The global coalition of oil cursed citizens

Yasuní-ITT

2011-04-07T03:16:00.000-07:00

Ecuador has been marketing for about three years a truly revolutionary proposal, Yasuní-ITT, consisting in asking the world for some of the resources it could obtain exploiting some important oil reserves so as not to have to exploit these, as they lie in a forest reserve that contains an extremely rich and valuable biodiversity. The proposal does not seem to be receiving as favorable response as it merits and I think I suspect some of reasons for that, besides that of having perhaps unnecessarily complicated the proposal with some technicalities.

During the 2009 UN conference on environment in Copenhagen I got upset seeing environmentalists from rich countries announcing that because the rich countries were the ones most to blame, they should and would assume the responsibility and pay for protecting the environment… which sounded just like global leftwing politicking, and effectively negated the poor the right to participate as human and equals in confronting something which from all perspectives would be a challenge to the human race.

In that respect it seems to me that the Yasuní-ITT proposal, because of its immense importance, should never have been presented as a government to government proposal, or one extended only to groups with environmental concerns, but should have been tabled as a proposal from the Ecuadorian citizens to all other indigenous people of the earth, meaning us, 1all other citizens. If the possible ecological damages of exploiting the oil in Yasuní-ITT are as serious as we are told, we cannot afford that the fight against these gets sequestered by other interests, agendas, or green Taliban.

Also, because the world needs oil and if not extracted in Yasuní-ITT it will do so elsewhere it would be good to have a study of the marginal environmental costs of exploiting oil in many different places. This would also be extremely important information if we later would like to replicate Yasuní-ITT.

The proposal was presented as having to select between a ferociously irresponsible oil extraction and a marvelous conservation of a habitat, and the truth is never that clear. It would be very important to know the cost and the significance of exploiting the oil in Yasuní-ITT in the most environmentally friendly way possible, so to also give the world the chance of accepting something that might sound more reasonable, or at least of knowing that this possibility has been analyzed. Since in Europe, the European taxman, by means of the taxes on its consumption derives more income from it than the country that gives up that resource for ever, it would seem quite reasonable that the European citizen could ask that at least a part of those taxes should go to help extract the oil in the best way possible. (Where is the oil company that specializes in green oil exploitation?)

But, more than anything, since no one likes to pay taxes to its own government much less would they like to pay a sort of an environmental tax to other governments, much less if these are rich in oil resources… the proposal should include that all funds, up to the last cent, should be given directly to the citizens of Ecuador… or in equal parts in cash, o through conditional cash transfer programs… for instance to all Ecuadorian children that go to school.

And I say this because as a Venezuelan I know very well that too much oil money in the hands of a government is bad… not only because it gets wasted, but mostly because, one way or another, involuntary or on purpose, that money ends up subjugating the citizens.

Translated from El Universal

Citizens of Libya

2011-04-05T06:49:00.001-07:00

Give yourselves a fighting chance to become real citizens in your own country. Demand for the oil revenues to be paid out to you directly. If you so wish, you can then later hand it over to your government in taxes… but at least that way you make it clearer to your government that it works for you.

As an oil-cursed citizen I object the Revenue Watch Index 2010... They do recall cars, don't they?

2010-10-12T10:41:00.000-07:00

The 2010 Revenue Watch Index on the transparency of governments in oil gas and mining industries prepared by Revenue Watch and Transparency International was released on October 2010.

And there I see that my country Venezuela ranked 14th among 41 countries with 63.0 points out of 100 possible. What does that mean? I have no idea except being absolutely sure it does not mean what it is supposed to mean.

The first and foremost reason is that there either is sufficient information for a citizen to have a reasonable understanding of what the government is up to, or there is not. What would happened if auditors could rank companies in terms of how much of the information they would need to complete an audit they receive?

I have insufficient knowledge of other countries but what is absolutely certain is that in Venezuela the citizen is not receiving the information he would require to even have a sketchy idea of what its oil industry is really up to and how it is doing. And so I absolutely object to the ranking and declare that the ranking itself is extremely little transparent.

Besides:

A fact such that the Venezuelan Government, even if it wants to market itself under the brand of 21st Century Socialism, gives away gas at the pumps for around US$ 5 cents per gallon and with that disappears a big chunk of Venezuela’s GDP, from those having nothing of nothing and gives it to the motorists, is not even reflected on the Index. Just that fact alone should have placed Venezuela among the last.

As an oil cursed citizen who knows that the absolute worst part of the oil-curse is the creation of an independently wealthy government for which the citizens are almost a nuisance, what I would like to see standing out in any applicable index, is how much of the oil revenues are turned over to the citizens in cash, no questions asked, no votes expected. This has not even been referred to in the Index.

Finally if you really want to be transparent on oil, you would have to complement this index with a report of how much the foreign taxman receives from taxing gasoline because that income often exceeds the whole oil income an oil extracting country receives for sacrificing its natural resources.

I truly understand and believe that Revenue Watch and Transparency International produce this index with their best intentions, and I thank them for that, but unfortunately, when you are an oil-cursed citizen all the best intentions of the world do not cut it.

I shiver to think how many oiligarchs and petrocrats can and will use the index to convince their poor oil-cursed citizens that they are doing a great job, comparable to what the other resource countries do, and, if off-track, this is only marginally so… as the figures indicate.

I respectfully request the Revenue Watch Index 2010 to be immediately recalled because of serious and dangerous malfunctioning! They do recall cars, don't they?

Ps. If further proof about the index being totally faulty is required, it suffices to mention that in the just published Corruption Perception Index 2010, published by Transparency International my country appears as number 164 among 178.

Ps. During the recent conference “Extractive Industries and sustainable Development” organized by the Vale Columbia Center on Sustainable International Investment I had the opportunity to make some of the observation against the 2010 Revenue Watch Index to Karin Lissakers, the Director of Revenue Watch Institute. She admitted they also had serious doubts about it. But if they had serious doubts, why did they then go ahead and publish it? Have they never heard of “do no harm”?

Has the US Congress now sided with the petrocrats and the oiligarchs of the world?

2010-08-28T08:08:00.000-07:00

The recently approved ‘‘Dodd-Frank Wall Street Reform and Consumer Protection Act’’… includes in SEC. 1504. Disclosure of Payments by Resource Extraction Issuers, a rule, sponsored by Senators Benjamin Cardin and Richard Lugar, which obliges US-listed companies engaged in oil, gas or minerals extraction anywhere in the world to report how much they pay to governments in their annual filing to the Securities and Exchange Commission. To be able to access the US capital market, companies - US and foreign - must publicly disclose all royalties, taxes, and other payments, project by project and country by country.

Since I am for transparency I see nothing wrong with that. In fact, as a citizen of an oil cursed country, Venezuela, I obtained the crucial information I needed on some of its investments only because its oil company, PDVSA, had to file that information with the SEC. (And that was even before the hugo chávez’ years).

BUT, according to this Act, those payments as determined by the Commission should be “consistent with the guidelines of the Extractive Industries Transparency Initiative (to the extent practicable)”, AND the Extractive Industries Transparency Initiative (EITI), for reasons that are unexplained, specifically states as its 2nd Principle the following:

“We affirm that management of natural resource wealth for the benefit of a country’s citizens is in the domain of sovereign governments to be exercised in the interests of their national development.”

Which, as I read it, means that the US Congress, though most of the oil in the US has been exploited by the private sector, and it adheres to free market principles, is lending credibility to an organization that is lending credibility to the notion that oil revenues should be managed by authoritarian petrocrats and oilygarchs like hugo chávez.

That does not make it easier for those who like me are fighting for the sharing of the oil net income directly with the citizens of a country, as the single most important factor that could help to diminish the negative consequences of the oil-curse.

Besides EITI is little by little becoming just another Basel Committee, monopolizing the rulemaking and the debate, without anyone outside comprehending sufficiently where their globally reaching authority really springs from.

Like oil-cursed citizens

2010-06-29T07:42:00.000-07:00

The asymmetrical empowerment of the authorities is by far the worst part of the natural resource curse.

2010-06-16T16:50:00.000-07:00

Today I assisted another conference arranged by Oxfam and where they presented a report titled “People, Power, and Pipelines: Lessons from Peru in the governance of gas production revenues” This report tried to analyze what had happened to the about $1.13 billion in revenues generated by the Camisea natural gas project that were transferred to local governments between 2004 and 2009.

It is a good report and it reaches many correct conclusions. Unfortunately, when it quite traditionally ends with recommending “building subnational governments (SNGs) capacity for extractive industry revenue management” it evidences that this NGO at least has not yet achieved sufficient understanding of the “resource curse”, probably because most of their member have never been resource-cursed themselves.

In the villages of the Amazon which were studied, before the SNGs received the resources, the villagers were most certainly very poor, but they were still an important part of society, and their collaboration must have been of great importance for their then similarly poor SNGs. But then me the natural resource revenues and empowered the SNGs, and since then the citizens are not any longer needed and are most often treated as mere nuisances who just expect favors. It is precisely this asymmetric empowerment of the authorities that causes the absolutely worst part of the resource curse.

And so if SNGs (or central authorities) have been asymmetrically empowered with excessive resources, then those we really need to empower with the capacity of managing the resource curse are the citizens.

The last thing we want to hear is those SNGs who are already in possession of the resource moneys, also telling the citizens: “We are the ones who have been capacitated to manage these by the World Bank and Oxfam (or any other in the list of willing capacity builders). Therefore, if you do not understand the hedging of our Muni-fund exposure to the yen, don’t worry, be happy, and remember that it is in your best interests to vote for us next time too, since frankly you would never even begin to understand the level of sophistication that is required and that we have achieved.”

What do I propose? For a starter, in order to increase accountability and place expectations in a more correct perspective, to give each citizen a receipt that indicates exactly what is their share of the natural resource revenues that has been received in their name by their SNG; followed up by giving them more and more of the revenues generated, in cash, for the same reason you are better off giving the citizens a fishing rod for them to learn how to fish, than giving them the fish you so carefully and so very lovingly selected for them. It is always better to have capable citizens than capable governments!

Friends in Oxfam, please follow up the current report with one that specifically analyzes how the natural resource empowered SNG’s behave when compared to those less “blessed”. It might be an eye-opener! It might help to capacitate you on the true meaning of the natural resource curse.

A war with the neighbor is awful but less bad than a civil war

2010-05-08T17:33:00.000-07:00

I just read a post in a blog that seemed to imply that Ghana and the Ivory Coast might fight over some border oil. No matter how sad that sounds it is nonetheless a thousand times better than the internal low intensity civil or uncivil wars for the oil revenues that will occur within the countries themselves… unless they can find an expedite and just way to distribute the oil revenues directly to the citizens.

A partial objection to the S. 2971 ‘Energy Security Through Transparency Act' currently being discussed in the US senate:

2010-05-01T18:52:00.000-07:00

The Act reads: "SEC. 408. SENSE OF CONGRESS RELATING TO TRANSPARENCY FOR EXTRACTIVE INDUSTRIES: (2) the United States Government should commit to global leadership of transparency in extractive industries by supporting-- (A) multilateral pro-transparency efforts, such as the Extractive Industries Transparency Initiative, in revenue collection, budgeting, expenditure, and wealth management"

Now the Extractive Industries Transparency Initiative has, as it 2nd Principle, “We affirm that management of natural resource wealth for the benefit of a country’s citizens is in the domain of sovereign governments to be exercised in the interests of their national development.”

Given that the oil in the US was and is exploited mainly by the private sector we do not understand how the US could lend support to such a principle.

And many of us oil-cursed citizens, though we certainly support and are appreciative of some of the initiatives of EITI, we do hope that the US will not support anything that has as a stated principle that oiligarchs, petrocrats or vulgar oil-thugs, and who feel themselves independently wealthy and consider most often us citizens as a nuisance, have to manage the natural resources in our interest.

EITI and Natural Resource Charter, I dare you to do a Full Monty on oil revenue transparency!

2010-05-01T08:03:00.000-07:00

You, oil consumers of Europe wanting to solve our oil-curse with more transparency, why do you not dare to be real transparent about it and confess that you at your gas pumps are capturing much more of its value than what is received by the country who sacrifices its natural resource for ever… often only to end up depositing those lesser funds in the consuming countries banks.

You tell me… NGOs from Europe, why should I trust you good hearted oil curse fighters from consumer nations? Have you ever spoken out against your governments capturing too much of the value of the gasoline/petrol we give up for ever at your pumps?

What might be lost to corruption in the transaction between oil companies and the petrocrats, oligarchs or simple oil thugs of our governments, is but a fraction of what you collect in gasoline/petrol consumptions taxes at your pumps… often pouring salt in the injury arguing it is because you want to protect the environment, while at the same time subsidizing your dirty coal behind our backs.

The little receipt!

2010-04-29T14:19:00.000-07:00

During the recent World Bank meetings in Washington (spring 2010), there were again several conferences relating to the question of why abundant natural resource richness translates into such poor results for their respective countries.

And again I had to submit to the smirking smiles with which those who have not the faintest idea of what an oil curse really means try courteously to hide they think it has to do with us being third class citizens.

And again I had to hear the barrage of arrogant and wise solutions offered by those who have never lived an oil curse.

And again I felt the so Venezuelan conflict of knowing oneself so chévere (great) and by the day being able to show less and less evidence of that. Heck even our hydro-electrical dam Guri, recently a source of national pride has with the electricity crisis turned into another symbol of ineptitude. What are we left with? Our beautiful women and the Ibis Escarlata?

And the worst part was that all of the solutions offered, outside and inside Venezuela, all sound like all recipes for the cooking by a distant great aunt whose food we never liked but of which we became fed up of as children.

“You need to diversify the economy; more agriculture; more manufacturing industries; you have to increase tax collections form the non-natural resource sector, even if that makes it more difficult to develop the non-natural resource sector; you must reduce income volatility by setting up funds; you need to invest in education”. Yes, yes and yes!

Bankrupted iron steel and aluminum industries; industrial zones that seem like desert towns in the wild west; tremendous education programs that have our professors teaching in the best universities abroad; investment funds with no funds?... well no, no and no! We have to find something new to do about it.

And having written so much on the subject and even promoting a global alliance of oil-cursed citizens I feel I would be satisfied if only those who always manage and sow the oil in our name, because they are such great sowers and we’re not, would only give, each one of us Venezuelans, a little receipt.

Mrs. Juana Rivera. Shack # 17, Path The Miracle; Village The Hope, Municipality The Fortune, State of Barinas, Venezuela

Dear Mrs. Rivera: In the name of our glorious Venezuelan nation allow me to inform you that last year, as administrators, we received in your name, in income from that your non-renewable oil, the amount of 178.98 US dollars per month, free and clear of all costs.

In relation to the same we also include here five receipts exactly the same and which correspond to your five children. The receipt of your husband is kept in our archives, as we have not been able to locate him.

Respectfully and expressing again the gratefulness in the name of our glorious nation your generopus contribution we remain,

Your sincerely

Your oiligarch, petrocrat or oil thug in turn.

From El Universal

What’s more important for a nation, good citizens or good governments?

2010-03-06T06:18:00.000-08:00

Friends

March 3 and 4, 2010, I participated in a very interesting conference titled “Oil and Gas in Federal Systems” held at the World Bank in Washington D.C. organized by the World Bank and the Forum of Federations, with sponsorship from NORAD.

I believe all participants learned a lot about issues and facts related to how oil and gas revenues are and should be distributed to central governments, states and municipalities. I know I certainly did. Thank you all!

Unfortunately, the sharing of the oil and gas revenues directly with those citizens whom are always told that these resources belong to them was not considered, not even as a possibility.

I did my best to remind those present that if we were to heed the wise words of Amartya Sen telling us to look for the things we share instead of what separates us, we should remember that at the last count, we are all citizens. Sadly, this did not impress many of the aspiring government, state or municipalities’ consultants, or authorities present, and so I felt that, as an oil cursed-citizen, I needed to intervene more actively. I hope the organizers will still invite me the next time.

I spoke out along the following lines:

What is more important for the future of a country, good governments or good citizens? I have no doubts whatsoever that the right answer is “good citizens”. Therefore, in an oil rich country, it is more important that the citizens learn to manage the oil-richness than thyat their governments do. But how can the citizens learn when governments thinking them to be the experts and the responsible for us, insist on managing all those resources?

Only those who have lived as cursed citizens know what the oil-curse is really all about. Only they know what it is to have an independently wealthy government which often considers the citizens to be more of a nuisance standing in the way of their grandiose plans. Only they know how easy it is for the citizens to succumb to be simple observers holding immense expectations about what oil and gas revenues will bring them.

Constitutions are written in order to defend the citizens from the excessive powers of their government. Should therefore not any methodology of sharing oil revenues between central governments, states and municipalities have as its absolute first priority that of avoiding accumulating excessive powers anywhere?

Yes I am all for transparency but, let us be sincere, quite often we know perfectly well we are being taken for a ride without needing to know the details. On occasions I have held that for an oil-cursed citizen more transparency is sometimes like having the right of also seeing when ones nails are extracted by the torturer.

Having been an Executive Director at the World Bank (2003-2004) I am perfectly aware that the World Bank works directly for the governments and only indirectly for the citizens. That said I find no reason why the World Banks needs to be so accommodative to the governments so as to sign up on the 2nd principle of the Extractive Industry Review (EITI) which states “We affirm that management of natural resource wealth for the benefit of a country’s citizens is in the domain of sovereign governments to be exercised in the interests of their national development.”

The Iraq Study Group Report of May 2006 stated: “There are proposals to redistribute a portion of oil revenues directly to the population on a per capita basis. These proposals have the potential to give all Iraqi citizens a stake in the nation’s chief natural resource, but it would take time to develop a fair distribution system.... There is no institution in Iraq at present that could properly implement such a distribution system. It would take substantial time to establish, and would have to be based on a well-developed state census and income tax system, which Iraq currently lacks.”

Is it not exactly for this type of challenges that we have in the World Bank a “knowledge bank”? We all know that if there was a real will, a system to do exactly that could be designed and put in place quite expeditiously.

Finally I spend some time voicing some “wise” bullets and thumb rules.

When accounting for the government’s share, you must include what they give away, like for instance the value of the 25 percent of Venezuelan oil production that at US$ 8 cents per gallon is just given away to those who drive cars.

Having been there, I cannot see one single new proposal related to have centralized governments make better use of oil and gas revenues that has not been tried and proven to fail before.

Having been there, as a manager in the initial stages of the Venezuelan Investment Fund 1974, I know about the total worthlessness of any oil and gas fund that the governments could influence in even the most minor way… so please do not sell false potions.

Would Norway be today's Norway had they found their oil when kings were kings?

Please do not let perfection become the enemy of the good by working on turning oil and gas revenues into a blessing. Most of us citizens would feel more than blessed were we able to avoid just the worst parts of the curse.

The best way for citizens to guarantee their freedom is paying for their governments. No central government, state or municipality should receive more than 10 percent of their revenues from any other source that is not direct tax payments by the citizens.

Never provide a ruler or a bureaucrat with income that he feels he cannot be contested or held really accountable for. If governments need the revenues let them pay the full per capita oil or gas revenue check to the citizens and then explicitly withhold the taxes on such payments.

Corruption is not acceptable whether centralized or decentralized and bullies are bullies, whether in the central government, states or municipalities.

Any government that receives more than four percent of GDP in fiscal resources that have not passed through a taxpayer’s pocket becomes de-facto a communist state.

The problem is not about producing the miracle of a government that puts centralized oil and gas revenues to good use for a country and its citizens… It is about being able to repeat that miracle over and over again.

Friends, I thank you in advance for listening to me and I appreciate immensely any echoing of my voice by resending this message to anyone who could be interested in it… and to many of those who are not but should be.

Best regards

Per Kurowski
Just another oil-cursed citizen

PS. I told the conference that two of my daughters had moved to Canada, one to Ontario and the other to Quebec and that, after reading about Alberta’s centralized oil revenues, I was thankful they had not moved into another future Venezuela. Someone replied that in Alberta they would not have to pay taxes. He did not really get my drift… paying taxes is the only way a citizen can have a government that works for him... and not the other way round.

EITI, please change your 2nd principle

2009-11-25T04:35:00.000-08:00

I am an oil cursed citizen who has seen my homeland waste immense non-renewable natural resources for nothing and destroy all its social structures, all as a direct consequence of the oil revenues going directly to the state coffers making our governments independently wealthy and powerful.

And then the Extractive Industries Transparency Initiative (EITI) 2nd principle states:

“We affirm that management of natural resource wealth for the benefit of a country’s citizens is in the domain of sovereign governments to be exercised in the interests of their national development.”

To me any moment a government receives, for example, more than 4 percent of its GDP in fiscal income which does not proceed from the taxpayers, it is de-facto turned into a natural resource autocracy, a central planned economy and a communist state.

I cannot believe that the people supporting EITI are really aware about this, but if so, and they still agree with it, then we must fight against EITI, since it is clear that it will only serve as an instrument to create the illusions of change, to be used by the oil-autocrats to keep us citizen down.

The sum of many individual decisions on what to do each one with their part of the oil revenues is always going to be better long term that the central-planned decisions by some autocrats.

But if the oil revenues have to go to the government then, as a minimum, they have to take the route of first pass through the tax-payer’s pockets.

Most of the oil curse does not have its origin in the oil revenues per se but in their distribution. Distributing the oil revenues directly to the citizens will stop the citizens from becoming beggars of favours and the governments from becoming haughty grantors of favours.

My comments to EITI

2009-11-24T17:35:00.000-08:00

This http://bit.ly/8JUZQP is what Jonas Moberg, the Head of the Secretariat of the Extractive Industries Transparency Initiative (EITI) wrote and below my comments:

In “EITI necessary but not sufficient” you say “I therefore find it disappointing when the impressive implementation work done in many EITI countries is criticised for not being the solution.”

Since I include myself among those criticizing EITI, in what I intend to be a constructive way, let me be clear that the critique has nothing to do with “the impressive implementation work done in many EITI countries.”

What I do criticise is that your 2nd principle establish “We affirm that management of natural resource wealth for the benefit of a country’s citizens is in the domain of sovereign governments to be exercised in the interests of their national development.”

That principle, inasmuch as it concentrates excessive power in the state, power that does not flow from the citizens, turns the countries into de-facto centrally planned statist nations, and there are many of us citizens that profoundly object to that.

You also say “we don’t consider that an initiative with big private companies and small NGOs on its board should be issuing requirements on how governments spend their money. It is for the citizens of that country, through democratic processes, to decide how public money should be spent.”

Indeed that is correct but just the same you must be totally aware that this is exactly what is happening and what many NGO´s are directly pursuing. In a recent conference on oil-curse a representative of one of the major NGOs and that appears among EITI supporters explicitly spoke about “a tripartite agreement between companies, governments and NGOs”. I do not hold that this is EITI´s direct responsibility but EITI must be aware that some major international NGOs are effectively usurping the rights of representation of the local citizens and act accordingly.

Indeed, to be even more specific, EITI's principle # 12 establishes “In seeking solutions, we believe that all stakeholders have important and relevant contributions to make – including governments and their agencies, extractive industry companies, service companies, multilateral organisations, financial organisations, investors, and non-governmental organisations.” And the question is... where is the citizen?

If EITI really wants to help the citizens in resource-cursed countries then the only thing it should be doing is empowering the citizens of those countries to fight the fights they need to fight on their own. Otherwise, sadly, there are objective reasons for us citizens to suspect you are more interested in imposing an ideological agenda or creating “opportunities” for your own supporters.

Time and time again EITI honestly declares that it is not the final cure but only an aspirin. Many thanks for that, but please do not forget that an aspirin a day can keep the final cure away.

You ask “those that mainly seem to find flaws with the EITI: Is it better to be negative about the world around us and keep dreaming of a silver bullet solution, or to actually contribute towards a real solution by building on the incremental changes that initiatives like the EITI are generating?”

I reject the implied tone of “those that mainly seem to find flaws with EITI” since as oil-cursed citizens we are much more directly affected by this than any of you policymakers there at EITI, and so we have the right and the duty to speak out as loud as we can.

If we think that finding systems by which to transfer to the citizens the power that is generated by the extraction of natural resources is a must, it is not because we are thinking of it in terms of a silver bullet but in terms of a prerequisite for any sustainable real solution. For instance, in Norway you have been able to find a way for controlling strictly how the oil resources flows to your government...and so why don´t you replace your 2nd principle with that?

An open letter to His Majesty King Norodom Sihamoni of Cambodia from an oil cursed citizen

2009-10-20T19:43:00.000-07:00

The Phnom Penh Post

Oil revenues belong to the citizens and should not be used to pay them off.

2009-10-20T15:45:00.000-07:00

The single reason why I who have so actively been supporting oil revenue sharing by the citizen for years do not feel too optimistic about Nigeria’s current plan to pay 10 percent of the revenues directly to the Niger Delta citizens, is that it smells too much of a payoff, a societal bribe to some Nigerians; and leaves too much in the hand of too few.

Pay out 100 percent of the net oil revenues to all the Nigerians and if needed retain a percentage in taxes. That is the only way to put the citizens in charge of a democracy, as they are supposed to be in a democracy.

The frontier of curse-land

2009-07-07T05:21:00.001-07:00

Any moment the State receives more than 4% of GDP in fiscal income directly from any extractive industry or similar, then the State has become too independently wealthy and the balance of powers needs to be restored by paying out all exceeding revenues directly to the citizens.

A letter to the Extractive Industries Transparency Initiative (EITI)

2009-04-21T10:50:00.000-07:00

Dear friends,

By now you must know that though I harbor some reservations I support most of your initiatives, and most specially their spirit. That said…

In the video “Making resources work for people” that is posted on your web Obiagely “Oby” Ezekwesili says that “It ought to be the case that these revenues [from natural resources] can transform the life of the citizens but then you see the opposite happen.. It is the challenge to move the benefits of the natural resources out of the hold of a smaller club of people and instead diversify the opportunity that it offers to a larger number of people that is what will reverse the curse and that is the most important issue of the day for mineral rich countries.”

I could not agree more. And that is why I hereby express my deepest reservation about your second principle that says:

“We affirm that management of natural resource wealth for the benefit of a country’s citizens is in the domain of sovereign governments to be exercised in the interests of their national development.”

The management of natural resource wealth for the benefit of a country’s citizens should be managed by the country’s citizens... otherwise, how will they ever learn how to manage it? The role of the government is to provide government not manage wealth for the voters.

Also, in the same video, Peter Sutherland Chairman of the Board of BP, talking sort of both for the consumers and the producers of oil, expresses that a steady predictable supply of natural resources at a reasonable price is in the interest of everyone... and that stability and predictability is dependent on good governance... for which transparency is a very important component.

I agree completely, on the first part, but instead of transparency on the status quo, and which I have equated to being able to see when the torturer extract your nails, I would much rather prefer that Peter Sutherland would help intermediate between oil producing and oil consuming countries in order to offer directly to all the citizens of an oil producing country, the true shareholders of oil, long term take up contracts, which would provide them with equitable and stable dividends and the consumers with equitable and stable oil prices.

Sincerely yours

Per Kurowski

An oil cursed citizen.

We don’t need more transparency

2009-04-09T09:38:00.000-07:00

A new group of well intention academicians who want to help those countries blessed with natural resources to transform these in development and wealth for their citizens has recently been created. This group will summarize its conclusions in something named “The Natural Resource Charter”.

Just like the Extractive Industries Transparency Initiative, EITI, one of its guiding principles is that helping make more transparent the information of the origin and destiny of the funds obtained from the natural resources, will make the citizens request better results. Forget it!

We Venezuelans do not need more transparency to be absolutely sure that we are anchored in an infamous oil feudalism where or feudal lord on duty keeps all the seeds and shares out what is left or what he has digested. More transparency would be like the tortured clamoring for their rights to also be seeing how they extract their fingernails.

We Venezuelans do not need more transparency to be absolutely sure that the most we can expect substituting for the feudal lord on duty with another from the same tribe of the getoutoftheway-toplacemyselfs is that he will hopefully do just what the previous did a little bit better, though always running the risk he will do it worse.

We Venezuelans do not need more transparency to be absolutely sure that our lives are wasted fighting among each other for a share in our own net oil results, wallowing in a sort of eternal piñata at the feet of the benevolent on duty who distractedly observes us with a sarcastic smile.

We Venezuelans do not need more transparency to be absolutely sure that instead of a feudal system that administers our own net oil results we need a normal government that governs our country.

We Venezuelans do not need more transparency to be absolutely sure that we are much better off trusting each one of us a little, instead of trusting a chief so much that we elevated him to be our feudal lord.

In conclusion we Venezuelans do not need the slightest bit of more transparency to be absolutely sure that what we most need is the strength and will to free ourselves from this feudal oil state in which we are trapped by requesting they give us our oil results directly, so that we can plant them… instead of discussing so many stupidities and believing in so many pregnant birds.

Translated from “El Universal” Caracas, Venezuela, April 9 2009.

Plain awful

2009-04-03T11:04:00.000-07:00

It is plain awful to be a citizen where the government is independently wealthy because of income from national resources and does not really need the citizens.

EITI´s unacceptable principle.

2009-04-03T11:01:00.000-07:00

The Extractive Industries Transparency Initiative states as its 2nd EITI Principle the following:

I hold that the individual citizens will always be better, on average, at making the most out of any resource blessings than any government managing all of them.

A letter to The Natural Resource Charter from an oil-cursed citizen

2009-03-26T13:05:00.000-07:00

Friends, you say in your precept 2 “Extractive resources are public assets and decisions around their exploitation and use should be subject to public oversight.”

Let me introduce myself. I am one of those millions of oil cursed citizens t and I do have some serious reservations with respect to this precept 2 draft. Let me explain.

Let us suppose that all the net results of the exploitation of any extractive resources placed by providence in a country had been equally divided among the citizens, those who arguably are the most legitimate owners of said funds. Let us then suppose that the central government requests the citizens to give to it all the net results in their possession... what would we have? We would have the mother of all the regressive tax systems, with the marginal tax rate for the poorest being 100%.

Would anyone of you in the Natural Resource Charter support such a regressive tax system? I don’t think so. And so why then do you take it as a big given, without even putting it up for discussion, that “extractive resources are public assets”?

In Venezuela, in 1974, the Oil Boom I of my time, Carlos Andres Perez´ time, as a rookie MBA I was appointed diversification manager in the Venezuelan Investment Fund that was being set up in order to safeguard the oil income that the country had no chance to digest in a reasonable way. It took me less than a month to discover that the whole set-up was doomed to fail and so I quit, the same day my new desk arrived. I thereafter worked as a financial and strategic consultant in Venezuela for 28 years.

In 2002 as a result of some almost inexplicable events, like being recruited for it on the web, I was appointed for two years an Executive Director at the World Bank. I have since suffered and witnessed in detail, though from a sufficient distance to see the forest, the Oil Boom II of my time, Hugo Chavez´ time. Frankly I know more than most what the oil curse is really all about and I pray for and do the most that I can in order to find a way for my country of not wasting Oil Boom III whenever it comes.

This week I assisted the “Improving Extractive Industries Benefits for the Poor” (those taxed at 100%) organized by the World Bank´s Oil and, Gas and Mining Policy Division. There were many interesting conferences but, with respect of how to avoid the oil-curse, I heard no new lessons derived from Oil Boom II that I had not previously learnt from Oil Boom I.

The main explanation for it might be very difficult for anyone who has not lived under the oil curse to really understand it.

Though it is great having transparency, like that promoted by EITI, whose efforts I fully support , the real oil curse is not about the lack of transparency; the real oil curse is about a nation of citizens sitting down and expecting their government to sow the oil revenues and harvest something good for them, without given the slightest thought about taking that responsibility upon themselves; the real oil-curse is the citizens handing over through elections the check book containing their own oil revenues to the chief in turn just in order to fight among themselves the next years for a larger share of these or to have to bow to the chief to get something of those net revenues back.

As I see it the only way we citizens have to escape the oil curse is by avoiding centralizing the net oil revenues in the hands of the government, at least during an oil boom. The way I, an oil cursed citizen, would start visualizing a solution, is in terms of having any net oil revenues that represents more than a percentage of GDP and that is distributed, being paid out in cash, directly to the citizens instead of to the government.

Friends, we oil cursed citizens have had enough with our government finding itself to be independently wealthy during an oil boom and therefore having no fiscal income incentive to even keep up the appearances of a responsible behavior.

May I therefore respectfully ask the Natural Resource Charter not to start tackling this issue as if the oil revenues were given to the States by God and instead try to side with the citizens. Frankly our politicians do not deserve having more policymakers endorsing their populist promises.

There is no such thing as an oil-cursed politicians, oil-cursed governments or oil cursed policymakers, on the contrary they are all most often shining examples of oil blessings... there are only oil-cursed citizens.

Please!

http://www.eluniversal.com/2009/03/12/opi_art_nosotros,-los-maldec_12A2250731.shtml

The only way

2009-03-07T19:49:00.001-08:00

The only way we citizens have to escape the oil curse is avoiding the centralization of the net oil revenues in the hands of the government, at least during an oil boom.

The way I, an oil cursed citizen, would start visualizing a solution, is in terms of having any net oil revenues that represents more than a percentage of GDP and that is distributed, being paid out in cash, directly to the citizens instead of to the government.

The mother of all regressive tax systems

2009-03-07T19:43:00.001-08:00

Let us suppose that all the net results of the exploitation of any extractive resources that were placed by providence in a country had been equally divided among the citizens, those who arguably are the most legitimate owners of said funds.

Let us then suppose that the central government requests the citizens to give to it all the net results in their possession... what would we have? We would have the mother of all the regressive tax systems, with the marginal tax rate for the poorest being 100%.

Would anyone of you support such a regressive tax system? I don’t think so.

My minimum minimorum on exiting Iraq!

2008-09-09T09:50:00.000-07:00

I was never in favor of the invasion of Iraq but, once it occurred, I pleaded for a scheme that would put its oil revenues directly into the pockets of all the Iraqis, and thereby set an example that could help to empower the democracy in all the other countries that are cursed with the centralization of their oil revenues… the mother of all oil curses. Unfortunately, the supposed builders of democracy forgot to bring with them to Iraq such a fundamental building block.

Now, when exiting Iraq, as a minimum minimorum, we should at least aspire that the next Saddam Hussein, whenever he will appear, should not find it easier to be the next Saddam Hussein… much the same like the next Bush, whenever he will appear, should not find it easier to be the next Bush.

http://www.policyinnovations.org/ideas/commentary/data/000083

Let us sit down and talk about oil!

2008-06-26T10:08:00.000-07:00

On June 26, 2008 I published in Caracas an imaginary letter from Arnold Schwarzenegger to the citizens of Venezuela and in which he offers to buy, on a rolling five years average price, 2 million of oil barrels per day, so as to satisfy the needs of his California constituency and also to take the worst of that volatility out of the market that keeps his electorate running crazed between Hummers and hybrids.

To provide the Venezuelans with the incentives to entering into such a contract Arnold is offering to pay an equal share of the proceeds, to each one of the 26 million citizens of Venezuela, in the currency and in the account each one of them would order… instead of giving all that money to chávez.

Economics is about making the most out of scarce resources and so when seeing the oil suppliers in OPEP exercising their powers successfully, which is OK since oil in a non renewable resource and since the world at large should benefit from consuming less of it, one cannot help but ask why the consumers do not exploit their powers as consumers. I suspect because there are some not wanting them to do that.

I wonder what the Venezuelans would say if they would formally receive such an offer from Arnold since today the primary reason for which Venezuela is not exporting more oil, even though its citizens might need the money, is that its government gets more oil revenues than it can handle… in fact so much that they even give away some of the oil to London and Boston.

Fellow citizens from oil supplying and oil consuming countries, why do we not sit down and talk about it all, without intermediaries like oil companies or oil dictators?

Please... while you are busy leaving Iraq

2007-08-12T13:28:00.000-07:00

The search for transparency in an oil-consuming world

2003-12-24T09:40:00.000-08:00

Sir, There has been a lot of talk lately about a curse that, through corruption and other distortions, is stopping oil-rich countries from turning income into development. The Extractive Industries Transparency Initiative, championed by the United Kingdom and endorsed by the World Bank, has been named an exorcist and is starting the rites by applying a much-welcomed transparency to projects such as the Chad-Cameroon pipeline.

In the name of that same transparency, let us also remember that for every $1 received by any oil-producing country (which forever sacrifices a nonrenewable asset), the public treasury of many oil-consuming countries receives, net, at least $4 and is therefore a likely victim of the same curse, albeit stricken by different symptoms. For instance, in many oil-consuming developed countries, the curse has now created such an addiction to petrol taxes that their whole fiscal structures would be completely unsustainable without them.

Transparency would also, perhaps, not be a bad rite to use to exorcise this tax man’s curse, since most of the gasoline consumers in these countries are not remotely aware of the real extent of the taxes and much less of how the proceeds are used.

For instance, having been told that these taxes were environmental, they would be surprised to learn that probably less than 0.5 per cent of the 100,000 million dollars collected yearly in Europe, just in taxes on lead-free gasoline, goes to the environment; and, worse, that much of it goes in subsidies to the even less environmentally friendly coal.

Also, today, as the possibilities of satisfying the world’s demands for energy seem quite uncertain and the world becomes more aware that the ultimate cost of cutting, or not cutting, the trees of the Amazon will be paid by all, whether they like it or not, it is clear that the world needs to become much more penny-wise when developing alternative energies; and we all know that the best and only companion of the penny-wisest is transparency.

So, after the pipelines, when do we start with the Exchequer’s bag?

The Financial Times

On Transparency and Curses

2003-11-20T09:24:00.000-08:00

Lately there has been a lot of talk about a curse that, through corruption and other distortions, is stopping oil-rich countries from turning income into development. The Extractive Industries Transparency Initiative, championed by the UK and endorsed by the World Bank, has been named exorcist and is starting its rites by applying a much welcomed transparency to projects such as the Chad-Cameroon pipeline.

In the name of that same transparency, let us also remember that for every single dollar received gross by any oil producing country (who forever sacrifices a non-renewable asset), the public treasury of many oil consuming countries receives, net, at least four dollars, and is therefore a likely victim of the same curse, albeit stricken by different symptoms. For instance, in the oil-consuming developed countries, the curse has now created such an addiction to gasoline taxes, that their whole fiscal structures would be completely unsustainable without them.

To exorcise the taxman’s curse transparency would also be a good starting point as most of the consumers in these countries are not remotely aware of the real extent of the gasoline taxes, and even less of how the proceeds are used. For instance, having always been told that these taxes were environmental, they would be surprised to learn that probably less than half a percent of the US$100 billion collected yearly in Europe, just in taxes on lead-free gasoline, goes to the environment and, worse, that much of it goes in subsidies to the even less environmentally-friendly coal.

Also, today, as the possibilities of satisfying the world’s demands of energy seem quite uncertain and the world is becoming more aware of the final cost of cutting or not the trees of the Amazon will be paid by all, whether they like it or not, it is clear that the world needs to become much more penny-wise when developing alternative energies… and we all know that the penny-wisest best and sole companion, is transparency.

So, after the pipelines, when do we start with the Exchequer’s bag?

El Universal, Caracas

The Oil Referendum

2001-06-07T09:46:00.000-07:00

WOULD YOU BE IN AGREEMENT if the Bolivarian Republic of Venezuela were to sign an oil contract with the United States of America (U.S.A.) under the following conditions?

The U.S.A. and Venezuela agree that starting today and for the next 50 years, the U.S.A. would buy and Venezuela would sell three million barrels of oil per day with Venezuelan characteristics. The Reference Price (RP) would be US $25 per barrel, indexed to the U.S.A. inflation rate, plus or minus an adjustment equivalent to 50% of the difference between the RP and the spot-market price.

As a consideration, Venezuela would also keep an additional 2 million barrels per day at the preferential availability of the U.S.A., which could be bought by the U.S.A. at spot-market prices, provided there were an emergency that made those prices exceed the RP by at least 100%.

In order to guarantee to the U.S.A. that Venezuela would always be in a position to meet its supply obligations, Venezuela would agree that it would not, under any circumstances, contract a new public debt, so as to make sure that the oil revenues to be received over the next 50 years would not be given as guarantees for new fresh loans today, and thereby risk wiping away the value of those reserves in a mere 50 days.

In order to ensure the enthusiastic applause of environmentalists, Venezuela would earmark 3% of oil revenues to planting trees in our country, trees which would capture carbon from oil emissions.

In order to ensure that the Venezuelan citizenry would get its fair share of the revenues (and vote “YES”), 30% of Venezuela’s gross oil revenues would be directly distributed in equal amounts to each Venezuelan. That distribution could be made in cash or in vouchers for health and education services.

If the “YES” vote were to win the hypothetical referendum described above, Venezuela would have macroeconomic stability, enabling it to formulate a true development plan, and the U.S.A. would have a larger, more secure supply of energy.

But so long as the natural market for our oil, the United States of America, remains incapable of gauging its interests beyond the current quarter, and doesn’t care if oil falls to 7 dollars a barrel, and prefers to create costly strategic reserves by burying crude oil or exploiting environmentally delicate areas, then any Venezuelan president trying to defend his or her country and keep the price of oil somewhere above the miserable marginal cost of extraction has no alternative but to strengthen OPEC and seek alternatives elsewhere, if for no other reason than to incite jealousy.

To the best of my understanding, this is what geopolitics is all about; and that’s why it might not be such a bad idea for the United States to study realpolitik—especially when, as happened forty years ago on a Caribbean island, they flunked that subject royally.

Published in El Universal, Caracas, June 7, 2001

P.S. The above is what I wrote in 2001, but no one in the U.S.A. picked up on the idea or proposed anything similar. That is why today, when oil is up around 60 dollars, I don’t care a lot about some of the crybabies.

P.S. Now, in 2009, after having seen another oil-boom gone to naught in my country I would as a citizen not settle for the 30% mentioned above but request 90%, not in vouchers but in cash!

Kohlenweiss 1979

2000-08-03T17:14:00.000-07:00

It’s been twenty years, and the deadline established to keep the minutes of the European Union (EU) Inter-Ministerial meeting secret has elapsed. At last, we can read what was agreed to in the small German town of Kohlenweiss during a rainy autumn weekend in 1979, when EU Energy Ministers met in conclave to draw up a strategy on “how to defend oneself from the crude rent aspirations on crude of OPEC countries.”

One debate registered in the minutes seems particularly horrible with all its prejudices against oil-exporting countries. However, because of lack of space, I will limit myself to summing up the approved plan, as originally presented by German minister Grüngelde, a plan that allegedly hinged on the following five key actions.

The first measure (the most innocuous) was to strengthen the relations between European governments and the environmental organizations to such a degree that the latter could be used to apply pressure in favor of diminishing oil consumption without its affecting the more contaminating coal, which Europe happened to possess.

Secondly, a program of continued hikes in taxes on oil and its derivatives, especially gasoline, was established to ensure not only a drop in demand but also that day after day the oil producers would receive a lesser and lesser proportion of oil's real value in the final market, namely, the price paid by the consumer. In this respect, the countries pledged themselves not to allow a lowering of gas prices to the consumer so, each fall in the price of crude should set off an immediate increase in taxes.

The third course of action was aimed at weakening OPEC's internal cohesion and in that sense, using Cold War tactics (the Berlin Wall hadn't tumbled yet), disinformation was one of the recommended instruments, aimed principally at sowing doubts and suspicions inside OPEC itself regarding such things as compliance with quotas set by the organization.

The fourth element agreed to was the “Community’s prior interest to promote and support efforts that would lead to the privatization of the oil industry in OPEC countries.” The reasons are understandable, when among the arguments, is that “as long as the oil industry belongs to the states, they will have the possibility of brandishing the weapon of geopolitical bargaining.” The report established that “to achieve the goal of privatization, the ensuing competition among the partners would guarantee greater volumes of production and lower prices, in view of the fact that they all have a common interest in increasing profit and cash flow in the short term.”

The Fifth ...? Why continue?

I admit the above is pure fiction and that, as far as I know, it doesn’t exist except in my imagination. There’s no Kohlenweiss or Grüngelde. I have no knowledge of any such meeting and I definitely don’t believe that the European Union fixed a period of only twenty years to make documents of this kind public.

However, since reality is stronger than fiction, I trust the reader will pardon my cheek. Let’s see:

Since 1980 all taxes on oil and derivative have been hiked. For example, in the United Kingdom they went from 85% added value in 1980 to a confiscatory 456% in 1998. Obviously, during the same period oil products price index on the consumer level increased in the UK in constant terms from 100% to 247%, while, as if it were planned, the crude oil price index fell from 100% to a miserable 18%.

A barrel of oil contains around 160 liters of oil products broken down into gasoline (84), jet fuel (12), gas oil (36), lubricants (16) and heavy residuals (12). Today, when oil in Europe sells at a minimum $1.20 per liter, we see that this component represents more than $100—adding the other derivatives we come to a market value, that is, the price the consumer is prepared to pay, of more than $150 per barrel. If we start from the fact that refining, transport, and distribution costs aren’t high, let’s say around $20 per barrel, we can conclude that the European Treasury retains a minimum of $100 per barrel, while the producer, who actually sells an asset and sacrifices a nonrenewable resource, has to be satisfied with $30—scarcely 20% of its European value.

As for cooperation with environmental movements, there’s no doubt it’s been a complete success, since oil has been punished with all kinds of possible taxes, thus diminishing its consumption, while coal hasn't been touched even with a feather, arriving at the absurd situation where it’s even being subsidized in some countries by taxes on oil. The consequence of such disparity in treatment can be seen in International Energy Agency statistics, which indicate that in 1973 oil accounted for 44.9% of world fuel consumption compared to 35.3% in 1996. Coal consumption in 1973 represented 24.8% and had maintained the same percentage in 1996.

Despite the fact that the figures mentioned above show clearly that only through geopolitical instruments like OPEC can existing injustice be reversed or at least cushioned, in Venezuela privatization has not only been preached until the beginning of 1999 but it has also been partially achieved through Apertura Petrolera (Oil Opening).

Another trick was to egg us on to believe that the solution lay in increasing the volume of production, even though the price was $8 per barrel, 5 cents for each liter (less than bottled water), a price that hardly covers the costs of extraction. Pressures to increase production were so intense that they continue even today, when we see important representatives of our local academe propose a weird thesis, according to which if Venezuela produces 3 million barrels of oil per day and sells it at $30 a barrel, we will find ourselves in the immoral grip of living on rents whereas, if, on the contrary, we produce 7 million barrels a day and sell it for just $7 a barrel, it would reflect an immense and praiseworthy productive effort.

Finally, with respect to OPEC, we can only say it has just saved itself from extinction—for the time being.

With this on record, who can doubt that, in fact, I have produced enough material to inspire a thriller script? If anyone out of curiosity wants to know what the imaginary Kohlenweiss fifth pillar was in the hope that (as my daughters say) recounting a nightmare makes sure it will never happen, I confess that recently I have been waking up each morning bathed in nervous sweat, fresh from the nightmare that the EU has plotted to plant an environmental extremist in the White House.

From El Universal, Caracas, August 3, 2000