THIRD WORLD: World Bank funds fossil fuel crooks

Issue 

BY JIM GREEN

A new study by the Sustainable Energy and Economy Network (SEEN), a branch of the Washington-based Institute for Policy Studies, reveals that the World Bank provided over US$24 billion in corporate welfare for 229 fossil fuel projects in Third World countries between 1992 and August 2002.

While transferring natural resources and public funds into the hands of Western transnational corporations, the World Bank is aiding and abetting economic disparity, repression, political instability, local environmental disasters and global climate change.

World Bank-sponsored projects which have attracted international opposition and controversy — such as the Chad-Cameroon oil pipeline, the Brazil-Bolivia gas pipeline, and the planned Baku-Ceyhan oil pipeline in the Caspian region — are just the tip of the iceberg.

The World Bank began to invest in oil and gas in 1977, with the US leading the push. A 1981 report from the office of the US Treasury's assistant secretary said the World Bank should expand its investment in fossil fuels to "expand and diversify global energy supplies to enhance security of supplies and reduce OPEC market power over oil prices".

The US Treasury also noted that, in contrast to the US government, "the neutral stance of the bank can play an important role. As a multilateral 'development advisor' it can help Least Developed Countries revise their incentive structure to encourage investment."

In addition to direct funding of fossil fuel projects, the World Bank has encouraged legislative and regulatory reforms in Third World countries — such as deregulation of foreign direct investment, and privatisation — to facilitate investments in fossil fuel projects from export-credit agencies, international financial institutions and private corporations.

Of the top 20 corporations that benefited from World Bank energy and power projects from 1992 to 2002, 14 are US-owned. Of the world's 10 largest corporations, five are among the World Bank's top 15 recipients of fossil fuel funding.

Most of the 15 largest corporate beneficiaries of the World Bank's energy and power funding are being investigated in the US and elsewhere for alleged accounting irregularities, energy market manipulation, fraud, bribery and/or human rights abuses.

Corporate welfare

These corporations include Halliburton, whose accounting practices are being investigated by the US Securities and Exchange Commission; Enron, which continues to seek public financing despite bankruptcy proceedings; and El Paso Corporation, which illegally manipulated the energy markets in California, for which the Californian government is seeking US$3.7 billion in damages.

According to Jim Vallette, author of the SEEN report: "If we connect the dots, between Enron, El Paso, Halliburton and others, the picture reveals these companies experienced explosive growth as they entered regions where the World Bank demanded deregulation and privatisation. The bank's fossil fuel portfolio has nothing to do with poverty alleviation, and everything to do with corporate welfare in the name of development and globalisation."

Other corporate beneficiaries of World Bank fossil-fuel financing include Harken Energy (US President George Bush's old company), and Unocal (which a federal US court recently ruled could be liable for human rights abuses associated with a gas venture in Burma).

The major oil corporations — including Shell, ChevronTexaco, ExxonMobil and BP Amoco — are other big winners of World Bank corporate welfare.

Australian-based companies also profit from World Bank largesse. BHP has a significant involvement in projects attracting $371 million of World Bank funding, with most of that for the controversial Bolivia-to-Brazil gas pipeline. Austa Energy (Australia) is involved in the construction of a coal-fired power plant in China, which won $400 million in World Bank funding.

Some projects are laying the foundations for future exploitation, such as the US$11 million World Bank grant to advance petroleum sector privatisation in Papua New Guinea (PNG), in which the Australian companies BHP and Oil Search are involved.

The World Bank's mandate is to alleviate poverty but its policies have the opposite effect — except for transnational corporations. Poor people are the most likely to be forced off their land and made homeless by the World Bank's mining projects, they are the most likely to live in polluted surroundings and the least able to demand fair compensation.

A recent study by former World Bank visiting scholar Michael Ross concluded that the more heavily countries rely on oil and mineral exports, the worse they do with regard to health, education and income indicators. Mineral exporting nations spend a far higher percentage of their budgets on military expenditure, diverting funds from programs that directly address the needs of the poor.

Governments and corporations associated with fossil-fuel operations routinely force relocation of local populations, with critics intimidated, assaulted and sometimes murdered. Resource wealth enables governments to better fund the repressive apparatus.

Dependence on oil and other minerals is also associated with a higher risk of civil war. World Bank analyst Paul Collier has found that countries dependent upon resource exports run a risk of civil war 40 times greater than countries with no resource exports.

Climate change

Local impacts of World Bank-sponsored fossil fuel projects include spills, gas flaring, improper disposal of waste, and mining accidents. In addition to the manifold — and mostly adverse — local impacts of World Bank-funded fossil fuel projects, they make a major contribution to greenhouse gas emissions.

"Ten years after the Rio Earth Summit", Jim Vallette says, "the World Bank is still changing the Earth's climate for business. It is the tallest tree from which these rotten corporate apples fall".

The World Bank acknowledges that global warming is a serious threat. But the bank and its major shareholders — Western governments — continue funding fossil fuel projects and pushing privatisation and deregulation of the power sectors in various countries.

In 1997, World Bank president James Wolfensohn said the bank would calculate the impact of all its energy projects on climate change and assist developing countries to finance more climate-friendly options. But five years on and the World Bank still does not routinely calculate greenhouse gas emissions from the fossil fuel projects it funds.

Drawing on its extensive database, SEEN has calculated that the 229 fossil fuel projects funded by the World Bank from 1992 to 2002 have leveraged enough fossil fuel to generate 46.7 billion tonnes of carbon dioxide — almost double the amount produced by all humanity in the year 2000.

By comparison, the World Bank provides far less support for renewable energy and energy efficiency projects. Since 1992, the Bank has supported 39 projects targeting renewable energy or energy efficiency, with approved financing of $1.35 billion — 18 times less than the amount committed to fossil fuels.

In September 2000, Wolfensohn agreed to initiate an independent review of World Bank policies concerning fossil fuel projects, which led to the ongoing extractive industries review (EIR). Wolfensohn and World Bank staff promised a transparent, inclusive, analytical, and participatory review, but the review has failed on all counts.

The EIR secretariat's first field trip, to an oil project in PNG, appears to have been designed as a public relations exercise. The only environmental group contacted for the consultation was the World Wildlife Fund, which has a $3 million contract with Chevron to manage the oil project in PNG and, not surprisingly, thought the project was going well.

The SEEN report, "Transnational corporate beneficiaries of World Bank Group fossil fuel projects, 1992-August 2002", is available at <http://www.seen.org>.

From Green Left Weekly, November 6, 2002.

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