What Big Oil is hiding about EU transparency
By Gavin Hayman
Big Oil is on the warpath. It hates the new transparency provisions in the EU Accounting and Transparency Directives which would require all EU-listed oil and mining companies to publish what they pay to governments around the world on a country-by-country and project-by-project basis.
Improving transparency of the money from oil, mining and gas to reduce the appalling levels of diversion and corruption affecting resource-rich countries is a good idea, as even the most vocal opponents of the new EU rules grudgingly agree.
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Transparency around that money is a first step towards improving natural resource management. Money from oil and mining, for example, was worth some US$250 billion to Africa in 2009, about five times the value of foreign aid.
The EU is not operating in a vacuum. The US put these transparency provisions into its landmark ‘Dodd Frank’ Wall Street Reform Bill, although the rulemaking process by the US Securities and Exchange Commission has been very protracted, not least because of legal threats by oil business lobby groups.
Oil companies are now making strenuous efforts to slow progress down in Europe too by misrepresenting the facts and making unsubstantiated assertions.
The first is that the new rules would 'handicap' companies and give a 'leg-up' to foreign competitors from Russia and China. Rosneft, the Russian oil company, has been cited as one of those companies apparently rubbing its hands in glee over the prospect of the new rules. But Rosneft is listed on the London Stock Exchange, and so will be subject to its reporting requirements. China’s three biggest oil companies are all listed in the US and so will have to report there.
In our study of resource deals done since the passage of the Dodd Frank Bill in July 2010, we found no evidence that companies covered by rules lost out to competitors. BP, for example, has just been authorized by the Chinese government to explore for gas in the South China Sea and Chevron in Vietnam. International oil companies have won oil blocks in Iraq and Indonesia in competition with Chinese or other Asian companies (and sometimes in partnership with them too).
The petro-lobby is also asking that the EU rules include a waiver so that companies do not have to publish where a foreign government does not want the information disclosed. This would encourage every dodgy dictator to pass a blocking law at home.
A waiver would mean that revenue information would not be disclosed where it is most needed and would gut the legislation. Europe, the home of democracy, could actually encourage more repressive laws abroad.
It is striking that in China - which has already partly moved ahead on this issue by requiring companies listing in Hong Kong to publish payment information at the time of listing – contains no such waiver.
Companies also want to prevent ‘project level’ disclosure. Projects can be easily defined as “equivalent to activities governed by a licence, concession, or similar legal agreement”.
Shell, for example, recently argued that the project level reporting “will not provide any meaningful transparency in a significant majority of the countries where we operate”. Fascinatingly, at the same time as arguing this, obscure documents filed in a New York courtroom related to arbitration in a commercial dispute showed exactly why project level reporting was necessary.
Those documents revealed that Shell and other companies had paid over a billion dollars to acquire an offshore oil block called OPL 245. Ordinary Nigerian citizens will be very interested in this information because the Nigerian government agreed, in the same month, to pay precisely the same amount to a company controlled by an Abacha-era Minister who was convicted in France in 2007 of money-laundering.
You can see then how the disclosure of this information raises some very interesting questions about the credibility of Nigeria’s licencing procedures and who its beneficiaries are. This, of course, it precisely why companies do not want it.
Another ridiculous argument, again from Shell, is that revealing project level information would allow terrorists to target major resource extraction facilities, as if they couldn’t read the newspapers or, indeed, the oil companies’ own websites.
These arguments do not stand up. But they seem to have played well in Brussels. The German government has emerged as a major blocker on progressive rules, ostensibly over a worry about being able to access minerals for its high tech industry.
Favouring secrecy favours appalling tyrants like President Obiang of Equatorial Guinea whose stranglehold over the population comes from patronage, corruption and diversion of oil rents. Can you really base a strategy of security of supply on that basis?
Isn't it better to have stable and prosperous countries governed by rule of law with an emerging middle class who will be the growth markets for Europe's services and exports in the future, especially for the kind of goods that Germany excels in producing.
Now, that is a real geopolitical strategy for Europe to follow rather than to mount a retreat, as championed by the oil lobby, into stagnation, opacity and tyranny.
The writer is Campaigns Director of Global Witness