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Oil companies and their human rights (ir)responsibilities
Written by Christine Petré (1) Wednesday, 16 May 2012 08:02

In recent years, gas and oil discoveries have been made on the African continent in countries such as Mozambique,(2) Ghana, Tanzania and Uganda and on prospected fields in Kenya, Mali and Sierra Leone. Today, 19 African countries are important oil and/or gas producers, with six of these, namely Nigeria, Libya, Algeria, Angola (oil), Sudan (oil) and Egypt (gas), accounting for the majority of the production.(3) However, for many countries the resource discoveries have been a curse rather than a blessing. 

On the African continent there are numerous cases of the infamous resource curse and the so-called Dutch disease. Companies getting involved in resource-rich areas of Africa, many of which are ravaged by conflicts and poverty, face a series of obstacles. Some of these obstacles are connected to companies’ responsibilities under the Universal Declaration of Human Rights, which states that all individuals and organs of society, including companies and business enterprises, must protect and promote human rights.(4) Oil companies are often accused of hampering developing countries’ progress and violating human rights. Such accusations beg the questions: what can be expected from oil companies and what problems are they facing?

This paper discusses the human cost of oil by grouping human rights into two categories:  direct and indirect human rights atrocities. The direct human rights atrocities are defined in this paper as those caused by oil companies because of their presence and activities in a country. The indirect human rights abuses are the ones in which revenues from oil and gas do not reach the people to whom the natural resources belong. Instead, the revenues encourage authoritarian Governments, or simply reach a small elite, hampering development and thus, indirectly violating peoples’ rights.

The black gold and its curse

A high number of human rights abuses related to fossil fuel operations have been perpetrated by Governments and corporations around the world. These include, for example, forced relocation and deadly suppression of critics.(5) In addition to human rights violations, the relationship among corruption, authoritarian governments, governance, conflicts and extractive industries tends to have a ‘repression effect’ in which resource wealth hinders democratisation by making it possible for governments to fund tools of repression.

Furthermore, World Bank analyst, Paul Collier, has declared that countries relying on revenues from resource exports run a 40 times higher risk of civil war, thus demonstrating a link between dependency on oil and serious armed conflict.(6) The two most recent African examples where tensions have increased and may continue to escalate due to disagreements surrounding oil are the border conflict between South Sudan and Sudan and the recent dispute between Kenya and Somalia. The latter is a result of newly identified oil exploration blocks in an area of the Indian Ocean being claimed by both countries.(7) 

Simultaneously clashes between the global oil industry and a transnational human rights advocacy network are becoming increasingly evident.(8) So, what is it that makes natural resources, the oil business in particular, so prone to human rights abuses?

The direct effects of hydrocarbon industries on human rights

Direct effects, as defined above, include the mistreatment and forced relocation of indigenous peoples and unfair treatment of company employees.

As indicated in an ‘Economies of Violence’ report by Michael Watts,(9) the most common human rights violation by oil companies is connected to the fact that their activities are often located within the areas where indigenous peoples live or work. The governments in most petro-states have set up constitutional monopolies over national resources such as oil, while the indigenous or ethnic minorities in many countries have incorporated, within constitutions or customary law, essential rights to their land. Thus controversy is frequently caused by claims over access to and control over oil revenues and access to the oil companies as stakeholders. The companies often simply pay lip-service to local communities and submit unequal and minimal payments for use of their land and the resources removed from this land. Frequently, there is no rigorous and accountable set of governance structures that connect capital and community.(10) The displacement of indigenous people’s also constitutes a violation of the rights of people in oil-rich regions. Former Sudan is one example where the Government, since 1999, has been involved in human rights violations by moving people from the oil producing areas, causing displacement of 175,000 people.(11)

Direct implications on human rights also include the unequal treatment of locally employed people and international employees. Other issues evolve in the areas of the oil compounds where boomtowns have grown and with them prostitution and sex trade. The oil industry has made no efforts to regulate these developments.(12)

One of the most notorious and high profile examples of gross human rights abuses comes from Nigeria where Ken Saro-Wiwa and eight other men experienced the price of oil in 1995. The men were hanged in Nigeria’s Port Harcourt prison after launching a non-violent movement for social and ecological justice for the Ogoni people in the Niger Delta, challenging the conduct of the oil companies and the Nigerian Government.(13) The oil company, Royal Dutch Shell, had their reputation severely damaged. Global campaigns of disinvestment were launched by many different organisations.(14) In the end Shell was forced to pay US$ 15.5 million in a court settlement due to their atrocities against the Ogoni people in the 1990s.(15) The event triggered the social investment movement and led to Shell’s launch of the Statement of General Business Principles, which included the company actively seeking out non-governmental organisations (NGOs) for policy “dialogue”, as well as BP’s “What we stand for…” statement in 1998.(16)

By the late 1990s most of the oil companies had implemented codes of conduct, as an emerging movement on cooperate social responsibility led to a number of voluntary codes of conduct, including their approach towards community development, labour and payment and environmental accountability. However, these codes of conduct are most often weak on the important issues, such as monitoring, disclosure and enforcement.(17)

Welcomed by many advocacy groups, the United Nations (UN) Draft Norms, launched in 2003, address the importance of protecting civilians, worker rights, non-discrimination, security and war laws, social and economic cultural rights and indigenous people’s rights. They also include enforcement and compliance instruments.(18) The framework was released due to the assumption that self-regulation or civic regulation cannot provide a sufficient framework for regulating global businesses.(19) Mandatory regulation is necessary where states are key players. The regulatory effort also includes the transparency and monitoring efforts of multilateral agencies such as the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF), such as the IMF’s oil diagnostics programme in Angola. The Norms also imply that the World Bank will take a more critical approach towards the market of oil and gas.(20) 

In addition to the steps taken by bodies such as the UN, there are society groups, watchdog agencies and NGOs which engage in monitoring corporate activities. New forms of global regulations are thus, continuously being developed.(21)

The indirect effects of hydrocarbon industries on human rights

The indirect human rights abuses include the encouragement of the development of Dutch disease, as well as patronage and rent seeking and keeping oppressive African leaders in government.

The Dutch disease is the most well known economic mechanism for anti-developmental outcomes. Dutch disease is a macroeconomic dynamic where a boom in the resource sector harms the non-resource sectors of the economy.(22) Countries tend to become dependent on their resource sector and do not diversify their economies. While oil prices remain high, Governments spend money through credit expansion and augmentation of the public sector. Thereafter, when the prices fall as a result of the volatility of the international oil market, these economies fall into debt.(23) The resource curse has therefore become widely used to describe the risk petro-states face. The oil industry is also, to a large extent, a closed society with limited employment effects, which creates few non-state multiplier effects.(24)

Oil has a tendency to encourage patronage and rent seeking instead of statecraft, transparency and state-institutional capacity. However, it is the level of corruption, fraud and total pillage of the public cashier that represent the core of the rights violations perpetrated by both companies and governments.(25)

It must be noted that as these effects are indirect, oil companies cannot be held directly responsible for them. Indeed, the presence of oil companies may also have beneficial outcomes for the countries in which they operate. China’s involvement in the oil business in African countries has been widely criticised from a human rights perspective. However, on the other hand, China is simultaneously investing in Africa’s governmental sectors, particularly infrastructure sectors in many countries, evident in China’s investment in Angola.(26)

Despite the investments in countries made by oil companies, if citizen’s rights are to be respected, it remains essential to address the economic and political issues described. In this effort, the World Bank, for example, started a Chad-Cameroon Oil Pipeline project, which finished in September 2008 after a fourteen-year engagement with the Government of Chad. The effort was aimed at setting a new standard for engagement of international donors in resource-rich but democracy-poor nations. The ambition was to establish institutions that would keep Chad from facing the typical political and economic issues related to oil booms in poor nations. The institutions were to direct oil revenues towards reducing poverty and certify fiscally sound and transparent Government spending. However, according to ‘Betting on oil: the World Bank’s attempt to promote accountability in Chad produced results that were far from positive. Moreover, the oil revenues might even have fuelled the consolidation of authoritarian power by, for example, arming rebellions.(27)

Oil revenues have also contributed to keeping oppressive African leaders in government, which makes transparency in oil deals of significant importance. Increasing transparency has been identified as the main factor in the struggle against the resource curse, for example, through the Extractive Industries Transparency Initiative (EITI), which is a global organisation of governments, companies, civil society groups and investors. Its aim is to strengthen governance by improving transparency in the sector of natural resources. The promotion of public reporting of revenue flows is reinforced through legislation such as Section 1504 of the United States Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), which requires companies to report on tax payments from each country. Similar sets of rules have also been proposed by the European Commission. This development is one step towards breaking the pattern of the resource curse and exploitation as oil, gas and mining companies pay what they should and governments manage revenues in a socially beneficial way.(28)

However, whether these control measures will be observed and have their desired effect, remains to be seen. Kenya recently discovered the country’s first oil deposit in its northwest territory of Turkana. Kenya’s oil findings are being compared to the ones made in Uganda in 2006. The oil is considered high-quality. Tullow oil, an oil exploration company in the territory, declared the site Ngamia-1 in Kenya’s Turkana County.(29) However, the discovery raises both hope, due to the investment that may enter the impoverished region, but also fear for the exploitation and abuse of Turkana province’s indigenous peoples.(30) Kenya has relatively stable democratic institutions, but struggles with corrupt elite. With this said, the oil discovery in Kenya is yet to be determined as a curse or a blessing.(31)

Concluding remarks

This paper concludes that it is only the direct human rights atrocities for which an oil company can be solely accountable. It also shows that the increasing global social movements of society groups, NGOs and watchdog agencies, as well as legislation and the monitoring efforts of multilateral agencies, play an essential role in preventing these atrocities. Their presence increases the price for human rights violations, which in turn increases the company’s incentives to remain lawful.

The issue of the indirect human rights abuses are more complex. These atrocities are usually a result of corruption, lack of transparency and authoritarian governments. The oil companies can not be given full blame for these situations which may incite a blame game between the companies and the state. However, with a legal framework of transparency these abuses could be regulated more efficiently. This would be beneficial for the oil companies operating in countries with a weak democratic apparatus since that would keep them from bad publicity. This paper encourages this development as an increasing number of African countries are being subject to natural resources discoveries and international attention.

NOTES:

(1) Contact Christine Petré through Consultancy Africa Intelligence's Rights in Focus unit ( This e-mail address is being protected from spambots. You need JavaScript enabled to view it ).
(2) ‘Statoil says finds partner for Mozambican blocks’, Reuters, 25 April 2012, http://www.reuters.com.
(3) ‘Africa oil and gas: a continent on the move’.  Ernst & Young Oil and Gas Center report, 2011, http://www.ey.com.
(4) ‘The Universal Declaration of Human Rights’, United Nations, http://www.un.org.
(5) ‘Human Rights’ Oil Change International website, http://priceofoil.org.
(6) Ibid.
(7) Gillblom, K., ‘Kenya, Somalia border row threatens oil exploration’, Reuters, 20 April 2012, http://www.reuters.com.
(8) Watts, M., ‘Human rights violence and the oil complex’, Niger Delta: Economies of violence, working paper no. 2, 2004, http://oldweb.geog.berkeley.edu.
(9) Ibid.
(10) Ibid.
(11) Ibid.
(12) Ibid.
(13) Wheeler, D., Fabig, H. and Boele, R., 2002. Paradoxes and dilemmas for stakeholder responsive firms in the extractive sector: lessons from the case of Shell and the Ogoni. Journal of Business Ethics, 39(3), pp. 297-318.
(14) Ibid.
(15) ‘Human Rights’ Oil Change International website, http://priceofoil.org.
(16) Watts, M., ‘Human rights violence and the oil complex’, Niger Delta: Economies of violence, working paper no. 2, 2004, http://oldweb.geog.berkeley.edu.
(17) Human rights & oil in Nigeria’ Amnesty International, August 2004, http://www.amnesty.org.
(18) Watts, M., ‘Human rights violence and the oil complex’, Niger Delta: Economies of violence, working paper no. 2, 2004, http://oldweb.geog.berkeley.edu.
(19) Ibid.
(20) Ibid.
(21) Ibid.
(22) Gould, A. and Winters, M., 2011. Betting on oil: the World Bank’s attempt to promote accountability in Chad. Global Governance 17(2), pp. 229-245.
(23) Bantekas, I., 2005. Natural resource revenue sharing schemes (trust funds) in international law. Netherlands International Law Review, 52, pp. 31-56.
(24) Ross, M., 2001. Does oil hinder democracy?’ World Politics, 53, pp. 325-61.
(25) Watts, M., ‘Human rights violence and the oil complex’, Niger Delta: Economies of violence, working paper no. 2, 2004, http://oldweb.geog.berkeley.edu.
(26) Taylor, I., 2006. China’s oil diplomacy in Africa. International Affairs, 82, p. 937-959.
(27) Gould, A. and Winters, M., Betting on oil: the World Bank’s attempt to promote accountability in Chad. Global Governance, 17, pp. 229-245.
(28) ‘Rigged? The scramble for Africa’s oil, gas and minerals,’ Global Witness report, January 2012, www.globalwitness.org.
(29) ‘Kenya discovers first ‘major’ oil deposit’ Al Jazeera, 26 March 2012,  www.aljazeera.com.
(30) Alpert, E., ‘Newly discovered oil fuels hope and fear in Kenya’. Los Angeles Times, 27  March 2012 http://latimesblogs.latimes.com.
(31) Wanyonyi, T., ‘Will it be a curse or blessing for Kenya?’ Daily Nation, 26 March 2012, www.nation.co.ke.


Written on Wednesday, 16 May 2012 08:02 by Christine Petré (1)

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