A Corrupt Militia
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by Jonathan Ewing
Local militia, created by the government had by 2007 also begun to play a greater role in the counter-insurgency. One of their most important tasks was to protect construction crews from attack and the roads from being sabotaged by the ONLF.
At a series of public meetings held in villages and towns throughout the region beginning in 2006, high ranking regional government officials and federal military officers ordered village elders and chiefs to begin organizing militias in their areas. At one such meeting, in the town of Kabridahar, some 250 miles south of the regional capital Jijiga, Col. Gebre Egziebher, said the government was committed to exploiting the oil and natural gas in the region—one of the main reasons for the exploration area, and for preventing the ONLF from attacking construction crews and vehicles along the route, or from trying to destroy portions of the road. These clan elders and chiefs were then ordered to return to their respective villages and begin organizing and training the militia for the task.
Egziebher repeated his orders at several villages during 2006. One former government administrator, Mohammed Abdirahman, who belonged to a prominent family in the Fik area of the Ogaden, was ordered to return home to organize and help finance a militia in his area. “This was the order of the day, it was the government’s latest plan—using the local militia to help its forces defend the roads,” said Abdirahman.
The militia at this time was unpaid, but from their barracks in larger towns and along roads, they were able to earn money from food aid stolen from the United Nations, according to senior U.S. and UN officials, who spoke on condition of anonymity. The roads were also very important for the movement of food aid through the region. They are expected to be even more important for the oil companies in the future.
As an administrator, Abdirahman remembers attending a meeting in Addis Ababa in 1993 when officials discussed various options for moving oil and gas out of the region by either road or pipeline. No decision was made during that meeting, and both options are still being discussed by the government, according to Tadesse at the Ministry of Mines and Energy.
But the issue remains vital for many potential corporate investors in the Ogaden. For the oil companies, it’s one thing to talk about exploration. But the situation becomes opaque when it comes to figuring out how to get oil out of East Africa and into the world market.
Hanspeter Heinrich, head of Safestainable, a Geneva-based firm that advises companies investing and working in areas of conflict, pointed out, “If you don’t have roads, and you don’t have a pipeline, you don’t have a transport network. You’re headed for trouble, because you will need to militarily defend a very long transport route. The big oil companies will probably not be very eager to invest in Ethiopia because getting the oil or gas to market in a safe way will be extremely costly.”
High Risk, Low Reward?
Heinrich founded his consulting firm after working in Ethiopia for the International Committee of the Red Cross for several years during the 1990s. From his office in Geneva, a world away from the Ogaden, he charts the security, legal and reputational risks that any company might face if it chooses to invest in an area of conflict such as Ethiopia. Over the past five years, he advised against investing in the region to all companies that have asked him.
“The risks are simply too high, and the potential rewards are too few,” he said. But for companies like Petronas, Lundin and Africa Oil Corp., Dubai based Ethiopian Exploration and Production and Black Marlin Energy, this is the political and security environment that they have chosen. With the exception of Petronas, all are small to mid-size companies, which traditionally have specialized in locating the oil and then selling that land for a healthy profit to large, internationally integrated companies.
Privately-run small and mid-size enterprises have traditionally worried less about reputational risks. But larger, publicly-traded companies are often more responsive to pressure from watchdog groups regarding issues related to corporate social responsibility and human rights. Smaller, publicly-traded western companies are even more vulnerable, so several have approached Safestainable to assess the risks of investing in Ethiopia. Lundin Petroleum was one of those companies Heinrich said he has advised. In Ethiopia, however, of all the publicly-traded companies—Lundin and Africa Oil Corp., Petronas and Black Marlin Energy—only Lundin has publicly discussed, in company papers, ways to mitigate some of the problems associated with operating in the Ogaden.
Strikingly, however, Lundin never specifically mentions the civil war or the difficulties of remaining neutral in a hostile environment. In its 2007 annual report, Lundin said that prior to obtaining the three oil exploration licenses, it carried out a review of the country from a cultural, economic, political and social perspective. It undertook a number of field visits and consulted with local as well as international experts in order to understand the country and its challenges. Community and security clauses in the production sharing agreement were drafted with particular attention to Lundin Petroleum’s Corporate Responsibility commitment and its support for the Voluntary Principles on Security and Human Rights, an international standard developed through multi-stakeholder participation from governments, the extractive industry and non-governmental organizations. Comprehensive field surveys were conducted to assess the target regions from social, environmental, security and infrastructure perspectives.
In the end, Heinrich advised Lundin against investing in the region. “My point is very clear,” he told the company’s executives. “You should not invest in the Ogaden because the human rights situation is terrible. Any company is facing an up-hill challenge when trying to manage its reputational risks. If you invest there you have to rely on the army, or you might have to rely on other armed forces such as militia. You might be pressured into supporting them logistically and you might end up, one day, facing very serious legal charges and answering questions about your role in the conflict.”
As for Lundin, they considered the risk of possible litigation, which were considerable in Heinrich’s opinion, and matched those risks against the opportunities. In the end, they decided to minimize any potential damage by not involving their company name, so they sold their concessions in 2009 to a related company—Africa Oil Corp. One of Africa Oil’s major shareholders was Ellegrove Capital Ltd., a private corporation owned by the estate of the late Adolf H. Lundin, founder of the Lundin Group of Companies. Lundin Petroleum loaned Africa Oil money to then pay back Lundin Petroleum $20 million for the right to explore for oil prospects in the region. Using Africa Oil as a shield, Lundin has essentially retained its control and interest in the region but removed its name from the books.
“At the end of the day it becomes an issue of not having your brand name up-front. The companies realize that ‘OK, you have the concessions, but you shouldn’t have your name exposed to this kind of reputational risk. You maintain your interests, such as the concessions, and you give yourself time to find other, more durable solutions,” Heinrich says. But Lundin’s bid to conceal the link between the two companies is superficial at best. When a call is placed to Africa Oil’s head office in Vancouver, Canada, the receptionist answers the telephone with the standard greeting: “Lundin family of companies, how may I direct your call.”
It remains unclear if Lundin’s transition to a credit lender will protect it from potential legal or reputational damage. A growing number of cases bearing some similarity to the situation in the Ogaden have been tried in American courts under the Alien Tort Claims Act [ATCA], which grants district courts jurisdiction over civil actions against parties violating U.S. law, even if the conduct took place outside the United States. In Ethiopia’s case, “if a risk analysis was performed and it says that you stand a very high probability of being complicit in the human rights violations that are happening, then that company could be legally complicit,” Joshi from Global Witness says. Indeed, there have been a number of recent efforts to use ATCA to sue transnational corporations for violations of international law in countries outside the United States. If these suits are allowed to proceed, then ATCA could become a powerful tool to increase corporate accountability. Through ATCA, Lundin could be held accountable for complicity in the human rights violations in the Ogaden.
Last year, Royal Dutch Shell agreed to pay $15 million to settle several lawsuits alleging it collaborated in the execution of writer Ken Saro-Wiwa in Nigeria. His son, Ken Saro-Wiwa Jr., accused the company of backing a campaign of repression conducted by Nigeria’s former military government in the oil-rich Niger Delta region in the 1990s. Saro-Wiwa Jr. and the relatives of other victims sued under the ATCA, which left Shell open to the suit.
State-owned companies like Malaysia’s Petronas have proven largely invulnerable to human rights pressures. Petronas’ company papers appear to make little or no mention of their operations in Ethiopia and the war that is quietly being waged there. Since it has few operations in the United States, it could prove immune to ATCA. “Typically, decision making at the larger companies, like Petronas, is dictated by the corporate character and any actual influence often comes from the political pressure of big government,” says Luke Patey, a researcher at the Danish Institute for International Studies.
Next, mired in political and social tension, Ogaden is slowly improving--but only marginally.
Jonathan Ewing is a Stockholm-based investigative reporter who traveled to East Africa on a grant from the Investigative Fund at The Nation Institute, researching the relationship between the government of Ethiopia, the separatist rebels, the petroleum industry and the global interests they represent.
Picture via Flickr, by carsten_tbSource From World Policy Journal
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