Resource Cursed

Imagine a tiny country flush with oil money, where the wealth per person is on par with that of Spain or Italy. Now picture a place quite the opposite, where nearly two-thirds of the population lives in extreme poverty and infant and child mortality rates are on par with those of the war-ravaged Democratic Republic of the Congo.

Impossible as it sounds, these two sentences describe the same place: Equatorial Guinea, a West African country home to roughly a half-million people. Earlier this month, the country's president, Teodoro Obiang Nguema Mbasogo, marked the 30th anniversary of the coup that brought him to power.

Few Americans have heard of Equatorial Guinea, but some U.S. corporations -- including ExxonMobil, Marathon Oil, Hess Corporation, and Noble Energy -- know all about it. U.S. companies dominate the country's oil business, and most of Equatorial Guinea's exports end up in the United States.

Equatorial Guinea is a textbook case of the resource curse: The country's leaders have squandered its oil wealth while its people have languished. The GDP of this once-poor country has shot up more than 125-fold since the mid-1990s, when oil was first discovered there, elevating its wealth per capita to the highest level of any country in sub-Saharan Africa. Meanwhile, the proportion of government spending dedicated to health and education in Equatorial Guinea falls well below the regional average. Rather than benefiting the people, vast sums of the country's oil revenues have gone to bankroll personal purchases for President Obiang, including two mansions in suburban Washington. Obiang's eldest son allegedly spent more on houses and cars in the United States and South Africa between 2004 and 2006 than the government did on the entire education sector in 2005. Corruption is endemic. And as if mismanagement were not enough, Obiang's government has overseen a litany of human rights violations, including forced evictions and rampant police torture.

Despite this record, Equatorial Guinea's relations with the United States have warmed in recent years. In 2006, then-Secretary of State Condoleezza Rice welcomed Obiang to Washington as a "good friend" of the United States, and Washington sent a resident ambassador to the capital, Malabo, after a dozen years of covering the country from the U.S. Embassy in nearby Cameroon. It's not that the United States has been unaware of the profligacy of Equatorial Guinea's leader. Obiang's Washington homes were cataloged in a 2004 Senate investigation of Riggs Bank (now part of PNC Bank). Nor should Europeans be in the dark: Legal complaints filed in Spain and France allege that members and friends of the Obiang family misappropriated oil funds to purchase properties and sports cars in Europe.

Instead, it was oil that endeared Equatorial Guinea to the United States during the Bush administration. And it's a friendship that the Obama administration would do well to rethink -- not least because the United States has the chance to address the resource curse in a country where U.S. leverage could make a real difference.

Now is the ideal time to change tack. The Obama administration nominated a new ambassador in July, and Equatorial Guinea's presidential election is due in late 2009 or early 2010 (no date has yet been set). The U.S. government should insist that Obiang's government stop harassing and jailing the beleaguered opposition and end the myriad other policies that stand in the way of a free and fair vote. Releasing political prisoners and opening up a genuine political dialogue would be a good start.

But what about the oil curse? With the United States a customer and major source of investment, the U.S. government should stress transparency in its dealings with Equatorial Guinea. One good sign is that the Obiang government has signed on to the Extractive Industries Transparency Initiative, an international project meant to promote greater openness about government oil and mining revenues. But the Obama administration should look for concrete results, including genuine civil society participation in the revenue-watching process. There might be an opportunity to encourage Equatorial Guinea to use its oil proceeds to benefit its people through the long-delayed Social Development Fund, financed by a portion of the oil money and administered through the U.S. Agency for International Development (USAID). Now that the fund has approved financing for some development projects, it's essential that USAID ensure active civic participation in selecting and carrying out these projects, as well as robust monitoring and public reporting on the use of the monies.

There are changes to be made on this side of the Atlantic as well. The Extractive Industries Transparency Disclosure Act, introduced in both the U.S. House and Senate in 2008, is likely to be reintroduced in Congress this year. If enacted, the law would require oil, gas, and mining companies that are publicly listed in the United States, including those hailing from other countries, to reveal their payments to foreign governments. The United States should also use anti-money-laundering laws to investigate lavish purchases financed with proceeds of corruption.

In his recent address in Accra, Ghana, U.S. President Barack Obama criticized "leaders [who] exploit the economy to enrich themselves." Yet in response to separate reports issued last month by Human Rights Watch and the Center for Economic and Social Rights, Obiang claimed that most people in his country "are living very well" and that lazy citizens who "don't want to work" should "sweat a bit" to earn money. Most Equatorial Guineans live on less than a dollar a day.

U.S. energy security need not come at the expense of human decency. That's a message that Secretary of State Hillary Clinton echoed on her Africa trip, in the resource-rich capitals of Angola, Nigeria, and the Democratic Republic of the Congo. And it's a message that the United States should now deliver directly to Malabo.

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JWARD1201

8:05 PM ET

August 27, 2009

Saying that natural resources

Saying that natural resources are a curse for the people of any country begs the question – what was it like before the resources and is it better or worse now? In the case of Equatorial Guinea , and no one should know this better than Mr. Alicante, the country was a nation in name only before the 1979 coup of the murderous dictator Francisco Macías Nguema and though it hasn’t been perfect, life in EG has gotten better under president Obiang and significantly better since the discovery of oil in 1996. To say any different is a misleading distortion of the past…and the future.

You make reference to the recent progress in EG – the USAID Social Development Fund and emphasis on transparency – but it also important to highlight the human benefits of the country’s natural wealth. Specifically, the impact of the Malaria Control Project and the electrification of the country, the paving of roads and the construction of hospitals, universities and schools all of which were made possible by petroleum dollars invested in the country by a government learning how to be a developing nation. In fact, a March 2009 IMF report said “[The country] has taken steps to manage effectively its oil reserves and the income derived from it. Equatorial Guinea has managed to save a substantial amount of its oil revenues since 2000.” The vague reference to a scandal that never was for Equatorial Guinea at Riggs bank and the half- truths about the wealth of government officials and their interests ignores the facts to paint a picture of greed and corruption where one of lack of sophistication and experience with international finance would be more appropriate – at least according to the U.S. Senate.

No one who is familiar with the history of EG could deny its past troubles, but as the United States and the international community continue to work with president Obiang and the Equatorial Guinean government we would all do well to remember where they came from and where they want to go. Representatives from Human Rights Watch have not visited Equatorial Guinea since 2003 and even then only spoke with 12 people. Things have changed and continue to change for the better. Without question, the people of Equatorial Guinea are better off today than they were before they struck oil, the only question is how much better off can they be tomorrow if the world gives them a hand and some time.

Equatorial Guinea is perhaps the world's most striking example of why oil hurts, rather than helps, many of the countries that have it. Will the Obama administration stop the country's dictator from sucking its people dry?

BY TUTU ALICANTE, LISA MISOL | AUGUST 26, 2009

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