[DEBATE] : (Fwd) Chad regime v. Chadians and WB: lessons for oil strategy
pbond at mail.ngo.za
Wed Sep 10 16:10:11 BST 2008
(On Friday, at the Centre for Civil Society, we'll put this particular
incident centre stage in discussion about whether "keep the oil in the
soil" is the appropriate strategy for red-green social movements: for
skypecast details see http://www.ukzn.ac.za/ccs/default.asp?2,68,3,1601)
World Bank pulls plug on Chad oil pipeline agreement
By Lesley Wroughton
9 September 2008
WASHINGTON, Sept 9 (Reuters) - The World Bank on Tuesday pulled the plug
on an oil pipeline agreement with Chad after long-standing tensions with
the government over failed promises to spend the oil profits on programs
for the poor.
In a statement, the World Bank said Chad prepaid the outstanding balance
of $65.7 million under the $140 million loan deal on Sept. 5 following
talks with the government of President Idriss Deby.
The impoverished central African country is expected to earn about $1.4
billion in oil revenues this year.
The pipeline was one of the World Bank's biggest investments in Africa
and billed as a test case for how Africa's oil wealth could benefit the
poor if spent properly.
The bank said Chad had failed to comply with agreements, in which the
government agreed to set aside a chunk of its oil revenues for local
communities, health and education.
After two agreements since 2001 with Chad over the pipeline and no
progress, World Bank President Robert Zoellick wrote to Deby in August
saying the bank could no longer support the project and urged him to
prepay the balance of the loan and end the arrangement.
"Regrettably, it became evident that the arrangements that had
underpinned the bank's involvement in the Chad/Cameroon pipeline project
were not working," the bank statement said.
"The bank therefore concluded that it could not continue to support this
project under these circumstances."
A government official in N'Djamena told Reuters the bank's decision
would not affect the country's oil output.
The World Bank backed the $4 billion, 170,000-barrels per day
Chad-Cameroon pipeline, operated by U.S. major Exxon Mobil, by financing
a portion of it in 2001 on condition profits were spent on programs to
The 620-mile (1,000 km) pipeline, which carries oil from Chad through
Cameroon to international markets, was heavily criticized by aid
agencies which warned that Chad was marred by corruption, political
instability and human rights abuses.
GRAB FOR PROFITS
Former World Bank President Paul Wolfowitz halted lending to Chad in
January 2006 and froze a dollar account at Citibank in London after the
government made a grab for the oil revenues by altering an oil law to
access more of the profits.
Relations were restored in April 2006 when the agreement was
renegotiated and the government promised to allocate 70 percent of
budget spending in 2007 for programs for the poor.
Over the past year, however, Deby has signed several decrees handing him
personal control over the landlocked oil producer's finances and
circumventing World Bank attempts to ensure a large share of oil profits
go to social spending.
Relations with the bank have worsened as the government has tapped more
of the oil profits for military spending amid growing threats by rebels
and increased costs related to refugees fleeing the Darfur conflict in
The bank had been warned by local and international development groups
that the pipeline project had little chance of reducing poverty, said
Ian Gary, senior policy advisor for extractive industries at Oxfam America.
"The project's record of failure proves these warnings correct," Gary
said. "Looking forward, the World Bank must absorb the lessons of
failure from this and other oil and mining projects around the world and
avoid financing such efforts in places not yet ready to manage the risks."
The World Bank's decision on the pipeline does not affect its existing
seven development projects in Chad and a bank mission is expected to
review the projects shortly.
Nor does it affect an agreement between the World Bank's private-sector
lender, the International Financial Corp, and the pipeline's operator
Exxon Mobil, including environmental and other monitoring of the pipeline.
The World Bank said it recognized Chad's problems and was willing to
help, despite the parting of ways over the pipeline.
"If the government of Chad wishes to focus its energies on a program to
support inclusive development to overcome poverty, assist displaced
people, and improve governance and effectiveness to achieve results, the
World Bank is willing to work with Chad to assist," the bank said.
The bank said it looked forward to talks with senior Chad officials in
Washington at the end of September on future relations and a development
program that reduced poverty. (Reporting by Lesley Wroughton, Editing by
Diane Craft and Neil Fullick)
World Bank Statement on Chad-Cameroon Pipeline
Available in: Français
Press Release No:2009/073/AFR
In Washington: Carl Hanlon (202) 473-8087
chanlon at worldbank.org;
In Paris: Rachel Winter Jones + 33-1-4069-3052
rjones1 at worldbank.org
Washington, September 9, 2008 – In 2001 the World Bank provided
financing to Chad to support development of the Chad-Cameroon pipeline
with a specific agreement that substantial oil revenues would be
directed to poverty reduction.
Over the years, Chad failed to comply with key requirements of this
agreement. A new agreement was signed in 2006, but once again the
government did not allocate adequate resources critical for poverty
reduction in – education, health, infrastructure, rural development and
governance. Regrettably, it became evident that the arrangements that
had underpinned the Bank’s involvement in the Chad/Cameroon pipeline
project were not working. The Bank therefore concluded that it could not
continue to support this project under these circumstances.
We conveyed our concerns in discussions with the Government of Chad,
including through our development partners, that failure to comply
undermines the basis for the World Bank’s involvement in the project.
During discussions held with the Government of Chad in N’Djamena the
week of August 25, 2008, the Chadian Government agreed to prepay the
World Bank for pipeline related financing.
Chad has now fully prepaid both the IBRD and IDA components of the loan,
as of September 5, 2008.
While the payment ends the Bank's involvement in the pipeline project,
the Bank has explained to the Government of Chad that it recognizes the
country's significant development problems, which have been exacerbated
by regional instability and the flight of refugees. If the Government of
Chad wishes to focus its energies on a program to support inclusive
development to overcome poverty, assist displaced people, and improve
governance and effectiveness to achieve results, the World Bank is
willing to work with Chad to assist.
To this end, the Bank welcomes the upcoming visit of the Prime Minister
of Chad to Washington, planned for the end of September. We will discuss
further the future of the relationship between Chad and the Bank, and
the cooperation and support we could provide for rebuilding a
development program that supports the poorest people in the country.
More information about the Debate-list