Global Policy Forum

By Ken Silverstein

After launching the ground invasion of Iraq, President Bush paused to have dinner Thursday with an unlikely guest, given the circumstances. Bush and Secretary of State Colin L. Powell met in the White House with the leader of Cameroon for a discussion of "common interests."

Best known for poverty and corruption, Cameroon is among the nations being courted to support the war. But the country also figures prominently in a monumental new initiative to tap rich West African oil fields and reduce U.S. dependence on Middle Eastern oil, an aim that has taken on added urgency with the conflict in Iraq.

Construction is nearly complete on a $3.7-billion, 670-mile pipeline that will move hundreds of thousands of barrels of oil per day from landlocked Chad across Cameroon's tropical forests to its Atlantic coastline, where tankers will carry it to U.S. and European refineries. The pipeline, which is being built by a consortium of Exxon Mobil Corp., ChevronTexaco Corp. and Petronas of Malaysia, also represents an ambitious attempt to avoid the corruption that has been a hallmark of energy development in Africa. The participants, which include the World Bank Group, have pledged that, this time, pipeline revenue will benefit the poor and the environment will not be ravaged.

Chad, one of the world's poorest nations, has committed to spend its pipeline revenue on economic development and social programs. To guard against corruption, an oversight committee will control an offshore bank account for Chad, which owns the oil reserves and thus will collect most of the money. In Cameroon, residents were promised that development would be spurred by pipeline jobs, road-building and compensation to villagers affected by construction.

"We're going to be keeping a very close watch," the U.S. ambassador to Chad, Christopher Goldthwaite, said in an interview in N'Djamena, the capital. "If it works correctly ... it will be precedent-setting, and the experience here will be much, much better than in other oil-producing countries."

Already there are signs that achieving those lofty goals will be difficult. President Idriss Deby of Chad spent $4.5 million from a "signing bonus" paid by the oil companies to purchase weapons to combat insurgents. On several occasions, the World Bank threatened to withdraw from the project if Deby didn't curtail human rights abuses. Security forces detained six opposition candidates after Chad's 2001 presidential election, and World Bank President James D. Wolfensohn had to phone Deby to win their release.

The promised pipeline jobs have turned out to be temporary, disappearing as each segment is completed. Despite industry-sponsored efforts to discourage it, prostitution has proliferated along the pipeline route. Health professionals believe it is responsible for an upsurge in AIDS cases in Chad, a country that had been relatively insulated from the pandemic.

A World Bank committee monitoring the pipeline has warned of a two-track problem: The oil companies are well ahead of schedule in building the pipeline, but the two governments are far behind on the social and environmental programs that the oil money is supposed to fund.

The pipeline is the largest single investment in Africa, according to World Bank officials. When the pipeline is completed, Chad will become the fourth-largest oil producer in sub-Saharan Africa. The country is expected to receive at least $2.5 billion in net oil revenue over 25 years. Cameroon will collect an estimated $500 million in transit fees for allowing the pipeline to cross its territory en route to the Atlantic.

Wisely spent, the money could sharply reduce poverty and disease. Jan Piercy, the bank's U.S. executive director when it approved the project in 2000, predicted that the pipeline's success or failure would shape the future of international aid programs — and the bank itself. "The stakes," she said at the time, "could not be higher."

Coups and Corruption

Foreign companies found oil reserves in Chad in the 1970s, but political chaos prevented their development. The country has been in a state of almost continuous civil war since attaining independence from France in 1960. In 1982, the Reagan administration determined that Chad's president was too friendly with Moammar Kadafi, the ruler of neighboring Libya, and supported a coup. The new regime killed 40,000 people and tortured hundreds of thousands.

In 1990, Deby seized power. The State Department says his security forces also have tortured and killed political opponents. The government, which is largely dominated by Deby's tribe, barely functions in many parts of the country. "Deby is more of an ethnic leader than a head of government," said Philippe Vasset of African Energy Intelligence, a Paris-based industry newsletter.

Cameroonian President Biya heads a similar government. A fanatical golfer, Biya spends much of his time at a vast estate — complete with a nine-hole course — that he built with state funds near his native village. Transparency International, a European-based anti-corruption organization, has consistently rated Cameroon as one of the world's most corrupt countries.

Nevertheless, Exxon Mobil and the other members of the pipeline consortium felt conditions were stable enough to allow them to move forward by the mid-1990s. Yet the companies were worried about adverse publicity. They had been condemned by human rights groups and sued by local residents over their roles in Third World oil development.

In war-torn Angola, the president has used oil revenue to build a vast military apparatus. In Nigeria, a former dictator is accused of stealing $4 billion, the poverty rate has climbed sharply and oil spills have devastated the Niger Delta. ChevronTexaco is fighting a lawsuit that charges it with complicity in three assaults by Nigerian security forces on protesters demonstrating against its operations. Exxon Mobil is fighting a similar suit for allegedly supporting an Indonesian army unit that tortured, raped and killed civilians. Both companies say the allegations are groundless.

Royal Dutch/Shell Group — which had been targeted by human rights and environmental groups because of its extensive operations in Nigeria — sold its stake in the Chad-Cameroon consortium, partly because of potential negative publicity.

A New Chapter

To avoid a repeat of past failures, Exxon Mobil turned for assistance to the World Bank, which is charged with promoting economic development in the poorest countries. Some bank staffers feared that the Deby and Biya governments would renege on commitments to spend oil revenue on social development and to protect the environment, and that Chad in particular would use the money on arms. As the bank was debating its involvement in the project, Amnesty International reported that security forces in Chad had killed at least 100 civilians accused of supporting a rebel group.

"The two countries are extraordinarily corrupt," said Piercy, the former bank official. "The natural resources belong to the people, but there was a possibility that the revenue would go to the elites. I was extremely uneasy."

European and American environmental and human rights groups, joined by Chadian and Cameroonian organizations, lobbied against bank participation. They pointed out that oil development generally creates few permanent jobs, especially in poor countries without a skilled labor base.

In response, Exxon Mobil heavily lobbied the World Bank, the Treasury Department, which oversees U.S. participation in the bank, and other government agencies that took part in a review, required by law, of all development projects that receive loans from the World Bank. The company emphasized that oil revenue could help two desperately poor countries and promised that the pipeline would bring employment as well as new roads and bridges.

John Fitzgerald, an environmental policy analyst at the U.S. Agency for International Development, said he was not swayed by a visit from two Exxon Mobil executives. He warned in several memos that corruption in Chad and Cameroon would lead to "severe governance problems," and that the project did not have an adequate plan for cleaning up oil spills.

Fitzgerald predicted a number of negative side effects from the pipeline, among them a boom in prostitution and a possible increase in AIDS cases. He also expressed concern that people would abandon their farms to seek pipeline jobs. "While the opportunities from this project are great, so are the risks," Fitzgerald wrote. "The central question is whether the countries are ready to ensure that those resources contribute to development and not to a cycle of degradation."

Nevertheless, the Clinton administration urged the World Bank to approve the project. The U.S. Export-Import Bank provided a $158.1-million loan guarantee for the pipeline. President Bush has been equally supportive. His national energy policy, released in May 2001, predicted that West Africa would become "one of the fastest-growing sources of oil and gas for the American market." The Sept. 11 terrorist attacks increased pressure to develop oil supplies outside the Middle East. In 2002, the U.S. Overseas Private Investment Corp. approved as much as $250 million in political risk insurance for Pride International of Houston, which is drilling oil wells for the pipeline.

The Bush administration was "gung-ho for the project because of the participation of U.S. oil companies," said Fitzgerald, who lost his job in September. He says he was fired because of his public opposition to the pipeline and other U.S.-backed energy projects. The agency says his job was eliminated for reasons unrelated to his position on the pipeline.

In June 2000, the World Bank agreed to oversee the pipeline, and construction began a few months later. The World Bank provided 2.7%, or $192.9 million, of the financing, including loans to Chad and Cameroon that allowed each to buy a nominal share in the pipeline. But for the oil companies, the bank's support amounted to a vital seal of approval.

The World Bank drew up an elaborate Revenue Management Plan to ensure that oil revenue reaches the people of Chad. It puts project revenue in an offshore account — and out of the immediate control of President Deby. A nine-member Oversight Committee will monitor project revenue and approve expenditures. The government of Chad is required to spend almost all of the oil money on education, health and rural development.

To minimize damage to forests and fragile ecosystems in Cameroon, the bank and the oil consortium undertook an environmental study. The results led the companies to alter the pipeline's route to spare endangered species.

Exxon Mobil has launched efforts to combat malaria and discourage prostitution, among other social initiatives. To respect local customs, the company sponsored animal sacrifices when construction forced the relocation of burial grounds and other sacred sites. "In 50 years, I have never seen corporations make such an effort to ensure a project's success," said Donald Norland, a former American ambassador to Chad.

Still, detractors remain. African church leaders meeting last year in Equatorial Guinea expressed serious doubts about the pipeline and asserted that multinational firms, not the local populations, are the primary beneficiaries of energy projects. "You can't expect that oil revenue will be an island of good government and transparency when the rest of the country doesn't experience it," said Ian Gary, Africa policy advisor for Catholic Relief Services, a U.S.-based organization that provides emergency aid.

A Shot in the Arm

Chad, a nation roughly three times the square mileage of California, has only a few hundred miles of paved roads. Exxon Mobil installed 120 megawatts of electric generating capacity for the pipeline project — about five times Chad's preexisting capacity.

Some 735,000 people live in N'Djamena, most of them in shantytowns like Diguel, a sprawling neighborhood of mud huts on the outskirts of the capital. During the four-month rainy season, it's impassable except by dugout canoes that move atop a fetid lake of trash and waste. A single balky water pump was installed by UNICEF. The community school consists of two open huts with piles of rocks for seats.

The pipeline could help change all this, Ambassador Goldthwaite said. "The country is not going to get rich, but it could be a real shot in the arm."

The man who oversees the pipeline for the World Bank is Jerome Chevallier, a highly regarded official brought out of retirement when the project's programs appeared to be foundering. Interviewed in his office in N'Djamena, Chevallier conceded that there are numerous obstacles to the project's success. "The major difficulty is that it takes more time to build the government's capacity to manage the oil money than it takes to build the pipeline's physical infrastructure," he said.

At the same time, Chevallier expressed exasperation with some hard-line critics. "What are we supposed to say, 'Forget about petroleum because other countries have failed miserably'? In a country this poor, you can't say, 'Let's not develop oil.' That's criminal."

The political climate in Chad has improved since the early-1990s, when Deby ended one-party rule. But soldiers are a common sight on the streets — they shake down motorists for small bribes.

Security forces are on hair-trigger alert. Vehicles that stop near Deby's presidential palace are presumed hostile. In 1995, the wife of then-U.S. ambassador Laurence Pope stopped there to pick up a friend. A guard opened fire, shattering the windshield and just missing her.

In a recent closed-door meeting with business and human rights representatives, a World Bank official noted that the government spent 84% of the annual defense budget, but only 4% of money allocated to fight poverty in the first six months of 2002.

The key to the project's success is the oversight committee that will manage oil revenue. Four of the nine members are appointed by independent organizations, while the remaining five are selected by institutions with close government ties, such as the Supreme Court, which is packed with Deby loyalists.

So far, though, the committee has not been a rubber stamp. It turned down several early requests for money from the $25-million "signing bonus" that the government received from the oil consortium. In one case, the minister of agriculture asked for funds to buy grain. The committee refused, suspecting a ruse. Part of the money was to pay for cars, supposedly to distribute the grain, but which the committee believed might be turned over to officials for their private use.

Last month, an internal World Bank report warned that supplies bought with public funds and intended for local facilities "had a tendency to vanish before they reach their destination." Such incidents only bolstered the view among independent Chadian organizations that Deby has not changed its ways. They fear that once the oil is flowing and money starts piling up in the offshore account, his regime will buy off committee members and misappropriate the funds.

Chad's prime minister, Haroun Kabadi, said such worries are unfounded. The government will "play by the rules," he said during an interview in his paneled office, where an Exxon Mobil pipeline calendar hangs on the wall. The picture for December 2002 shows Deby and Biya walking the streets of Kribi, the Cameroonian coastal town where the pipeline ends.

Fears about Deby's intentions grew in late 2000, when his regime used the first $4.5 million from the "signing bonus" to buy arms to fight a rebel movement. That expenditure — made before the oversight committee had begun operating — came as his government was making an urgent appeal for international food aid.

Kabadi depicted the weapons purchase as a necessity. "It's very difficult for any government to be attacked and not to react," he said while sitting on a black sofa flanked by plastic fruit trees, as security officers armed with machine guns stood guard. "I don't believe there is any problem at all."

Norland, the former U.S. ambassador, says Deby sees the pipeline project as his legacy. "He was a warlord but the project has changed him," he said. "He's not clean for heaven's sake, but he's learning."

Delphine Djiraibe, a lawyer and human rights activist, is less sanguine. She believes the World Bank and foreign governments will lose their leverage over the regime once the pipeline is finished. "Before, the government was responsive to outside pressure because it needed the project to be approved," Djiraibe said. "But now, they are confident that they can do whatever they want."

Second Chances

The Biya government in Cameroon is not subject to the World Bank's revenue management plan, but its cooperation is important because the pipeline runs across hundreds of miles of delicate and often lush terrain in Cameroon. Biya has been in power since 1982, and his early years were marked by an oil-fueled economic boom that produced 150,000 barrels a day at its peak. During that period, Cameroon was a heavy importer of French champagne.

"At state functions they served Dom Perignon," said an American official who was based in Yaounde during the boom times. "There was one bottle for every two people, and if it ran dry, they would bring a new bottle and keep pouring."

But oil production has been declining for almost a decade, and a huge percentage of the population works as street vendors. The central market in Yaounde is enormous, with thousands of people hawking fruit, pens, clothing, old books and magazines, toys and cocoa beans.

"The oil is starting to run out but the government never used it to develop the economy," said Oliver Mokum, who works with the local offices of Catholic Relief Services, as he led the way through a maze of market stalls. "This is the only type of work most people can do."

Biya's government provides virtually no accounting for oil revenue. The World Bank and the International Monetary Fund finally forced the government to conduct an audit of the state oil company last year, but it was never made public. Meanwhile, human rights abuses abound, according to the U.S. State Department. Biya's security forces "committed numerous extrajudicial killings" and "tortured, beat, and otherwise abused detainees and prisoners." Through its Washington embassy, the Cameroonian government declined requests for an interview with Biya or other officials.

Despite all that, Emmanuel Noubissie Ngankam, the World Bank's representative in Yaounde, insisted, "The government has shown that it is serious about meeting its commitments."

Cameroonians, not surprisingly, are cynical about Biya's promises of reform. Before joining Catholic Relief, Mokum worked for the Agriculture Ministry and represented the government at community meetings on the pipeline. He encountered people angered by Biya's failure to use past oil revenue to provide schools, hospitals or social services. "They saw the presence of the government at the talks as an insult," he said. "I was lucky to get out of some of those meetings alive."

The Center for Investigative Reporting and its Fund for Investigative Reporting on the Environment contributed to the reporting of this article.

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