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World Bank Backs Big Oil
-- Refuses to Implement Recommendations of Extractive Industries Review
World Bank Backs Big Oil Refuses to Implement Recommendations of Extractive Industries Review By Nadia Martinez Sustainable Energy & Economy Network (SEEN) / Institute for Policy Studies The World Bank has declared itself to be more concerned with the needs of oil companies than the impoverished people it officially serves, by ignoring most of the recommendations of a path-breaking report that the lender itself commissioned over three years ago. After spending millions of dollars having an independent team of experts evaluate the effects of its energy lending, the bank brushed off most of the final report’s conclusions. By doing this, the lender has failed to distinguish its goals and standards from the likes of Halliburton, ExxonMobil, Shell and other profit-driven institutions. U.S. taxpayers’ contributions to the World Bank are supposed to constitute international development assistance, not corporate handouts. After years of civil society pressure to make the World Bank accountable for the impacts of its investments, World Bank President James Wolfensohn pledged in Prague in 2000 to undertake a review of the World Bank’s support for the extractive industries (oil, gas and mining). He said the review would be similar to the World Commission on Dams (WCD), an independent evaluation process that was taking place at that time. His announcement came before the final WCD recommendations were released – which, as we now know, the World Bank did not implement. For groups that had been working on these issues for years, and for those directly affected by World Bank extractive projects, the launching of this review was seen as a positive step. Initially, civil society groups wanted the Extractive Industries Review (EIR), to mirror the WCD, which was seen as an independent and objective body that was not bank-controlled. However, World Bank staff resisted, claimed that they were not represented enough in the WCD, and implied that this was a factor in the Bank’s failure to implement its recommendations. Bank staff argued that if they were involved in designing the process there would be a higher chance that they would take the results seriously. For the EIR, the Bank promoted an “eminent person” model that essentially put all the power in the hands of one person. Wolfensohn appointed Dr. Emil Salim, a former Environment Minister from Indonesia, who served under Suharto’s dictatorship, to lead the review. Dr. Salim was also on the board of Indonesia’s largest coal company. With those credentials, most of the environmentalists, faith-based groups, development advocates and human rights activists who had demanded this assessment were pessimistic about ever seeing the Bank change its ways. Throughout the EIR process, the basic civil society strategy was to use all the tools available to change the playing field. We sent joint letters to the World Bank, to Dr. Salim and to the press when we felt that the process was being undermined. We formed strong North/South alliances, and organized sign-on letters, strong press outreach, informal lunches and formal dinners. We took every step in large diverse coalitions that included environmental groups, human rights organizations, faith-based groups, labor, development NGOs, indigenous groups and others. We even threatened to abandon the process when our voices were not being respected. The EIR plan was to hold a series of consultations with civil society, industry, and governments in the various regions around the world where the World Bank has invested in extractive industries, and draft recommendations based on those consultations. During the consultations, civil society representatives, especially those from affected communities and indigenous people gave testimonials and presented evidence that World Bank-sponsored oil, gas, and coal projects have not helped them. In the end, to every observer’s surprise, the EIR concluded in January 2004 that World Bank support for fossil fuel and other mining projects simply doesn’t alleviate poverty. The report calls for the World Bank to cease all lending for oil by 2008 and continue its moratorium on lending for coal. The report recommends that the Bank increase lending to renewable energy by 20% annually and become a leader in clean energy development globally. The report emphasizes other important environmental protections and improved governance mechanisms that the Bank should follow. The EIR also prioritized social protections, especially for those directly affected by extractive projects. It calls for free prior and informed consent for indigenous peoples, a key demand of indigenous rights groups all over the world. Free prior and informed consent enables indigenous and other affected communities to have a voice in any development plans within their traditional territories. Although often mischaracterized as a right of veto, free prior and informed consent may result in a positive as well as a negative decision on particular projects and policies. International law already recognizes this right, particularly under the International Labor Organization’s Convention 169, which states that not only do indigenous people have the right to decide their development path, but that they have the right to benefit directly from economic activities taking place within their territories. In terms of the movement as a whole, the EIR had some interesting results as well. Civil society groups are much better organized and unified now than two years ago around sustainable development issues, and are better able to launch a more effective external campaign than two years ago. Indigenous rights groups, particularly, can claim an important victory, since the EIR specifically recognized the right of indigenous communities to free prior and informed consent. Placing the issue directly in the center of the development debate opened a political space that may not have existed before to continue demanding this basic right. The bank, which might have expected a different outcome, initially sat on the report for months. In early August 2004, the bank’s board of directors finally discussed the EIR. Unfortunately, the World Bank’s management and board of directors opted to merely endorse minimal commitments to change the way the Bank does business. For example, while they pledged to increase renewable energy financing by 20 percent annually, the baseline the lender is using is so low that the target for renewable support in 2005 is lower than the bank’s loans for renewables in 1994. Currently fossil fuel financing at the World Bank exceeds renewable lending by a factor of 17 to 1. On the issue of free prior and informed consent for indigenous people and affected communities, the official World Bank response to the EIR modified the term “consent” to “consultation”, which signifies no new commitment by the Bank on this extremely important issue. Although the World Bank is a taxpayer-funded institution whose mission is to help the poorest people on the planet, it is putting the interests of oil companies based in rich countries ahead of the needs the world’s poor. Twelve years have passed since the World Bank and most of the nations in the world committed to help reduce greenhouse gas emissions at the Rio Earth Summit. Yet the Bank remains one of the biggest catalysts of fossil fuel extraction in the developing world, and nothing that the Board did in response to the Extractive Industries Review will reverse that trend. The World Bank’s rationale for continuing to subsidize oil companies is that people in developing countries need energy. However, the Institute for Policy Studies’ research demonstrates that 82 percent of the Bank’s oil extraction projects wind up supplying consumers in the United States and Europe. One can assume that developing country debt to the World Bank and IMF plays a significant role in the export of oil from energy-poor countries to wealthy northern countries. The Institute has also calculated that the largest number of procurement contracts for World Bank fossil fuel extractive projects go to Halliburton, Shell, ChevronTexaco, Total, and ExxonMobil, in that order, and the list continues with additional corporate behemoths from rich countries. Another rationale the World Bank offers is that its involvement in these highly destructive projects makes them more environmentally sound and less prone to corruption. In reality, many of the bank’s projects are riddled with these kinds of problems. For example, the President of Chad used part of the first proceeds from the World Bank-supported Chad-Cameroon oil pipeline on military weapons. Then, ironically, the President's brother-in-law was appointed to the committee that will oversee management of the project’s revenues. The Extractive Industries Review proved that oil companies’ profits don’t trickle down to the people the Bank is supposed to serve. The World Bank has missed a golden opportunity to bring its lending more in line with its stated mission. The results might suggest to some that its stated mission diverges from a less explicit but more powerful mission: to insure profits for Northern- based multinational corporations and continued repayment of developing country debt to northern financial institutions. The question for civil society now is how to proceed, given this new reality. Some will continue to work with the Bank to ensure that some of the commitments they made, however minimal, are implemented fully. Others may use this opportunity to call for a strengthened effort around the World Bank Bonds Boycott campaign or will devise new ways of challenging the bank and other so-called development institutions, to ensure that we achieve that other world that we know is possible. With or without the World Bank’s involvement, energy systems based on fossil fuels will eventually become obsolete. The only question is how soon, and how much damage will be endured — particularly by the poorest -- in the meantime. For more information on the EIR, see www.eireview.info For more information on the international oil industry and its intersection with the international financial institutions, see SEEN’s website, www.seen.org |
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