingly small amount of money for its "black gold." The World Bank projects $1.5 billion in oil revenues over 28 years, for a volume of oil that is worth-- at today's prices-- at least 20 times that much.

The big winners in this deal are the multinational oil companies: ExxonMobil, the world's largest, and Chevron are leading the charge. But they have made it clear they won't sign off on it unless the Bank is on board.

The Bank has raised more than half the money, but Big Oil needs the Bank for more important reasons. Together with the International Monetary Fund, the World Bank runs a cartel-- much more powerful and effective than OPEC's oil cartel-- that controls credit for underdeveloped countries. So the Bank is one of world's most powerful enforcers.

And the Bank has its own reasons to get that oil pumped out of the ground: more than half of Chad's debt is owed to-- the World Bank! A.k.a., the company store.

Now for the bad news: there are grave dangers associated with a pipeline that will make seventeen major river crossings. The oil companies have so far been unwilling to commit significant resources, or even adequate planning, to deal with potential oil spills. Remember the Exxon Valdez?

Even less has been provided for the thousands of indigenous people whose lives and livelihoods will be adversely impacted by the pipeline. The Bank's own guidelines, which require that land rights for indigenous people be established, have been violated.

The oil companies' track record in Africa provides more cause for concern. Chevron is currently facing a lawsuit in our Federal court for its involvement in the Nigerian military's violent repression of protests there. The protestors were demonstrating against the destruction-- and lack of compensation-- from oil drilling. And five years ago, when Nigeria executed the world-renowned environmental and human rights activist Ken Saro-Wiwa, Shell Oil was widely condemned as acquiescing in the killing of one of its most vocal and effective critics. (Shell was originally part of the Chad-Cameroon project, but has pulled out).

No wonder they want the World Bank in on this deal, to provide political cover as well as risk insurance. The cycle of repression and resistance has already begun in Chad, before a single oil well has been drilled. More than 200 people were killed in the oil-producing regions in 1997 and 1998. In the last few weeks, military and government officials threatened to kill anyone who opposes the oil project.

Both countries' poor human rights records, and the civil war in Chad, have convinced environmental and human rights groups-- local and international-- that the Bank is heading for another disaster. They have called for a two-year moratorium on the project.

The World Bank's spokesman for Africa, Robert Calderisi, said: "We think the deal is within international norms, a fair deal." 

For whom?


Mark Weisbrot is co-director of the Center for Economic and Policy Research, in Washington, D.C. He is also president of Just Foreign Policy

 

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