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Addicted to Oil Cash and Seeking Help (Part 2)

In part two of this series looking at the fight for transparency in Iraq and Yemen’s energy sectors, Diana Kaissy of the Publish What You Pay coalition and Yemen expert Fernando Carvajal look at some of the big challenges facing Yemen, as continued strife puts pressure on food supplies.

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oil field oil wells

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Read the first half here

Last month we looked at some of the problems with Iraq’s first report as an EITI “compliant” country. The Extractive Industries Transparency Initiative awarded Iraq this status satisfied that Iraq’s energy revenue flows were adequately accounted for and publicly viewable. Oil expert Ahmed Mousa Jiyad was quick to point out some of the flaws in Iraq’s EITI report, while I noted the challenges facing civil society in Iraq as it struggles to hold a notoriously corrupt government to account.

Yemen faces many similar problems, notably a tenuous security situation and the lack of a free press. This has not stopped them from joining Iraq in signing up to EITI, and despite a delay in the validation process (due to the revolution) the country was declared “compliant”to EITI standards in March 2011. Overall progress against corruption has been mixed, depending on your opinion of EITI and whether it will work. Nonetheless, the country has its own coalition (TCEIW) determined to hold a dangerously fragmented transitional government to account. Diana Kaissy explains:

 “TCEIW is an independent, neutral and non-for-profit coalition that represents an organizational frame that unifies the efforts of civil organizations, academia, human rights activists, media and others, who participate in monitoring extractive industries to achieve transparency and a better utilization of these resources. Its aim is also to ensure easy access to information related to this sector.”

Kaissy gives an insight into the network of pressure groups and civil society organisations working for transparency:

“Since 2009, PWYP has been closely collaborating with the TCEIW to help them in their mission. Coalition members have attended several capacity building workshops done by PWYP /RWI targeting areas of revenue monitoring, advocacy planning, oil contract reading and understanding, national strategy building and execution. PWYP has lately been heavily involved with the coalition to help them expand and include new members that are representative of the several provinces in Yemen.”

She goes on to say how this also works within a regional framework:

“Members of the TCEIW participated in PWYP MENA (Middle East North Africa) workshops 1 and 2 that were done last year to help promote building a national as well as a regional strategy that is aligned with PWYP vision 20/20. TCEIW members will also be participating in the upcoming 3rd MENA workshop organised by PWYP in Beirut in March. The workshop aims at helping current PWYP coalitions in the MENA area finalize their national strategy, and build the capacity of participants in areas such as contract understanding and analysis, obtaining/using access to information laws, good governance within coalitions and revenue monitoring.”

A looming disaster?

Many reports have noted that Yemen’s oil production is dropping rapidly and liquid natural gas production is not yet at the stage where it can make up for these falling revenues. By many indicators such as violence, economic potential and even the supply of food and water, Yemen is in serious trouble. I wondered if there was a sense of urgency among those in Yemen to get EITI working and leave the old days of patronage and corruption behind, or if things were moving slowly. Kaissy believes there is positive momentum:

“There is definitely a sense of urgency within the Yemeni multi stake holders to get the EITI working in order to reduce corruption in the extractive industry sector that is fast becoming depleted.The Yemeni parliament endorsed its annual budget on January 19th, 2013, where serious concerns regarding the use of their fast dwindling resources were raised, with parliamentarians making several demands.

These included requiring the ministry of finance and the ministry of oil and minerals to draw the contracts related to the transfer of oil derivatives (by land or sea) in accordance to the tenders, auctions, and government storage law, and to refer all those who were caught smuggling oil derivatives to the judiciary court. Also, parliamentarians demanded the establishment of a national public organization for petrol that will handle all excavation, production and administration of gas and oil fields.”

Kaissy remains optimistic that this new sense of urgency about a looming crisis will continue:

“Taking the above into consideration, and keeping in mind the very active role of the Yemen PAC (Yemen Parliamentarians Against Corruption), a group of Yemeni parliamentarians who are actively lobbying against corruption within the Yemeni parliament, we can clearly see that the Yemeni multi stakeholder groups (government, parliamentarians and CSOs) are very much aware of the critical situation that Yemen has reached where its EI sector is concerned. This awareness should ultimately be maintained by their position as an EITI compliant country with huge obligations to maintain “compliant” status.”

A bleaker view

In 2006 USAID identified oil wealth as “the main source of state patronage in Yemen.” I asked a Yemen analyst (who wished to remain anonymous) if he thought the networks of patronage are changing or dissolving and are whether he was hopeful about the current “national dialogue”-ongoing talks about the future of Yemen’s political system:

“Oil networks run through Ali Muhsin (powerful Yemeni general) and Hamid al-Ahmar (millionaire politician) as much as Ali A Saleh (former president.)  There are many shifts involving Islahis now (Yemen’s largest party affiliated to the Muslim Brotherhood) specifically in the petrol industry. Hadhramawt’s oil is highly contested (the main oil producing region) and the main airport is under the control of a commander under Ali Muhsin.”

This analyst was sceptical about reports of Yemen’s oil running out: great news if they can put a stop to corruption, but this is apparently “a big if.”

“There are no ‘dwindling’ oil supplies because Yemen has huge reserves (according to diplomats and oil companies.) Access to supplies is just more difficult and expensive and needs more security. Only Total and OMV have a hold on the industry, so why would they demand more transparency?”

Press freedom

Without a free press, civil society will be unable to access information on oil deals and revenues from Yemen’s oil and growing natural gas extraction (as well as Zinc mining which is also covered by EITI.) I asked Fernando Carvajal about how press freedom is evolving in Yemen today. Like the unnamed analyst, his outlook was also bleak:

“In 2010 an NGO was holding ‘investigative journalism’ training workshops in Sanaa. There is no way this approach will ever have a real impact. The issue is with political actors who have a hold on journalists. It is an underpaid profession co-opted by all political sides. Yemen’s media is a long way from being a truly independent media.”

Likewise, the unnamed analyst was particularly gloomy about the prospects for transparency:

“Transparency is of no interest to any party, not the government, not the oil companies.  We saw this issue arise last year with the Ministry of Energy, where a tender was given to an Islah ally to buy power for cheap and sell it back to the government at a much higher price. Someone leaked the contract to a newspaper and only when it reached social media outlets did the government deal with the issue, but the contract is still valid today.”

Conclusion

Yemen and Iraq’s ascendency to EITI compliance has arguably had a limited impact on the wider culture of corruption that afflicts them. Additionally, oil companies’ commitment to transparency is erratic in both countries. But EITI could be the start of something excellent for the region, and is getting increased international backing in the form of tough US and EU legislation that major oil companies have opposed. In both countries, EITI has brought the subject of corruption into focus at the highest levels. This is surely a start for nations recovering from decades of war and dictatorship, and a long way from when EITI started a decade ago.

But like the many groups now fighting corruption, CSOs who back EITI are not ignorant of the challenges ahead. Like the first protesters of the Arab Spring, they are determined not to give up, believe in their cause and won’t be satisfied until there is real, lasting change.

From my own analysis of Iraq and Carvajal’s analysis of Yemen, I fear the success of these initiatives will always be fragile until the rulers of these countries commit to transparency. Until then, the global coalition against corruption will keep on fighting. EITI, while flawed, is a necessary start in a long battle.

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Photo Credit: Loco Steve

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