by Jennifer Davis, The Africa Fund
Presented to the Council on Foreign Relations, New York
January 30, 1998
In my ten minutes it's not possible to do more than paint with a very broad brush and those of you who know far more about the details of the Nigerian economy will forgive me if I omit elements you see as essential, and will make good my omissions.
As many of you know a very large part of my life was devoted to working for the imposition of sanctions on apartheid South Africa. Naturally I spent a lot of time opposing corporate arguments - and I cannot claim to have more than a couple of good friends among major CEO's.
But I do have some - and more since the success of sanctions has brought democracy and an explosion of new business leadership from among former Trade Union and ANC leadership in South Africa. All this to say that I do have concerns about the role of U.S. and multinational corporations in Nigeria and I hope you will not lay them all at the door of some form of knee-jerk corporate bashing.
Nigeria's Economy
Since the early 1970's the production and export of crude oil has come to totally dominate Nigeria`s economy, most reserves being found along the country's coastal Niger River Delta. Oil revenues are vital to the survival of the military dictatorship, accounting for 95% of hard currency earnings and at least 80% of government revenue. Nigeria is among the largest producers of oil in the world, (in the top seven) currently producing at least two and one quarter million barrels of high grade "sweet light" crude a day.
The U.S. is by far the single largest market for Nigerian oil, purchasing between 35 and 45 percent of total production annually. Figures for 1996, the most current, place U.S. purchases of Nigerian crude at over $4 billion dollars.(595,000 barrels per day according to the U.S. Energy Information Administration)
1998 marks the 40th year of oil production operations in Nigeria, initiated by Shell in 1958. In that time the company has pumped $30 billion worth of oil from Ogoniland alone and well over $100 billion worth of oil from the whole country. Nigeria's oil wealth has financed decades of military dictatorships and made Shell one of the largest and most profitable corporations in the world, but it has brought only oppression, poverty and pollution to the Nigerian people.
Indeed, between 1983 and 1994, a period of dramatic growth in Nigerian oil production, per capita income plunged from nearly $1200 to less than $250 in an unbroken period of dictatorship that continues to this day.
Despite the immense cash flow generated by oil sales, the Nigerian military regime is severely squeezed for capital and has failed to meet payments on its huge foreign debt. It is also about $1 billion dollars in arrears to the oil companies on its share of production and maintenance costs and allocated only about half of the amount sought by the companies for exploration and infrastructure in the current budget.
The Key Companies.
Three oil companies -- Shell, Mobil and Chevron -- produce over 95% of Nigerian oil. Shell is by far the largest and produces about 49% of the total, followed by Mobil (24% ) and Chevron (23%). Shell has begun a nearly $4 billion expansion of its Nigerian operations, with Mobil and Chevron also planning multi-billion dollar developments -- primarily in natural gas.
Corporate /State Partnerships.
Any attempt to assess how far major corporations can become agents of economic and political change must take into account both formal relationships and history.
Under Nigerian law all oil production operations are structured as joint ventures between the multinationals and the State oil company -- with the foreign firms as minority partners. This means that Shell, Mobil, Chevron and the other foreign producers are literally business partners with the Nigerian military government. (Most joint ventures are 60 percent owned by the state and 40 percent by the multinationals. A few later ventures are 51-49.)
All the oil companies are deeply and structurally connected to the repressive apparatus of the state. All oil companies are required to pay the salaries and expenses of a special armed and uniformed national police force tasked with guarding oil industry facilities. These are not company security guards but national security forces answerable to the dictatorship. In addition, after years of public denials, Shell was finally forced to admit that it purchased thousands of guns and millions of rounds of ammunition for its police contingent, known among the people as the "Shell Police." ( There are also "Mobil police", etc.)
According to the State Department's 1996 country human rights report ALL Nigerian security forces engaged in widespread and systematic human rights abuses, although MOSOP has charged that the Shell Police have been particularly brutal.
Moreover, Shell again after strenuous denials had to admit last year that it made special payments to the notorious Rivers State Internal Security Task Force (known as the "Kill and Go Boys") the paramilitary occupation unit engaged in the brutal repression of MOSOP and the minority Ogoni people. In one documented case, a task force unit paid by Shell to disrupt an Ogoni protest over a Shell pipeline opened fire on the peaceful demonstrators, killing one person and wounding several others.
Ken Saro Wiwa's trial and execution in 1995 focused world attention on what were longstanding acute tensions between Shell and the Ogoni people; millions saw grim pictures of environmental devastation and brutal military occupation.
This has been carefully documented in a recent World Council of Churches publication, entitled Ogoni, The Struggle Continues. Respected Nigerian academic Professor Claude Ake also compiled detailed evidence about Shell's degradation of the fragile Niger River Delta, describing hundreds of oils spills and the constant gas flaring, a serious health hazard.
Shell blames particularly the continuous oil spills on community sabotage to receive company damage awards. But Shell's own environmental expert resigned after the company ignored his report on severe pollution at Shell facilities in the Delta and refused to implement international environmental standards for its operations.
Shell's own internal documents confirm that the company spied on Saro-Wiwa in the 1990s as he traveled internationally to build awareness of Shell's role in Nigeria and it failed completely in 1995 to condemn the farcical proceedings of the Military Tribunal which condemned him and his 8 fellow protestors to death, although the proceedings were strongly condemned by by among others, Amnesty, Article 19, the UN and the International Court of Justice.
In an effort to head off the executions, Ken's brother Owens met with then Shell Nigeria MD Brian Andersson to seek the company's intervention. According to Wiwa, Andersson said the company would be prepared to use its vast influence to commute the sentence but only if MOSOP repudiated its claims of environmental pollution and ended the international campaign. Only at the 11th hour did the company finally issue a brief public statement urging clemency on humanitarian grounds. At the same time running ads in the British press suggesting that the human rights and environmental movements should bear responsibility for the executions.
In the face of growing MOSOP and international pressure for change the company has responded with claims of corporate good citizenship and an expensive effort to portray MOSOP as terrorist and unrepresentative, rather than acknowledging the movement's extensive support and seeking ways to address the urgent political and economic agendas MOSOP presents.
None of this is unique - I have heard very similar statements re good citizenship from Mobil executives who assure me that they use quiet diplomacy where they can. I am reminded of a similar situation in South Africa, where an irate worker in 1975 leaked to us a General Motors "Contingency plan" which laid out how the Company would co-operate with security forces in times of unrest. Property needs protection.
The Case for Sanctions - the Debate
Given the regime's dependence on oil exports for its economic survival, the Nigerian human rights and democracy movements have called for international oil sanctions to secure the release of political prisoners, return the military to barracks and implement the 1993 election results.
But sanctions have been dismissed by the private sector, the Clinton Administration and many policy analysts as, variously, unwise (companies), politically impractical and functionally ineffective. The private sector position can be understood as self interest. The policy establishment argues that sanctions cannot work because:
(1) Nigeria could, over the medium term, find new markets, in Asia, to replace lost sales in the U.S. and Europe. (2) Only multi-lateral sanctions could be effective and there is no consensus among the great powers (3) Enforcement would require a naval blockade of Nigerian ports.
They argue instead for the maintenance of the largely ineffective diplomatic sanctions currently in place in the U.S. and Europe, with the addition of a freeze on the personal assets of members of the regime, which is unlikely to be very effective.
These measures would be further weakened by "constructive engagement" i.e. normalized and vastly expanded diplomatic contact, including direct military to military contacts with the regime and at least tacit support for Abacha's transparently fraudulent 1998 transition exercise.
Nigeria is not South Africa, the argument goes, and sanctions cannot and will not work as they did against apartheid. They are correct, Nigeria is not South Africa. The regime's absolute dependence on oil exports for survival and U.S. dominance of the Nigerian petro-economy as both producer and consumer make a much stronger case for sanctions than South Africa's relatively diversified economy ever did (given of course that no-one ever believed gold sanctions possible.)
The Case for Sanctions
Ironically it is only with hindsight that so many now argue that sanctions on South Africa were a good idea. The policy makers are as wrong about Nigeria now as they were about South Africa when the battle for sanctions started in the 1960's.
At the heart of the case for sanctions is the understanding that Abacha does not have a "medium term" in which to re-route his markets. Asia is in an economic crisis of vast proportions and has already dramatically reduced its energy demands. China, often pointed to as a likely replacement market for Nigerian oil, is, as the New York Times reported last year, heavily committed to coal for energy production and lacks both the capital and the will to convert to oil.
Moreover, there are significant retooling costs associated with converting refineries geared for heavier middle eastern crude to Nigeria's lighter premium grades. Adding to Abacha's difficulties in locating new markets is the large and growing glut of crude on the world market -- an oversupply likely to grow with the return of Iraq to the market, the coming online of the Caspian Sea fields and the ready abundance of North Sea and other crude grades comparable in quality to Nigeria's sweet light exports.
At best Abacha would have to market his oil at a sharp discount to attract buyers, further weakening his ability to finance his corrupt and reactionary regime and imposing real costs for his repressive policies.
Fewer dollars to spend and increased international diplomatic support for democracy, can force Abacha to release prisoners and open a dialogue with the democratic movement to resolve the crisis.
Abacha is clearly feeling increasing domestic pressures as evidenced by his mass arrests of "coup plotters" including his second-in-command and the outpouring of people in Abacha's northern political stronghold to mark the death in prison of popular democracy leader Shehu Yar- A'dua in December. At the point where he is unable to pay off the Nigerian military and civilian ruling elites his regime is doomed.
Arguments that only military action can effect sanctions miss the point. The real goal of oil sanctions is to raise the costs of repression past the point that the regime can bear.
The Case for Unilateral Sanctions
American diplomacy combined with determined American action can build multi-lateral support for sanctions. But given the extraordinary U.S. dominance of the Nigerian economy, the U.S. can act unilaterally and should do so if necessary.
While the U.S. market is vitally important, and we believe irreplaceable -- to the dictatorship, Nigeria accounts for less than 7 percent of American oil imports. The U.S. can easily and cheaply find new sources of Nigerian oil -- a view confirmed by a 1994 GAO report.
But Abacha cannot find ready markets for half of his exports.
It is worth restating that two U.S. companies, Mobil and Chevron, produce nearly half of Nigeria's oil, while the single largest producer, Shell, is also vulnerable to U.S. pressure because the U.S. is its single largest profit center. The U.S. therefore has the capacity to act effectively and unilaterally against Nigeria.
The companies argue that others would replace them should they withdraw, but only a handful of corporations have the capital and the technical capacity to maintain Nigeria's huge production and they too are American.
What seems lacking now is not an analysis to support the imposition of sanctions, but rather the will to act to support democracy in Nigeria.
The White House has avoided involving human rights and environmental groups in the current review process and Congress seems paralyzed by a combination of corporate lobbying and Nigerian influence buying.
Recent reports raise concerns about whether illegal Nigerian campaign contributions to President Clinton's re-election campaign have touched the review process; there is certainly growing evidence of Nigerian payoffs to U.S. religious and political leaders, although grassroots support for sanctions is growing.
World leaders from Nelson Mandela to Bill Clinton to John Major and other Commonwealth heads of state have engaged in protracted diplomacy to resolve the crisis in Nigeria and avert a bloody repetition of the Biafran civil war. But without sanctions diplomacy has been disarmed and it has been ineffective.
It is past time for America and the West to arm diplomacy with power. There must be real consequences for the regime if it continues its bloody war on its own people and real consequences for the oil companies if they continue to finance military dictatorship in Nigeria.
For additional information: The Africa Fund, 17 John Street, New York, NY 10038 USA. Tel: (212) 962-1210 Fax: (212) 964-8570 E-mail: This e-mail address is being protected from spambots. You need JavaScript enabled to view it
