The Resource Curse: Stopping the Flow of Stolen Resources (Part 3)

Secretary Rice and President Obiang U.S. Secretary of State Rice and President Obiang,
Equatorial Guinea CREDIT: U.S. State Dept

This is the third in a series of four articles that were first posted in 2007 in the Council's online magazine Policy Innovations.

THE CASE AGAINST MIGHT MAKES RIGHT

Oil is big business. In fact, oil is the biggest business. Five of the ten largest corporations in the world are oil companies, and oil accounts for more than half the value of all global commodity transactions. Any initiative that will restrain oil companies from buying from the world's worst regimes must be able to withstand the tremendous commercial and political pressure to bring ever more oil to market. Any such initiative will have to be grounded in deep principles of law and morality that cannot be dismissed.

Such principles already exist. In fact, they are the ground rules of the global capitalist system: the principles of ownership and sale. The major players in international commerce can hardly disavow these market principles. Corporations depend on the principles of ownership and sale for their existence as both buyers and sellers, and the governments of powerful countries like the United States have championed the spread of the market order across the globe. Yet international resource corporations often violate these basic market rules when dealing in poor countries.

The people of each country own the natural resources of their country. The rights of citizens are violated, as any owner's rights would be, when someone takes control of their property through stealth, deception, force, or extreme manipulation. An owner cannot possibly authorize a sale of property without knowledge of the sale, and without the ability to stop it.

In the political context, this means that citizens must have at least bare-bones civil liberties and political rights in order to authorize sale of their resources. Citizens must be able to find out who in the regime is getting how much for selling the country's resources. And citizens must be able to protest resource sales peacefully and effectively without risking cruel judicial punishment, disappearance, serious injury, or death.

The oppressed citizens of Equatorial Guinea could not possibly be authorizing the dictator Obiang to sell off their oil. They are either unaware of the sale of their resources, or are unable to protest these sales, or are too fearful to try. Obiang takes control of the oil because he can—yet the capacity to threaten a people does not confer the right to sell off their resources. Obiang is in a very real sense stealing the country's oil.

The corporations that transport this oil overseas knowing that it is stolen actively further the violation of the people's rights. Obiang cannot rightly sell the country's oil, so the corporations that sign contracts with him do not have good title to the oil that they steam away in the holds of their ships. These oil companies are literally trading in stolen goods.

MAKING THE CASE IN U.S. COURTS

To stop corporations from signing contracts with regimes like Obiang's, and to enforce the property rights of peoples in countries like Equatorial Guinea, this case must be made in court. Fortunately, the U.S. government has approved for official use a set of public, bright-line ratings that indicate whether the people of any country could possibly authorize the sale of their natural resources. These ratings put all actors within U.S. jurisdictions on notice about which regimes can sell their countries' resources legally and which cannot.

In 2002, the Bush administration established the Millennium Challenge Account as a mechanism for distributing development aid to poor countries. In his speech launching the MCA, President Bush required that countries be selected for aid based on "a set of clear and concrete and objective criteria" on governance that would be applied "rigorously and fairly." For the governance criteria concerning civil liberties and political rights, the U.S. government selected the ratings of Freedom House.

Since 1972, Freedom House has published Freedom in the World, an annual report on the political conditions in countries around the world. This survey uses indicators drawn from the Universal Declaration of Human Rights to rate each country in two broad categories: civil liberties and political rights. The Freedom House ratings are widely used by journalists, academics, and non-governmental agencies. The U.S. government uses the Freedom House ratings not only to choose countries for development aid, but also to set official targets for the State Department.

THE FREEDOM HOUSE RATINGS

The Freedom House report assigns each country a rating from 1 (best) to 7 (worst) on civil liberties and on political rights. The rating on civil liberties measures to what degree citizens are free from arbitrary coercion, violence, or manipulation. The report describes countries with the worst two scores on civil liberties in this way:

Rating of 6—People in countries and territories with a rating of 6 experience severely restricted rights of expression and association, and there are almost always political prisoners and other manifestations of political terror. These countries may be characterized by a few partial rights, such as some religious and social freedoms, some highly restricted private business activity, and relatively free private discussion.
Rating of 7—States and territories with a rating of 7 have virtually no freedom. An overwhelming and justified fear of repression characterizes these societies.

Among the countries rated 6 on civil liberties in the 2007 Freedom House report are Iran, Syria, Equatorial Guinea, and Zimbabwe. Among the countries with a rating of 7 are Burma, Libya, North Korea, Somalia, and Sudan.

The Freedom House rating of political rights measures how much the people's informed and unforced choices control what the political authorities do. The descriptions of countries that receive the worst scores on political rights are as follows:

Rating of 6—Countries and territories with political rights rated 6 have systems ruled by military juntas, one-party dictatorships, religious hierarchies, or autocrats. These regimes may allow only a minimal manifestation of political rights, such as some degree of representation or autonomy for minorities. A few states are traditional monarchies that mitigate their relative lack of political rights through the use of consultation with their subjects, tolerance of political discussion, and acceptance of public petitions.
Rating of 7—For countries and territories with a rating of 7, political rights are absent or virtually nonexistent as a result of the extremely oppressive nature of the regime or severe oppression in combination with civil war. States and territories in this group may also be marked by extreme violence or warlord rule that dominates political power in the absence of an authoritative, functioning central government.

Among the countries rated 6 on political rights in the 2007 report are Angola, Cambodia, Rwanda, and Somalia. Among the countries rated 7 are Burma, Equatorial Guinea, Libya, North Korea, Sudan, Syria, and Zimbabwe.

Taking the absolute minimum standard, we can say with confidence that a Freedom House rating of 7 on either civil liberties or political rights should be conclusive in American courts for establishing that the citizens of that country do not have sufficient information about resource sales, or sufficient opportunity to protest those sales. A Freedom House rating of 7 is decisive for proving that the people of that country cannot possibly be authorizing resource sales, and so that no regime in that country can legitimately transfer resources to outsiders. Any corporation that deals with such a "disqualified" regime is guilty of receiving stolen goods.

STOPPING THE FLOW OF STOLEN RESOURCES

Using the Freedom House ratings, calculations show that oil companies illicitly transport into the United States over 600 million barrels of oil each year. This is 12.7 percent of U.S. oil imports—more than one barrel in eight. Most of this petroleum is refined into gasoline and diesel. The rest is used in making a wide range of consumer products, from plastics, inks, and asphalt to clothing, cosmetics, and medicines. Judged by basic market principles and its own official standards, the United States receives a massive inflow of stolen resources every year.

This argument draws its power from the deepest principles of ownership and contract, and is robust enough to support a variety of approaches in litigation. American courts could rule right now that all purchases of natural resources from countries like Equatorial Guinea are illicit. Cases requiring that the United States follow its own principles in enforcing property rights are waiting to be made.

Read More: Oil, Energy, Development, Human Rights, Trade, BusinessExtractive Industries, International Trade, , Africa, Global, Sub-Saharan Africa, Equatorial Guinea

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