Time to get tough on energy firms’ secretive deals
As the European Parliament considers its position on anti-corruption proposals for the extractive industries, EU governments appear to be buckling under pressure from big mining, oil and gas companies to water down the rules. Member states are likely to endorse a less-transparent alternative to European Commission proposals, an alternative that has been pushed by corporate lobbyists. This is despite news from Libya and Angola that shows why these tougher regulations are needed.
France’s Total and Italy’s ENI, two of the biggest European oil companies, are being asked by the US Securities and Exchange Commission to provide information on deals that may have involved bribes made to the regime of deposed Libyan leader Muammar Qaddafi. Opaque shareholdings in Angolan oil exploration companies by government officials are also under the spotlight.
Greater transparency and access to information about operations would allow regulators and civil society to track the money and hold governments to account.
Two-thirds of the world’s poor live in resource-rich countries. Clearly those who live on just $2 a day are not benefiting enough from the trillions of dollars’ worth of oil produced where they live.
EU lawmakers should endorse proposals that mandate companies to report on every project they operate worldwide. Payments would have to be disclosed for every project, forcing oil and gas companies to provide far more detail on their payments to governments. This would induce governments to ensure that the deals struck benefit all the citizens of resource-rich countries, not just shareholders and self-interested government officials.
The industry argues vehemently against the proposed legislation on the grounds that it would do nothing to stop corruption.
This argument is simply not true. Transparency is always the best weapon in the fight against corruption. Where money and resources flow between companies and governments without transparency and accountability, there is a significant risk that it will be siphoned off with impunity.
But big corporations are too hooked on secrecy. A 2011 report by Transparency International on transparency in the oil and gas industry showed that of 31 companies surveyed, all but two (Norway’s Statoil and Canada’s Nexen Inc.) received less than a 50% grade when it came to disclosing the details of their international operations. ENI got 20% and Total 11%. Five companies scored zero, including Sonangol, the state-owned oil and gas company at the centre of the scandal in Angola.
The EU now risks bucking a global trend toward enforcing greater transparency in the extractives sector. If the legislative proposals are weakened, it will find itself out of step with legislation passed in the US in 2010 (the Dodd-Frank Act) that requires companies listed in the US to report on a project basis. If their EU-listed counterparts escape this requirement, US companies are sure to bemoan the lack of a level playing-field.
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The timidity of EU lawmakers might also encourage US companies to try to overturn or amend the US legislation. Certainly, the oil and gas companies have pushed back hard on Dodd-Frank legislation. In doing so, they have not been afraid to pull out their wallets. In 2011, oil and gas companies paid lobbyists $148 million (€114m), according to the Centre for Responsible Politics. The American Petroleum Institute, which represents the US oil lobby, has gone further by hinting that it will sue the Securities and Exchange Commission, the agency responsible for drafting the rules that will implement the Dodd-Frank legislation.
When will companies finally acknowledge that by being secretive, they prop up dictators, benefit elites and tarnish their image with investors, customers and the public at large? EU governments should be concerned about perpetuating this secrecy. Now policymakers have an opportunity to send companies a strong message – they too need be a part of the solutions necessary to stop corruption.
Jana Mittermaier is head of the EU liaison office of Transparency International, a global anti-corruption organisation.