In an op-ed in Le Monde, Revenue Watch Deputy Director Antoine Heuty reminds resource rich autocracies that transparency and accountability in oil contracting and management are essential. An English version of the op-ed is below.
By Antoine Heuty
Whatever the next turn of events in Egypt, the upheaval there has already sent a strong signal to countries in North Africa and the Middle East that, unlike Egypt, have the seeming advantage of oil wealth. Public trust, protestors in Cairo have shown, requires open, accountable government, qualities in which the region is markedly poor.
Egypt produces relatively modest amounts of petroleum relative to the size of its population and economy. Tunisia's oil and natural gas production is even smaller, and Jordan has none. But oil wealth raises the stakes even higher for other governments in the region.
The recent spike in oil prices demonstrates the fear of contagion to other regimes. North Africa and the Middle East provide about a third of the world's petroleum, and governments in the region control over half of global oil reserves. In some states in the region—Algeria, Iran, Iraq, Kuwait, Saudi Arabia and Yemen, for example—oil and gas account for more than half of all government income.
Rising oil prices may provide additional revenues for oil rich autocracies over the short term, but the volatility of prices calls into question their ability to regulate energy markets, and also focus international pressure on the rulers. Oil wealth, on its own, can not provide insurance against protests. One of the lessons of Tahrir Square is that without government transparency, political stability will be at risk.
Oil-rich states urgently need to extend transparency and accountability to their revenues from oil and to how those revenues are spent. In principle, all governments manage revenues from natural resources on behalf of their citizens, so it is reasonable for citizens to insist that the money be used to promote sustainable economic growth—that is, for the benefit of all society rather than a favored class. But in too many countries, the public has access to little information about the money and how it is spent.
None of the governments of the region make public their contracts for oil exploration or production, not even contracts involving state-owned companies, as reported by the 2010 Revenue Watch Index. The Kuwait Petroleum Corporation is the only state-owned company in the region that publishes reports by an independent international auditing company. Only Iraq, Revenue Watch found, publishes information on the assets and transactions of a government fund created with the profits from natural resources.
Some oil-rich states count on maintaining public support by keeping personal taxes low (or by having none) and by offering generous payouts to its citizens while importing cheap labor force from abroad—sometimes in clear violation of basic economic, social and human rights. Kuwait, blessed with nearly 10 percent of the world's petroleum reserves, last month announced grants of about $3,500 to each Kuwaiti, to help mark the 50th anniversary of independence from Great Britain and the fifth anniversary of Sheikh Sabah al-Ahmad al-Sabah becoming emir.
That model, however, is ineffective and unsustainable. In Kuwait, since 2006, parliament has been dissolved three times and five governments have resigned.
Information is crossing borders more freely than ever before, generating a competitive marketplace for openness, as demonstrated in Tahrir Square. That hunger for transparency is part of the competition for people, their ideas, and for capital—and they, too, are less and less bound by national borders.
The more transparent a government is, the greater the opportunity to have accountbility and the greater the trust citizens can have in the government's actions. Without that openness, no amount of oil wealth can buy that trust.
La fin des rois du pétrole ? (Le Monde, Français)
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