U.S. Oil Companies, the Nigerian Civil War, and the Origins of Opacity in the Nigerian Oil Industry

U.S. Oil Companies, the Nigerian Civil War, and the Origins of Opacity in the Nigerian Oil Industry Downloaded from https://academic.oup.com/jah/article/99/1/155/854916 by guest on 29 September 2021 Kairn A. Klieman Present-day oil producers in Africa suffer from the “oil curse” or the “natural resource curse.” Despite massive influxes of oil revenues, these nations experience stagnating economies, declining standards of living, and increasingly authoritarian and corrupt forms of government. Nigeria provides a classic example. Ranked fifth globally in oil production, this nation has earned more than $340 billion in oil and gas revenues since the 1970s. Still, 70 percent of its population currently lives on less than one dollar per day, 43 percent have no access to clean water, and rebel insurgents in the oil-producing Niger delta threaten the stability of the Nigerian state. Corruption is rampant. In a recent study, the Nigerian National Petroleum Corporation received a ranking of zero for its level of transparency; the average ranking for the forty-four oil companies evaluated was sixty-five.1 International financial institutions and Western governments have advocated increased transparency to cure the oil curse—focusing on public disclosure of oil-related financial dealings to discourage the misappropriation of revenues and to hold governments accountable. The current emphasis on corruption as the cause of the natural resource curse represents the latest in a long history of economists’ and political scientists’ attempts to explain the phenomenon, labeled resource curse theory. Because those fields privilege the creation of universalist explanations, resource curse theory has become deterministic, failing to take into account specific historical eras, cultures, and locales. This article provides a corrective, utilizing historical methods to delineate the convergence of events, actors, and policies that set the Nigerian oil industry on its path toward becoming the most opaque on the globe today.2 Kairn A. Klieman is an associate professor of African history at the University of Houston. She would like to thank Tyler Priest, Jamie Monson, Obi Nwakanma, Tom Mitro, James Schafer, the Energy and Environmental History Discussion Group at the University of Houston, and the anonymous JAH reviewers for their insightful comments. She also thanks the very capable research assistants Samantha Rodriguez, Tomiko Meeks, and Kinal Patel. Readers may contact Klieman at [email protected]. 1 On the “oil curse,” see Macartan Humphries, Jeffery D. Sachs, and Joseph E. Stiglitz, eds., Escaping the Resource Curse (New York, 2007), xi; and Ian Gary and Terry Lynn Karl, Bottom of the Barrel: Africa’s Oil Boom and the Poor (Baltimore, 2003), 25–27. “Promoting Revenue Transparency: 2011 Report on Oil and Gas Companies,” Transparency International, http://www.transparency.org/news_room/in_focus/2011/prt_2011#7. 2 On the resource curse theory, see, for example, Hazem Beblawi and Giacomo Luciani, eds., The Rentier State, vol. II: Nation, State, and Integration in the Arab World (London, 1987); Terry Lynn Karl, The Paradox of Plenty: Oil Booms and Petro-states (Berkeley, 1997); and Ricardo Soares de Oliveira, Oil and Politics in the Gulf of Guinea (New York, 2007). doi: 10.1093/jahist/jas072 © The Author 2012. Published by Oxford University Press on behalf of the Organization of American Historians. All rights reserved. For permissions, please e-mail: [email protected]. June 2012 The Journal of American History 155 156 The Journal of American History June 2012 The period of civil war in Nigeria (1967–1970) is often neglected in analyses of Nigerian oil, but during that time the structures, policies, and political relations that created Nigeria’s unique version of the oil curse were established. New evidence reveals that a tax battle waged by U.S. oil companies contributed to the regional and ethnic tensions leading to the outbreak of war. In the prewar oil boom period in Nigeria, U.S. independent oil companies undertook intensive lobbying and propaganda campaigns to convince Nigerians that newly imposed Libyan-style tax laws would force them out of Downloaded from https://academic.oup.com/jah/article/99/1/155/854916 by guest on 29 September 2021 business. In turn, they argued, the regions where they operated, as well as the ethnic groups inhabiting them, would be relegated to perpetual poverty. This campaign thus exacerbated ethnic tensions, falsely heightening the stakes over which the war was to be fought. Furthermore, key actors in the drama—the federal military government under Yakubu Gowon, the international oil companies and their home governments, and the secessionist leader Emeka Ojukwu—all concluded, for differing reasons, that oil matters were best kept out of the public sphere. As a result, the particular political economy of oil in Nigeria introduced opacity—the deliberate obfuscation of information related to oil production, revenues, accounting, and operations—as a governing principle. Background: Nigeria’s First Republic and the Outbreak of Civil War The roots of Nigeria’s civil war can be traced to colonial rule, when the British forced three very distinct peoples, each living in their own region—the predominantly Muslim Hausa-Fulani in the North, the Yoruba in the Southwest, and the Igbo in the Southeast— to integrate into a state that encouraged regional and ethnic competition. Interspersed between these three groups were ethnic minorities that lacked political rights. Recognizing the tensions inherent in the system, the British worked with Nigerian leaders to create a federal system that gave each region substantial autonomy over its own affairs. Although the Yoruba and the Igbo called for Nigerian independence early on, the northerners greatly feared southern domination in an independent state.3 To manage this tension, the British appointed the moderate northerner Abubakar Tafawa Balewa as the first prime minister in 1960. Nigeria achieved independence that same year and in 1963 became the Federal Republic of Nigeria. A fourth national region (the midwestern region) was created at that time to give resident minorities a larger political voice. None of those changes, however, quelled the problem of regionalism. Citizens living outside their home region faced discrimination and exclusion in the provision of public goods. The system established in 1963 ultimately fostered “an intense rivalry among the regions to outdo each other in socioeconomic development, maximize their share of the federation’s resources, and control federal power.”4 By 1964 the federal structure was failing. Ethnic minorities were revolting, rival political factions were fighting in the western region, regional governors were attempting to inflate population numbers in national censuses, and elections were both boycotted and rigged. Disillusioned with political chaos and corruption, a group of (primarily Igbo) army officers staged the January Coup (January 15, 1966), assassinating Balewa and key members of his government. A military government was installed under Gen. Johnson 3 For an overview of the ethnic tensions and the conflict in Nigeria, see Eghosa E. Osaghae,Crippled Giant: Nigeria since Independence (Bloomington, 1998); and Karl Maier, This House Has Fallen: Nigeria in Crisis (New York, 2000). 4 Osaghae, Crippled Giant, 7, 9. The Origins of Opacity in the Nigerian Oil Industry 157 Aguiyi-Ironsi (also an Igbo) thereby ending Nigeria’s First Republic. Aguiyi-Ironsi quickly introduced a new constitution and attempted to create a unitary state. Aguiyi-Ironsi’s move threatened northern military officers, who staged a countercoup six months later, on July 29, 1966, killing Aguiyi-Ironsi and replacing him with a northerner, Maj. Gen. Yakubu Gowon. Extreme violence in the North, in which thousands of Igbo civil servants and their families were massacred, preceded and followed the coup. As a result, Lt. Col. Emeka Ojukwu, who had been appointed governor of the eastern region Downloaded from https://academic.oup.com/jah/article/99/1/155/854916 by guest on 29 September 2021 under Aguiyi-Ironsi, called for all Igbos to return to their homeland. Refusing to recognize Gowon as legitimate head of state and calling for a loose confederation of states, Ojukwu began the nine-month standoff that led to the formal creation of Biafra (the secessionist state) on May 30, 1967. Thirty-five days later the first shots were fired, and the war between the federal government of Nigeria and the secessionist state of Biafra began. The Oil Boom of 1964–1965 Standard histories of Nigeria attribute the nation’s first oil boom to the 1970s, when global oil prices skyrocketed. This is a mistaken assumption, for research indicates a substantial boom occurred between 1964 and 1965. Nigerian oil production began in 1956, when Royal Dutch Shell (as Shell D’Arcy) discovered oil at Oloibiri in the eastern region. By 1965 both Shell and Gulf Oil were producing—the former from onshore concessions in the East and the latter offshore in the midwestern region. Five other companies— Société Africaine des Pétroles (safrap), Azienda Generale Italiana Petroli (agip), Philips Petroleum Company, Amoseas, and Mobil—had struck oil and were in the early stages of development, and Tenneco had obtained concessions but not found oil. In the eastern city of Port Harcourt more than twenty-five service companies had established offices, and a new refinery was opened in September 1965.5 The American embassy in Nigeria reported on the “boom atmosphere” of Port Harcourt, citing 1964 as “the benchmark for when Nigeria moved from a marginal producer to a major world oil producer of great promise for the future.” Crude output increased from 84,000 barrels per day in January 1964 to 301,352 barrels per day in August 1965, with an attendant increase in export revenues from £20 million to £60 million, ranking Nigeria the thirteenth-largest oil producer in the world.6 Nearly all of Nigeria’s oil was produced in the eastern region (83 percent by Royal Dutch Shell and 9.4 percent by safrap).

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