The Multinational Monitor


G L O B A L   N E W S W A T C H

Oil Companies to Third World: Trust Us

by Carl Mayer

When the petroleum industry advises the U.S. government on how to help oil-importing Third World countries become energy self-sufficient, it is little wonder that the oil companies are seeking to advance their own interests, and not those of the energy poor developing nations.

The National Petroleum Council presented its report, Third World Petroleum Development: A Statement of Principles, on December 1 to U.S. Secretary of Energy Donald Hodel. The 115 member Council - an advisory body to the Department of Energy - is mostly comprised of the chairmen of America's petroleum corporations.

The National Petroleum Council's recommendations to Third World host governments were: 1) give companies the right to export a reasonable portion of the oil produced and retain the proceeds abroad, 2) establish foreign exchange regulations and investment laws that impose minimum restrictions on movements of funds into and out of the country, and 3) permit full repatriation of capital and earnings.

Instead of seriously discussing Third World petroleum development, the Council took the occasion to launch a broad attack on government regulation. Consider NPC's three recommendations to the U.S. government:

  • Legislation should be enacted that would open U.S. courts to claims by U.S. citizens who have lost their property abroad through illegal expropriations or breach of host country undertakings.
  • Certain U.S. legislations, particularly the Foreign Corrupt Practices Act and the foreign boycott provisions of the Export Administration Act of 1977 and the Tax Reform Act of 1976, pose unnecessary hindrances to U.S. companies operating abroad.
  • U.S. tax legislation should be modified to encourage petroleum development throughout the world - rules regarding foreign taxes that qualify for U.S. tax credits should be revised to avoid double taxation of the same income.

These are hardly proposals based on rigorous study of Third World needs; they are an industry attempt to press an ancient agenda of power enhancement at the expense of Third World countries.

The National Petroleum Council's most controversial recommendations were aimed at international financial institutions. The Advisory Council suggested that multilateral agencies drastically reduce their role in helping Third World countries become energy self-sufficient. In recent years the multilateral lending agencies - particularly the World Bank - have directly assisted oil exploration in the Third World.

"The use of public funds for such commercial ventures [oil exploration, development, and production] displaces private financing." concluded the NPC report. "Development of uneconomic oil and gas deposits is not the best use of either private or public resources." The Council also opposed the use of UN funds for providing petroleum consulting services to Third World governments.

By opposing World Bank lending to state petroleum companies, the National Petroleum Council and the Department of Energy are siding with the Treasury Department in a dispute that has divided the business and financial community. Bankers, who take issue with Treasury, contend that World Bank lending helps petroleum starved Third World countries meet their increasingly burdensome debt obligations (see Multinational Monitor, September 1981).

John Swearingen - Chairman of the Board of Standard Oil of Indiana (AMOCO) - headed the National Petroleum Council Committee that released the report on Third World petroleum development. Although Swearingen's frequent public appearances have established him as a spokesman for the industry, he refused to support the Council's contention that World Bank lending displaces private funding.

"No, I could not be more specific and the report deliberately avoids looking at individual countries" replied Swearingen to a question from Multinational Monitor. "I just don't think that public energy companies are adequate to the task; I believe in the private enterprise system."

Many of the National Petroleum Council's conclusions were based on the broad assumption that "private petroleum companies have compiled a long and impressive record of discovering and developing petroleum resources throughout the world." In reality, the oil companies are reacting against the emergence of state oil corporations and the increasing sophistication of Third World governments in negotiating natural resource concessions.

"The state oil companies demand a real sharing of control; this is the most important issue in Third World contracting," says Stephen Zorn, an oil industry analyst at Tanzer Natural Resource Associates, a New York consulting firm. "What American private corporations most worry about is state oil companies getting involved and telling them what to do; they don't like that down in Texas."

This report was written by Carl Mayer, who is currently writing a book on the history of oil company control of mining on U. S. public lands.

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