CHAD: ‘It is immoral for the oil companies to take so much’
The world has become aware of Chad in recent years for two reasons: oil and Darfur. The building of a $3.7 billion, 1070 kilometer pipeline through Cameroon to the Gulf of Guinea by private oil companies enabled Chad to enter the club of African oil producers, while the civil conflict in neighboring Sudan, which has drawn the concern of governments and people around the world, has spilled over into Chad in the form of hundreds of thousands of refugees, and some related conflicts of their own.
When significant quantities of oil are discovered in poor countries, one never knows what the impact will be. Will new-found wealth be used wisely? Or will the ruling elites simply enrich themselves? In short, will it be a blessing or a curse?
In Africa, as elsewhere, the record has not been good, but in the case of Chad the government agreed with the World Bank and ExxonMobil, which heads the private consortium that built the pipeline and is pumping the oil, on a mechanism for distribution of oil revenues that guaranteed most would flow into infrastructure, education and health, reducing poverty in Chad.
Chad’s ambassador to Washington, Mahamoud Adam Bechir, is eager to set the record straight about these issues. In a recent interview with DiplomaticTraffic.com, he explained how Chad is indeed using its oil wealth wisely, and pointed out that while Chad has been impacted by the fighting in Darfur, its domestic situation is very different from that in Sudan. He said one should not assume close parallels between the two.
Chad’s 1999 deal with the World Bank was considered a pioneering approach because it tied support from the bank (for building the pipeline and other programs) to procedures and laws controlling the flow of oil revenues, which began in 2003.
When in January 2006 the Chad parliament passed legislation changing the distribution formula (most importantly, raising the amount of income flowing into the general budget from 13.5 percent to 30 percent), leaving 70 percent for all poverty-reducing programs, the bank suspended all assistance to Chad.
The dispute was finally resolved a year ago when a compromise was struck under which the bank agreed to 70 percent of all government revenue (not oil alone) being allocated to poverty reduction, and a commitment by Chad to develop a new Poverty Reduction Strategy, and to strengthen the College de Contrôle et de Surveillance, Chad's independent oil revenue oversight authority.
Ambassador Bechir said that the dispute with the World Bank was due to a “misunderstanding of our use of the oil, but never a substantial difference.” And added: “We are respecting our agreements with the World Bank.”
Asked if Chad was not suffering from the ‘oil curse’ that has been so damaging to other African countries, he said, “That is why we have put in place all these procedures, for the first time in history.”
The basic idea behind the World Bank agreement is to make the use of oil revenues transparent, and to make sure the bulk of them go to poverty reduction.
Income from the oil companies goes into an escrow account at Citibank in London, while the disbursements are governed by Chadian legislation, with the whole process overseen by the College, which is composed of representatives from Chad’s Supreme Court, its National Assembly, government ministers and professional societies, with reports posted on its website: www.ccsrp-tchad.org.
The ambassador said it is “undisputable” that the bulk of the oil revenues benefits ordinary citizens.
He said the reason Chad wanted to change the agreement with the World Bank was that it found it needed funding for the general budget to make sense of the poverty-reducing programs. He described new schools and clinics staffed by government employees who had not been paid for four months. Naturally, the civil servants felt they were being neglected, and the new investments could not be fully exploited.
“A lot has been done in a very short time, despite many challenges,” he said. “We have done a lot in four years.”
This year, for the first time, the national budget has a surplus.
The ambassador said that while Chad still suffers from what he called “poverty-driven corruption,” there is no evidence of the usual high-level corruption of senior government officials stashing cash in foreign bank accounts. “You can’t point to any wrongdoing by government officials,” he said.
The ambassador complained about the contracts Chad signed with the oil companies, which give the lion’s share of income to them in exchange for their investment in finding and extracting the oil, and getting it to market.
“The oil contracts were not very well negotiated,” he said. They give 87.5 percent of the revenue to the private companies, leaving only 12.5 percent for Chad. Under this formula, the costs of building the pipeline to the ExxonMobil-led consortium have already been paid off, he said.
“It is immoral for the oil companies to take so much,” he complained. “I think it is a crime.”
Turning to Darfur, the ambassador said that the root of tribal conflict there, which pits largely black African agriculturalist village dwellers against nomadic Arab herders, is “not at all” like the situation in Chad.
“Muslims, Christians and animists live together, with no conflict,” in Chad, he said. “We are fortunate.” “Rivalries in Chad are not tribal, but political,” he said. “They are not tribal or religious.”
He said the recent deployment of French troops to Chad was “to oppose foreign intervention…. [The French] are not involved in solving our internal problems.”
He said, their main purpose is to support the supply of aid to the hundreds of thousands of refugees from Darfur in camps on the Chad side of the border. “The French are offering services, such as logistics and medical supplies, for Chad’s troops,” he said.
The ambassador said his country’s relations with Washington are very good. He said that since Chad’s independence in 1960, relations with Washington “have always been excellent.” In several instances, the two countries have the same strategic goals.
He noted that the United States has “always helped in times of difficulty.” He mentioned support from the Reagan administration to oppose Libyan intervention in the 80s, the leadership of American companies in extracting and exporting oil, and now the close coordination in dealing with the refugees from Darfur.
Washington has also helped Chad with intelligence regarding threats from Islamic extremists. The ambassador said that with this assistance, Chad was able to locate and destroy an incursion of Salafists from Algeria, who had established themselves in the northern mountains. “Chad’s army was able to neutralize them completely,” he said.
He said Washington is also helping with “transparency reforms in electoral law,” and other governance issues.
Oh yes, and all Chad’s oil exports go to the United States.