Research Paper: Report of Transparency in Oil Extraction for Equatorial Guinea and Chad

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Chad Guinea

Guinea promises superior transparency than Chad for oil or any other point-source extractive investment particularly because of constitutional checks and balances to executive power and integration with global monetary and financial authorities. Chad has stronger financial balance sheet fundamentals, particularly regarding inflation, but faces significant structural challenges absent in Guinea, foremost of which is concentration of power in the executive, where such centralization has already presented obstacles to international monitoring and oversight, specifically the President rewriting the constitution to remove democratic checks and balances. As IMF staff point out in a June 2011 technical assessment regarding disarray in Guinean financial and monetary data, "[r]eal sector statistics are incomplete, and published with insufficient timeliness to support economic policymaking" (Ross and Martijn 2011:

Likewise while Chad's balance sheet information shows continuity over a greater period of years than Guinea's, if there is reason to suspect the government tells investors and global authorities whatever it wants them to think, comparing balance sheets too specifically results in a discussion of inaccurate data to inadequate data. Compelling evidence suggests such critical evaluation may be prudent, particularly when considering Chadian government financial and policy statements.

Exogenous macroeconomic, geographic and demographic factors also suggest higher risk to information transparency and economic stability including basic private property rights and the rule of law in Chad beyond balance sheet performance. These factors suggest that while Guinean financial performance is less than transparent and what information is available is probably highly debatable at the current time, accuracy and performance will improve much faster and will deliver more stability and deeper, perhaps full transparency, over the medium to short-term future than is likely to take place in Chad even given total reversal of centralization of power. This report considers these factors from such wider exogenous perspectives first, then restricts focus to specific economic and social policies and factors within both countries.

The basic political difference between these two nations reduces to a known, existing threat to resource transparency in a military dictatorship (Chad), versus unknown risk in a new, democratic but struggling and fractured political system recovering from military overthrow in Guinea. What is to prevent the Guinean system from transforming into a Chadian-type closed, basically private, only superficially democratic autocracy based on violent repression? That seems to be the prior situation only recently (McSherry 2006: 24). The disarray in Guinea can actually be considered an asset if international investors, donors and authorities have access to and participate in rebuilding democratic policies and institutions where checks and balances can prevent the type of autocratic centralization into what is effectively a black box in Chad. The Guinean reconstruction process has produced significant and verifiable evidence of transparency, integration and power sharing that indicate such autocratic centralization could likely be diffused or prevented by external actors even if the current state of information and institutions exists largely in a state of disarray. These differences are aggravated by local geographic factor endowments which suggest existing trends will likely persist.

Guinea has more advantageous resource, location and geographic assets

The Republic of Guinea, also called interchangeably Equatorial Guinea and Equatroguinea, is located on the Gulf of Guinea while Chad is entirely landlocked. The Guinean oil deposits are located offshore, which allows for access to international inputs and markets, whereas Chadian access to external markets have been dependent on a pipeline to the Atlantic through Cameroon, although an infant refining industry has come online within Chad that should fulfill domestic demand, mitigating consumer prices and supply disruption (Ladd 2011: n. p.). The point-source location of oil deposits in Chad apparently aggravates ethnic factionalism that contributes to the existing political situation, which consists of a number of distinct religious and hereditary groups that vie for power within and across internal and national borders (Boggero 2009: 20). These competing factions result in unequal distribution of political and military power that reinforce ongoing centralization in a number of specific ways described below. The Guinean oil deposits exist outside the easy physical control of any particular group or clan although they are refined on islands in the Gulf of Guinea (Republic Of Equatorial Guinea Ministry Of Finance And Budget National EITI Coordination Office 2010: 4). The result is less pressure for economic and military domination through control of extractable resources by one party, unless they have a navy that can defend the island from international military forces.

Guinea also has a more diverse initial endowment of primary resources for extraction than Chad. Guinea's mineral endowment includes bauxite reserves, gold, diamonds and other precious gemstones, uranium, nickel and iron (Diallo, Tall and Traore 2011: 29-32), while Chad's primary exports after oil are comprised mainly of cotton and other small agriculture and livestock (U.S. Department of State 2011e: n. p.). Guinea's location between Gabon and Cameroon is a mixed factor. Gabon is one of the more politically stable, if not economically performing nations in the region, with bicameral democratic representation in a legislative assembly (U.S. Department of State 2011d: n. p.) that has the potential at least to diffuse centralization of power away from the type executive autocracy characteristic of Chad. Cameroon has been more politically volatile, with concentrated executive power resulting in appointed representation in most departments of government, censorship of media, expropriation of industry, and the removal of constitutional limits on presidential power that characterize authoritarian regimes (U.S. Department of State 2011b: n. p.). Cameroon's situation is salient to Chad's potential oil revenues given the conflict endemic in the two nations and surrounding region because of potential disruption to the Chad-Cameroon pipeline.

Chad's geographic situation introduces military complications that leave the political system and economy vulnerable to disruption and such disruption has been central in shaping the institutions and balance of power governing every aspect of the current situation in Chad. Military disruption in Libya has driven some 70,000 refugees across the border into Chad (Ladd 2011). We can imply from the IMF's typical codespeak "the government remains concerned about the security implications" (Ladd 2011) that there is more going on than migration; perhaps rebel recruiting or conflict over lifesaving supplies, or perhaps just potential conflict. This type of cross-border military externality is fundamental to Chad's current political organization, because current President Deby originally seized power from his predecessor at the head of troops from Sudan just over Chad's border to the east, and military conflict in Darfur, Sudan's westernmost state and Chad's immediate neighbor, has contributed to Deby's consolidation of power, including through several coup attempts since 2000 which the executive allegedly used to justify constitutional revision removing checks and balances like term limits (Boggero 2009: 22). Winters and Gould (2011) make compelling arguments the World Bank actually facilitated Deby's consolidation of power by underwriting the Chad-Cameroon Pipeline and two related oil extraction projects in Chad starting 2000 (229). That story sheds light on the mechanisms through which centralized control of point-source resource extraction can distort political and economic institutional formation especially combined with military conflict like Chad has been faced first on its eastern border (Sudan) and now from Libya in the north, since Deby seized power in 1990.

Chad-Cameroon Pipeline may have contributed to reduced oil transparency

"Today, Chad remains a corrupt and unstable authoritarian state with little hope for political liberalization." (Winters & Gould 2011: 230)

In 2000, the World Bank signed off on roughly $70 million in loans to finance a 1000-km pipeline from oil deposits in southwestern Chad, through Cameroon to the Gulf of Guinea, under the justification that a significant share of the royalties would be earmarked to reduce extreme and widespread poverty in Chad. The infrastructure was completed ahead of schedule and an international public-private consortium began pumping oil after some delay in 2003 (Winters & Gould 2011: 235). Royalties began flowing into Chad, and Deby's influence increased to some 70% of the elected Congress by 2004. The World Bank investment came with a monitoring board, the "College de Controle et de Stirveillance des Ressources Petrolieres (hereafter College)" (Winters & Gould 2011: 234), but Deby was able to stack the College, replacing the Central Bank head, the Supreme Court designee and other representatives, through what Winters & Gould call the "[p]atronage dynamics" (2011: 232) which seem to uphold the entire Deby regime. The College issued a scathing report that had no enforcement mechanisms, and which the Bank was powerless to mandate. Deby used the 2004 coup attempt from Darfur to revise the Constitution, removing term limits and other checks to executive power, and replace the elected Senate with an appointed privy council, all of whom he enacted through a plebiscite boycotted by opposition voters.

In fall 2005 when the Bank expressed concern Deby was not investing royalties into development and poverty reduction, Deby seized the Future Generations Fund (an escrow account within the Bank-controlled offshore royalty disbursement mechanism); the Bank retaliated by freezing $125 million in royalties and another $124 million in new supporting pipeline development spending. Since the fixed, i.e. immovable assets were already completed, Winters and Gould (2011)… [END OF PREVIEW]

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Report of Transparency in Oil Extraction for Equatorial Guinea and Chad.  (2011, December 3).  Retrieved April 25, 2019, from https://www.essaytown.com/subjects/paper/report-transparency-oil-extraction/3989595

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"Report of Transparency in Oil Extraction for Equatorial Guinea and Chad."  Essaytown.com.  December 3, 2011.  Accessed April 25, 2019.
https://www.essaytown.com/subjects/paper/report-transparency-oil-extraction/3989595.