Study says big oil adding to corruption

Most oil-rich countries are burdened by corruption and oil companies contribute to the problem by not publishing information on payments made to governments and state-owned oil companies, according to Transparency International.

“Transparency International urges Western governments to oblige their oil companies to publish what they pay in fees, royalties and other payments to host governments and state oil companies,” said Peter Eigen, chairman of TI, in a statement released on Wednesday. “Access to this vital information will minimize opportunities for hiding the payment of kickbacks to secure oil tenders, a practice that has blighted the oil industry in transition and post-war economies.”

The survey’s “Corruption Perceptions Index” for 2004 shows oil-rich Angola, Azerbaijan, Chad, Ecuador, Indonesia, Iran, Kazakhstan, Libya, Nigeria, Russia, Sudan, Venezuela and Yemen all with extremely low scores, suggesting significant crooked business practices.

“In these countries, public contracting in the oil sector is plagued by revenues vanishing into the pockets of Western oil executives, middlemen and local officials,” he said, adding that TI estimates that at least $400 billion is lost worldwide in all business sectors each year due to bribery in government procurement.

A total of 146 countries were surveyed and corruption was deemed “rampant” in 60 countries, while 106 scored less than five points on the scale, where a score of ten represents the least corrupt.

Azerbaijan, Bangladesh, Haiti, Nigeria, Chad, Myanmar and Paraguay were judged the most corrupt, all tallying scores of less than two points.

Opec members had mixed results in the survey, with a wide range in rankings. The United Arab Emirates had the best ranking, improving to 29th place, while Bahrain held number 34 and Qatar was at 38. The rest of the Opec rankings in descending order were Kuwait (44); Saudi Arabia (71); Iran (87); Algeria (97); Libya (108); Venezuela (114); Iraq (129) and Indonesia (134).

Eigen focused on Iraq, saying that the country’s future depends on transparency in its oil sector.

“The urgent need to fund post-war construction heightens the importance of stringent transparency requirements in all procurement contracts,” Eigen said. “Without strict anti-bribery measures, the reconstruction of Iraq will be wrecked by a wasteful diversion of resources to corrupt elites.”

TI urged international donors and governments to introduce “no-bribery” clauses into all major contracts.

“Tough sanctions are needed against companies caught bribing, including forfeit of the contract and blacklisting from future bidding, said TI vice-chairperson Rosa Ines Ospina Robledo.

TI said tenders should include objective award criteria and complete public disclosure. In addition, exceptions to open competitive bidding must be kept to a minimum, as well as explained and recorded, since limited bidding and direct contracting are particularly prone to corruption. Public contracting, according to TI, must be monitored by independent oversight agencies.

The report also urged companies from the richer Organization of Economic Cooperation and Development (OECD) group of countries to adhere to the obligations of the OECD Anti-Bribery Convention.

“With the spread of anti-bribery legislation, corporate governance and anti-corruption and compliance codes, managers have no excuse for paying bribes,” said Ospina Rebledo.

While lauding the attempts of TI to increase transparency and reduce bribery, progress will be difficult without focusing on the true source of the problem, said Bob Ebel, head of the energy program at the Center for Strategic International Studies in Washington, DC.

“Transparency is certainly something to strive for, and I think foreign oil companies are making an effort,” said Ebel. “But without transparency in the receiving governments then it won’t amount to much. It’s not hard to put together a list, but it is very hard to get these governments to show how this money is being used.”

Houston-based oil services firm Halliburton faces allegations that bribes were paid by a consortium it is part of to win work in Nigeria in the 1990s (OD Sep.3,p6). Halliburton subsidiary Kellogg Brown & Root is part of the TSKJ conglomerate that has worked on engineering and construction of the Nigeria Liquefied Natural Gas project.

Halliburton has said it is working with the Nigerian government and is committed to getting the matter resolved.

Recently, Norway’s Statoil has been linked to shady contract negotiations in Iran, while some executives at French Total are being investigated regarding allegations that bribes were paid to government officials in Iraq and Russia.

The Oil Daily, October 21, 2004

Categories: Corruption, Odious Debts

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