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Oil: a blessing and a curse

When oil was discovered in Chad‘s Doba basin in the early 1990s, probably nobody would have imagined the extent of the impact of this commodity on the country. Still in 2003, when the first estimates of possible earnings were made, they put the mark at 2.5 billion dollars in the entire lifespan of the project (25-30 years). Just ten years later, thanks to the surge of the oil price on the global markets, a sum four times higher had already flown into the state coffers.

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This unexpected success is only one of the elements that have turned the country into a case study – both for positive perspectives and risks –  when dealing with Africa’s new oil producers. After the Doba oil fields, operated by Esso (as the American company ExxonMobil is known in the country), drilling begun also in the Bongor Basin (where a license was awarded to the Chinese National Petroleum Corporation, or CNPC) and in the Badila field (where the Canadian company Caracal, previously known as Griffith and now controlled by Glencore, was active). But the oil boom did not bring economic development or poverty relief: Chad is still 184th out of 187 countries on the UN’s Human Development Index. This also was the subject of several controversies between the local bishops – who denounced ‘corruption and partiality’ and the ‘total impunity’ in the hydrocarbon sector – and the government. The last case was that of bishop Michele Russo of Doba (now and emeritus of the same diocese), who in 2012 was temporarily expelled from the country after having reportedly criticized  the mismanagement of natural resources by the authorities.

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The development policies made possible by the recently discovered wealth, in fact, have been much less successful than expected: apart from modernizing its army, Chad has built roads and public buildings, but their actual usefulness has often been questioned, as in the case of the University of Doba, which wasn’t probably a priority in a city with a population of just 50.000 and in a country where, every year, a mere 5.000 youth get a degree. And yet, when it was established, the agreement under which Chad’s oil industry was set up, was seen as a breakthrough: it made provisions for 80% of the revenue to be spent on key social sectors such as health and education, and for a fund ‘for future generations’ financed with another part of the income.
More than ten years later, it can undoubtedly be said that the ground-breaking agreement, which also involved the World Bank, has largely failed in its aim to avoid the so-called ‘resource curse’, plaguing many African countries. Not only did Chad’s development never materialize, but the fortunes of the country are still tied to the oil revenues and, therefore, the oil prices. When last year the latter began to fall on the international markets, the national economy also suffered.

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The lack of the money needed to finance the ambitious military missions on foreign soil was just one of the consequences. The great projects for an African Union summit due to take place in N’Djamena in June had to be stopped and even paying civil servants’ salaries and day-to-day expenses became increasingly difficult. In the last months the government announced twice that austerity measures were necessary. These included cuts on politicians’ indemnities and expenses (official missions abroad were authorized only if they were an ‘absolute necessity’) but also measures imposed on the general workforce, such as salary freezes. This pushed the unions to declare a national strike in early October, after an alarming report on the economic prospects was released by the International Monetary Fund. “It’s not the workers who must pay for the poor management of the oil revenues”, the union leaders said at the time.
Some international actors, who seemed to be more optimistic on the future of the country, were also hit by the economic crisis. An example is the already mentioned mining and commodity giant Glencore, which in June 2014 accepted to finance with 1.3 billion dollars the purchase by the state of some oil industry assets in the Doba area, following a decision by Chevron to focus on its Texas projects. Then, in August 2015, Glencore was forced to announce a cut in the value of its projects and in its investments in Chad.

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This is not the only shadow cast on Chad’s economic future, since a controversy arose between the government and China’s CNPC: when a number of oil spills in the company’s projects were uncovered, N’Djamena asked for reparations worth 1.2 billion dollars. Given the refusal to comply on CNPC’s part, the authorities threatened to take the firm to an arbitration court in Paris and withdrew five of its exploitation licenses in the country. Even if Déby’s visit to Beijing and his meeting with Chinese president Xi Jinping hinted at reconciliation, the whole incident is emblematic of the choice the country might face in a near future: between oil wealth and environmental integrity. (D.M.)

 

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