The Petroleum and Poverty Paradox: Assessing U.S

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The Petroleum and Poverty Paradox: Assessing U.S 1 110TH CONGRESS " ! S. PRT. 2d Session COMMITTEE PRINT 110–49 THE PETROLEUM AND POVERTY PARADOX: ASSESSING U.S. AND INTERNATIONAL COMMUNITY EFFORTS TO FIGHT THE RESOURCE CURSE REPORT TO THE MEMBERS OF THE COMMITTEE ON FOREIGN RELATIONS UNITED STATES SENATE ONE HUNDRED TENTH CONGRESS SECOND SESSION OCTOBER 16, 2008 Printed for the use of the Committee on Foreign Relations Available via World Wide Web: http://www.gpoaccess.gov/congress/index.html U.S. GOVERNMENT PRINTING OFFICE 44–727 PDF WASHINGTON : 2008 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 VerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00001 Fmt 5012 Sfmt 5012 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB seneagle COMMITTEE ON FOREIGN RELATIONS JOSEPH R. BIDEN, JR., DELAWARE, Chairman CHRISTOPHER J. DODD, Connecticut RICHARD G. LUGAR, Indiana JOHN F. KERRY, Massachusetts CHUCK HAGEL, Nebraska RUSSELL D. FEINGOLD, Wisconsin NORM COLEMAN, Minnesota BARBARA BOXER, California BOB CORKER, Tennessee BILL NELSON, Florida JOHN E. SUNUNU, New Hampshire BARACK OBAMA, Illinois GEORGE V. VOINOVICH, Ohio ROBERT MENENDEZ, New Jersey LISA MURKOWSKI, Alaska BENJAMIN L. CARDIN, Maryland JIM DEMINT, South Carolina ROBERT P. CASEY, JR., Pennsylvania JOHNNY ISAKSON, Georgia JIM WEBB, Virginia DAVID VITTER, Louisiana ANTONY J. BLINKEN, Staff Director KENNETH A. MYERS, JR., Republican Staff Director (II) VerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00002 Fmt 5904 Sfmt 5904 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB CONTENTS Page Letter of Transmittal ............................................................................................... v Introduction .............................................................................................................. 1 Fighting the Oil Corruption Curse .................................................................. 1 Findings .................................................................................................................... 2 Recommendations .................................................................................................... 5 Discussion ................................................................................................................. 9 Resource Curse ................................................................................................. 9 The Transparency Cure ................................................................................... 12 Extractive Industry Transparency Initiative ................................................. 13 United States .................................................................................................... 17 Mandatory Securities Reporting ..................................................................... 20 Additional Multilateral Efforts ........................................................................ 21 Extractive Industry Transparency Initiative Plus Plus ......................... 21 G-8 .............................................................................................................. 21 International Monetary Fund .................................................................. 22 World Bank and Regional Development Banks ...................................... 24 Extractive Companies ...................................................................................... 25 Resource Revenue and Sovereign Wealth Funds ........................................... 26 Country Reviews ...................................................................................................... 28 Africa ................................................................................................................. 28 Angola ........................................................................................................ 28 Chad ........................................................................................................... 31 Equatorial Guinea ..................................................................................... 33 Ghana ......................................................................................................... 36 Nigeria ........................................................................................................ 38 Asia .................................................................................................................... 42 Cambodia ................................................................................................... 42 China .......................................................................................................... 44 Indonesia .................................................................................................... 47 Timor-Leste ................................................................................................ 49 Vietnam ...................................................................................................... 51 Europe and Central Asia ................................................................................. 54 Azerbaijan .................................................................................................. 54 Kazakhstan ................................................................................................ 56 Norway ....................................................................................................... 58 Russia ......................................................................................................... 59 United Kingdom ........................................................................................ 62 (III) VerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00003 Fmt 5905 Sfmt 5905 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB iv Page Country Reviews (continued) .................................................................................. Latin America ................................................................................................... 63 Brazil .......................................................................................................... 63 Chile ........................................................................................................... 65 Peru ............................................................................................................ 67 Middle East ....................................................................................................... 70 Iraq ............................................................................................................. 70 Saudi Arabia .............................................................................................. 73 United Arab Emirates ............................................................................... 75 APPENDIXES Appendix I: Administration Responses to Questions from Senator Lugar ......... 79 Appendix II: U.S. Legislation Pertaining to EITI and Related Extractive Industry Issues ..................................................................................................... 85 Appendix III: Summary of G-8 Commitments on Extractive Industry Trans- parency .................................................................................................................. 93 Appendix IV: Excerpt from Accountability Report: Implementation Review of G-8 on Anti-Corruption Commitments ........................................................... 103 Appendix V: Extractive Industry Transparency Initiative U.N. Resolution ....... 111 Appendix VI: World Oil Consumption and Production, by Country .................... 113 Appendix VII: Origins of U.S. Imports of Crude Oil ............................................. 115 Appendix VIII: Acronyms ........................................................................................ 117 VerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00004 Fmt 5905 Sfmt 5905 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB LETTER OF TRANSMITTAL UNITED STATES SENATE, COMMITTEE ON FOREIGN RELATIONS, Washington, DC, October 16, 2008. DEAR COLLEAGUES: I recently directed minority staff of the Sen- ate Committee on Foreign Relations to travel to a number of nat- ural resource-rich developing countries to assess U.S. and inter- national efforts to address the ‘‘resource curse,’’ the phenomenon whereby large reserves of oil or other resources often negatively af- fect a country’s economic growth, corruption level and stability. Overcoming the impacts of this curse helps promote U.S. policy goals of poverty alleviation, good governance and energy security. With the soaring price of oil inflicting economic pain on American consumers, creating vast pools of sovereign wealth controlled by often authoritarian regimes, and jeopardizing gains we have made in poverty alleviation worldwide, the prudent management of en- ergy flows and their revenues has formed a critical nexus of U.S. foreign and domestic policy: failure to secure our interests abroad has threatened prosperity at home. Paradoxically, history shows that rather than a blessing, energy reserves can be a bane for many poor countries, leading to fraud, corruption, wasteful spending, military adventurism and insta- bility. Too often, oil money that should go to a nation’s poor ends up in the pockets of the rich, or it may be squandered on the trappings of power and massive showcase
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