Benefit Sharing Arrangements in the Russian North and Alaska

As part of a recent study, we investigated benefit sharing arrangements between oil companies and indigenous communities in several regions of Russia—the Nenets Autonomous Okrug [NAO], Khanti-Mansiiski Autonomous Okrug (KhMAO), Sakhalin—and on the North Slope of Alaska—Barrow, Nuiqsut, Kaktovik. Our analysis demonstrates that indigenous communities are not benefitting equally from oil and gas extraction. The project analysed the procedural and distributional equity of four different types of benefit sharing arrangements: paternalism, corporate social responsibility, partnership and shareholder models. Costs and Benefits Oil extraction in remote territories of the Russian North and Alaska brings opportunities for development to remote areas, as well as costs to local communities and indigenous peoples, affecting their subsistence way of life and making land unavailable for traditional resource use. In many cases, it is apparent that the costs of resource extraction to local communities outweigh the benefits. Most transnational corporations working in the Arctic oil and gas sector have declared their commitment to benefit-sharing arrangements that assist indigenous communities and protect indigenous rights to land and access to traditional resources, but the local implementation of these commitments varies. Ideally, benefit sharing represents a more stringent notion of social equity than corporate social responsibility (CSR), since it claims to reduce the gap between local resource providers and global beneficiaries (Schroeder, 2007). Differences in benefit sharing arrangements depend upon legislation, local and regional contexts and the level of empowerment of indigenous communities. Benefits from oil extraction can be shared by oil companies with local communities in a number of ways: taxes, development of infrastructure, local employment, and through less formal negotiated benefits, such as sponsorship, compensation for damage, oil dividends, and socioeconomic agreements, among others. Ideally, the concept of benefit sharing has to incorporate both procedural and distributional justice that goes beyond compensations for loss. Our recent literature review has identified four models of benefit-sharing arrangements, including paternalism, CSR, partnership and shareholder types (Tysiachniouk 2016). This study is based on qualitative research methodologies, including semi-structured interviews, participant observation and document analysis. Interviews were conducted with more than 190 oil industry representatives, members of indigenous peoples’ organizations, NGO experts, representatives of regional and local authorities, and local residents between 2011 and 2016. Field research showed that there are mixed types of benefit sharing arrangements in both the Russian North and Alaska, resulting in different outcomes for local communities and indigenous peoples. In each region, benefit sharing arrangements were assessed from the perspective of procedural and distributional equity. To assess the fairness of benefit sharing arrangements, we make use of the concept of equity developed by McDermott et al (2013). They make a distinction between procedural and distributive dimensions of equity. Procedural equity refers to participation in decision-making processes—for example, who is involved in the design of benefit sharing arrangements and to what extent can indigenous people participate in them? Distributive equity encompasses the distribution of monetary and non-monetary benefits that indigenous people receive from oil production. The articles in this issue of the Russian Analytical Digest analyze benefit sharing arrangements observed in the Nenets Autonomous Okrug (NAO), Khanti-Mansiiski Autonomous Okrug (KhMAO), Sakhalin, Komi Republic, and the North Slope of Alaska (Barrow, Nuiqsut, Kaktovik). Major Modes of Benefit Sharing Arrangements There are four types of benefit-sharing arrangements. Each is described briefly below. Paternalistic mode: The state is dominant in this mode and it monitors and intervenes in companies’ corporate social responsibility efforts. The company adds to or replaces the state’s efforts to provide support to local communities and indigenous peoples, who do not, or only poorly control, the delivery of benefits. In Russia, the paternalistic mode is rooted in the lingering effects of the Soviet past and often results in the indigenous people’s dependency on the oil companies. Therefore, in some areas, there has been a transition from state paternalism to corporate paternalism. In Alaska, paternalism is perceived by both scholars and indigenous people as rooted in colonialism. Here we show how this system works in the Nenets Autonomous Okrug. RUSSIAN ANALYTICAL DIGEST No. 202, 28 April 2017 3 Corporate Social Responsibility (CSR) mode: The oil company network is dominant in this mode. The company adopts globally developed standards coming from such sources as the International Labor Organization (ILO) convention, United Nations guidelines, the Arctic Council guidelines, standards of the European Bank of Reconstruction and Development (EBRD), World Bank, and International Finance Corporation (IFC). Companies pursuing benefit-sharing arrangements take into account both global standards and local path-dependent practices in a minimalistic way. This mode of benefit sharing arrangements was observed in several Russian regions: Komi Republic, Khanti-Mansiiski Autonomous Okrug and Irkutskaya oblast. This paper illustrates the CSR mode in the example of the Khanti-Mansiiski Autonomous okrug. Partnership mode: This type of benefit sharing takes the form of tripartite partnerships among the oil companies, government and indigenous communities. The partnership mode fosters development, empowerment, self-sufficiency and participatory decision-making in the indigenous communities. This mode was studied on Sakhalin Island. Shareholder mode: The shareholder approach provides residents with dividend funds and shares from regional and village corporations. This mode has been investigated in the North Slope of Alaska.