Regulating the Resource Curse

How a small change by the SEC could prevent war, decrease corruption, and help developing countries fight Big Oil.

It's not often that a change in accounting rules could reduce the probability of war. But that's exactly what happened at the U.S. Securities and Exchange Commission (SEC) last week.

On Wednesday, the SEC finally enacted long-overdue regulations requiring any oil company that is publicly listed on a U.S. stock exchange to report the tax, royalty, and other payments it shells out to foreign governments where it operates. Previously, companies were able to conceal this information, enabling a culture of corrupt payoffs that kept the petrodollars flowing into authoritarian leaders' coffers -- even where it directly contravened U.S. interests.

Making this kind of financial information available to the public is an important step toward reducing corruption and increasing political accountability in developing countries where oil is extracted. This, in turn, will improve development prospects and counteract authoritarian tendencies, potentially even reducing rates of civil conflict. High rates of corruption in oil-producing states like Angola and Nigeria, for instance, have stymied development and contributed to human rights abuses -- some of which oil companies were directly responsible for. In Nigeria, for instance, Royal Dutch Shell is accused of complicity in dozens of murders and human rights abuses, the details of which have been laid bare in a U.S. Supreme Court case this year.

In Angola, both sides of the bloody civil war that lasted from 1975-2002 were financed by natural resource wealth: one by oil, the other by diamonds. The oil industry played a pivotal role in that war, generating critical funding for the eventual victors, the People's Movement for the Liberation of Angola (MPLA), as well as grievances that inspired separatist groups in the oil-rich Cabinda region to fight for independence from the rest of the country. The presence of oil companies also generated additional incentives for South Africa, Cuba, and the Soviet Union to intervene, as each stood to gain preferential access to Angola's oil in the event that its side won (though oil was not their only motive).

But the SEC ruling is not just beneficial to developing countries -- it is also in the interests of the United States and its allies. If oil money is not managed well -- and it rarely is -- it can get channeled into civil and interstate conflicts that threaten the United States or its interests. Research shows that oil-producing states led by revolutionary governments like that of ousted Libyan leader Muammar al-Qaddafi are more than three times as likely to instigate militarized international conflicts as a typical state. Oil income makes these petrostates aggressive, emboldening them to pick fights they might not otherwise attempt -- think Iraq's 1991 invasion of Kuwait or Libya's armed conflicts with Chad that lasted over two decades. And with 16 developing countries about to become new oil exporters, the likelihood of petro-fueled conflict is only getting higher.

Among those that have recently uncovered oil reserves are Liberia, Mali, Sierra Leone, and Uganda -- all of which were recently entangled in civil or interstate war, or both. Providing these governments with oil income -- especially without transparent financial procedures and political institutions -- is an invitation to disaster.

Predictably, the U.S. oil industry opposed the SEC ruling. Executives at Exxon and Shell have come out against the rule change on the grounds that it could contravene local laws in oil-producing countries. Yet it's not even clear that laws forbidding the disclosure of such payments exist. Of the four countries (Angola, Cameroon, Qatar, and China) identified by the industry as having such laws, three clearly do not prohibit disclosure, and there is no evidence of a legal prohibition in the fourth (China).  Brazilian oil giant Petrobras, which operates in 30 countries (including Angola) and will fall under the new rules because it is listed on a U.S. stock exchange, has said it was not aware of any country with a curb on official disclosure.

The oil lobby has so far stuck to its guns, insisting that in addition to respecting local laws, it must also safeguard sensitive commercial information. The head of the American Petroleum Institute, for example, argued in the Wall Street Journal: "The danger arises if publicly traded energy firms are required to release -- for public consumption -- commercially sensitive, detailed payment information about every foreign project." But the law makes no such requirements; the royalty rate or commercial terms of a project, for instance, do not need to be released. Only the type and total amount of payments made for each project and to each government need to be reported.  A more likely explanation for the oil industry's opposition is its desire to remain insulated from public scrutiny and criticism.

No one should be fooled by Big Oil's reaction to the SEC decision. Whatever small burden it is forced to bear will be more than outweighed by reduced corruption in oil-producing states and ultimately, reduced chances of war. The SEC ought to be congratulated.

John Moore / Getty Images


Breivik Won

In the end, Norway's killer got what he wanted: official recognition that his extremist ideology doesn't make him a madman.

After being sentenced Friday to 21 years in prison for the July 22 attacks that killed 77 people in Norway, Anders Behring Breivik was asked how he wished to respond to the ruling. Did he wish to appeal? Did he want some time to think about it? Flanked by his attorneys, he shuffled some papers, pulled the microphone toward him, and denounced the proceedings.

"As I explained in my first statement to the court on April 16, I do not recognize this court as legitimate. I do not recognize this court as it has received its mandate from political parties that support multiculturalism.... The verdict is in my eyes illegitimate. At the same time, I cannot appeal the verdict, for to appeal would be to legitimize this court."

After a brief pause, Breivik continued: "I wish to end by expressing my regret. I express my regret to militant nationalists in Norway and Europe that I can no longer..."  With that, Judge Wenche Arntzen angrily cut him off. If Breivik wished to speak to his followers, Arntzen would have none of it, turning to Brevik's lawyer instead to determine whether he wished to file an appeal. He did not, Brevik's attorney said.

And with that, Norway's trial of a century came to an end -- and Brevik won. The prosecution had asked the court to find Breivik insane, an argument the court rejected, and in a press conference after the trial proceedings, it was announced that the prosecution would not appeal the ruling. But Breivik got exactly what he wanted: to be pronounced mentally fit enough to be punished for actions he has never disavowed, not dismissed as a madman.

Though he denounced the court as illegitimate and did not recognize its authority, Breivik admitted to carrying out the attack that amounted to Norway's worst peacetime atrocity. In the immediate aftermath of the attack, one question kept being asked: "How could this happen in Norway?" What could possibly compel this blonde, blue-eyed Norwegian to carry out a grisly attack against his countrymen, most of whom were teenagers at a political summer camp on the idyllic island of Utoya? Surely, many argued, this must be the work of a lunatic, someone who has lost all grip on reality, someone who is deeply ill.

But Breivik has rejected that narrative, styling himself as a foot soldier in the fight against "multiculturalism," which he thinks represents a mortal threat to all that he considers good --Norway, Europe, Christendom. In this way, Breivik represents the utmost extreme of a radical right-wing ideology that has made significant gains in Europe over the past two decades. In Norway, its representative is Fremskrittspartiet -- the Progress Party -- of which Breivik was at one point a member. Across the continent, a similar screed of xenophobic paranoia is peddled by the likes of Jean Marie le Pen in France, Geert Wilders in the Netherlands, and, before his death, Jorg Haider in Austria.

For this reason, Breivik is highly dangerous for the contemporary radical right. These parties have sought to place themselves as legitimate political movements while at the same time advocating explicitly racist policies, especially toward Europe's growing Muslim population. Breivik risks tarring these groups with his violent acts, which, in turn, endangers the parliamentary gains made by the far right. And make no mistake, the far right is on the march: In Norway, the Progress Party won 22.9 percent of the vote in 2009, the FPO won 17.5 percent of the vote in Austria in 2008, and the Freedom Party won 15.5 percent of the vote in the Netherlands in 2010.

The question of Breivik's sanity therefore cuts in two different directions. In Norway, dismissing Breivik as a madman allows his actions to be written off as an utter aberration. For the right, his insanity would mean that an ideological climate rich in racism and xenophobia had no significant role in nurturing a man who proclaims himself a soldier in a war for European civilization. But if he is sane, Norway faces the prickly question of explaining how such an act could have taken place. For the right, if he is sane, the ideological stew in which Breivik steeped becomes more difficult than ever to ignore.

In its decision Friday, the Oslo court had to decide between two conflicting psychiatric evaluations. One evaluation found that Breivik suffered from schizophrenia and could not be held accountable for his actions. The other found that while Breivik suffered from narcissistic personality disorder -- a condition marked by an "inflated sense of self-importance," according to the U.S. National Institutes of Health -- his mental state did not cross the line of psychosis and could, in fact, be comprehended within the context of his beliefs.

The court sided with the latter report and found that the first evaluation had erred by failing to consider "his actions in the light of his right-wing extremist ideology." In court on Friday, Judge Arntzen read the entire verdict, which goes into painstaking detail about the reasons for ruling in favor of Breivik's sanity.  It notes that when police arrived at Utoya after the shooting, Breivik calmly and clearly explained his actions. It notes that in conversations with his psychiatrists, Breivik is able to engage in the give and take of argument and is able to acknowledge the validity of other points of view. It further notes that he is now emotionally stable and has good impulse control.

But above these psychiatric niceties hovers the fictional organization to which Breivik claims to belong, the Knights Templar. Investigators have found no evidence of any such organization, and Breivik's insistence that there is in fact such a group dedicated to the battle against multiculturalism remains a prime example of the kind of delusional thinking that marks his worldview. But the court discounted this argument, contending that the Knights Templar was but one piece of Breivik's elaborate -- and rational -- plan. Such an organization, the court argued, was imagined to add legitimacy to Breivik's actions in the immediate aftermath of the attack and helped strike fear by raising the specter of other attacks. Crucially, the court argued, Breivik has de-emphasized the organization over the course of the trial, a clear example of his ability to think rationally and strategically.

In the days after the attack, Norwegian Prime Minister Jens Stoltenberg delivered a widely praised speech in which he promised that Norway would respond to the attacks with "more democracy, more openness and greater political participation." A repudiation of previous responses acts of terror that have been followed by security crackdowns and rollbacks of civil liberties, Stoltenberg's vision was hailed as a brave embrace of democratic values. Stoltenberg's vision came to fruition Friday with a numbingly procedural reading of his verdict in a civilian courtroom with a team of lawyers at his side. But that wasn't enough to wipe the smug look off Breivik's face.

In the press conference with prosecutors that immediately followed Friday's ruling, a reporter for the Associated Press asked whether Breivik hadn't gotten everything he wanted. His attack was successful, and, now, an Oslo court, defying the wish of the prosecutors, had validated his sanity. The prosecutors dodged the question, saying they respected the court's decision, but the question hung in the air.

When he left the courtroom, Breivik made his trademark gesture: his clenched right fist touched his heart, and then he extended his arm in a modified Heil Hitler, his fist still clenched. Sixty-seven years after the end of World War II, it was a ridiculous gesture. But as his face curled into a smile, it was also gesture of victory -- at least in his mind.

Junge, Heiko/AFP/GettyImages