Thoughts on ExxonMobil from China

Photo by Christiane Badgley

I’m writing from Guangzhou, China, where I’m spending a few days working with the city’s Nigerian community. This work is not directly related to oil, although it’s not hard to make the connection. The corrosive impact of oil on the Nigerian economy (and society more generally) comes up again and again in conversations.

How many Nigerians have left their country because of its oil-generated “wealth”?

It’s interesting to hear people explain what needs to happen back home in order to create a climate where business can thrive. Everyone puts electricity at the top of the list — without electrification, real economic development is next to impossible. Second on the list is corruption. Corruption can probably move up to the first position as it is largely to blame for the lack of electricity (and so many other problems).

Corruption can certainly exist without oil, but in Nigeria oil and corruption are so intertwined it’s impossible to speak of one without talking about the other. Section 1504 of the U.S. Dodd-Frank financial reform legislation is intended to help Nigerians (and others) fight corruption. If implemented, this reform will provide local actors with useful information: they will be able to find out how much money oil companies are paying their governments. Of course, this won’t eliminate fraud and corruption, but if this knowledge can help local actors hold their governments accountable, it may be a useful first step.

The industry is fighting hard to gut Section 1504, claiming it will hurt U.S. business. ExxonMobil is one of the companies putting major pressure on the S.E.C. to soften the Section 1504 rules.

Businessweek has recently published ExxonMobil vs. Dodd-Frank by Steve Coll, who describes industry efforts to weaken Section 1504:

The companies argue that the proposed rules would be “excessively burdensome,” in the words of Patrick Mulva, ExxonMobil’s vice president and controller. Big Oil’s “greater concern,” as Mulva wrote in a letter to the commission, is that 1504 would have a “detrimental effect” on the “global competitiveness of U.S. companies.” The fear is that Chinese, Russian, Brazilian, and Indian oil and mining companies, lacking qualms and unburdened by Dodd-Frank rules, would exploit the financial disclosures made by their Western competitors to outbid them—and potentially persuade leaders of resource-rich countries in the developing world to stay away from U.S. companies altogether.

Coll points out that this is exactly what American multinationals said a generation ago when the U.S. Congress passed the Foreign Corrupt Practices Act. You know, if everyone else can bribe and we can’t, we’ll be at a disadvantage. Well, it turns out that American business was not hurt at all by that legislation.

So why are the oil companies so opposed to disclosure?

More soon…

 

 

 


 

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