The rebound in international oil prices up to $72 per barrel in June was the result of premature investor expectations that the global economic crisis had bottomed out. But localised factors in specific energy-rich countries are also causing sharp volatility in the commodity?s flow and value.
Take, for instance, the recent upsurge of violence in Nigeria, Africa?s oil goliath. Militants from the Movement for the Emancipation of the Niger Delta (MEND) just attacked an oil dock outside the capital Lagos, killing five persons. The incident, which signalled expansion of the rebellion beyond the southern Delta states, raised fresh fears about the sustainability of Nigeria?s current model of oil extraction and export.
In the last one-and-half months, MEND?s gunmen intensified attacks on oil facilities and forced giants like Shell, Chevron and Agip to curtail around 300,000 barrels per day of production. Global oil prices felt the push and rose in response. Worker security costs for expatriate oil personnel in the Delta are exorbitant because of abductions of foreigners for ransom by MEND and other outfits.
Nigerians from the Delta have least benefitted from the precious resource that abounds under their soil. It is a classic case of the ?resource curse?. Unfortunately, the response of the Nigerian government and the multinationals to the socio-economic and environmental grievances of Delta people, fronted by MEND, has been one-pronged. They view the militancy as a national and economic threat that must be countered and eliminated by state security forces.
MEND?s central demands are receipt of 50% of revenues from Delta?s oil and withdrawal of government troops from oil-rich areas. Abstractly, militants also agitate for locals to gain ?resource control? over the commodities that multinationals covet. The
escalation of tit-for-tat violence between MEND and the Nigerian army, navy and air force has sadly worsened the condition for Delta dwellers, who now have to reckon with bloody war besides grinding penury and environmental degradation.
A similar dynamic is at play in the Amazon basin of Peru. Local activists had been protesting the rapid and unsustainable opening of the Peruvian jungle to logging, oil and gas explorations by the present government of President Alan Garcia. As per one estimate, the territory opened for commercial exploitation between 2005 and 2007 rose from 13-70% of indigenous-inhabited land.
As in Nigeria, the state and its multinational partners such as Mobil, Shell and ELF do not inform locals while negotiating exploration concessions and production contracts. Matters reached a crescendo on June 5th, when dozens of policemen and indigenous protesters were killed in an insurgency-like confrontation triggered by the entry into force of the Peru-US Free Trade Agreement (FTA) that portended more accelerated exploitation of the Amazon by foreign companies.
Prior to this flare up, lengthy resistance by the indigenous people (45% of Peru?s population), had rattled the state oil company, Petroperu. It shut a pipeline carrying 40,000 barrels of oil each day. A siege of transportation and business for nearly 70 days by aboriginals eventually compelled President Garcia to concede that ?there were serious errors? in the government?s handling of the conflict.
In a conciliatory gesture, the Peruvian Congress also repealed two decrees pressed in to facilitate the FTA. Seven more disputed laws that were part of a package enabling the FTA stayed, but local people in the Amazon could at least take solace that the state had verbally undertaken not to legislate behind their backs in the future.
Democratic consultation and participation in awarding land and resource contracts to multinationals are golden principles which should never be substituted with high-handed methods that rub salt into wounds. The lesson from battle-scarred Nigeria and Peru, and much of the developing world, is that dialogue is a win-win strategy but dragooning drags everyone down.
The author is associate professor of world politics at the Jindal Global Law School