In August 2006, the son of the President of the Republic of the Congo went shopping for designer gear. Denis Christel Sassou-Nguesso spent the equivalent of nearly $24,000 on Louis Vuitton and other luxury brands in the Spanish resort of Marbella.
We don’t know exactly what Sassou-Nguesso bought, or even if he went to the shops in person. We do know, however, that Mr. Christel, as some call him, heads a Congolese state agency responsible for selling his country’s oil, and that his personal credit card bills, which came to several hundred thousand dollars over three years, were paid by an offshore company under his control. This offshore company, called Long Beach Limited, appears to have received, via intermediary companies, money related to oil sales by the Congolese state.
Mr. Christel’s father, President Denis Sassou-Nguesso, seems to share his son’s taste for lavish spending. The London Times reported that his entourage dropped $295,000 on hotel bills over eight days in New York in September 2005. The aim of the visit? To seek international debt relief for Congo on the grounds that the country could not afford to meet its obligations.
Until recently, the shopping habits of African ruling family members like Mr. Christel provoked little more than a shrug from oilmen and Western government officials. There is nothing new, after all, in the observation that oil breeds corruption, and that countries whose economies rely on selling the black stuff tend to be more poorly governed and unstable than those without it. Two trends are now unsettling a once-complacent attitude toward misrule in Africa, however.
The first trend is that sharply rising oil prices and Middle Eastern unrest have made west Africa a relatively attractive source of oil. By the beginning of the next decade, up to a fifth of U.S. oil imports may come from countries around the Gulf of Guinea, mainly Nigeria and Angola. Other thirsty consumers, notably China, are providing Western companies with strong competition in the region as well.
The second trend is growing international attention to the character of government in oil-producing countries and its possible impact on the long-term security of energy supplies. A good deal of influential scholarly work has been done in recent years by academics such as Paul Collier on the “resource curse” and its effects on social and political stability. International oil companies, whose opaque relationships with autocratic governments in Africa have attracted intense criticism in the past, are increasingly willing to support publicly the idea that, without greater public accountability in oil-producing countries, the revenues they pay are unlikely to contribute to stability or prosperity.
At the same time, civil society groups inside and outside oil-producing states are using tools like the Internet to exercise greater scrutiny over such countries’ governments and their relationships with oil companies in a bid to make the management of countries’ oil wealth more accountable to citizens. One such civil society organization is Global Witness, a nonprofit group with offices in London and Washington that has campaigned against the misuse of oil wealth for nearly a decade. Global Witness posted Mr. Christel’s credit card bills and other documents on its website after they entered the public domain via a courtroom battle between the Congo and so-called vulture funds, which invested in distressed Congolese debt and have used the world’s court system to seek repayment in full.
In response, Mr. Christel hired Schillings, a London law firm famously aggressive in defending the privacy of its rich clients, to seek a court order forcing Global Witness to stop publishing some of the documents. This turned out to be a disastrous strategy for Mr. Christel. The judge dismissed his case in August 2007 in a ruling that said, referring to a related case in Hong Kong, “There may never be a trial in Hong Kong on the issue whether the Claimants [Mr. Christel and Long Beach Limited] are ‘unsavoury or corrupt.’ The specified documents, unless explained, frankly suggest that they are.” Referring to Cotrade, the state entity headed by Mr. Christel which was not a party to the case, the judge added, “The profits of Cotrade’s oil sales should go to the people of the Congo, not to those who rule it or their families.”
While these events were a triumph for public accountability advocates, there has been a predictable backlash from those who prefer not to be scrutinized. The Republic of the Congo has been particularly clumsy in its efforts to suppress public debate about its oil revenues and their uses. In 2006, the government mounted a sham prosecution against the country’s two leading anti-corruption activists, Christian Mounzeo and Brice Mackosso. A torrent of public concern from abroad, notably from then-World Bank President Paul Wolfowitz, did not end the prosecution, but it may have helped to ensure that the activists were let off with suspended sentences.
Other oil-rich countries in the region have also tried to block free public discussion about their management of natural resources. A government minister in oil-rich Gabon recently threatened to suspend activist groups for criticizing the state: Although he quickly backed down under international pressure, one leading activist, Marc Ona, was actually taken off a plane by the Gabonese authorities this June on his way to attend an anti-corruption conference in New York.
Global Witness has directly experienced this kind of harassment, as well. The government of Angola arrested senior Global Witness staffer Sarah Wykes during a research visit in February 2007 on vague “national security” grounds. Wykes was allowed to leave Angola only after international protests, including a letter signed by Barack Obama and other members of the U.S. Congress, and the case remains open. Angolan civil society organizations and other independent voices there face intense official pressure, such as public accusations by a senior official in July 2007 that leading local human rights groups are operating illegally.
The United States and other oil-consuming nations are seeking more African hydrocarbons at a time when the link between oil wealth and governance is under more scrutiny than ever before. Policymakers and investors alike increasingly recognize that corruption and bad government are not only morally wrong and a huge hindrance to development, but also that they can actually destabilize these countries to the point that oil exports are threatened. One need look no further than recent spasms of violence in the Niger Delta region to illustrate the point.
Oil corruption poses a particularly sharp dilemma for the United States, which tends more than most to justify its foreign policy by reference to universal principles of freedom and justice. Worldwide cynicism about U.S. motives may be at stratospheric levels these days, especially where oil is concerned, but the evidence to hand shows that the U.S. government is actually conflicted about how it should weight its actions in Africa on the scale of justice and expediency.
The U.S. Department of Justice, for instance, has actively pursued some significant corruption cases in the oil industry, putting Europe’s largely dilatory law enforcers to shame. Two major oil-related cases remain unresolved, however. The case of U.S. citizen James Giffen, who has been under U.S. indictment since 2003 on allegations (which he denies) of paying huge bribes to public officials in Kazakhstan in the 1990s in relation to oil rights, has still not come to court. An inquiry by the Securities and Exchange Commission into transactions by U.S. oil companies in Equatorial Guinea, launched in 2004, also remains unresolved.
President Bush’s August 2006 Anti-Kleptocracy Initiative explicitly identified high-level, large-scale corruption as a threat to America’s global interests. Yet the State Department often seems unsure whether to chastise or welcome the leaders of some of the countries with the worst reputations. The Presidents of Angola and Equatorial Guinea were officially welcomed in Washington in the last two years, despite their countries’ troubled records on managing oil money and the State Department’s own criticism of their records on civil liberties and human rights. It would be nice to think that the United States delivers such leaders a firmer message behind the scenes than the one it delivers in public. If this is the case, then the message apparently isn’t getting through. Neither government so far has taken more than token steps toward greater transparency in the oil sector.
A further complication is the delicate position of U.S. oil companies operating in Africa. On the one hand, these companies are clearly nervous about offending African governments, particularly in a market in which rising prices give governments the confidence to insist on tougher terms or even on renegotiating contracts. On the other hand, no oil company, not even the biggest, can lightly ignore the reputational damage of appearing to collude with misrule in Africa. Since a Senate investigative report in 2004 triggered the Riggs Bank scandal by exposing a complicated web of relationships between oil company payments, the government of Equatorial Guinea and the latter’s dealings with Riggs Bank in Washington, DC, some U.S. oil companies have become more outspoken in their support for transparency.
A test of the U.S. government’s ability to reconcile these conflicting pressures will be its role within the Extractive Industries Transparency Initiative (EITI). Launched in 2002 by then-Prime Minister Tony Blair, EITI is a ground-breaking global initiative that aims to promote the better use of oil and mining revenues by increasing the amount of public information about them. EITI is a direct response to the civil society movement called Publish What You Pay, which was founded by George Soros, Global Witness and others.1 The movement has pushed for the simple principle that oil companies should fully disclose their payments to governments around the world. On the Hill, the House Financial Services Committee recently held a hearing on a bill introduced by Congressman Barney Frank (D–MA) that would reinforce the EITI by requiring all oil and mining companies regulated by the Securities and Exchange Commission to disclose their payments to foreign governments. If passed into law, this would be a huge step forward for transparency. It would set a compelling example for other countries with major securities markets, notably the United Kingdom.
EITI is a unique partnership between governments, companies and civil society groups. Its international nature allows companies publicly to associate themselves with the cause of transparency without antagonizing individual oil-producing governments. The twenty-member EITI board represents all constituencies, bringing together such unlikely colleagues as the State Department, ExxonMobil, Global Witness and activists like the aforementioned Christian Mounzeo. After four years of negotiation and uncertainty, EITI is becoming an increasingly credible global presence. Participating countries now include major producers such as Kazakhstan and Nigeria. Most recently, Norway has joined in order to demonstrate to other potential members of EITI that even countries with a reputation for clean government can benefit from transparency in their oil sectors.
Even if it works as planned, the EITI would only go a small way toward tackling the vast problem of oil and corruption in Africa. In the end, the credibility of EITI will depend on the willingness of all its members, particularly the United States and U.S.-based oil companies, to play by the rules. Those rules very much include avoiding the temptation to seek special treatment for certain, favored oil-rich countries that are keener about warding off international criticism than allowing public scrutiny of their oil sectors by their own citizens. The evidence suggests so far that respect for the rules is winning, but not by much. The likes of Denis Christel Sassou-Nguesso may not be forced to change their shopping habits any time soon. Still, EITI’s success or failure in the coming years will be a telling signal as to how the United States plans to balance expediency and principle in its policy in Africa—and perhaps the rest of the world, too.
Full disclosure: Some members of Publish What You Pay, including Global Witness, receive a portion of their funding from Soros’s foundations.