Revenues from natural resources – especially oil and gas, or the ‘extractive industries’ – are an important source of income for the governments of more than 50 developing countries, including Angola, Azerbaijan, Indonesia, Kazakhstan, Nigeria and Venezuela. In 2005, global revenues from oil exports alone were estimated at US $694 billion.[1].

The paradox is that much of this wealth flows out of countries with high levels of poverty. Properly managed, these revenues ought to serve as a basis for poverty reduction, economic growth and sustainable development. Unfortunately this is not the case. In the absence of transparency and strong institutions, the huge sums of money involved engender corruption and abuse. Inadequate governance and lack of accountability in the use of natural resource revenue keeps countries that ought to be prospering from the resources, poor.

Transparency International’s (TI) Promoting Revenue Transparency Project is one of a number of civil society initiatives aiming to increase transparency in extractive industry revenue flows, and to empower citizens with the information they need to hold their governments accountable for how these resources are used. Other similar initiatives include the global civil society coalition ‘Publish What You Pay’, the international multi-stakeholder ‘Extractive Industries Transparency Initiative’, and the Revenue Watch Institute. TI’s project works in close collaboration with these other initiatives.

Questions of poverty and energy are on the agenda of the 2007 Group of Eight (G8) Summit this June, in Heiligendamm, Germany. This is not the first time that the G8 will be discussing these issues. It is vital that they reflect on past promises, and ensure that the statements they issue this year are bolstered by concrete, measurable goals.

The message must be made clear: oil and gas revenue transparency is a precondition for fighting poverty and for sustainable economic development.

There are a number of actors involved in the process of natural resource extraction, including its financial transactions: multinational companies, the national governments of these companies, and of course, the ‘host’ governments from which the resources come.

Revenue transparency seeks to increase public knowledge of the scale and scope of extractive industry revenues. This includes enhancing public information about the flow of money from oil producers to governments, as well as greater understanding of the oversight systems that are in place. Host governments should publish how much money they are receiving from companies, companies should publish how much they are paying, and home governments of the multinational companies should regulate and enforce the disclosure of this information. Civil society plays a large role in any revenue transparency initiative by monitoring the flow of these resources and ensuring first-and-foremost that the information is publicly and widely available.

The involvement of civil society is critical, as the information provided about revenue-flow is of little worth without someone to use it. The provision of this information is the first and necessary condition to improve the quality of life of those living in poverty amid tremendous natural resources. Once armed with the information of how much money the government is receiving from oil revenues, citizens can increase the accountability of government and monitor how the money is spent. This creates the right conditions for sustainable growth.

The Extractive Industries Transparency Initiative (EITI) is at the forefront of the issue of revenue transparency in the extractive industries, and provides a way for both companies and host countries to sign up to a system of information provision, verification and monitoring.

When host governments seek opacity in the revenues from oil and other natural resources, civil society activists in this field are put in danger. Two recent cases illustrate this:

• In November 2006 Christian Mounzeo, a Congolese anti-corruption activist, member of the Publish What You Pay coalition and a member of the international board of the Extractive Industries Transparency Initiative (EITI), was arrested by the Congolese authorities in Brazzaville. “It is especially disturbing that he was detained after returning from speaking at the recent high level EITI conference in Oslo and at the Annual Meeting of the Club of Madrid.” Following sustained international pressure from civil society organisations around the world, including a resolution passed by TI, Mounzeo was released.
• In February 2007, Dr. Sarah Wykes, a human rights and anti-corruption activist working with Global Witness was arrested by armed Angolan police while visiting the oil-rich nation to meet with civil society, firms and government representatives. In late February, Dr. Wykes was granted bail and released from prison.

Revenue transparency brings together several issues on German Chancellor Angela Merkel’s stated G8 agenda, including sustainable resource use – in particular with regards to energy – good governance, Africa, economic and democratic development, and greater cooperation with emerging economic powers.

Many of the world’s oil producing countries targeted under revenue transparency initiatives are in Africa. The goal is for this revenue to effectively drive development, decreasing both poverty and reliance on donor support. Sub-Saharan Africa receives billion of dollars a year in oil revenues, and yet continues to receive the most development assistance of any region in the world, approximately US $26 billion each year.[2]

“Twenty years ago 150 million people in that part of the world lived in extreme poverty today that number has doubled to roughly 300 million, nearly half the Sub Continent. During that same period of time or a slightly longer period of time, over the last three decades it is estimated that Africa has seen some 500 billion dollars of oil revenues, very little of which is gone to help the people of Sub Saharan Africa. Those revenues will grow in the future. They’re estimated over the next five to ten years to be five to ten times official development assistance numbers, but too often the people of Africa don’t see that.” Paul Wolfowitz, World Bank President, in an address to the EITI Conference, Oslo, Norway, 16 October 2006.

In the context of the upcoming G8, TI has called for specific measures to catalyse a better use of mineral resources for development, focussing on widening the application of the Extractive Industries Transparency Initiative (EITI), including its adoption by more countries and companies, and material support for the EITI by G8 countries.

The messages revolve around the EITI as a strong global vehicle for ensuring greater revenue management and transparency in host countries.

TI also is adamant that it is just as important for the wealthy donor countries of the G8, many of which sit atop considerable mineral resources themselves, to lead the way by:

• Applying at home the same stringent conditions of transparency demanded of developing nations subscribing to the EITI, and
• By strictly enforcing their anti-corruption obligations in regards to their domestic companies behaviour in overseas markets.

These messages dovetail with a broader campaign for global financial transparency and mutual legal assistance in terms of asset recovery. This includes supporting cross-border investigations and prosecution of corrupt acts and taking steps to stop the abuse of G8 financial markets for the movement, laundering and storage of the proceeds of corruption.

Topics of oil and revenue transparency have been topping news headlines as of late. Here are a few articles of interest:

Energy politics and the suburban lifestyles
“Big oil money brings corruption to these undeveloped countries. Oil is sometimes more of a curse than a blessing. Politicians skim the profits, buy arms to keep themselves in power and ignore environmental destruction and their people's poverty.”
Marin Independent Journal (California); 23 March 2007

Total’s CEO charged in Iran Probe
After two days of questioning by the French police, preliminary charges were filed against the chief executive of Total SA, Christophe de Margerie. The French oil company is under investigation for allegedly paying bribes to win a contract for gas field development in Iran. Total responded by issuing a statement that no laws had been broken at the time the contract was signed.
Forbes.com, 23 March 2007

Is Hugo Chavez Mr. Misunderstood?; To poor, he’s a savior; to rich, he’s ‘that crazy guy’
Venezuela’s president, Hugo Chavez, has remained wildly popular with the general population despite growing criticism of his political and economic policies.

“This larger-than-life figure may…be more vulnerable than he appears. There are early signs that Chavez, even as he dominates regional politics, is losing ground at home and elsewhere in Latin America,” reports USA Today.
USA Today, 23 March 2007

Nowadays, Angola Is Oil’s Topic A
This article puts the resource curse and need for transparency into context, using the example of Angola, the fastest-growing source of oil exports to the USA. “These days, Angola still has a terrible record on corruption and ranks on the lowest rungs of nearly all development indicators. Elections have been postponed several times and are currently scheduled in 2009. The nation’s contradictions are glaring. Angola earned more than $30 billion last year from its petroleum exports. But according to a recent World Bank report, 70 percent of the population lives on the equivalent of less than $2 a day, the majority lack access to basic health care, and about one in four children die before their fifth birthday.”
The New York Times, 20 March 2007

Transparency International manages the Promoting Revenue Transparency Project in partnership with the Revenue Watch Institute (RWI). Other partners in the project include CAFOD, CARE UK, Global Witness, Save the Children UK, Secours Catholique and other members of the Publish What You Pay global coalition.

For more information please see:

Promoting Revenue Transparency Project: www.transparency.org/policy_research/surveys_indices/promoting_revenue_transparency

Extractive Industries Transparency Initiative (EITI)
www.eitransparency.org/

“Towards a sustainable future: corruption and natural resources management” – conference report from the 12th International Anti-Corruption Conference (IACC) in Guatemala, November 2006
http://12iacc.org/modules.php?name=Content&pa=showpage&pid=117

G8 presidency pages:
www.g-8.de/Webs/G8/DE/Homepage/home.html

Germany development ministry pages:
www.bmz.de/en/EU_G8/ziele_eu_undg8/index.html)_