NY Times - "The Short, Sad History of Chad's 'Model' Oil Project"
Graham Saul
The Short, Sad History of Chad’s ‘Model’ Oil Project
Whenever I receive e-mail from people I met while traveling in Chad, I worry. I visited the deeply poor central African country in 2003, just after it became the world’s newest oil exporter. Back then, kids in the streets told me oil was a “blessing,” and women wore new dresses reading (in French) “Chad, Our economy is petroleum.” Chad’s oil project was the product of a innovative collaboration between the World Bank, Exxon Mobil and the Chadian government, and the hope was that oil money would bring stability and prosperity.
But since the arrival of the oil money, life in Chad, a country three times the size of California with only a few hundred miles of paved roads, has gotten worse: the conflict in Darfur has spread from Sudan into Chad; the country’s government, already weak and corrupt, has become weaker and more corrupt; and bandits have become rebels. All of this in a country of 9 million people, 80 percent of whom live on less than a dollar a day.
The most recent e-mail message came from a university professor and former member of Chad’s parliament. It was typically stoic and disturbing. “Thank God, we are still surviving … my kids were so frightened [by a coup attempt] because they have seen dead bodies burnt near our house.”
Only four years ago World Bank officials called Chad a “model” for oil and development projects in other countries. The World Bank’s support had been crucial in making the project possible. Commercial banks had already looked at Chad’s history of civil war and thought it too risky to develop the country’s oil resources. The World Bank stepped into the mix as a key guarantor, getting Chad’s president to agree to distribute some of the oil revenue to development projects, and allow a panel of citizens to oversee the spending. They also persuaded Exxon Mobil to adhere to high social and environmental standards. In 2003, the project was considered state of the art — with safeguards for the environment and transparency — though critics said these structures were too weak. American taxpayers backed $293 million in World Bank loans, as well as $200 million in loans from the United States Export-Import Bank for the project.
Money in hand, Exxon Mobil, as leader of a consortium that included ChevronTexaco and the Malaysian company Petronas, invested $4.2 billion dollars in developing oil fields in Chad and building a pipeline to an export terminal on the coast of Cameroon. It was the largest investment ever in Africa, and Exxon Mobil followed through on its commitment to hold thousands of community meetings.
But the project had barely gotten started when word got out that Chad’s president Idriss Deby had spent $4.5 million in bonus money paid by the oil companies on weapons to fight rebels within his own borders. World Bank officials quickly made the president return the money to the oil program, but Deby continued to push his way around the much-lauded safeguards. Meanwhile, Chad became a key player in the war on terrorists in the Sahel region of Africa, and the United States began offering antiterrorism training to Chad’s military.
Last year Deby demanded oil money for his army, and in April of 2006, World Bank president Paul Wolfowitz agreed to change the agreement to allow Deby to buy weapons with money earmarked for development on the condition that 70 percent of Chad’s overall budget be spent on development.
Here is another e-mail message, from a Chadian with a graduate degree who works on the oil project: “It is true that policemen and soldiers are grabbing young people to be sent to the war area …. We are worried not only because of the war but what will be next. We know what we have in hand but what we are waiting for may be worst.”
Statistically, it’s not a surprise that oil money has destabilized Chad. Many academic studies show that underdeveloped countries that are highly dependent on money from natural resources tend to be poorer, less democratic and more unstable than similar countries without resource revenues. What’s surprising is how quickly Chad has deteriorated.
Things haven’t gone well for the oil companies either. Last summer, Deby tore a page from Hugo Chavez’s playbook and started talking about nationalizing Chad’s resources. In August he ordered ChevronTexaco and Petronas to leave the project in Chad, claiming they owed $500 million in unpaid taxes. Now there are rumors that Chad would like to replace Exxon Mobil with a Chinese oil firm to get a bigger share of profits and work on a new development program with the help of the Chinese government.
“The shorthand of what went wrong in Chad is that the revenue-management law was based on the expectation that a law could fix something in a country without the rule of law,” Ian Gary, a policy advisor for the relief agency Oxfam, who has been studying the project since its inception, told me. “Chad has no independent judiciary, no history of peaceful transfer of power and no locally elected officials. All the power is located in the presidency, and it’s only grown more concentrated over time. The [World Bank] characterized the project as ‘High risk. High reward.’ If it went well the bank would have looked good, but all the risk was born by the people of Chad.” (World Bank employees have blogged about their shock and bewilderment at being evacuated because of fighting in the capital this December.)
As life has gotten worse in Chad, the country has slipped further from the American consciousness. The rush of reporters who covered the opening of the oil project has fallen off, and when an oil spill was reported at the export terminal in Cameroon last month, it got very little attention here. But the United States did have a lot at risk in Chad — taxpayers had ponied up money, of course, and we also had put our faith in the ability of oil revenues to provide stability and development.
Since the 1920s Americans have hoped that importing oil from underdeveloped places, including Venezuela and Saudi Arabia, would lead to prosperity and stability in those countries (while meeting our need for their oil). This faith has lead to the development of petrostates that, in the dry words of Vice President Cheney’s 2001 Energy Policy, “do not always have America’s interests at heart.” The Chad model was important to the United States, if only because its success would have meant that similar programs might have a chance of working in Kazakhstan, Sao Tome or even Iraq — places that might become friendly oil producers.
As the power struggles in Chad continue, the United States is losing much more than a single potential friend and oil supplier; the area around Chad — including Darfur and Libya — is becoming involved in conflict. “The oil project didn’t create the problems in Chad,” observed a researcher who has followed Chad closely and who spoke with me on the condition that he remain anonymous. “But it’s made peacemaking more difficult because the huge amounts of cash coming into the country represent a prize. Rebels now attack the government and get paid off with oil money — there’s sort of an economy of peacemaking developing.” The crisis in Darfur, he says, requires a large coordinated regional solution — one that is nearly impossible with the oil-fueled conflict next door.
At the end of March, the government of Chad will receive oil tax payments of more than a billion dollars — money that is not covered by the original World Bank agreement — and Chadians are watching to see who will try to take the money, and how.
Another e-mail message in December, from the man who works on the oil project: “Everything here has been set up in a rush. Speeches were gently humanitarian but [in] reality, [we are still] - waiting for action. The vast majority of the money paid to Chad served to purchase firearms for the internal unrest. Three years of the oil project equals thousands of Chadians dead uselessly, because what we experience right now is an interest-related war. We live in fear at any time of the day.”