[DEBATE] : (Fwd) Chad regime v. Chadians and WB: lessons for oil strategy

[Patrick Bond]

(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 
reduce poverty.

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 
neighboring Sudan.

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."

REFRAMING RELATIONS

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

Contacts:

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.