New US President Donald Trump has been repealing laws and regulations implemented by former President Barack Obama at breakneck speed.
I wanted to highlight why I, and others, believe repealing some of these laws is a big mistake, to put it diplomatically, and is ultimately counterproductive.
I will focus on issues that I as an energy and technology journalist know a little bit about, starting with Trump’s repeal of the Cardin-Lugar transparency provision. It sounds boring but it’s not, trust me, it’s important.
Transparency to fight corruption
Essentially this law requires US-listed extractive companies like Exxon, Chevron, and several Chinese oil majors, to publish details of the hundreds of billions of dollars they pay to governments across the world in return for rights to natural resources.
Put simply, the law is designed to provide some transparency in regards to the payments made by companies to foreign governments, particularly those that are a high risk for corruption.
If the public know how much money is exchanging hands for oil/gas/ mineral licences, the government receiving the funds can be held more accountable for how those revenues are spent. i.e is the money being spent on public infrastructure and healthcare or to build palaces for the ruling elite?
If nobody knows how much money has exchanged hands, it’s impossible to trace how it is spent, right?
At the beginning of February Congress voted to rescind Cardin-Lugar regulation, followed by a corresponding vote by the House of Representatives and then the Senate.
Corruption and the extractives industry
When the law was passed in 2010 and then finally implemented in 2016 it was considered ground-breaking, and, frankly, well overdue.
This is because for years people in poverty-stricken and/or war-torn nations such as Eritrea, the Democratic Republic of Congo (DRC), Angola, and many others, have been robbed of their natural resource wealth by kleptocratic governments working in partnership with Western and Chinese companies.
These are nations that routinely receive aid from Western countries.
It’s hard to prove allegations of corruption in any country, let alone in chaotic and notoriously secretive states such as Eritrea or Angola, for example.
Yet due to the incredible work of journalists and NGOs, systematic fraud, money laundering and illicit deals, that often fund internal conflict, have been uncovered. I have written a few articles myself highlighting the excellent work of Financial Times journalist Tom Burgis for his book The Looting Machine and by NGO Global Witness.
Companies such as ExxonMobil, which has worked in Angola, along with UK company BP and US-based Chevron in partnership with state-owned oil company Sonangol, have lobbied against such laws, claiming them to be cumbersome, bureaucratic, costly and putting them at a competitive disadvantage.
It’s no surprise therefore that this piece of regulation was overturned after ExxonMobil CEO Rex Tillerson was appointed US Secretary of State. It’s clear whose interests are being looked after here.
It’s also in-line with the protectionist policies Trump was elected on. It does, however, go against the global trend.
As Global Witness writes in its response to the repealing of the regulation:
“This move sets the U.S. in opposition to a broader global trend toward greater transparency and accountability in how oil, gas and mining revenues are managed. Thirty other major economies around the world, including the UK, Canada, Norway and all 27 members of the European Union – have laws requiring their oil, gas and mining companies to disclose their payments to governments. Dozens of major European and Russian oil companies have already published their payments to governments. Claims made by the oil lobby that greater transparency will harm U.S. oil companies’ competitiveness has proven untrue.”
From my experience covering both the mining and oil and gas industries, there has been the attitude that if Western companies don’t operate in high-risk countries, even if this involves facilitating corruption, they’ll lose out to Chinese firms.
This argument ignores the fact that Western companies, especially American firms, hold a lot of sway and power because they have immense knowledge, expertise and access to technology unmatched by the Chinese.
And, in fact, Chinese companies are restricted by Western transparency laws too. They are required to reveal payments made to overseas governments as a condition of their listing on European and US stock exchanges.
The Chinese government has also brought in measures to tackle corruption. In 2014 the Chinese Chamber of Commerce for Minerals, Metals and Chemicals Importers and Exporters (CCCMC), launched a set of voluntary guidelines for Chinese mining and minerals trading companies working overseas.
Wealth for everyone
We all need the minerals, oil and gas that are extracted from third world countries. And, generally speaking, the populations of those countries would be, overall, adversely affected if extractive companies stopped investing and operating in them altogether.
Mandatory transparency is the start to ensure that extractive wealth benefits all stakeholders, and not just despot governments and the multinational companies making deals behind closed doors.
It’s paramount that profit is not pursued above everything else and repealing the Cardin-Lugar regulation suggests all that is important is the bottom line of American companies’ balance sheets.
Sometimes it’s important to remember there is more than enough to go around – just look at the profits made by ExxonMobil, BP and others.
If resource wealth was shared more fairly, it’s likely less foreign aid would be needed and, furthermore, fewer people would be forced to flee their homes due to poverty, war and a lack of basic necessities in search of a better life.
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