Around the world, private sector actors operate in conflicted areas. However, as Banfield, Haufler and Lilly argue, the impact that profit motivated actors have on conflicts has not yet been systematically studied (Banfield, Haufler, & Lilly, 2005). The aim of this dissertation is to define and present the linkages between private sector actors and conflicts, to explain influences as well as consequences private sector actors have on conflicts, and examines to what extent they cause, exacerbate, mitigate or prevent conflicts.
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Among various private sector actors that operate in many conflict areas, this dissertation will focus on Multinational Oil Compnanies (MOCs), the world’s most profitable industry, and explores the impact of MOCs on conflict by means of chapters on the economy, the environment and politics, with coverage of a selection of case studies. As the economical influences, MOCs’ operations can have negative ramifications on economy of a country, by generating economic distortions as countries become excessively rely on oil revenues. Furthermore, MOCs can exacerbate conflicts by financing “whether directly or indirectly the repressive efforts of one group against another” (Switzer, 2001, p. 12). In addition, oil production pose a threat to the environment through gas flaring and oil spillages, causing destruction of agricultural land and forest (Onwuka, 2005). As the political influences, MOCs are often deeply involved in government corruption, and indirectly support corrupt and repressive regimes.
As a result, local populations who have been impoverished through these adverse effects tend to regard MOCs as their targets of attacks. Apart from affecting a country’s economy, politics and environment, MOCs are thus directly involved in conflict as a military target. In addition, as a result of associating with repressive government, MOCs have “often been accused of complicity in human rights abuses carried out by armed groups in conflicted situations” (Global Witness, 2007). Facing international condemnation, MOCs are now taking broader political roles in conflicted regions, participating in the governance of regions and its development more than ever. Given the high demand of oil and gas, their operations in conflicted area will be continued, and the roles that MOCs play in such regions are becoming increasingly important. The improvement of the roles that Multinational Oil and Gas Corporations play in conflicted situations is thus inevitable. Meanwhile, MOCs can also achieve a benefit in contributing to peace in such regions. It would not be easy even for them to develop and extract Oil and gas under conditions of conflict. So far their negative ramifications on conflicted situations have been stressed when talking about their impacts on conflicts. However, there is still room for their attempts to contribute to peace and security of the regions in which they operate.
Around the world, private sector actors operate in conflicted areas. However, as Banfield, Haufler and Lilly argue, the impact that profit motivated actors have on conflict has not yet been systematically studied (Banfield, Haufler, & Lilly, 2005). The aim of this dissertation is to define and present the linkages between private sector actors and conflicts, to explain influences as well as consequences private sector actors have on conflicts, and examines to what extent they cause, exacerbate, mitigate or prevent conflicts. Among various private sector actors that operate in conflict areas around the world, this dissertation will focus on Transnational Corporations. Transnational Corporations (TNCs) is a broad term, usually defined as a company which operates in many parts of the world through direct foreign investments (Milberg, 1998, p. 77). Among the TNCs in the extractive industry, the oil industry will be focused in this dissertation, the world’s most profitable industry which can have a huge influence on the distribution of political and economical power in the world. The reason this particular type of extractive industry was chosen, is due to their scale and their importance on world economy.
According to Ross’s definition, the International Oil Corporations are “legion, operating both the private and public sectors and they are remarkably diverse in character and objectives” (Ross T. D., 1987, p. 67). Although it will be difficult to generalize it, in order to keep the discussion within manageable proportions, the attention of this dissertation will be confined to the major privately owned corporations, such as UK based British Petroleum (BP), US based ExxonMobil and French owned Total. The businesses of these Multinational Oil Companies (MOCs) are not confined to extraction, production and marketing of oil, but also gas related production including Liquefied Natural Gas (LNG). The aim of this dissertation is therefore, to define and present the linkages between Multinational Oil Companies and conflicts, and to explain influences as well as consequences these companies have on conflicts, and examines to what extent they cause, exacerbate, mitigate or prevent conflicts. These companies are often accused of their lack of transparency regarding cozy relationships with the governments of their home countries. However, their relations with the home countries will not be discussed here.
These MOCs often invest their capital in unstable regions. In addition to that, their investments in the form of projects are usually large as well as long term. As noted already, the reason for taking a detailed look at the role of the giant, privately owned oil majors is simple. There are not many larger examples of TNCs, and “of all non-governmental bodies, such companies seem to be the most powerful” (Turner, 1978, p. 15). ExxonMobil for instance, is now one of the largest industrial corporations in terms of sales, assets, net income and stockholder’s equity in the world. According to the Fortune’s annual ranking of the world’s largest companies in 2008, among the top ten companies, surprisingly six companies belong to oil industry (CNN, 2009). ExxonMobil comes second, followed by Shell and BP. Chevron is ranked at the 6th, Total at the 7th and ConocoPhillips at the 10th in the ranking list (CNN, 2009). These oil major companies have been exploring oilfields in unstable parts of the world, for examples, BP in Colombia, Shell in the Niger Delta, and ExxonMobil in Aceh. However, there has been little effort to examine a role that MOCs play in these conflicts, though there can be seen some researches on the relationships between oil and war. For example, Le Billon has evaluated the significance of the political economy of oil in the Angolan Conflict (Le Billon, 2001). Collier and Hoeffler also examined the cause of conflict and have argued that “exports of primary commodities” such as oil and diamonds considerably “increase conflict risk” (Collier & Hoeffler, 2004, p. 588). This dissertation, however, aims to define and present the linkages between “oil companies” and conflict, not “oil” and conflict.
Another factor I’d like to mention here is that, the oil and gas industry is currently concentrating on Corporate Social Responsibility (CSR) these days (Frynas, 2005). CSR is usually defined as a responsibility of firms to manage their operations to create affirmative impacts on community, not be solely devoted to maximizing their profits (Collings, 2006). On the websites and in public statements, MOCs give prominence to their operations focusing on benefitting local communities. For example, on BP’s website they claim that “Mutual advantage is the guiding principle behind our support for local education, skills and business programmes. Wherever we operate we seek to align BP’s business interests with those of local communities. From security and human rights to economic development, we’re working with communities to make a positive difference” (BP, 2008). ExxonMobil also describes their strategy as “to address the challenge of sustainabilityâ€”balancing economic growth, social development, and environmental protection” (ExxonMobil, 2008). According to Frynas, MOCs pay more attention to their societal as well as environmental influence on the regions in which they operate than ever, and try to build more close relationship with local populations (Frynas, 2005). Since the oil and gas industry emphasizes more on their CSR and their influences on society than they used to in the past, I believe it is worth analyzing the impact that MOCs have on conflicts. This dissertation’s thesis is that by examining the relationship between Multinational Oil Companies and conflict, it could become a part to better understanding of both conflict and Oil Corporations’ CSR activities.
However, it is not simple to prove whether and how MOCs can have their influence on conflict as their exploration for and the production of oil are multi-faceted operations. According to Patey and Switzer, through the production of profitable resources, MOCs’ involvements often exacerbate conflict as well as increase corruption (Patey, 2007) (Switzer, 2001). For example, in Angola, the MOCs were forced to pay duties/tax “in order to secure exploration and production rights in deep offshore blocks” (Renner, 2009). Consequently their money was apparently used to buy arms, directly fuelling conflicts as consequences. However the MOCs’ impacts are more than a matter of economical concern. There are a number of political influences. In oil producing areas, governments and giant MOCs are usually deeply involved beyond necessity (Pearson, 1970). Governments have been directly affected by its relationships with oil company officials at several levels. Many MOCs have close relationships with ruling government, providing money, transport or other support to security forces that protect their facilities in violent and unstable countries. In addition to that, there is also a matter of environmental concern. In Nigeria, the oil production activities damage and destruct the environment of the regions because of the poisonous substance included in oil related products (Onwuka, 2005). Poor oil industry operations, such as “constant flaring of natural gas, along with frequent oil spills from antiquated pipelines and leaks from toxic waste pits, have exacted a heavy toll on soil, vegetation, water, air, and human health” (Renner, 2009), causing serious environmental destruction.
This dissertation defines and examines the impacts made by MOCs in conflict prone areas, by looking at the cases in Colombia, Niger Delta in Nigeria, Aceh in Indonesia, Angola and Sudan. In order to keep the discussion within manageable proportions, impacts made by MOCs will be classified into three categories; economical, environmental and political. In each chapter, after describing and examining influences and consequences that MOCs have in conflicted situations, it will be analyzed how it is related to conflict. At the end of the dissertation, I will summarize all chapters, making conclusion as a whole, and define what kind of role MOCs play in conflicts.
Before we start examining the cases, it is important to define what conflict means in this dissertation. Conflict is usually defined as a situation in which there is “opposing action of incompatible ideas”, opinions or persons, often described by destructive actions (Merriam-Webster Incorporated, n.d.). Although it is often defined as damaging actions, in this dissertation a conflict can be non-violent, latent or violent. According to Switzer’s definition, conflict “can take place at the local, regional, national or international revel. It includes the fragile peace that exists after a period of open conflict, as well as the unstable peace that prevails before conflict emerges.” (Switzer, 2001, p. 7) This dissertation agrees with this Switzer’s definition on conflict.
According to the definition above, the oil producing areas which will be mentioned in this dissertation as the example cases can all be described as clear “conflicts” where armed conflict has broken out, or is at high risk of breaking out. These regions are also resource-rich areas with a tremendous proved reserve of oil or natural gas.
Angola is one of the largest oil producers in sub-Saharan Africa; producing 1,875 thousand barrels per day (BP, 2009). Accounting for considerable portion of total exports as well as government revenues, oil has been “the engine of Angola’s economy” (Embassy of the Republic of Angola in UK). Attracted by its wealth, a number of MOCs such as Chevron and ExxonMobil has been operated in Angola. In addition to that, Angola is an area abounding in other highly profitable natural resources such as diamonds and other precious minerals (Malaquias, 2001). However, contradictory to its wealth, Angola is regarded as one of the “worst country in the world” (Malaquias, 2001, p. 521). This is mainly due to the conflict between the governing the People’s Movement for the Liberation of Angola (Movimento Popular de Lebertacao, MPLA) and the National Union for the Total Independence of Angola (Uniao Nacional para Independencia Total de Angola, UNITA) rebels, which originally started as a ethnic conflict but aggravated by the ideological rivalries during the Cold War (Malaquias, 2001).
Aceh is one of the outlying regions of Indonesia abounding in natural resources especially Liquefied Natural Gas (LNG), producing approximately a third of Indonesia’s LNG exports through the project known as “Arun” operated by ExxonMobil (McCulloch, 2003). However, Aceh had been “the site of one of Asia’s worst as well as longest-running internal conflicts” (Burke, 2008, p. 50). The conflict between the government of Indonesia and the armed insurgency Aceh Sumatra National Liberation Front (or Gerakan Aceh Merdeka, known as GAM) had been taken place since 1976 until recent ceasefire. Over this period, the rebels had been contested the government’s sovereignty by carrying out various destructive attacks such as guerilla warfare and occasional bombings. The government had responded with “poorly disciplined” military attacks which caused collateral damage against local populations, which had made them responsible for gross human rights abuses (Burke, 2008, p. 51).
Colombia is a major oil producing country in Latin America and just as many other oil producing countries, oil has been accounting for considerable amount of the country’s total export (Renner, 2009). Major MOCs such as BP have been operated in the region. Here again, “oil has not brought development in the sense of a self-sustaining economic progress able to meet the needs of all the population in the region” (Kaldor, Karl, & Said, 2007, p. 225). The internal conflict had lasted for long and considerable numbers of kidnappings, constant bombings and terrorist attacks had taken place in Colombia by the rebel groups such as FARC and the National Liberation Army (ELN), who have tried to cut into the ruling elites’ oil-related income (Renner, 2009). In addition to that, in Casanare, not only guerilla groups but also the armed forces of the state and right-wing paramilitary groups have been responsible for gross human rights violations (Kaldor, Karl, & Said, 2007).
Nigeria is one of the biggest oil producers in the world; producing 2,170 thousand barrels per day (BP, 2009). As of 2009, the proved reserve of natural gas resources is 184.2 trillion cubic feet which is the 5th largest in the world (BP, 2009). Consequently, its economy is heavily dependent upon oil which accounts for 50 per cent of the country’s GDP (Kaldor, Karl, & Said, 2007). Similar to other oil producing countries which have already been discussed, oil development has enriched only a small group of elites and has not served the interests of local populations (Omeje, 2005). The oil production activities create environmental destruction and health problems among the population of the area (Ross M. , 2003). The attacks of the local population frequently directed against MOCs, which had been responded by the military dictatorship with “a campaign of violence and intimidation, provoking various ethnic groups in the delta to attack each other” (Renner, 2009), resulting in more than 2,000 deaths.
In Sudan, a conflict between the North and the South became Africa’s one of the longest running civil war, which broke out in 1983 and lasted for more than 20 years (Global Witness, 2009). In 2005, peace agreement was signed to bring an end to the conflict. One of the drivers of this conflict was the tensions over the distribution and control of the country’s large oil wealth which was located in the South (Global Witness, 2009). The conflict between insurgent the Sudan People’s Liberation Army (SPLA) from South and Sudanese government who had sought to expand oil production had cost many lives (Patey, 2007). Reportedly more than 2 million people died during the period (Renner, 2009).
The brief overviews of these conflicted regions imply MOCs’ involvement in these conflicts. However, to analyze it systematically, firstly MOCs’ economical influences on these conflicts will be examined in the next chapter.
The exploration for the extraction, production and marketing of oil related products are multi-faceted operations. It would be highly problematic and also difficult to possess the wide-ranging capabilities that might be required to investigate and evaluate the physical and social ramifications of this process. The aim of this dissertation is to map out the linkages between oil companies and conflict. To start with, the scope of this chapter comprises economic aspects of the operations and influences of the oil companies on conflicted regions. This chapter then examines how their operations relate to the movements of conflict. One of the useful ideas for the understanding of the motivation for conflict is the theory of “greed” and “grievance”, as the primary motivating factor behind civil wars (Collier, 2000). The propriety of this theory will be examined in the conclusion of this chapter as it is to explain the motivation for internal conflict in terms of economy.
Obviously, oil has an overwhelming effect on economy. It would not be difficult to characterize the impact of oil production on a country’s economy. One of the useful ways to analyze it is to evaluate the rents provided through oil production, which is, “the returns in excess of production costs” (Ross M. , 2003, p. 2). Taxes and signature bonuses paid by oil companies are included. In resource-rich countries, oil plays a significant role in economy and oil related money accounts for considerable portion of a country’s GDP and export revenues. Thus it would be usual for oil rich countries to become heavily dependent upon oil revenues. For example in Nigeria, Oil and gas sector account for surprisingly 97.5% of export revenues in 2008 (World Bank). Oil industry’s economical impact on Nigerian income is thus huge. However, in spite of its oil wealth, Nigeria falls short of enjoying economic affluence, with “60% of people live on less than US$ 2 a day” (Kaldor, Karl, & Said, 2007, p. 41).
The impact that the liberalists have on the world’s decision makers is huge. One of the important ideas they have been fostered is that, “by promoting trade, TNCs contribute towards world peace based on the belief in the positive effect of trade” (Frynas & Wood, 2001, p. 587). According to this theory, highly profited resources such as oil and gas, and TNCs which seek to promote trading of such resources, have the potential for economical as well as political development of a country of origin. Kaldor, Karl and Said argue that oil revenues can also have a mitigating influence on conflict. With the exception of some offshore deposits, oil, by its nature, cannot be developed and extracted under conditions of total state collapse and the interruption of supply. “All potential beneficiaries of oil rents are ultimately interested in safe guarding the large investments and modicum of rule of law required to keep oil flowing” (Kaldor, Karl, & Said, 2007, p. 4). However, according to Ross, oil revenues also have the potential to damage the economy by creating economical volatility (Ross M. , 2003). This is because oil rents heavily depend on the international oil price and market which involve various actors from all over the world. When not being managed properly, economic issues such as “fiscal and monetary disequilibria and inflation” will be created by external shocks (Ross M. , 2003, p. 4). This particularly affects the poor compare to the general population as they are more vulnerable to these shocks (Ross M. , 2003, p. 4). In addition to that, oil industry is capital intensive rather than labour-intensive, and low employment in all stages of its production cycle (Le Billon, 2001). Only a small workforce is needed to produce and export oil related products. Furthermore, like the case in Angola, because the oil sector is often one of the few parts of the country’s economy to grow, and because the pay and opportunities provided by oil companies are so much better than in any other sector, the oil industry has sucked in the vast majority of the country’s most qualified and able personnel at the expense of other sectors. Besides, economically, oil sector’s performance has been entirely unrelated to, and unaffected by, the performance of the rest of the sectors in economy (Le Billon, 2007). Although there have been little studies, synergy effect on growth in other economic sectors is hard to find. This is mainly due to a characteristic of oil and gas production. In extreme cases, “petroleum can be pumped from offshore platforms into waiting oil tankers, allowing it to leave the country without touching its soil” (Ross M. , 2003, p. 6).
Economic development “in the sense of self sustaining economic progress” cannot be expected from oil industry operations (Kaldor, Karl, & Said, 2007, p. 225).
Moreover, foreign investment itself has negative economic ramifications. Usually, technically less advanced countries invite foreign corporations to form local subsidiaries and thereby supply management and technology, capital, and markets, or undertake joint ventures in which foreign investors supply management and technology and markets (Banfield, Haufler, & Lilly, 2005). Usually oil production activities are located in specific locations, benefitting only a small group of people and alienating others. Rest of the population rarely enjoys benefits. This may create or reinforce inequalities in the country, becoming an origin of grievance among the population. Banfield, Haufler and Lily argue that inequity reinforced by such foreign investment may deteriorate the already existing class or ethnic divisions, as well as aggravating the disunity within society and consequently “become a source of grievance” (Banfield, Haufler, & Lilly, 2005, p. 21). Under normal circumstances, the government has a responsibility to solve such issues. However, usually the government is the only actor to negotiate with the MNOs regarding foreign investment. Those ruling statesmen often act to protect their interests to the detriment of wider public interests, creating grievances among local people as well as reinforcing economical inequities.
MOCs’ operations thus have negative ramifications on a country’s economy. In a conflicted or potentially conflicted situation, this can create grievance, the primary motivating factor behind civil wars (Collier, 2000). However, damaging economy is not the only economical ramifications oil companies have on conflicts. In conflicted situation, oil companies can “finance, whether directly or indirectly, the repressive efforts of one group against another” (Switzer, 2001, p. 12).
As one the most apparent impacts on conflicts, MOCs often directly fund arms purchases by the parties involved in conflicted situations. By paying taxes and contributing to a country’s oil revenues, MOCs can have an advantage over their competitors in building up business interests (Frynas, 2005, p. 600). The governments of conflicted regions use such money to carry on conflicts. In addition to that, oil companies are often tainted by illegal financial transaction, supplying weapons to the government, as well as providing them security protection. For example in Angola, during the Cold War, Angola had given military assistance by Soviet. However, after the soviet had left, most of the military expenditure was covered by oil revenues. Oil money provided by MOCs has made it possible for the Angolan government to compete against heavy armed UNITA “by building up a capital-intensive war machine which placed government forces at the centre of Angola’s political economy” (Le Billon, 2001, p. 64).
The recipient of the oil related money does not have to be a legitimate government. Oil money had often been paid to not only governments but also to armed insurgents. In Colombia, where “oil monies obtained through official or illegal channels have paid all sides in the conflict, providing not only the state and its armies but also armed insurgents and in some cases, paramilitary groups with increased material capacity to wage war” (Dunning & Wirpsa, 2004, p. 86). Oil monies provided by the MOCs had provided economic opportunities to sustain as well as aggravate internal conflict in Colombia. The importance of the access to oil revenues and control over it, added a new aspect to the existing wars (Dunning & Wirpsa, 2004). In addition to that in Colombia, apart from the revenues generated from oil products, rebel groups such as the ELN and FARC have also extracted “war taxes” from MOCs “using kidnaps, extortion and bombings of oil pipelines as leverage” (Dunning & Wirpsa, 2004, p. 88). As Dunning and Wirpsa describe in their work, an executive of Occidental Petroleum once admitted that “the company’s contractors paid a “war tax” to rebels for the protection of the local workers and their families” (Dunning & Wirpsa, 2004, p. 88). Even Occidental’s founder and former CEO admitted that they had offered jobs to the guerillas, and took care of them in the hope of getting protection from other insurgents (Dunning & Wirpsa, 2004). Although they are coercively required to do so, in situations like these, MOCs and their local security contractors play significant role in prolonging conflict, as a source of revenue for both sides of opposing parties (Dunning & Wirpsa, 2004).
In addition to funding the conflict, in Angola, the presence of oil money paid by MOCS can even influence “the duration and course of the conflict” (Frynas, 2005, p. 594). Since the end of the Cold War, oil revenues played significant role in Angola’s internal conflict by waging the war after the departure of Soviet equipments. Oil revenues funded both the government and the rebel groups since the patrons left. Furthermore, oil revenues affected the characteristics of this war by providing enough abundant funds to carry on the warfare. “Rather than using handguns and light artillery as in many other conflicts in Africa, both sides were still able to afford expensive jet aircraft, attack helicopters and tanks” (Frynas, 2005, p. 594). By examining the government’s access to oil revenues, it is even possible to understand part of their actions against UNITA on some level, timings for example. The international oil price declined sharply in 1998 and it had a profound impact in the country’s export earnings. The price of the most common crude oil in Angola dramatically declined by US$9.71 per barrel in 1998 (Frynas & Wood, 2001), largely affecting the government’s fund. During this period, the rebel UNITA successfully gained more than a third of the areas which was once transferred to the government by the Lusaka Accords, Which declared a ceasefire but have collapsed later (Frynas, 2005). However, oil related loan and payments by MOCs saved the government. “Some US$ 900 million was paid by multinational oil companies as signature bonuses for the sought-after offshore oil licenses”(Frynas, 2005, p. 595). The government spent the US$ 900 million of revenue on heavy military equipment. As the international oil price recovered, the government launched “a major counter-attack on UNITA in 1999″(Frynas & Wood, 2001, p. 595). Although it would not be possible for us to evaluate the actual decision making process, “it is obvious that oil revenues from oil companies influenced the direction of the war” (Frynas & Wood, 2001, p. 595). As just described, in addition to having negative influences and consequently doing harm on a country’s economy, Multinational Oil Companies can finance the war by funding “whether directly or indirectly”, legally or illegally, “the repressive attempts of one group against another” (Switzer, 2001, p. 12). Moreover their access to oil revenues can even provide an explanation of the extent and the characteristics of the conflict.
One of the useful ideas for the understanding of the motivation for conflict is the theory of “greed” and “grievance”, as the primary motivating factor behind civil wars (Collier, 2000). Collier describes this idea as “Rebellions might arise because the rebels aspire to wealth by capturing resources extralegally (greed) or they might arise because rebels aspire to rid the nation, or the group of people with which they identify, of an unjust regime”(grievance) (Collier, 2000, p. 91). According to Collier and Hoeffler, although “greed and grievance” discourse is useful in explaining the motivation for conflict, another useful index when understanding the conflict is “the ability to finance rebellion” (Collier & Hoeffler, 2004). With this in mind, they state that countries full of resources have a high probability of breaking out conflicts as they are likely to become heavily dependent upon primary commodity export (Collier & Hoeffler, 2004). Soysa also discusses the importance of the availability of mineral wealth, arguing that such greed effects are “a potent predictor of conflict” (Soysa, 2002, p. 395).
Although this dissertation’s aim is to examine the linkages between MOCs and conflict and not “oil” and conflict, this chapter supports “greed” discourse and the argument that the economic motivations are the driving force of contemporary conflicts, as Kaldor, Karl and Said argue (Kaldor, Karl, & Said, 2007). The political economy school of conflict (Keen, Duffield and others) is primarily concerned with civil wars and the private greed as well as sources of finance of both state and non-state actors (Kaldor, Karl, & Said, 2007). The linkage between MOCs and conflicts in terms of economy clearly shows that the greed argument applies to both motivation and opportunity toward these conflicts. “Access to oil revenues may be a motive for initiating or continuing conflicts as well as an opportunity to finance military activities” (Kaldor, Karl, & Said, 2007, p. 20). Le Billon argues in his work, in the absence of strong economy, a wealth of resources is likely to result in poor governance and economic crisis that conflicts with the high expectations of populations associated with a resource bonanza. Consequently this will create inequality, evoking frustrations among populations who has been impoverished. In this sense, MOC’s operations also contribute to create “grievance” of populations, the other motivating factor behind conflict which focuses on inequality.
In short, MOCs’ operation can have negative economic consequences by help generating economic distortions as states become highly dependent on oil related revenues, as well as failing to diversify their economies. By funding the war directly, MOCs play significant roles in conflicted situations. As the examples in Angola and Colombia show, MOCs, “as a source of revenue for legal and illegal armed groups”, play significant role in sustaining violence (Dunning & Wirpsa, 2004, p. 92). This can be thus explained by the greed argument which argues how conflicts are financed and why well-financed conflicts are especially difficult to end.
In this third chapter, environmental consequences associated with oil production activities will be highlighted. After describing some specific impacts oil production has on environment, this chapter examines how it relates to conflict, using the case in the Niger Delta, Nigeria. In addition to its economical influences as described in the second chapter, oil production is also associated with various adverse impacts on environment. The supply chain of oil production is consisted of a number of stages from digging to transportation. For the most part of this process, oil production has harmful impacts on environment and consequently causes environmental degradation.
Firstly as Frynas describes, MOCs’ operations can cause soil contamination by oil leaks of pipelines and create aerial pollution through gas flaring (Frynas, 2005, p. 594). In addition to this, oil spills by tankers into the ocean while loading or unloading the cargo at the stage of transportation cause the water pollution. Refineries can also pollute the environment by “releasing of waste water containing oil residuals, solid waste disposal and atmospheric emissions” (Frynas, 2005, p. 594). There are also a number of social impacts that oil production activities have on local populations. Land take for the construction of access roads and other infrastructures related with oil production has often “resulted in the diversion of rivers or dying up of water reservoirs, rendering areas unsuitable for fishing and forcing families to quit their settlements” (Frynas, 2005, p. 595). In conflicted situations such as Nigeria, oil production activities operations thus have an adverse effect on environment and cause the degradation of agricultural land; consequently create grievances among local people which has lead them to violent protest (Frynas, 2005). It is particularly serious in the Niger Delta, where oil production causes large-scale environmental degradation, destroyed rural livelihoods and aggravated poverty, as well as having serious ramifications on the welfare of the communities (Kaldor, Karl, & Said, 2007).
Niger Delta is a region located in the northern part of Nigeria, consisted of a number of constituent states such as Ondo, Delta and Abja. This region has abundant mineral resources such as crude petroleum and natural gas, and the production in the area had been increased in the past few years. According to BP, the production of natural gas rose from 5.1 billion cubic meters to 35.0 billion cubic meters in 10 years since 1998 (BP, 2009). Furthermore, Nigeria has proved reserve gas of 5.22 trillion cubic meters as of 2008, which consists of 2.8% of world total. The production of mineral resources has also been huge. In 2008, it produced 2,170 thousand barrels per day (BP, 2009). This region is not only rich in biological diversity, but also “being surrounded by rivers, mangrove forests and abundance of aquatic, and wildlife are situated in this region” (Onwuka, 2005, p. 658). It was this rich area that oil production caused large-scale environmental degradation and destroyed rural livelihoods and aggravated poverty (Kaldor, Karl, & Said, 2007).
In 2001, more than 5,000 barrels of oil spillages were recorded by Shell’s subsidiary in Nigeria (Opukri & Ibaba, 2008). Although many MOCs have blamed that most of the incidents are due to sabotage, Opukri and Ibaba claim more than 80 per cent of the incidents are caused by MOC’s equipment failure (Opukri & Ibaba, 2008). Pollution is in the form of gas flaring which has an adversely affect on human body, and “the heat it generates kills vegetation around the flare area, destroys mangrove swamps and salt marsh, suppresses the growth and flowering of some plants, induces soil degradation” and consequently cause productivity decline in agriculture (Opukri & Ibaba, 2008, p. 14). According to Kaldor, Karl and Said, gas flaring is said to “release 35 million tons of carbon dioxide and 12 million tones of methane” into the atmosphere annually (Kaldor, Karl, & Said, 2007, p. 65). Such pollution in the form of oil spills and gas flaring has thus destroyed marine life and crops, made water unsuitable for fishing and rendered large areas of farmland unusable, because of its toxicity (Onwuka, 2005).
Normally it takes more than 10 years to recover from oil spillage impact with proper treatment. However, in the Niger Delta, most of the oil spills are not even cleaned (Opukri & Ibaba, 2008). Moreover, according to the research done by Kaldor, Karl and Said, although oil companies have attempted to reduce flaring, it remains worse than in most of the oil producing countries (Kaldor, Karl, & Said, 2007, p. 65).
Apart from this, the construction of oil pipelines and oil rigs damages farms and farmers, and are conducive to acid rain, deforestation and destruction of wildlife. “A 24-inch pipeline runs 103 kilometers from the Brass oil fields to the Brass river terminal in this region. The pipeline involves 56 river crossings, 14 of which have spans of over 400 feet, with the rest of the route crossing swamps and jungle” (Onwuka, 2005, p. 658). In addition to this, the degradation of forests and farmlands also has an adverse effect on the quality and even periodicity of water flows. As it is one of the most important factors for traditional irrigation practices, agriculture in the area will be seriously damaged if the flow of rivers is impinged. The impacts on upstream distorts the rest of the flows, having adverse impacts on the lower part of a river (Onwuka, 2005). Another example of the adverse effect associated with oil production is the use of dynamites which cause the destruction of soil quality in the area.
Consequently, the local population is increasingly impoverished. In short, petroleum operations damage the soil, destroy wildlife, cause the pollution of water, make offensive smell, noise, and vibration, and even damage culturally important site. There have been serious ramifications on the welfare of the local communities such as a reduction on agricultural and fishing activities, and aggravation of the health of local people. “Local communities complain of respiratory ailments, skin rashes, tumors, gastrointestinal problems and cancers” (Kaldor, Karl, & Said, 2007, p. 65).
The local communities are often forced to migrate or move to the urban center because the environmental degradation associated with oil production damages their agricultural activities, depriving their means of production and living as a result. However, the local communities who had been forced to leave the area they used to live often “have little or no education and so lack the potential for formal employment” (Onwuka, 2005, p. 659). As a consequence, those who moved to the center urban area tend to “engage in various forms of informal occupations that are natural resources intensive with consequent increase in environmental degradation” (Onwuka, 2005, p. 659). Others have no alternatives but to migrate. Opukri and Ibaba have put importance on this issue, describing the situation as “internal displacement” which is “a major cause of productivity losses” (Opukri & Ibaba, 2008, p. 173). Thus, although they are from resource rich area, they do not enjoy the benefits of abundant natural resources. Instead, for them oil is a malediction threatening their life.
This situation perhaps explains why people in the Niger Delta are poor than those located in the rest of the country according to all social indicators, although they are living very close to the abundant precious resources. Approximately 70% of the people in Nigeria as a whole live with less than US$1 a day. Meanwhile, the percentage is slightly bigger in the Niger Delta with more than 72% (Onwuka, 2005, p. 559). Less than 30 per cent of households in the region have access to safe drinking water and electricity, both below the national average (Kaldor, Karl, & Said, 2007). This is particularly severe in Ogoni, where the local populations can no longer practice agricultural activities such as farming and fishing due to the environmental degradation mainly associated with oil production. Another example can be found in Colombia, where BP’s operation caused a number of environmental issues such as destruction of forests and contamination of water and soil (Beder, 2002). BP was fined US$ 500,000 for illegally dumping hazardous waste in Alaska in 1999 and for failing to report it (Beder, 2002). It is thus indisputable that oil production activities severely damage environment. This dissertation will now look at the interrelatedness between these situations and conflict.
According to Banfield, Haufler, & Lilly, these adverse impacts on the environment in which oil industry is associated with, “may in turn contribute to conflict” (Banfield, Haufler, & Lilly, 2005, p. 141). Development of natural resources can cause environment degradation, and depletion of resources arising from this may induce conflict as local populations compete over scarce resources. Moreover, as foreign investment is not often distributed geographically, associated environmental destruction arising from the operations automatically places a disproportionate emphasis on some regions in particular (Banfield, Haufler, & Lilly, 2005). They state that all these influences described above “can create grievances that may trigger violence” (Banfield, Haufler, & Lilly, 2005, p. 141).
In many cases where the MOCs operate, there can be seen a “gap between natural resource wealth and social prosperity” which is often explained by “the distribution of impacts and benefits” (Switzer, 2001, p. 8). As the case study of the Niger Delta and Colombia has shown, those who suffer from the social and environmental issues, usually the poor are often do not receive the social and economic benefits from oil production. As has been discussed in the previous chapter, oil revenue does not bring development “in the sense of self sustaining economic progress” that local population can benefit from it (Kaldor, Karl, & Said, 2007, p. 225). As Switzer states in his work, generally it is the local populations who suffer the most from both social and environmental issues associated with oil related projects, whereas the small number of ruling elites who benefit from these projects (Switzer, 2001). This is due to the inequality in the distribution of impacts and benefits. And it is this inequality in the Niger Delta, as Onkuwa describes, that it “has led to frustration among the people and such frustration has created the struggle for resource control in that region” (Onwuka, 2005, p. 660), creating grievances.
Rebellion occurs when “grievances are sufficiently acute that people want to engage in violent protest” (Collier & Hoeffler, 2004, p. 564). Although it is not easy to spot proxies for grievances, Collier and Hoeffler focus on economic factors (Collier & Hoeffler, 2004), saying high economic inequality can be the most significant proxies for grievance. “The poor may rebel to induce redistribution, and rich regions may mount secessionist rebellions to preempt redistribution” (Collier & Hoeffler, 2004, p. 572). It was this inequity that has caused frustration among the local population of the Niger Delta, and such frustration as well as grievances has created the conflict in that region (Onwuka, 2005). The rise of the Movement for the Survival of Ogoni People (MOSOP) is a typical example. MOSOP”s distinctive approach was to mobilize the Ogoni and peacefully confront both the MOCs and the military regime. However, as they were brutally suppressed, culminating in the trial and execution of MOSOP leaders, their activities as well as their protest has gotten increasingly savage. Their protests resonated throughout the delta and in the rest of Nigeria. According Idemudia and Ite, due to the increase in the violence in Niger Delta, “the Shell Petroleum Development Company of Nigeria (SPDC) was not be able to continue on shore oil production” and Chevron Texaco also “lost roughly US$ 750 million due to community strife and oil pipeline bunkering” (Idemudia & Ite, 2006, p. 194). Here again, MOCs operations have negative impacts on a country’s environment, creating grievances that may trigger more violence in conflicted regions.
In this section, impacts of oil production activities on environment have been discussed. It is undisputable that oil production often results in environmental degradation, consequently leads to productivity losses. In details, petroleum operations damage the soil, destroy wildlife, cause the pollution of water, make offensive smell, noise, and vibration, and even damage culturally important site. As the local population is increasingly impoverished, frustrations and grievances among local population may trigger violence especially in conflicted regions, as shown in the case in the Niger Delta in Nigeria.
In terms of environmental problems, MOCs are now facing various environmental issues. Their operations are intimately related to climate change issues, energy security and peak oil issues. Facing these topics, some MOCs such as BP have implemented an environmental management system, insisting that “safe and reliable operations are BP’s number one priority” (BP, 2008). However in the first place, as it has been discussed earlier, most of the oil spills done by the MOCs are not cleaned (Opukri & Ibaba, 2008), and oil spills and gas flaring still remains in most of the oil producing countries (Kaldor, Karl, & Said, 2007, p. 65). NGOs such as Friends of the Earth International has been campaigning against major oil producers and the government of Nigeria to stop these harmful practices (Friends of the Earth International).
Facing condemnation of the world, recently some MOCs have promoted the community development program which is to contribute to local communities who has been forced to move. However, this has also lead to violent crashes as people fight over the political position highly paid by MOCs (Opukri & Ibaba, 2008). Therefore, there is still room for improvement in MOCs attempts to mitigate environmental degradation and contribute to the welfare of local communities.
The aim of this fourth chapter is to examine MOCs’ political consequences on conflicted situations. As Penrose argues, oil industry and politics have always been closely associated (Penrose, 1987). Given the size of the industry and of the firms in it, and its economic and military importance, this is not surprising (Penrose, 1987). Since oil production is “capital-intensive”, and synergy effect on growth in other economic sectors cannot be expected from it, the government has a major role to play for the needs of all the population. “The allocation of the oil revenues by the government through public expenditure is thus crucial to the overall economy and the welfare of the population” (Le Billon, 2001, p. 61). However, the oil revenues have seldom seen used to develop self-sustaining economy in conflicted situations (Le Billon, 2001).
The presence of MOCs in resource-rich country does not always promote peace and good governance as liberalists claim. In terms of political aspects, there can be seen two reasons for this. Firstly, it is because much of the oil money has not been used for welfare of local population. Instead, considerable part of the oil revenue has been absorbed into the “private pocket” of ruling elites including leaders and presidents (Malaquias, 2001, p. 525). The corruption of the government is often reinforced by a close combination between state elites and MOCs. Secondly, oil revenues can have negative political consequences on a country’s government. To begin with, this chapter first argues these two issues. To examine how these issues relate to conflicts, this chapter then argues that close relationship between MOCs and ruling governments brings new issues to MOCs; local population see them as a military target as they become a central player of conflict. Moreover, as MOCs form relation of mutual dependence with repressive government, or operate closely with private security, some MOCs have often “been accused of complicity in human rights abuses carried out by armed groups in conflicted situations” (Global Witness, 2007).
All over the world especially in developing countries, bribery and corruption in the governments are nothing out of the ordinary. Given the high demand of oil and tight market, competition over limited resources among the MOCs has been increasingly tough. In such political environments, it would not be easy for multilateral companies to avoid involving in bribery and corruption. Once it’s done, corruption can cause governmental functions to deteriorate as beneficiaries often become reluctant toward transparency and accountability of governance, to maintain their profits. It will eventually bring the expansion and enlargement of corruption, where the multilateral companies take facilitating roles (Banfield, Haufler, & Lilly, 2005). This can encourage the already corrupted government, and “can also ultimately lead to state collapse and conflict” (Banfield, Haufler, & Lilly, 2005, p. 140).
Angola is one of the biggest oil producers in sub-Saharan Africa (Malaquias, 2001, p. 524), and a number of the major MOCs operate there including Chevron, Exxon, Mobil, BP and Shell. According to BP statistics in 2009, Angola produces approximately 1,875 thousand barrels per day (BP, 2009), accounting for about “90 per cent of total exports” (Malaquias, 2001, p. 525). As discussed earlier, much of the oil revenue has not been used for welfare of Angolans. Instead, it flows directly into ruling elites. Angola is an example where MOCs have profitably financed the bloodshed and can without doubt support a corrupt and repressive regime for decades (Le Billon, 2007). Moreover, oil induced corruption also has lead to exaggerated presidency. In Angola, oil induced corruption began in 1890s with the rise of the MPLA regime. The president of the state oil company Sonangol was blamed from the oil minister for taking bribes from MOCs, in 1891. As a result, the Petroleum Minister was disemployed and superseded (Malaquias, 2001). The oil minister was also accused of making “unauthorized agreements to sell Angolan oil to Gulf Oil Corp at cut-rate prices” (Malaquias, 2001, p. 528). Since the early 1980s, political corruption had been ubiquitous in the Angolan government. According to Malaquias’ research, since the 1980s, the Presidency had exclusively controlled most of the oil-related revenues (Malaquias, 2001). Only the Presidency had the power to approve major governmental expenditures, and there was even a personal oil account for the president. This excessive power of the Presidency, “with a lack of public scrutiny”, “have enabled members of the presidential entourage to engage in various forms of corrupt practices, especially kickbacks resulting from military procurement and outright theft” (Malaquias, 2001, p. 528). Moreover, the Angolan political and military elites often stole a considerable amount of money which was supposed to be included in the country’s budget (Malaquias, 2001). Similarly in Nigeria, corruption of the military government had been reinforced by bribes or “taxation” paid by MNCs. It was fashioned as an instrument for private accumulation and money politics, with little serious conception of the public good, or of the state’s responsibility to generate growth or promote social equity (Kaldor, Karl, & Said, 2007). One of the leaders of Nigeria and his family had reportedly embezzled more than US$ 2 billion during 4 years in office (Le Billon, 2007). MOCs have thus deeply involved in government corruption, and can support a corrupt and repressive regime in conflict area, although it would be difficult for any company to escape this environment once such corruption is pervasive (Banfield, Haufler, & Lilly, 2005).
Furthermore, oil revenues discussed in the first chapter often undermine both “good governance” and “political accountability to society” in conflicted regions (Frynas & Wood, 2001, p. 596). Firstly, because it is relatively easy to obtain revenues generated from oil, governments often become delinquent in the development of other economic sectors (Frynas & Wood, 2001). Consequently, a government will be significantly relying on oil revenues, and it leads to the neglect of other economic sectors (Frynas & Wood, 2001, p. 596). This does not bring self-sustaining economic development for the betterment of the people. Moreover, oil dependence itself can generate economic distortions, including large internal debt, “rampant inflation, stagnating per capita income and structural employment” (Kaldor, Karl, & Said, 2007, p. 59). Oil revenues generated by MOCs thus undermine good governance, create inequality and widespread poverty. An example can be found in Angola as the second chapter shows.
Secondly, oil revenue volatility also affects the quality of government services. When the petroleum sector is inconsistent, its volatility affects government revenues. “The more that a government relies on oil, the greater the impact that oscillation in oil revenues will have” on a country’s economy and also on its governance (Ross M. , 2009, p. 4). The volatility in oil sector considerably affects government plans. As unexpected moves in international oil market especially negative shocks in oil sector cannot be managed by government, it will prevent government from organizing long-term projects. Positive shocks also have negative ramifications, which typically “produce unhealthy rates of expansion in the size of government, leading to a drop in efficiency, and a rise in corruption and rent-seeking” (Ross M. , 2003, p. 4). This tends to be harmful, when considering political patronage. Usually, when spent for economic recovery or people’s welfare, political patronage should be a long-term plan, which is considerably affected by the expected future income. As government feel uncertainty towards future revenue projection, it encourages a government to adopt a shorter strategic plan with no good prospect for big profit (Ross M. , 2003). Ross also argues that a shorter gestation period of patronage helps to “increase corruption” as governments feel insecure about the stability of their funds and “have a greater incentive to appropriate as much as possible, as quick as possible, before it disappears” (Ross M. , 2003, p. 4). Example can be found in Nigeria and Angola. Volatility in the global oil market caused volatility in the economy of Nigeria, consequently have damaged the poor financially through a number of “macroeconomic” impacts (Ross M. , 2003, p. 4). Similarly in Angola, with uncertainty over future income prospects, the government officials neglected the needs of the people in Angola such as providing of basic infrastructure (Ross M. , 2003), consequently being reluctant towards conflict resolution. As oil provides abundant funds for arms, “a return to peace may provide relatively small economic opportunities for the warring parties, compared with opportunities related to natural resources extraction under war conditions” (Frynas, 2005, p. 696).
In short, oil revenues “undermine good governance” (Frynas & Wood, 2001, p. 596) and it is always the local population or the poor who is to be hit hardest on every front. Oil revenues enrich only a small group of elites and its revenues insulated the state from accountability to citizens in general and to communities in oil-producing regions in particular. “Mineral exporters tend to suffer from a cluster of economic and political ailments (Auty, quoted in Ross, 2003, p3),” and also tend to have “unusually high corruption rates (Sachs and Warner, Leite and Weidemann, and also Gylfason, quoted in Ross, 2003).” The logic of this “resource curse (Ross M. L., 1999)” may have a number of important respects in this sense. It is about, in spite of being well blessed geographically, many oil producing states “have experienced economic underdevelopment”, “military conflict” and “political mismanagement” (Frynas, 2005, p. 595). Usually governments have a principal access to resource accumulation as well as its distribution. When these governments lack accountability in sharing revenues, “conflicts over access to power are aggravated” and “likely to resort to violence” (Frynas & Wood, 2001, p. 11). Although this “resource curse” discourse mainly discusses oil itself, MOCs emerge as a significant player as well as a facilitator of government corruption, and also as a contributing factor to economic underdevelopment.
These two negative political ramifications MOCs have, especially the corruption of the government are largely due to the interlocking corporate relationships between MOCs and government. In politically unstable country, MOCs often deeply interface government of the regions.
In Nigeria, its economy has been heavily dependent on taxes and royalties generated by MOCs (Omeje, 2005), and Shell and other MOCs have deeply colluded with the government officials (Kaldor, Karl, & Said, 2007). Relationship between MOCs and ruling elites in Nigeria is thus so close that “it is sometimes difficult to distinguish government from the MOCs, since theirs was more than just an alliance” (Kaldor, Karl, & Said, 2007, p. 72). According to McCulloch, MOCs such as Exxon often paid the governments for its security. In Aceh, the military has been involved in protecting MOCs such as ExxonMobil and PT Arun, for a fee. There was even an agreement between Exxon and the government of Indonesia that requires the government to protect the operation of Exxon (McCulloch, 2003, p. 15). Apart from their partnerships on economic front, in this situation MOCs are in a “mutually beneficial relationship” with the government and consequently rely on the MOC’s financial and logistic support (McCulloch, 2003). The same could be said for other local military commands in Aceh where MOCs have paid to “local military commanders for their cooperation”, providing “transportation facilities, offices, posts, barracks, radios, telephones, dormitories, and other equipments” (McCulloch, 2003, p. 16). Gradually they have come to be dependent on the salary paid by MOCs for their operational costs.
Banfield, Haufler and Lily argue that a relationship between the MOCs and local security forces like this “can arouse a range of grievances” (Banfield, Haufler, & Lilly, 2005). Like the case in Aceh, foreign companies have no choice but to contract their security services from the government, due to the local law. However, there is no assurance that these governments are conscientious. “These governments can be repressive and undemocratic, and the security services personnel they provide â€“ either police or military â€“ may violate the rights of local citizens in the course of protecting the company” (Banfield, Haufler, & Lilly, 2005, p. 19). There have been a number of inhuman acts to local population under the pretext of protecting MOCs. Moreover, these ruling governments in conflicted regions tend to be neither produced responsible corporate governance, nor ensured that the proceeds of oil were invested productively. To avoid having relationships with governments with ill repute, a MOC may try to use private security forces rather than being related with an oppressive government. However, this can be problematic too as these private securities often become too violent to local populations. “They are perceived as protecting the company at the expense of the local people” (Banfield, Haufler, & Lilly, 2005, p. 137). MOCs can thus indirectly support repressive regime by forging close alliances with these regimes or militias.
Consequently, local populations who have been impoverished tend to regard Multinational Oil Companies as synonymous with the ruling government as well as their military target. Moreover, as shown in the earlier chapters, by doing harm on a country’s economy as well as damaging its environment, MOCs create economical and political grievances over unequal distribution of the benefits. In situations like these, MOCs directly involve in conflict as a “central player”.
For example in Aceh, the LNG industry and the MOCs epitomized everything that was wrong with Jakarta for GAM and many Acehnese, over centralization, crony capitalism, corruption, and ultimately repression to safeguard the elite interests. Although GAM’s overall goal was “an independent Acehnese state”, it comprised some ideological sub currents, one of which directly related to the â€˜protection’ of Aceh’s natural resources from the neo-colonial exploitation of the government in Jakarta and foreign oil corporations. The uneven development of the economy and infrastructure, the modernization process, “and the fact that throughout much of the conflict in Aceh most of the gas and oil revenue went to Jakarta with little return, contributed to popular economic as well as political grievances that nurtured secessionist sentiments” (Kaldor, Karl, & Said, 2007, p. 219). This gave GAM propaganda, and allowed them to see MOCs as representatives of neo-colonial government and thus as among its “legitimate targets” (McCulloch, 2003). Similarly in Nigeria, some MOCs including Shell were closely associated with the ruling government including dictatorships. Much of the oil revenue had not been spent for the welfare of the local communities in the Niger Delta. These communities have been suffered from the brunt of the extensive environmental damage from oil extraction, and have become increasingly alienated from both the MOCs and the government. Originally peaceful protests by the MOSOP in Niger Delta were brutally suppressed and this has lead MOSOP to exacerbate their protest. Similarly in Colombia, the ELN publicly stated that they regard “oil industry as their military target”, and had attacked BP’s production facilities (Pearce, 2004, p. 23). Besides, having being regarded as a military target has brought MOCs another serious issue.
Working closely with ruling governments in conflicted situations, it has brought MOCs another serious issue. As they form relation of mutual dependence with government, or operate closely with private security, some MOCs have often “been accused of complicity in human rights abuses carried out by armed groups in conflicted situations” (Global Witness, 2007). This also created new opportunities for MOCs. Facing international condemnation, MOCs are now taking broader political roles in conflicted regions.
An example can be found in Colombia. The Colombian government had been reported as responsible for human rights abuses (Kaldor, Karl, & Said, 2007). As discussed earlier, for the rebels who want the oil industry to be nationalized, MOCs such as BP can be their targets. As they take necessary countermeasures such as hiring its own army, it has led to another problem. BP has been accused of “forming its own army and of being associated with state repression” (Beder, 2002, p. 3). The military forces BP depended on were associated with the right-wing paramilitary forces, which are said to operate “as death squads with government impunity, attacking local protesters, communities they suspect of being sympathetic to guerillas” (Beder, 2002, p. 3). BP was thus accused of human rights abuses for “hiring security people with past histories of human rights abuses and even murder” (Kaldor, Karl, & Said, 2007, p. 225). Similarly Talisman, a Canadian MOC was once accused of human rights abuses for aiding and supporting human rights violations in Sudan (Macklin, 2003). Talisman’s critics charged the company with human right abuses committed by GoS (Government of Sudan) against the South in the course of waging war (Macklin, 2003). It has been accused of human rights violations for aiding human rights violations by Sudanese troops, by providing logistical support to Sudanese forces and allowing them to use company facilities for military operations (Global Witness, 2007). Likewise in Aceh, ExxonMobil has been accused of aiding and retaining “Indonesian military personnel”, who are “allegedly paid by the company, had committed murders, torture and other human rights abuses against civilians” (Global Witness, 2007, p. 4).
MOCs thus have been faced international condemnation for being responsible for complicity in human rights violations, as well as degrading environment, exploiting local communities and supporting the repression of protest, as has been discussed. International NGOs such as Human Rights Watch, Transparency International and UK based Global Witness have proclaimed imperative of the transformation of the roles that the MOCs play in conflicted areas. In response to these critics, the MOCs are now considering of taking a new roles in the regions in which they operate, focusing more on their CSR activities, and participating in the governance of regions and its development than ever. This is mainly due to the lack of national and legal government’s ability to provide solutions to conflicted situations (Pearce, 2004).
In Colombia, their attempts to “persuade the national government to focus on this institutional effectiveness as a guarantor of security” have led them to have a new as well as bigger political role (Frynas, 2005, p. 583). Multinational oil companies have traditionally addressed issues of oil and conflict from the perspective of ensuring the security of staff and equipment, and reducing the political risk of long-term investments through close relations with host governments. They had seldom been involved deeply in these situations. However, now they stand on its recognition that in the regions they have operated and made a profit through the production of oil, they have to play a broader part (Pearce, 2004, p. 48). For example in Colombia, BP began to involve in the conflicted situation of Casanare more actively than before. It has supported an educational institution for youth through various projects, as well as supporting a movement for “women’s rights and political participation” (Kaldor, Karl, & Said, 2007, p. 225). It has also supported the judicial system in Casanare by promoting “the Justices of Peace programme in Nunchia, Yopal, Aguazul and Tauramena”, which is working to “develop legitimate ways for resolving daily conflicts which would take months in the formal legal arena” (Pearce, 2004, p. 50). As Pearce states, BP is now playing a new role and has made a contribution for peace in Casanare (Pearce, 2007). Similarly in Angola, while most companies have come under criticism for being silent with regard to allegations of corruption in the Angolan oil sector, some MOCs have sought to improve their reputation through supporting humanitarian initiatives (Le Billon, 2007). Chevron made a donation of more than a million US$ in 1999, making about 30 grants for educational and health programs, “thus making it one of the larger private aid agencies operating in Angola” (Le Billon, 2007, p. 120). The areas of these humanitarian assistances include health, education and “domestic business-development sectors” (Le Billon, 2007, p. 120).
To reduce the political risk of long-term investment, multinational oil companies have used to stay away from involving in political issues significantly in conflicted regions. However, this approach ended up exacerbating instability. Today they are rethinking traditional approaches and have began playing broader political role. These actions are supported by the idea of Corporate Social Responsibility (CSR). In addition to that, in political instability, oil companies tended to become surrogates for an absent or neglectful government (Kaldor, Karl, & Said, 2007).
However, even these new roles are not free from critics. Global Witness, a British based NGO argues that although some MOCs have been joined “voluntary frameworks” on human rights, these frameworks appear to have no effect (Global Witness, 2007). On the websites and in public statements, the oil and gas sectors and MOCs give prominence to their work. However, the effectiveness of their “CSR initiatives” has been “increasingly questioned” (Frynas, 2005, p. 581).
This chapter analyzed MOCs’ political influences on conflict to figure out in what situation MOCs directly involve in conflict as the military targets for insurgents. MOCs emerge as a significant player as well as a facilitator of government corruption, and also as a contributing factor to economic underdevelopment. Local populations who have been impoverished tend to regard Multinational Oil Companies as synonymous with the ruling government as they become so close, consequently create economical and political grievances over unequal distribution of the benefits. As they form relation of mutual dependence with government with ill reputation, or operate closely with violent private security, some MOCs were accused of complicity in human rights abuses. Facing international condemnation, MOCs are now taking broader political roles in conflicted regions. However, the effectiveness of their “CSR initiatives” has been “increasingly questioned” (Frynas, 2005, p. 581).
Profit motivated actors had been considered as foreign to the conflict and the conflict resolution discourses. This dissertation has revealed that their involvement in conflict by means of chapters on the economy, the environment and politics, and also presented a vision for the future in which they play broader role in contributing to peace and development of the regions in which they operate. This dissertation has argued that Multinational Oil Companies had played significant roles in a number of conflicted areas such as Aceh, Colombia, Nigeria, Angola and Sudan. As the economical influences, MOCs’ operations can have negative ramifications on a country’s economy, by help generating economic distortions as countries become excessively dependent on oil revenues. Furthermore, MOCs can exacerbate conflicts by financing “whether directly or indirectly, the repressive efforts of one group against another” (Switzer, 2001, p. 12). In a conflicted or potentially conflicted situation, this can create grievance, the primary motivating factor behind conflicts. In addition, oil production can harm the environment at almost every stage of its supply chain, causing destruction of agricultural land and forest. In the regions of violent conflicted such as Niger Delta, such MOCs operations pose a threat to the environment through gas flaring and oil spillages (Onwuka, 2005). Local residents suffer from a number of adverse affects of oil and gas production, while ruling elites reaping profits. In the Niger Delta such inequality has created “frustration among the people” and such dissatisfaction has exacerbated the conflict in that region (Onwuka, 2005). Although Multinational Oil Corporations have the possibility to reduce the likelihood of conflict by assisting poor countries in developing economically and politically, according to the liberal views, it can also exacerbate conflict by “creating grievances such as inequitable distribution of impacts and benefits which contribute to violent uprising” (Switzer, 2001, p. 9). Moreover, as the political influences, MOCs are often deeply involved in government corruption, and can support a corrupt and repressive regime in conflict area. As a result, local populations who have been impoverished tend to regard MOCs as synonymous with the ruling government. In situations like these, MOCs are directly involved in conflict as the military target for rebels and insurgents. As they become associated with a ruling government or private security forces with ill reputation, some MOCs have “often been accused of complicity in human rights abuses carried out by armed groups in conflicted situations” (Global Witness, 2007). Facing international condemnation, MOCs are now taking broader political roles in conflicted regions, participating in the governance of regions and its development than ever. MOCs are now showing new responses to conflict, focusing more on their CSR activities. Some MOCs has increased the budget for their CSR practices, spending more on social community infrastructure, in which the MOCs “initially hesitated to provide on the grounds that it was not their responsibility to do so” (Frynas & Wood, 2001).
International demand for energy supplies such as oil and especially for LNG will remain strong. According to EIA (U.S. Energy Information Administration), world energy consumption is projected to increase “by 44 percent from 2006 to 2030” (EIA). LNG and natural gas has especially high demand (Ross M. , 2009). MOCs might have more positive ramifications in non-conflicted area, in terms of economical as well as political. These negative consequences shown in this dissertation have largely due to the characteristics of conflicted situations where local politics is instable or even repressive. However, as Frynas has argued “political instability does not hinder MOCs from operating in conflicted situation” because of their pursuit of profit (Frynas, 1998, p. 457). Given the high demand of oil and gas, their operations in conflicted area will be continued and the roles that MOCs play in such regions are becoming increasingly important. The transformation of the roles that Multinational Oil and Gas Corporations play in conflicted situations is thus inevitable. Meanwhile, it is also possible that MOCs achieve a benefit in contributing to peace and security in the areas they operate. It would not be easy even for them to develop and extract Oil and gas under conditions of conflict. Given the size of a project and huge investment amount, it is reasonable as well as inevitable that they actively engage in local social issues and contribute to stability and development of the region. Usually, oil and gas productions are long term programs with each projects last for 20 to 30 years, depends on the reserves. This means they can have long term consequences for contribution to peace and stability which will bring mutual advantage to both the MOCs and local society. Government Organizations like the United Nations and European Union, Non-Governmental Organizations are not the only actors as in the traditional context of conflict resolution. Multinational Oil Companies can also have influences on conflict. So far their negative ramifications on conflicted situations have been stressed. However, there is still room for their attempts to contribute to peace and stability of the regions in which they operate.
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