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Sustainable Energy and Economy Network » Article / Commentary

The World Bank Takes the Money and Runs from Chad

September 15, 2008 ·

After funding a predictable boondoggle of a pipeline, the international lender hightails it out of an impoverished African nation.

Now that the World Bank has announced its withdrawal of support for the $4.2 billion Chad-Cameroon pipeline, I can't help but remember the eyes of that boy. We were racing back from the Doba oil fields to the Chadian capitol city of N'Djamena in July 2006, traveling by van after dark. We were doing it against all of the advice of our colleagues, but we had a plane to catch early the next morning. There were three of us Americans, traveling with a Chadian activist. And we had spent a longer day than expected interviewing villagers and non-governmental organizations about the Chad-Cameroon pipeline, a high-risk, World Bank-financed oil pipeline project in the southern part of Chad, and its impact.

Chad is a dangerous country, where entrenched poverty can contribute to a state of lawlessness after the sun sets. "Coupeurs de route," bandits who block the main road with logs or broken-down cars and who usually allow you to escape with your life – but little else – were common in this part of Chad.

As we raced down the all-but-abandoned highway, sure enough, there was a truck up ahead, trying to flag us down, bricks around his vehicle signaling mechanical failure. Should we stop? Our driver slowed, while our Chadian friend urgently insisted he race on. Later, in his haste, the driver failed to swerve around a dog meandering across the road. We heard a sickening thud under the car and we continued on, as its dying yelps faded behind us.

Doba to N'Djamena

The road from Doba to N'Djamena is littered with the detritus of the oil rush. AIDS orphans and prostitutes lurk in the shadows, waiting to feed on the leftovers of visiting foreigners. As we raced through the dark, we passed the outdoor café we had visited on the way down — the one where servers offered up a scrawny roasted chicken together with a bottle of Coke. The children had fought over the chicken bones when our meal was over, descending on the plates as soon as we rose from the table. And then there was the boy. He was about the age and height — but not the weight — of the son I had left at home, and he was limping. He was hungry. And as he chewed on the chicken bones voraciously, he looked me in the eye and I felt ashamed.

Prostitutes, who could make more money in a single night servicing high-paid foreign oil workers than they could in six months of work, shopkeepers, and passersby watched the scene disinterestedly, as if they had witnessed it many times before, wondering how the foreigners would react. We got in our van and left.

Chad is one of the poorest countries in the world, yet it's a country of agricultural abundance: Mango trees dot the countryside for miles on end. If only we had some way of getting these mangoes to the market, or a mango canning plant, the villagers had told us, they wouldn't have to rot on the ground. If only the military didn't impose their curfew after dark for fear of banditry in the oil fields, the farmers told us, we would be able to work longer hours and better feed ourselves and our families.

Resource Curse

The World Bank got involved in a major financing project in Chad a decade ago. Sadly, instead of supporting a population that's largely illiterate and dependent on agriculture for its survival, the Bank had decided to take on a project that would bring oil wealth — and little in the way of jobs, schooling or health care — to this desperately poor and highly corrupt country. Civil society groups from around the world warned against the potentially negative repercussions of a rapid infusion of petro-capital into a war-torn nation ruled by a dictator and an ineffective public sector. They knew it would only exacerbate conflict in a country where corruption, poverty, illiteracy and ill health was at record levels. Known as the "resource curse," it's as predictable as the rising sun, infecting oil-rich governments from Rangoon to N'Djamena.

In 1998, I was at an international gathering of activists that came together to chronicle World Bank investments in fossil fuels and their impacts on the environment and human rights, and we vowed to try to stop this project from ever going forward. We spoke to the press. We delivered sign-on statements. We met with James Wolfensohn, who at the time was the World Bank's president. Chadian activists on the ground regularly risked their lives and the lives of their families to get the word out about the disaster unfolding there. As a result of civil society pressure, Wolfensohn pledged to make this a "model" project, whereby 82% of the oil revenue would be invested in poverty-reduction, health care, education for Chad's poor and a future generations fund.

When it became clear the 620-mile pipeline to Cameroon's coast was moving forward we called the Bank, informing them of the jailing and severe beatings of one opponent of the pipeline, despite Chadian Dictator Idriss Déby's promises such abuses would not take place. In response, Wolfensohn himself phoned Déby and scolded him. The man was released, severely injured, but the World Bank continued to move forward with the financing. In 2003, 170,000 barrels of oil per day began flowing through the Chad-Cameroon pipeline, and Déby promptly invested the first oil revenue installment in arms, blatantly violating the country's contract with the Bank. In response, Déby's London pipeline bank account was frozen by the World Bank and Déby had to scramble to repay the $5 million he had spent on arms.

In 2005 and 2006, as oil prices rose and conflicts grew on Chad's border with Sudan, it became clear that the Déby regime would see its budget almost double in a single year. Rather than use this money to provide for basic services for his people, Déby began forced conscription of young Chadians to fight the incursions from Sudan, and further beefed up his military. In response, in January 2006 World Bank President Paul Wolfowitz decided to suspend its $124 million in undisbursed low-interest loans to Chad from the Bank's International Development Association (IDA) division.

Chad's oil minister Hassan Nasser responded in kind: He pledged to stop the oil flowing through its pipeline unless the Bank reversed its decision. The Bank blinked. In a quiet visit to N'Djamena in July 2006, Wolfowitz rescinded the old agreement for Déby and presented a new agreement that allowed for most of the oil revenue to be spent on Chad's "administration" and "security," and all money earmarked for a "future generations fund" to be eliminated. Essentially, this new agreement meant years of posturing on the part of the Bank and wrangling by civil society groups for their share of the pie had now been transformed into money for bullets and guns.

When oil spilled for days in January 2007 from the mouth of the Chad-Cameroon pipeline at the Cameroonian port of Kribi, destroying the livelihoods of fishermen, the Bank did nothing.

The Bank's Other Boondoggles

It wasn't the World Bank's first boondoggle. Since 1948, World Bank projects have forcibly relocated over 10 million people. In 1978, the Bank lent $72 million to the government of Guatemala to build a dam on the Chixoy River. The Achi Indians, who would be displaced by the reservoir, refused to move without compensation. The Guatemalan military and death squads responded by assassinating villagers. Between 294 and 400 villagers were murdered, some after being brutally raped, as the Bank project moved forward.

While such atrocities have not been as blatant in India, the World Bank-financed Sardar Sarovar Dam, the largest of thousands of small- and medium-sized dams planned for the Narmada River, continues to displace hundreds of thousands of tribal people, usually the poorest, in India.

And the Bank played a key role in Enron's rise to global fame and fortune, promoting the natural gas company as it engaged in dubious — and even illegal — profiteering tactics in country after country around the world. Halliburton, whose former executive Albert J. "Jack" Stanley pleaded guilty earlier this month to violations of the Foreign Corrupt Practices Act in Nigeria, is one of the Bank's top corporate clients.

A Way Forward

I hope, against all odds, this gargantuan failure of a "model" development lending project will somehow be transformative for the World Bank. How? First, it must come clean. The World Bank Group must admit to its absolutely central role in the failure that is the Chad-Cameroon pipeline, a pipeline that never would have been built but for its hubris. This pipeline and its consequences are beyond tragic. It's simply criminal that a country this impoverished should be made more unstable, its citizens made more vulnerable to hunger, crime, violence, and disease — with taxpayer support — for oil to flow freely to the wealthy world.

Second, it must take responsibility. The Bank's rules must be revised to make them no longer immune to prosecution for failures on such a national scale. If they are held liable for the destruction they leave in their wake they, like other banks, might be less inclined to take on such huge risks — risks they merely pass on to their shareholders, the taxpayers, in the form of lost profits and to the poorest, in the form of even deeper impoverishment or death.

And third, it must change its behavior: The World Bank Group must never invest in an oil, gas or coal project again. Its own Extractive Industries Review found the poor are worse off as a result of investments in oil, gas and coal, and recommended in 2002 they withdraw entirely from these investments. Scientific studies predict that as the global warming trend continues, the poor will continue to be the hardest-hit by the burning of these fossil fuels. Africa will be ground zero in the food, water, and public health crises that will be the most obvious result of global warming. Indeed, some say the Chad-Sudan conflict is in part due to such climate change consequences.

However, with no sense of irony or shame, the Bank is instead busily investing in financing fossil fuel projects around the world while simultaneously profiting immensely from carbon trades, all of which offer little hope to the people of Chad, but more profits to oil companies and their government cronies. Instead of cleaning up their mess, the Bank made sure the Déby regime paid in full its final installment on the IDA loan for the pipeline. (While the public side of the World Bank has pulled out its private-sector lending arm, the International Finance Corporation, hasn't cancelled its $200-million agreement with the Exxon Mobil-led consortium of major oil companies, leaving that loan — with no complicated requirements for poverty alleviation and public oversight — in place.)

Mission accomplished. Joining the refugees it has helped create, the Bank is hightailing it out of N'Djamena.