OECD export credit supported pipeline is part of Chad's unstable political situation

With complex roots going back 20 years or more, the current unrest in Chad is linked in part to oil revenues from an OECD export credit agency supported pipeline project that has created economic, environmental and social conflicts which could have been avoided if proper standards had been maintained as required by the OECD's Common Approaches on ECAs and the Environment.

The U.S. Export Import Bank and France's Coface guaranteed loans covering the construction of a pipeline to transport oil extracted from southern Chad to the Atlantic coast of Cameroon, putting it in reach of international markets. At the time of it's construction in 2005, it was the single biggest foreign investment project in Africa.

In a 2005 report, Amnesty International called on the World Bank, multilateral development banks, export credit agencies and commercial banks to ensure that their institutions do not support projects such as the Chad - Cameroon pipeline which are underpinned by legal agreements that undermine the host state's ability to meet its international human rights obligations through clauses in these agreements that can be interpreted as either (1) curtailing the host state’s ability to fulfil its human rights obligations; or (2) discouraging the host state from fulfilling its human rights obligations.

In January 2006, What's New reported that the World Bank was obliged to suspend all funding for Chad. According to the International Advisory Group which was established by the World Bank to monitor project implementation, the oil consortium which feeds the Chad - Cameroon pipeline was taking land from poor subsistence farmers without ensuring that compensation payments will make up for lost livelihoods. Local authorities and the military are known to extort money from villagers when they receive cash compensation from the oil companies. Chadian human rights organizations report that human rights activists trying to defend local people’s rights often receive death threats and have to flee the region. Pollution is taking a toll on the health and crops of some of the poorest people on earth, but none of the project sponsors are even studying it, let alone resolving the problems.

In an insightful analysis of the current situation in Chad entitled "Making Sense of Chad", Alex de Waal in Pambazuka News provides important background to this complex war.

"President Deby of Chad came to power in 1990 on the basis of a simple deal with Khartoum - each would deny support to the other’s rebels. Since then, this agreement has disintegrated. The Chadian civil war is often described as a "spillover" from Darfur. That is a simplification. Darfur's war actually began as a spillover from Chad more than twenty years ago and the two conflicts have been entangled ever since. Many of the Arab militia fighting in Darfur are of Chadian origin, and many of the rebels similarly served in the Chadian army or militia. The current Chadian war is best seen through four different lenses: [1) the Chad/Darfur/Sudan conflict; 2) the internal Chadian conflict over land and resources; 3) Sudanese manipulation of weak border states and 4) a regional competition for dominance through a vast arc of central Africa that has rarely been governed by state authority.]

"Deby relies heavily on a very narrow circle of close kinsmen and on using state finance as his personal property, distributing largesse in return for loyalty. His position [is] strengthened by oil revenues and French military cooperation. He dismantled a model World Bank program for control of Chad's oil revenue in 2005, which had been intended to ensure that the funds were used for development, rather than patronage and arms purchases. He fixed the elections. He stays in power through intrigue, intimidation and cash." Cash from a project financed with OECD ECA guaranteed loans, which those ECAs have neglected to monitor and ensure that appropriate controls were put in place and implemented.

In an 18 December 2003 statement entitled "OECD Adopts Stronger Environmental Common Approaches for Export Credits", the OECD's Export Credit Secretariat noted that: "With regard to the most sensitive projects, the environmental standards to be applied will be reported and monitored by the ECG, and exceptional deviations below international standards will have to be justified." ECA Watch does not believe that any such monitoring has taken place by the OECD export credit agencies involved, or that deviations from international standards have been justified to the OECD's Working Party on Export Credits and Credit Guarantees (ECG), as required by Article 14 of the 2003 version of the Common Approaches. Despite lingering questions, the World Bank, whose lead OECD ECAs follow, agreed to resume lending to Chad in May 2006.

In addition to problems and conflict fueled in part by oil revenues in Chad, the pipeline itself continues to be a source of conflict in Cameroon. The Center for Environment and Development (CED), a Cameroon NGO active in monitoring the impacts of the pipeline project, reported a January 2007 spill at the Kiribi terminal that was not reported to the public until 4 days later. In April 2007, civil society groups issued a non-completion report contesting the World Bank's declaration that the pipeline project was completed and urging it to continue to monitor the project until a host of issues such as those agreed to by the project's sponsors led by Exxon-Mobil have been met. Their report notes that "the project appears to have fueled violence, impoverished people in the oil fields and along the pipeline route, exacerbated the pressures on indigenous peoples and created new environmental problems."

According to the April 2007 CSO non-completion report, the World Bank "in 2000 claimed that Cameroon would use the benefits of pipeline activity to support its poverty strategy. That claim was highly questionable given Cameroon's long running problems with corruption and transparency, including the government's failure to fully transfer revenues from its own oil production to the national budget... In early 2005, a Cameroonian study on HIV/AIDS along the pipeline found a marked increase of the rate of HIV/AIDS infection along the pipeline corridor." Korina Horta of the US NGO Environmental Defense notes today that: "Civil society organizations in Chad had called for a moratorium on financing the project because they predicted violent confrontation over the oil revenues. Sadly, these warning were ignored."

"The lack of democracy in Chad and Cameroon has much to do with the inequities and environmental degradation brought about by the project. Although the [OECD ECAs following the lead of the] World Bank [are] not directly responsible for the political situation in both countries, now that [they] have unleashed this mega-project, [they] must share the responsibly for the deterioration of the social situation and the environment that the project has created."

Meanwhile, the French government announced on 5 February 2008 that it will continue military support to President Deby of Chad, ensuring a continued flow of cash from French supported investments to fuel these conflicts. Deby has used the current unrest to arrest opposition figures, one of whom had submitted claims to the World Bank’s Inspection Panel mentioned above. The whereabouts of several civil society representatives monitoring the oil project were for a while unknown and their safety is still a concern.

While ECAs do not see themselves as development agencies nor promotors of sustainable development nor human rights, they are important financial actors, and have a duty, as state-owned, taxpayer funded, official bodies, to respect the international environmental and developmental commitments and obligations of their nations, by avoiding, mitigating and/or reducing environmental and social harm abroad. It is clear that they accept no such responsibilities in the case of projects such as the Chad - Cameroon pipeline.