Anti-Americanism Petri Dish: II

This is a follow-up to the discussion on how American corporations can directly influence anti-American sentiments through their dealings with the governments of unstable countries. The example used was ExxonMobil's extraction of oil off the shore of Equatorial Guinea. Most of the discussion was based on a report aired on 60 Minutes.

Although Exxon declined an invitation to be interviewed for the 60 Minutes segment, apparently they did send a written response to some questions. They don't get into specifics (and I've scoured their site for information on ROI that might shed some light on whether they took Equatorial Guinea to the cleaners, but to no avail), but they do make this declaration:

ExxonMobil is firmly committed to honest and ethical behavior. We pledge to be a good corporate citizen in all the places we operate worldwide. We maintain the highest ethical standards, obey all applicable laws and regulations, and respect local and national cultures.

More specifically to the question of the 12% pay out, they don't offer specifics but do answer one of the questions that came up yesterday:

Mobil Equatorial Guinea Inc. (MEGI) and our co-venturer have assumed all the risk and have made all the capital investment associated with each stage of development at Zafiro. As is typical throughout the industry for such contracts, the PSC was structured to allow MEGI and its co-venturer to recoup their investment in the early years. However under the agreement, the government’s share will increase substantially in the out years.

Now an annual report might as well be in Swahili for me, but the ExxonMobil 2003 report (pdf file) shows very strong profit increases over 2002, and an increase in Return on Average Capital employed (which I'm assuming means ROI...help please!) from 13.5 in 2002 to 20.9 in 2003 (so again, happy days are here for sure). Now tying these broad numbers into the contract signed by E.G.'s dictator is all but impossible, but I'll be darned if I can find any smoking gun here to suggest ExxonMobil may be contributing to budding Anti-Americanism via consciously ripping off the West Africans.

And, in fact, it looks as if ExxonMobil is making efforts to give more of the money back to E.G. ahead of schedule:

In March 1998, ExxonMobil and Ocean announced a renegotiated PSC with Equatorial Guinea for Block B. Under the revised PSA, Equatorial Guinea receives a 5% interest in Block B, ExxonMobil's share falls from 75% to 71.25%, and Ocean's share falls from 25% to 23.75%. The deal was restructured to allow the government to receive more revenue earlier in the life of the PSA.

Hmmm...sounds good on the surface of it. But, looking a bit closer we find:

In 1998, President Obiang's government introduced more liberal regulatory and profit sharing arrangements for hydrocarbon exploration and production activities, including a revised and updated Production Sharing Contract (PSC). Government oil revenues increased from 13% of receipts earned from oil exports to 20% in 1998 following the implementation of the new PSCs with the oil companies. Although the increase in oil revenues was significant, the government's share is relatively small by international standards.

In case you missed that last bit, I'll repeat it: the government's share is relatively small by international standards. The fact that Obiang is happy with the increase (and why not, it all goes into his pockets anyway), doesn't mean the next (and hopefully legitimate) government will be.

But in my research I also found out more about the topic Randy Paul's been doing some excellent work on: ExxonMobil and other companies are embroiled in a money laundering scandal via their Equatorial Guinea dealings:

Senate investigators say three U.S. oil companies may have "contributed to corrupt practices" while doing business in the West African country of Equatorial Guinea.

Examining possible money laundering at Washington's Riggs Bank, the investigators uncovered information about questionable business dealings involving Exxon Mobil Corp., Marathon Oil Co. and Amerada Hess Corp. in that oil-rich land.

Staffers on the Senate's Permanent Subcommittee on Investigations pointed to arrangements between the oil companies and entities controlled by the family of President Teodoro Obiang Nguema, as well as to scholarships doled out to relatives of the country's elite.

Sen. Carl Levin, the ranking Democrat on the panel, questioned whether the oil companies are doing enough to ensure they aren't helping corrupt government leaders loot Equatorial Guinea of its oil patrimony.

"You're now in a situation where you are basically in with either the dictator or his family," Levin said. "It seems to me that as Americans we've got to be troubled by that."

Maybe what someone noted yesterday really needs to be our focus. Maybe the guidelines US corporations must adhere to when dealing with lunatic dictators needs some serious reconsideration. As I suggested, the corporations should conduct all dealings with a longer-term understanding of the sociopoplitical reality and at least not prop up the corrupt regime through efforts to intimidate the State Department.

Comments

[Sebastian Holsclaw]

Attacking Exxon through the anti-corruption acts would be something I'm all for.

[Timmy the Wonder Dog]

As would I and overall Edward a much better post.

[Edward]

Thanks for the kind words Timmy.

I would still argue that Exxon isn't playing this as carefully as world events might demand they do.

One thing I didn't calculate in all this is that the original deal, done in 1995, was well before 9/11 and applying a post-9/11 worldview to their actions then is a bit unfair, but as I noted in the first thread, I'm using this as an example. I'm not picking on Exxon, per se.

[mnp]

I agree a much better post...

But, I mean this in all serious. I see only two paths. Regime change in EG is a goal or ban U.S. businesses from EG.

Getting half way into bed with someone bad has proven to be just as bad as getting into bed with someone bad.

There is no way that the U.S. could come out looking good, we are the world's scapegoat.

Even if the deal was excellent for the EG. As long as we are giving any kind of support to what they might consider a horrible leader we will get blamed.

[Edward]

As long as we are giving any kind of support to what they might consider a horrible leader we will get blamed.

I'm not sure they're wrong to do so either.

[mnp]

I concur. ; -)

[Sebastian HOlsclaw]

Brad Delong has an interesting quote in a similar vein.

"Well, dealing with outsourcing for one thing. It's coming--it's coming over the next generation. And the Democratic Party will have a very hard time figuring out how to deal with it constructively. It's likely to begin thinking that people in India who want jobs processing document-images for U.S. companies are our *enemies*. We can't afford to do that--a world in which Indians and Chinese in fifty years are taught that the U.S. tried to keep them poor will be a very unsafe world. A world in which we try to block expanded world trade will be a world in which we will be much poorer than we need to be. And as long as people see themselves as being pulled into better-paying jobs in other industries (rather than being pushed out of where they want to be by cheap foreign competition), we can make the coming generation's expansion of world trade--the coming generation's "outsourcing" boom--a source of wealth and development. But Democrats will have a hard time doing this.

[John]

once again, all subsequent comments on EG show that people here do not understand how life works there. I tried to get this point across in the last petri-dish piece, but it was too old for anyone to go back and notice. It's the last post here:
http://obsidianwings.blogs.com/obsidian_wings/2004/07/antiamericanism.html