Monday

29th Nov 2021

Opinion

Oil and gas companies tarnish EU reputation

EU leaders are being criticised for lacking a strong voice in north Africa. If they want to have a positive influence in the region, they would do well to look at the impact of their national corporate reporting rules, or lack of them.

It is no coincidence that the struggle for accountability in north Africa has found its way to a country with the world's eighth largest oil reserves – Libya. Much of the country's oil wealth has flown to a small political family that has dominated the country for generations.

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  • EU oil and gas companies are not disclosing their payments made to dictators like Gaddafi (Photo: Paul Lowry)

Where money and resources flow between companies and governments without transparency and accountability, there is always a risk that it will be siphoned off for ill-gotten gain. Two thirds of the world's poor live in resource rich countries, not benefiting enough from the $3 trillion of oil produced in 2009 (while you are reading this, that price is rising).

EU governments are failing people in resource-rich countries by not enforcing strong anti-corruption measures on European multinational companies.

If civil society activists, journalists, or citizens want to make sure governments use income from natural resources to tackle poverty, they need to compare government fiscal revenues with the production and fiscal payments of the companies producing them.

Governments in financial centres can make sure multinational companies act more transparently, so that the resource curse turns into a blessing.

The US Dodd-Frank Act requires all companies registered with the US Securities and Exchange Commission to publicly report their payments related to oil, gas or mineral extraction to governments on a country-by-country basis.

The EU commission recognised the importance of country-by-country corporate disclosure in its 2004 Transparency Directive, but it set the bar too low by only "encouraging" member states to introduce their own stricter rules.

As a result, no EU country introduced binding legislation, and the results in EU multinationals' transparency are there for all to see in the report on oil and gas company disclosure published by Transparency International and Revenue Watch Institute this week.

All eight EU companies in the report operate in Egypt, Libya or Algeria. None operate transparently. None reveal the royalty payments they pay to governments.

Of the 12 multinational companies we evaluated that operate in Libya, only the Norwegian company Statoil publicly discloses its payments to the government.

The people of Libya, like all those living in resource rich countries, have a right to this information. So do company investors who want to assess risk. Last week the risk of operating in countries ruled unaccountably was made very clear.

French President Nicholas Sarkozy has said he plans to ask for EU wide rules, and at last week's G20 finance meeting UK Chancellor George Osborne voiced his support, too.

The need for transparency is too great to wait for the EU commission's policy paper on financial reporting. Instead, it should make obligatory reporting of revenue payments to resource rich governments part of the reform of the Transparency Directive expected shortly.

The EU is the world's biggest development aid donor. Why let its efforts be undermined by corruption, which makes development wholly unsustainable? Why risk its reputation as a force for openness and transparency?

When it came to disclosing information on a country-by-country basis, EU companies scored less than North American and Australian ones. Their average score was equal to Lukoil of Russia, four times less than Statoil of Norway.

If the EU does not act, the US-German stock exchange merger (New York Stock Exchange-Euronext with Deutsche Boerse) may end up introducing the stricter US requirements in Europe anyway.

Does the EU want to see its much vaunted single market adapting standards, when it used to be setting them?

The writer is head of Transparency International's Brussels office.

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

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