What happens to Nigeria’s PDP if oil prices keep falling?

A lot of foreign policies and domestic spending programs in 2014 have, like the best laid plans o’ mice and men, been severely disrupted by the dropping world oil prices as supply jumps significantly. Those countries with a particularly heavy economic and governmental dependence on oil exports — including Africa’s largest economy, Nigeria — are especially susceptible to policy disruption.

On our upcoming episode of the “Arsenal For Democracy” show, my radio co-host Nate pointed out that if global crude oil prices keep falling, certainly Nigeria as a whole is going to be in for a pretty bumpy ride, but none more so than the country’s ruling party, the PDP. They’ve ridden the ten-fold increase in crude prices (higher even, at times before now) since taking power in 1999 to a lot of sketchy, payola-infused campaign victories. It’ll be much harder to buy votes, 15 years into power, if revenues drop sharply.
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Baghdad’s stalling of oil revenue talks is pushing Kurds out

The New York Times published an article on the latest efforts by the Kurdish Regional Government to go their own way from central Iraqi control on oil production and sales, in light of continued failure to negotiate new terms for revenue sharing.

The current arrangement is an 83/17 revenue split, with the national government in Baghdad on the high side, which hardly seems reasonable. I think it’s somehow derived from 17% of the reserves being in Kurdistan, but even that doesn’t make much sense (especially when so much of the past couple years’ rise in Iraqi production and new development contracts have been on Kurdish land and via the regional government). And the article suggests that the resistance by Baghdad to changing the arrangement is fueling a rapidly accelerating cycle of mutual non-cooperation that will probably end in an independence attempt:

The more Kurdish officials developed their oil industry, the more Baghdad balked. The more the central government restricted the Kurds, the more they felt like they had no choice but to press forward.

“Their policy is actually backfiring,” said Howri Mansurbeg, a professor of petroleum geosciences at Soran University in Kurdistan, said of Iraqi officials. “They want to prevent a Kurdish state, and now the exact opposite is happening.”

 
Maybe there would be a case for such an unbalanced ratio if Baghdad provided tons of services and defense to the Kurdistan Region, but they’ve done jack for them … and then have demanded everything from them, after the national security forces literally threw their weapons on the ground and ran away.

At the point Maliki handed Kirkuk to the Kurdish Regional Government to take care of, and their forces held it successfully, I think they earned the right to a lot more revenue. (And — as the Times points out, matching my analysis at the time in June — at the point he handed them Kirkuk, he also handed them enough oilfields to become independent.)

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Despite a rising war, Libya’s oil keeps flowing

There are now two rival governments in Libya, an unrecognized one in the western capital and an internationally recognized (and elected) one in the eastern city of Tobruk. From physical infrastructure to virtual infrastructure, everything is a target for the rivals. Politically and militarily, the western faction seems to have gained the upper hand for the moment, but on the economic front, the eastern faction is still maintaining competitive dominance in the battle for control and influence.

Libya is a country with one of the largest oil reserves in the world, and unsurprisingly one of the biggest political struggles between the rival governments is over effective control of the oil production, sales, and revenues — as explained by Jason Pack and Rhiannon Smith:

This battle for legitimacy and power is being played out within Libya’s two most influential institutions: the Central Bank and the National Oil Corporation (NOC). The HoR voted in September to dismiss Sadiq al-Kabir from his position as Central Bank governor, however Kabir appears to still be running the bank. Through him, the Islamist-aligned government has at least some control over Libya’s finances.

Last week, the Central Bank transferred Hassi’s [unrecognized] government enough funds to cover three months of family allowance payments, while a GNC-controlled public spending authority [allied with it] has managed to impose a payment limit of 200,000 Libyan Dinar across the public sector.

Meanwhile, Hassi’s Oil Minister Mashallah al-Zwey has physically taken over the NOC headquarters in Tripoli along with the NOC website. As such, officials are reportedly taking direction from him. Indeed, the official Libyan government website has been taken over by Hassi’s National Salvation government. Those cyberspace realities go a long way to validating the Tripoli government’s claim to sovereignty and legitimacy.

 
Based on this, one might expect a total breakdown in cooperation on oil between the rival factions. Instead, production is up and revenues are continuing to be distributed across the country. It’s a bit haphazard, to be sure, but they haven’t stopped.

Why? The realities of the complex setup of pre-Gaddafi oil royalty systems and citizen salaries, crossed with the international oversight of the country’s oil sector following the 2011 civil war, have resulted in a bizarre and almost amusing level of cooperation, even as the two factions send wave after wave of militias and soldiers and jets at each other.

Here’s the basic setup according to Reuters:

  1. Oil comes out of the ground all over the country.
  2. Oil is largely shipped to export terminals in eastern Libya controlled by the recognized government.
  3. Oil is sold legally on the international market by brokers.
  4. Money from these sales is deposited directly into an overseas account established by the international community.
  5. The only entity able to access the money overseas to bring it back to Libya is controlled by supporters of the unrecognized government and the western rebels.
  6. Most of the oil money brought back into Libya is paid to average citizens, fighters, soldiers, police, etc. in all areas of the country under a system established by Gaddafi. All beneficiaries nominally “work” for the government (either one) in jobs that may or may not exist.

If you detected a bit of a mutually assured destruction or prisoner’s dilemma-style roadblock in there, so did pretty much everybody involved, which is apparently why the two rival forces haven’t stopped the oil party.

When everyone in Libya is employed in a no-show government job funded by oil revenues, everyone in Libya is committed to keeping the oil flowing and being sold legally, despite their differences, even in the middle of what has clearly become a new civil war. Since Western rebels control the payouts and the Eastern government controls the exports, it’s important for everyone to work together even as they’re at war — or else nobody gets salaries. Without salaries, and barring substantially more proxy aid from the Persian Gulf, both sides would collapse as their hired combatants suddenly exit the war.

Unilaterally halting the exports automatically halts the revenue stream, while unilaterally halting the revenue payouts would trigger retaliatory cancellation of the oil exports. The only self-preserving and logical course, therefore, is for neither side to try to hold the other hostage on the oil cycle, at least until both the revenue transfers and exports are controlled by the same side, whether by force or by the international community intervening on the funds repatriation process.

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Climate policy: Disengage “stakeholders”?

Perhaps there has been too much engaging of certain uncooperative and undermining stakeholders in the climate change policy discussions. As one of the world’s largest climate action protests ever unfolded this weekend, Anna Lappé makes that case in a new Al Jazeera America op-ed entitled “What climate activists can learn from the fight against Big Tobacco”:

Progress has been stalled in part because the biggest polluters in the world — those oil and gas companies responsible for the lion’s share of emissions, for example — have been given a seat at the negotiating table, treated as partners and stakeholders at the annual global meetings called the Conference of Parties, or COP. Over the years, these COPs have featured industry-sponsored pavilions, dinners and breakaway meetings. And companies have been granted official observer status through their industry trade associations, which are considered nongovernmental organizations under current climate meeting rules. Some have even attended as official members of country delegations. (For instance, a representative from Shell joined the Nigerian delegation to COP16 in 2010 and Brazil’s to COP14 in 2008.)

As climate activists call for governments to take real action on climate, the decades-long fight against Big Tobacco — specifically, how public health advocates successfully kept companies away from the negotiating table — holds powerful lessons for the role industries should have in these key talks.

 
It would be one thing if the oil and gas companies were actively interested in pursuing new energy strategies or diversifying their future plans into new and cleaner areas, but as she notes they are spending a lot of money trying to undermine the case that new regulations or laws are even needed in the first place. And in that regard they are probably forfeiting their right to have a seat at the table as stakeholders.

Incidentally, that mention of the Shell rep serving on the delegation from Nigeria in 2008 and 2010 is very unsurprising. As I explored in an article in January 2011, entitled “The Nigerian Republic of Royal Dutch Shell”, on the Nigeria-specific revelations from the leaked diplomatic cables a few years ago:

Royal Dutch Shell has essentially become, according to the company itself, the industrial octopus inside Nigeria’s government, even in the “democratic” era…

The ambassador reported: “She [Ann Pickard, then Shell’s vice-president for sub-Saharan Africa] said the GON [government of Nigeria] had forgotten that Shell had seconded people to all the relevant ministries and that Shell consequently had access to everything that was being done in those ministries.”

 
Until now, most of the discussions have included oil and gas lobby folks on the theory that their “buy-in” would be critical to producing actionable plans for dealing with climate change. But what if they just refuse to buy-in? It should be clear after more than two decades of efforts that they aren’t really interested in taking the transformative steps necessary to bring their businesses into the future. At this point, they have too much influence at the table, rather than not enough. The fight against Big Tobacco is probably a useful analogy.

Dark clouds of smoke and fire emerge as oil burns during a controlled fire in the Gulf of Mexico, May 6, 2010. The U.S. Coast Guard, working with BP, local residents and other federal agencies, conducted the burn to help prevent the spread of oil following the explosion on Deepwater Horizon, an offshore drilling unit. (Credit: US Navy via Wikimedia)

Dark clouds of smoke and fire emerge as oil burns during a controlled fire in the Gulf of Mexico, May 6, 2010. The U.S. Coast Guard, working with BP, local residents and other federal agencies, conducted the burn to help prevent the spread of oil following the explosion on Deepwater Horizon, an offshore drilling unit. (Credit: US Navy via Wikimedia)

Why Brunei? How a tiny, anti-gay monarchy became a U.S. ally.

brunei-map-ciaSecretary of State John Kerry and the Obama Administration are now (justifiably, I’d say, at this point) taking huge heat for trying to cement a major alliance with the podunk Southeast Asian absolute monarchy of Brunei.

President Obama himself had been scheduled to travel to Brunei last fall during the trip to Indonesia, which the government shutdown canceled. Last year, he called the Sultan “a key leader in the Southeast Asia region and also widely respected around the world.”

Outrage has been stirred up with the long-planned launch in April by the government of a phased rollout for an elaborate new penal code with extreme religious conservatism based in hardline Sharia Law interpretations. In particular, U.S. LGBT activists in California are furious over the draconian anti-gay provisions and have been organizing boycotts against local Brunei state investments.

But the anti-gay problem is just the tip of the horrible, no good, very bad legal iceberg for the monarchy with fewer residents than Boston. At least a fifth of the country’s population is non-Muslim, which is now punishable with death by flogging. Interfaith marriages are now adultery, punishable with death by stoning. Breaking the laws of Brunei while outside the country (i.e. in neighboring Malaysia, also located on the island of Borneo) is also to be punishable under Brunei rules.

So why has the U.S. State Department been trying so enthusiastically to secure a partnership with the Sultanate of Brunei and its ironically named Abode of Peace?

Because it’s got a ton of natural gas and oil relative to its size (35th biggest oil exporter and 26th biggest gas exporter in the world), it’s an original member of the proposed Trans-Pacific Partnership free trade agreement, it’s strategically located on the South China Sea coast, it’s been a counterterrorism partner since 2001 … and I guess they weren’t expecting it to go way off the deep end suddenly like this.

But really, I think the warning signs should have been there. Generous oil-funded social welfare policies aside, Brunei has not been cool people for quite some time now. Their human rights abuses, near total lack of civil rights, and obvious authoritarianism were pretty well known before now. The former British protectorate and past regional sea empire has been ruled by one dynasty with a pretty ironclad fist for six centuries.

Some of the pretend constitution’s provisions have been ignored for so long by the monarchy that the country hadn’t even gained independence (1984) at the time they were suspended formally, in the 1960s. The safe money would have been on further regression, not a dramatic improvement, for all the signs the world has been picking up from Brunei in the past decade.

One of those signs? According to the Boston Globe, it should have been the 2013 global human rights report from… drumroll please… the U.S. State Department:

…the State Department’s 2013 global human rights report criticized Brunei for its restrictions on religious freedom; exploitation of foreign workers; and limitations of the freedom of the press, assembly, and association as “the most prevalent human rights problems.”

It went on to mention the adoption of the new legal code based on religious Sharia law but noted that “the effect of the law will not be clear until it is implemented, which was scheduled to begin in phases starting in April 2014.”

 
Nobody could have predicted…

But it seems that finishing a free trade deal with such a pivotal player was too much to pass up. It’s interesting that nearly 600 years after Brunei rose to power by controlling water trade and coastal ports in the dense commercial shipping zone not far from the Spice Islands, it’s leveraging the exact same strategic economic power to do whatever it wants. I guess it’s true what they say!

The Nigerian Republic of Royal Dutch Shell

I didn’t have time write about this when the relevant cable first came out, but I was reminded by a CBS roundup of “How WikiLeaks Enlightened us in 2010” to go back and take a look. It’s disturbing but not particularly surprising to longtime observers and critics. Royal Dutch Shell has essentially become, according to the company itself, the industrial octopus inside Nigeria’s government, even in the “democratic” era:

Cables from Nigeria show how Ann Pickard, then Shell’s vice-president for sub-Saharan Africa, sought to share intelligence with the US government on militant activity and business competition in the contested Niger Delta – and how, with some prescience, she seemed reluctant to open up because of a suspicion the US government was “leaky”.

But that did not prevent Pickard disclosing the company’s reach into the Nigerian government when she met US ambassador Robin Renee Sanders, as recorded in a confidential memo from the US embassy in Abuja on 20 October 2009.

At the meeting, Pickard related how the company had obtained a letter showing that the Nigerian government had invited bids for oil concessions from China. She said the minister of state for petroleum resources, Odein Ajumogobia, had denied the letter had been sent but Shell knew similar correspondence had taken place with China and Russia.

The ambassador reported: “She said the GON [government of Nigeria] had forgotten that Shell had seconded people to all the relevant ministries and that Shell consequently had access to everything that was being done in those ministries.”

 

What are some of the consequences of this level of control in Nigeria by an oil company? Here’s what I looked at back in June, for example:

How much is being spilled or is leaking? Well, right now there are about 300 incidents a year, and that has added up over the decades.

One report, compiled by WWF UK, the World Conservation Union and representatives from the Nigerian federal government and the Nigerian Conservation Foundation, calculated in 2006 that up to 1.5m tons of oil – 50 times the pollution unleashed in the Exxon Valdez tanker disaster in Alaska – has been spilled in the delta over the past half century. Last year Amnesty calculated that the equivalent of at least 9m barrels of oil was spilled and accused the oil companies of a human rights outrage.

According to Nigerian federal government figures, there were more than 7,000 spills between 1970 and 2000, and there are 2,000 official major spillages sites, many going back decades, with thousands of smaller ones still waiting to be cleared up. More than 1,000 spill cases have been filed against Shell alone.

Last month Shell admitted to spilling 14,000 tonnes of oil in 2009. The majority, said the company, was lost through two incidents – one in which the company claims that thieves damaged a wellhead at its Odidi field and another where militants bombed the Trans Escravos pipeline.

[…]

Caption: An oil spill from an abandoned Shell Petroleum Development Company well in Oloibiri, Niger Delta. Wellhead 14 was closed in 1977 but has been leaking for years, and in June of 2004 it finally released an oil spill of over 20,000 barrels of crude. Above: Workers subcontracted by Shell Oil Company clean it up. | photo & caption by Ed Kashi, via citisven

 
Nigeria is now America’s third-largest oil supplier, even beating Saudi Arabia, from which we get about 40% of our oil. It’s time to do something about this.

This post originally appeared on Starboard Broadside.

They hate us for our oil spills

The United States gets over 40% of its oil from the Niger Delta region. We get more oil from Nigeria than from Saudi Arabia. But there’s a lot of oil being pumped that’s never making it to any refinery because instead it’s ending up smothering the landscape across the region, which is always slick with oil, as I wrote in June…

How much is being spilled or is leaking? Well, right now there are about 300 incidents a year, and that has added up over the decades.

One report, compiled by WWF UK, the World Conservation Union and representatives from the Nigerian federal government and the Nigerian Conservation Foundation, calculated in 2006 that up to 1.5m tons of oil – 50 times the pollution unleashed in the Exxon Valdez tanker disaster in Alaska – has been spilled in the delta over the past half century. Last year Amnesty calculated that the equivalent of at least 9m barrels of oil was spilled and accused the oil companies of a human rights outrage.

According to Nigerian federal government figures, there were more than 7,000 spills between 1970 and 2000, and there are 2,000 official major spillages sites, many going back decades, with thousands of smaller ones still waiting to be cleared up. More than 1,000 spill cases have been filed against Shell alone.

Last month Shell admitted to spilling 14,000 tonnes of oil in 2009. The majority, said the company, was lost through two incidents – one in which the company claims that thieves damaged a wellhead at its Odidi field and another where militants bombed the Trans Escravos pipeline.

 

 
While still images coming out of the region are shocking enough, intrepid Current TV correspondent Mariana van Zeller went into the Delta to get video footage of the literally omnipresent oil slicks and spewing wellheads, as well as to interview locals.

While rebels or other individuals damaging pipelines to steal or disrupt oil may be a problem, as the oil companies claim and the Western media dutifully repeats, one local Ogoni activist tells her simply that “the greatest problem we have is that these facilities are too old” and they just corrode away and start gushing oil into the surroundings. And in fact he believes that the violence against the oil companies and the government is probably a result from, not a cause of, the many crude spills. The organization he works for helped bring down the Nigerian dictatorship in the 1990s, ushering in a new, ostensibly more democratic era, and yet they still face the same problems from the oil, which is killing their people. The military government was unresponsive and often downright cruel, as my background post explored, and in some ways this aspect has improved under democracy, but “security” thugs hired by Shell and the other offenders continue to deter local efforts to seek justice. (I want to note that my post was at one point apparently being circulated on an internal corporate server of Shell Oil, according to my site statistics data.)

We made a huge deal out of the large multi-month oil leak in the Gulf of Mexico — and rightfully so — but we as a nation don’t bat an eye over the reality that Nigeria’s delta people have been experiencing what is tantamount to a pervasive, multi-decade oil slick in the same supply chain that is attempting to slake America’s oil thirst and led to that smaller oil catastrophe in our marine back yard. (Yes there was actually less oil going into the Gulf this summer than has been spilled almost continuously in the past five decades in the Niger Delta region!) But these days, as is often the case, it is “un-American” to question our consumer demands and resulting detrimental overseas policies, to suggest that we might be causing well-founded distrust and dissatisfaction from our fellow global citizens, or to propose that we alter the status quo to improve the lot of others and thereby secure ourselves.

1.5 million tons of oil spilled over a half century. God bless our SUVs, every one.

This post originally appeared on Starboard Broadside and was featured by Boston.com.