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" ! COMMITTEE PRINT 110TH CONGRESS

2d Session 

S. PRT. 

2008

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 


seneagle
COMMITTEE ON FOREIGN RELATIONS

JOSEPH R. BIDEN, JR., DELAWARE, Chairman

CHRISTOPHER J. DODD, Connecticut 

JOHN F. KERRY, Massachusetts 

RUSSELL D. FEINGOLD, Wisconsin 

BARBARA BOXER, California 

BILL NELSON, Florida 

BARACK OBAMA, Illinois 

ROBERT MENENDEZ, New Jersey 

BENJAMIN L. CARDIN, Maryland 

ROBERT P. CASEY, JR., Pennsylvania 

JIM WEBB, Virginia 

RICHARD G. LUGAR, Indiana 

CHUCK HAGEL, Nebraska 

NORM COLEMAN, Minnesota 

BOB CORKER, Tennessee 

JOHN E. SUNUNU, New Hampshire 

GEORGE V. VOINOVICH, Ohio 

LISA MURKOWSKI, Alaska 

JIM DEMINT, South Carolina 

JOHNNY ISAKSON, Georgia 

DAVID VITTER, Louisiana 

ANTONY J. BLINKEN, Staff Director

KENNETH A. MYERS, JR., Republican Staff Director

(II)

C O N T E N T S 

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)

Page

iv 

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 Transparency .................................................................................................................. 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 

(v) 

LETTER OF TRANSMITTAL 

UNITED STATES SENATE, 

COMMITTEE ON FOREIGN RELATIONS, 

Washington, DC, October 16, 2008. 

DEAR COLLEAGUES: I recently directed minority staff of the Senate Committee on Foreign Relations to travel to a number of natural resource-rich developing countries to assess U.S. and international efforts to address the ‘‘resource curse,’’ the phenomenon 

whereby large reserves of oil or other resources often negatively affect 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 energy 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 instability. 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 projects instead of being 

invested productively and equitably. In some countries, national 

poverty has actually increased following the discovery of oil. 

This ‘‘resource curse’’ affects us as well as producing countries. 

It exacerbates global poverty which can be a seedbed for terrorism, 

it dulls the effect of our foreign assistance, it empowers autocrats 

and dictators, and it can crimp world petroleum supplies by breeding instability. The ongoing rebel attacks on Nigeria’s oil facilities, 

for instance, are a factor in today’s record high crude prices. 

This report argues that transparency in revenues, expenditure 

and wealth management from extractive industries is crucial to defeating the resource curse. Achieving transparency requires a higher profile in U.S. diplomacy and foreign policy. When oil revenue 

in a producing country can be easily tracked, that nation’s elite are 

more likely to use revenues for the vital needs of their citizens and 

less likely to squander newfound wealth for self-aggrandizing 

projects. When financial markets see stable economic growth and 

political organization in oil-rich states, supplies are more reliable 

vi 

and risk premiums factored into prices at the gas pump are diminished. And as official corruption tempted by oil wealth abates, our 

foreign assistance dollars can find more fertile ground to alleviate 

the suffering of the world’s most needy. 

I hope you find this report helpful as the U.S. Congress contends 

with the complex challenge of securing stable, affordable energy 

sources for our constituents, while curbing petro-authoritarianism, 

corruption, and privation abroad. 

Sincerely, 

RICHARD G. LUGAR, Ranking Minority Member. 

(1) 

1This Senate Foreign Relations Committee minority staff study was coordinated by Nilmini 

Gunaratne Rubin and includes significant contributions from Bradley Bowman, Jay Branegan, 

Neil Brown, Brooke Daley, Patrick Garvey, Keith Luse, Carl Meacham, Alison McCormick, Ken 

Myers III, Michael Phelan, and Marik String. The report includes substantial input from Congressional Research Service staffers Danielle Langton and Nicolas Cook. 

THE PETROLEUM AND POVERTY PARADOX: 

ASSESSING U.S. AND INTERNATIONAL 

COMMUNITY EFFORTS TO 

FIGHT THE RESOURCE CURSE1

INTRODUCTION

FIGHTING THE OIL CORRUPTION CURSE

At present, about 3.5 billion people live in countries rich in extractive natural resources such as oil, gas, solid minerals and timber. With good governance, these resources can generate vast sums 

to foster growth and reduce poverty. However, many of these countries have weak governance and the revenues have resulted in corruption and conflict. 

At the direction of Ranking Member Richard G. Lugar, the minority staff of the Senate Foreign Relations Committee undertook 

a study of transparency in extractive industries as part of the committee’s oversight responsibilities. Transparency is a key issue for 

promoting United States foreign policy and security interests, including energy security, combating corruption, and delivering the 

benefits of natural resources production for development. The effort 

is similar in scope to the ‘‘Embassies Grapple to Guide Foreign 

Aid’’ study issued in November 2007 and the ‘‘Embassies as Command Posts’’ study completed in December 2006. 

Through meetings, site visits and document reviews, staff members tested the viability and efficacy of policy recommendations for 

improving three levels of transparency: in revenues earned by resource rich countries; in expenditures made by those countries; and 

in their investment strategies. Staff also examined the impact of 

international transparency efforts such as the Extractive Industry 

Transparency Initiative (EITI), the G-8 initiatives, the IMF Resource Revenue Guide, the World Bank Anti-Corruption and Governance Strategy, and others. 

Staff drew on information gathered on travel to countries in: Africa (Angola, Chad, Equatorial Guinea, Ghana, Nigeria); Asia 

(Cambodia, China, Indonesia, Timor-Leste, Vietnam); Europe and 

Central Asia (Azerbaijan, Kazakhstan, Norway, Russia, United 

Kingdom); Latin America (Brazil, Chile, Peru); and the Middle East 

(Iraq, Saudi Arabia, United Arab Emirates). Overseas, staff met 

with foreign government officials, international organizations, 

2 

2 CIA World Factbook. 

members of the business community, and representatives of civil 

society. 

In Washington, D.C., committee staff met with officials from the 

National Security Council, State Department, U.S. Agency for 

International Development, Treasury Department, U.S. Trade Representative, Commerce Department, Bureau of Land Management, 

Mineral Management Service, U.S. Forest Service, U.S. Geological 

Survey, World Bank, International Monetary Fund and InterAmerican Development Bank, as well as representatives from nongovernmental organizations, advocacy groups, industry organizations, energy, extractive and financial companies, and academics. 

FINDINGS

The soaring price of oil is dramatically shifting the global economic landscape. In many countries, including the United States, 

it is hurting growth and inflicting great economic pain. By the 

same token, it is rapidly increasing the nominal wealth of the oilexporting nations, including many still classified as underdeveloped 

(see Appendix VI for graphs of leading oil producers and consumers). Unfortunately, there is no guarantee that these countries 

will enter into a new period of prosperity. In fact, the opposite may 

well happen. 

Paradoxically, history shows that rather than a blessing, oil or 

natural gas reserves can be a bane for many poor countries, leading to fraud, corruption, wasteful spending, military adventurism 

and instability. 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 grand palaces and massive showcase projects instead of being 

invested productively. A classic case is Nigeria, now the world’s 

eighth largest oil exporter, where despite half a century of oil production and half a trillion dollars in revenues, poverty has actually 

increased,2 corruption is rife and violence persists in the oil-rich 

Niger Delta. Having endured some of the worst consequences of oil 

wealth, Nigeria is now taking some of the most deliberate steps to 

correct the problem. 

The Netherlands found its economy sliding instead of soaring 

after it discovered natural gas in the early 1960s, thanks to a rising exchange rate and a fall-off in manufacturing, a phenomenon 

now known as ‘‘Dutch disease.’’ Even the states of the Organization 

of the Petroleum Exporting Countries (OPEC) are not immune: as 

a group, their per capita GNP actually dropped from 1965 to 1998, 

according to one study. The influx of ‘‘easy money’’ from other extractive natural resource industries, like gold, copper, or gems, can 

similarly thwart economic reform and devastate economies with 

primitive fiscal regimes. Governments with authoritarian tendencies can be insulated from domestic and international pressure 

by the steady stream of extractive revenues, sometimes leading to 

worse governance over time. 

While the ‘‘resource curse’’ damages U.S. foreign policy and humanitarian interests abroad, it also negatively impacts Americans 

at home. Social unrest, buoyed by perceived injustice in expenditure of oil revenue and use of oil as a currency of conflict, destaVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
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3 EITI’s 11 supporter countries (Australia, Belgium, Canada, France, Germany, Italy, the 

Netherlands, Norway, Spain, the United States, and the United Kingdom) that have provided 

political, technical and/or financial assistance and EITI’s 23 candidate countries (Azerbaijan, 

Cameroon, Cote d’Ivoire, Democratic Republic of Congo, Equatorial Guinea, Gabon, Ghana, 

Guinea, Kazakhstan, Kyrgyzstan, Liberia, Madagascar, Mali, Mauritania, Mongolia, Niger, Nigeria, Peru, Republic of the Congo, Sao Tomee Principe, Sierra Leone, Timor-Leste, and Yemen) 

intend to implement EITI criteria and await validation. 

bilizes the reliability of oil supplies. Resulting tightening of global 

markets and attachment of a risk cost premium to oil price inflate 

prices at U.S. gas pumps and result in a massive wealth transfer 

out of the United States (see Appendix VII for the composition of 

U.S. crude oil imports by country). Instability in the Niger Delta, 

which has shut-in nearly as much oil as there is existing spare capacity in the world, is a case in point of organized criminal and 

militant activity weighing heavily on global oil prices. Actions to 

support accountability, transparency and anti-corruption efforts in 

developing countries with extractive industries such as oil and gas 

could have a significant impact on the energy market. Where there 

is instability, there are higher prices. Foreign aid investments to 

support development in oil exporting regions can help quell discontent and help assure a stable energy supply. 

The link between energy security, energy prices, and transparency appears underappreciated within U.S. policy. 

Because the resource curse threatens our own security, economic 

and humanitarian interests, Senate Foreign Relations Committee 

staff assessed the efforts to help remove it. Looking at more than 

20 countries around the world, staff found that while there is 

greater awareness of the potential dangers from sudden oil and 

other extractive industry wealth, progress has been spotty at best. 

Ghana, a recent addition to the list of resource rich countries with 

the discovery of significant oil reserves beneath its coastal waters 

in 2007, is a country with a clear view of the potential outcomes 

of such a discovery. The situation in Ghana will be watched closely 

around the world to see if forewarning of the pitfalls can serve to 

effect better governance and cooperative international support in 

defense of domestic development and economic growth. 

To be sure, there is no simple cure, and without political will by 

the exporting country, little can be achieved. The hurdle for effecting change in several natural resource rich countries is high. Governments flush with cash from spiking commodity prices can be 

emboldened against reform. But where leaders are ready to face 

the problem, outsiders can offer important incentives and advice. 

One key prescription is to promote strong anti-corruption measures 

and to press for more openness or transparency in how much revenue extractive-rich countries are receiving, and how they’re spending it. 

The World Bank and the International Monetary Fund have both 

launched efforts to improve accounting and transparency of extractive industry revenues, to make it harder for government officials 

to hide corruption—and easier for citizens to demand that the 

money be spent wisely. 

Separately, a number of countries,3 led by Norway and Britain, 

along with energy and mining companies and civil society groups, 

have formed the Extractive Industries Transparency Initiative 

(EITI), a voluntary program which aims to certify that natural reVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
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source-rich countries, as well as all the companies operating there, 

are honestly accounting for the funds flowing into their coffers. The 

leaders of the G-8 industrialized countries at their July meeting in 

Japan strongly endorsed EITI, as they have nearly every year since 

2003. 

Yet action falls short. In Vietnam, where 30% of the budget 

comes from oil, the World Bank, the United States and other major 

donors have made little effort to support extractive industry transparency. Peru and Equatorial Guinea have signed up for EITI, but 

major-country donors are not stepping forward to strengthen those 

nations’ capacity to manage massive oil wealth. In Angola, which 

has the world’s highest infant mortality rate, the United States is 

terminating an assistance program to help the country administer 

its oil billions. Skeptical Indonesians asked why the United States 

has not signed up for EITI. 

Staff found an urgent need for concerted diplomacy and assistance targeted at budget management, expenditure accountability 

and reserves fund management. Donor coordination in these areas 

is rare and current efforts focused at improving economic performance frequently ignore the governance implications of volatile resource income. And China, whose state-backed companies have a 

large footprint in many developing countries, has not yet engaged 

on these issues. 

U.S. diplomats in several of the countries most threatened by the 

resource curse are often starved for personnel and resources. These 

limited means are often directed by Washington toward humanitarian needs, leaving resource management issues on the back 

burner. 

Over time, extractive revenues will level off and eventually dry 

up. For some small producers that drop in revenue is in the nearto mid-term. It is critical that these countries, with our help, act 

today to ensure that the revenues are managed and invested wisely 

so that the people and their future are not impoverished after earning billions in this time of high energy prices. Based on the findings of their work, staff has made a number of recommendations 

for action by the various parties. Among them: 

• The United States should demonstrate leadership internationally. It should sign up for EITI and provide additional financial 

assistance to that organization’s international trust fund. This 

low-cost move would pay large benefits by encouraging more 

developing countries to follow. It should explicitly seek to engage China and India. 

• The G-8 countries should require that their oil, gas and mining 

companies publish country-by-country data on their royalty, 

tax and other payments as part of routine financial reporting, 

and encourage influential credit rating agencies and commercial banks to take explicit account of a country’s transparency 

record. 

• The international donors who give aid to resource-rich countries should focus their efforts on improving revenue management and fighting corruption. Relatively small amounts of aid 

money could thus help channel large amounts of a country’s 

own funds toward poverty reduction. 

5 

• The World Bank and the IMF, which make regular assessments of country performance, should consistently reinforce 

the importance of transparency and good governance. The regional development banks should step up their efforts on governance and anti-corruption in countries with significant extractive industries. 

• The Extractive Industries Transparency Initiative’s secretariat, 

building on the lessons learned so far, should provide more 

technical assistance to underdeveloped countries that need 

help in implementing anti-corruption measures. It should also 

be more active in promoting and demonstrating the benefits of 

transparency to both countries and companies. 

• Oil, gas and mining companies, which often express support for 

the transparency agenda, should match their anti-corruption 

rhetoric with action by voluntarily disclosing more of their payments to countries where they operate. 

• Most importantly, the United States, whose attention to extractive industry transparency often appears sporadic and halfhearted, should make this a top priority throughout the administration, with the State Department as the lead agency, coordinating closely with Treasury and USAID. Embassies 

should develop country-specific transparency advocacy strategies. 

Minority staff found many encouraging anecdotes on the benefits 

of improved transparency. However, there is not yet a compelling 

body of evidence to prove the case that improved transparency will 

bring improved governance and economic development. Yet the 

negative impacts of lack of transparency with the accompanying 

corruption and ineffectual usage of funds are clear. It is also clear 

that the United States Government’s integration of transparency 

into foreign policy is in it’s initial stages. Innovative public-private 

partnerships and co-funding with host governments show promise. 

Initial efforts have been impinged by lack of personnel resources in 

several embassies, inflexibility in funding, and insufficient coordination among agencies. The potential of U.S. moral support, bilaterally and in multilateral fora, is substantial and will yield results 

only with the backing of diplomatic resources. 

RECOMMENDATIONS

Committee staff developed recommendations for the next administration, Congress, the international community and extractive 

companies to help nations fight the ‘‘resource curse’’ and advance 

the U.S. policy aims of reducing poverty, improving governance and 

securing our energy interests. 

1) The President should put greater emphasis on promoting 

extractive industry transparency by developing a clear strategy 

and designating responsibility for implementation of that strategy. 

a) The President should outline a clear strategy to drive 

our government’s push for extractive industry transparency from bidding and contracts, through company payments to governments, to budget transparency and acVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
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countability of spending. Such a strategy will necessarily 

draw upon expertise spread across government agencies. 

The strategy should identify the State Department as the 

lead coordinating agency and the Bureau of Economic, Energy and Business Affairs as the lead bureau responsible 

for promoting extractive industry transparency. 

b) The President should lead by example and have the 

United States become an implementing country of the 

EITI. This move would pay large benefits by encouraging 

more developing countries to follow. 

2) The Secretary of State should exercise more effort on 

transparency issues, and build on international momentum for 

extractive industry transparency at the United Nations, at the 

EITI secretariat and through our embassies. 

a) The Secretary of State should elevate U.S. representation to the EITI Executive Board to the Under Secretary 

for Economic, Energy and Agricultural Affairs. The U.S. 

has capable representation but at a rank much lower than 

the representatives from other countries, which limits the 

ability of the U.S. to secure change. 

b) The Secretary of State should clearly inform embassies of the importance of transparency efforts and more 

vigorously support such efforts in international fora. For 

instance, besides simply voting for the recently-passed 

EITI United Nations regulation, the U.S. should have been 

a co-sponsor. 

c) The Secretary of State should develop a tailored extractive industry transparency advocacy strategy, according to the conditions in the host-country. Where appropriate, U.S. Government representatives need to engage 

directly with extractive country governments to explain 

the benefits of increased transparency, identify opportunities to promote change, and, where appropriate, encourage 

them to sign onto EITI. 

d) The Secretary of State should review personnel capabilities at embassies in natural resource rich states and fill 

current lapses in embassy staffing. 

e) The Under Secretary for Economic, Energy and Agricultural Affairs should regularly lead coordination meetings of U.S. Government agencies involved with extractive 

industry transparency and should track agency actions 

and results. 

f) The United States should bolster its support for EITI 

by immediately depositing its $3 million contribution to 

the Multi-Donor Trust Fund. 

3) U.S. bilateral assistance in extractive countries should be 

focused on good governance, transparency and building civil society. 

a) Our Ambassadors and country teams should review 

their portfolios for critical opportunities to build capacity 

in governance, especially in revenue management, thus 

leveraging the most valuable additional asset—technical 

7 

know-how—the U.S. can bring to bear where financing is 

not the problem. 

b) USAID, along with the Treasury Department and 

other agencies, should emphasize technical assistance for 

extractive industry transparency in relevant countries, and 

EITI implementation in countries that have signed up for 

the initiative. 

c) Coordination between country teams and technical 

agencies in Washington should be improved and mechanisms put in place so that U.S. Government agencies are 

able to respond promptly and effectively to requests for 

technical assistance. 

d) As Overseas Private Investment Corporation (OPIC) 

is already doing, all U.S. foreign assistance agencies 

(USAID, Millennium Challenge Corporation, ExIm, etc.) 

should integrate transparency promotion into their oil, gas, 

minerals and timber programs, projects and policies. 

e) U.S. agencies should use public-private partnerships 

to provide information technology and training for platforms, such as geonavigator and mineral mapping software, to distribute information so that there would be ‘‘no 

excuses’’ for countries that profess to want to disclose. 

f) U.S. bilateral assistance should also expand upon public-private partnerships to engage experts in the private 

sector for technical assistance. 

g) U.S. bilateral assistance should build upon co-funding 

arrangements for technical expertise where host governments rich in extractive revenues pay the bulk of costs for 

such arrangements. 

4) The Secretaries of State and Treasury should engage 

China, India and Russia on transparency issues generally and 

encourage them to become supporting countries of EITI. Indian 

and Chinese companies are securing extractives contracts 

around the world, particularly in Africa. If they do not integrate transparency into their operations, they could undermine 

other international efforts. 

5) The Securities and Exchange Commission and the Treasury Department should encourage the International Organization of Securities Commissions (IOSCO) to develop consistent 

requirements for disclosure of extractive payments by companies to governments so that all the major stock exchanges require the same information. They should also support an International Accounting Standard for disclosure of extractive payments to governments. 

6) The international donors who give aid to resource-rich 

countries should focus their efforts on improving revenue management and fighting corruption. Relatively small amounts of 

aid money could thus help channel large amounts of countries’ 

own funds toward poverty reduction. 

a) The World Bank and the International Monetary 

Fund, which make regular assessments of countries’ performance, should be consistent in assessment of countries’ 

8 

progress on transparency compared to their own professed 

benchmarks. They also should ensure that their staffing at 

key posts reflects commitments made to those governments in technical assistance on improved financial governance. 

b) The regional development banks should integrate 

EITI into their operations. Not all of the regional development banks have endorsed EITI and, of those that have, 

few have fully applied EITI principles in their projects. 

The regional development banks should condition loans on 

revenue disclosure and contract transparency. 

c) The International Monetary Fund should consistently 

examine the transparency of extractive industry revenues 

for all resource rich countries in its Article IV reviews. 

d) The International Monetary Fund should actively engage and provide technical assistance to resource rich 

countries to implement the IMF sovereign wealth fund 

guidelines. 

7) The G-8 should show commitment to transparency in action, not just words. 

a) The 2008 G-8 report on its anti-corruption accomplishments was a good start but it needs to be done every year 

at a higher standard of disclosure and contain commitments to improved activity during the next disclosure period. 

b) The U.S., in conjunction with the other G-8 nations, 

should require that oil and mining companies listed on 

their stock exchanges publish country-by-country data on 

their royalty, tax and other relevant payments as part of 

routine financial reporting, and ask credit rating agencies 

and commercial banks to take explicit account of a country’s transparency record. 

c) G-8 countries with significant extractives industries 

should sign up for EITI which would enhance the credibility of the initiative and encourage other countries to 

join. 

8) Congress should support mandatory financial reporting requirements on a multilateral basis. This could be done through 

the G-8, where repeated endorsements of EITI and revenue 

transparency have not been followed up with concrete action. 

The SEC could seek to harmonize such reporting requirements 

among major global stock exchanges through the International 

Organization of Securities Commissions. 

9) Congress should pass legislation requiring that U.S. foreign assistance to extractive industry dependent countries include significant support for transparency. 

10) Extractives companies, which have taken the initiative in 

some countries but not others, should step up their engagement to promote transparency and be more proactive in public 

disclosure of revenue payments to foreign governments. Oil 

and mining companies should voluntarily disclose their extracVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00014 Fmt 6633 Sfmt 6633 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
9 

4The ‘‘resource curse’’ section draws heavily on a background memo entitled ‘‘The ‘Resource 

Curse’: Literature Survey Paper Summary’’ prepared by Danielle Langton and Nicolas Cook 

from the Foreign Affairs, Defense, and Trade Division of the Congressional Research Service. 

5See Mitchell Rothman, ‘‘Measuring and apportioning rents from hydroelectric power developments,’’ World Bank Discussion Paper No. 419, July 2000; Lars Lindholt, ‘‘On Natural Resource 

Rent and the Wealth of a Nation A Study Based on National Accounts in Norway 1930–95,’’ 

Discussion Paper 281, Statistics Norway, August 2000; and Ahmad Komarulzaman and Armida 

S. Alisjahbana, ‘‘Testing the Natural Resource Curse Hypothesis in Indonesia: Evidence at the 

Regional Level,’’ Working Paper in Economics and Development Studies, No. 200602 Department 

of Economics, Padjadjaran University, August 2006, inter alia. 

tives payments to foreign governments. They should publicly 

endorse transparency in bidding and contracts. 

11) Oil and other extractives companies should develop a reporting template for standardized disclosure of payments to be 

adopted as a global standard. Such a template could usefully 

be developed in conjunction with the EITI Secretariat. 

12) The EITI Secretariat should ensure clear criteria at each 

stage of progression to avoid the appearance of political favoritism in the implementation of EITI. 

a) The EITI board should have a mechanism to issue reports to the UN Security Council and other appropriate 

bodies. 

b) EITI should improve its efforts to clearly delineate, to 

countries and companies, the benefits of participation. 

c) EITI needs to focus more on technical assistance and 

make available to countries that sign-up for EITI a package of technical assistance to show good will and international support for the countries’ success through EITI. 

d) EITI must redouble its focus on implementation. 

While much effort has been dedicated to expanding the roll 

of EITI countries, a few successful countries could serve as 

concrete models for the gains EITI could bring. 

13) EITI certification criteria should resolutely include reporting by state-owned extractive industries companies. Credit 

rating agencies should make more explicit the importance of 

transparency as part of governance structures for indicating 

credit worthiness. 

DISCUSSION

THE RESOURCE CURSE 4

Large amounts of national revenues accrued from the sale of natural resources5 theoretically should generate wealth for an economy, promote economic progress, and reduce poverty by providing 

a source of investment capital for socio-economic development. According to many studies, however, a majority of countries that are 

rich in natural resources and highly dependent on revenues from 

such resources, notably those in the developing world, have experienced negative economic, social development, and political trends. 

Surprisingly, they have worse economic growth and poverty reduction records than many peer countries that lack concentrations of 

natural resource wealth. Furthermore, multiple empirical studies 

have documented a wide range of negative correlations between development and resource abundance, which collectively have been 

10 

6Sometimes more generally known as the ‘‘curse of plenty’’ or, in a term originated by academic Terry Lynn Karl, the ‘‘paradox of plenty,’’ (The Paradox of Plenty: Oil Booms and PetroStates, University of California Press, 1997.) 7Sources consulted for the following summaries, which do not reflect any of the country cases 

studies that are common in the literature on the resource curse, include Paul Stevens, ‘‘Resource 

Impact: A Curse or a Blessing? A Literature Survey,’’ International Petroleum Industry Environmental Conservation Association (IPIECA), March 2003; Jeffrey D. Sachs and Andrew M. Warner, ‘‘Natural resource abundance and economic growth,’’ NBER Working Paper 5398, 1995; 

Indra de Soysa, ‘‘Empirical Evidence for the Resource Curse,’’ Conference on Transforming Authoritarian Rentier Economies, September; John James Quinn, ‘‘The effects of majority state 

ownership of industry or mining on corruption: A cross-regional comparison,’’ CSAE Conference 

Growth, Poverty Reduction and Human Development in Africa, March 22, 2004; John Bray and 

Leiv Lunde, ‘‘Oil And Mining Revenues: From Curse To Blessing For Developing Countries?,’’ 

Challenges to Governments, Companies and NGOs Occasional Paper No. 3/04; Thorvaldur 

Gylfason, ‘‘Natural Resources and Economic Growth: From Dependence to Diversification,’’ 

CEPR Discussion Paper No. 4804, December 2004; Thorvaldur Gylfason and Gylfi Zoega, ‘‘Natural Resources and Economic Growth: The Role of Investment,’’ CEPR Discussion Paper No. 

2743, March 2001; and Thorvaldur Gylfason, ‘‘Natural Resources and Economic Growth: What 

is the Connection?,’’ CESifo Working Paper No. 530, 2001, inter alia. 8Dutch Disease is an economic problem named after a decline in the Dutch manufacturing 

sector in the 1970s following a rise in gas exports beginning in the 1960s. 

dubbed the ‘‘resource curse.’’6 The resource curse is the product of 

multiple factors7 including: 

• Dutch Disease,8 an economic scenario in which revenue inflows 

from a dominant export commodity cause the exchange rate to 

appreciate, making imports cheap, and undermine domestic 

production and economic growth by decreasing relative competitiveness 

• Crowding out of factors of production (land, labor, capital) by 

a dominant commodity export industry 

• Enclave development, in which a dominant industry, such as 

an oil or mineral sector, develops independently of the wider 

economy, and does not breed cross-sectoral growth, diversification, or investment. 

• Long term declines in national terms of trade due to dependence on revenues from a dominant export commodity in a context of static or declining prices for the commodity, or declining 

production yields. 

• Attempts to boost ailing domestic industries in commodity-dependent countries with low levels of economic diversification by 

enacting uncompetitive or otherwise ineffective industrial policy responses using such tools as import substitution, subsidies 

and trade protectionism. These policy responses cause domestic 

industries to become even less competitive and decline further. 

• The negative effects of commodity price and revenue volatility 

on incentive structures related to policy and investment decision-making and consumption patterns. 

• Increases in state borrowing using future national natural resource wealth as collateral, often involving the expenditure of 

disproportionately large amounts of credit to meet short term 

needs. 

• Growth of often ineffective, state-centric economic policy-making when there is access to large extractive industry revenues. 

• Increases in incentives for corruption and political rent-seeking 

when large commodity revenue streams are available. 

• Opaque contracting and market processes in extractive industries, especially in the oil sector, spur and enable corruption 

11 

9See Terry Lynn Karl, ‘‘Transparency of Extractive Industries: High Stakes for Resource-Rich 

Countries, Citizens and International Business,’’ Testimony before the House Committee on Financial Services, October 25, 2007; Ian Gary and Terry Lynn Karl, Bottom of the Barrel: Africa’s 

Oil Boom and the Poor, June 2003; Global Witness, Time for Transparency: Coming Clean on 

Oil, Mining and Gas Revenues, March 2004 and A Crude Awakening: the Role of the Oil and 

Banking Industries in Angola’s Conflict, December 1999; Save the Children, Beyond the Rhetoric: 

Measuring Revenue Transparency—Home Government Requirements for Disclosure in the Oil 

and Gas Industries, March 2005; and Revenue Watch, Following the Money: A Guide to Monitoring Budgets and Oil & Gas Revenues, November 2004, inter alia. 10 Thomas L. Friedman, ‘‘The First Law of Petropolitics,’’ Foreign Policy May/June 2006. 11Such conflicts were alleged to be spurred by contestation over control of national resource 

wealth; by suppression of political opposition by elites currently in control of the state and its 

revenues; by discontent over environmental damage caused by resource extraction activities; and 

by opposition by indigenes of regions where the resource is extracted to the transfer of resulting 

earnings to other parts of the producing country or to its political elites. Such conflicts are seen 

as undermining development because they tend to be economically regressive and absorptive of 

resources that might otherwise be invested in economic development and poverty reduction. 

and political rent seeking related to natural resource revenues.9

Political commentators in the media have also identified undesirable consequences of resources wealth. Many, for instance, partially 

attributed Russia’s August 2008, military incursion into Georgia to 

Moscow’s new-found ability to act in defiance of international opinion thanks to its oil and gas revenues. Thomas Friedman of the 

New York Times has argued that there is an inverse correlation in 

developing countries between oil income and democracy. He wrote 

that ‘‘a whole group of petrolist states with weak institutions or 

outright authoritarian governments will likely experience an erosion of freedoms and an increase in corruption and autocratic, antidemocratic behaviors. Leaders in these countries can expect to have 

a significant increase in their disposable income to build up security forces, bribe opponents, buy votes or public support, and resist 

international norms and conventions.’’ 10

While the proportion of countries experiencing such a curse is 

high, a small number of natural resource-rich countries have successfully been able to use natural resource revenues for social investments and policy initiatives that have generated markedly 

positive socio-economic development, which some have dubbed the 

‘‘resource blessing.’’ Those countries typically had a strong government structure, oversight mechanisms, rule of law and active civil 

society before discovering or exploiting their natural resource. 

The oil shock of the early 1970’s focused attention on the development prospects of oil exporting countries in a context of high oil 

prices and demand. Later research focused on the impact that large 

windfall revenues from oil, gas, and mineral revenues had on governments’ behavior. When such windfall revenues were available, 

governments often appeared to take actions that damaged growth 

and development prospects, and produced regressive public resource allocation outcomes. In many poor, developing countries, 

such negative effects appeared pervasive and strong, and were 

often accompanied by increasingly authoritarian and elite-controlled governance, state ineffectiveness, rises in military spending, 

and in some cases increased conflict, sometimes including civil conflicts.11

Increasingly, concern over resource curse effects became the 

focus of policy reform research and advocacy efforts aimed at assessing the impact of large extractive industry projects on host 

countries and identifying ways to mitigate potential negative 

12 

macro-economic and development consequences. With attention to 

such issues on the rise, many firms began to seek to ensure that 

their investments and reputations would be viewed as ethical, and 

to assess whether resource curse effects might pose an inherent 

threat to the economics of their investment projects. In light of the 

recognition that the resource curse was either possible or likely in 

countries on the brink of receiving large-scale extractive industry 

revenues, the international financial institutions (IFI’s) and donor 

governments began to support various institutional, legal, and 

other measures to prevent or mitigate the resource curse effects in 

such countries. These measures also aimed to prevent or mitigate 

potential damage to or poor returns for donor-backed investment 

projects. 

THE TRANSPARENCY CURE

There is no simple cure for the resource curse, and absent political will by the government of the exporting country, little can be 

achieved. But if leaders are willing, or can be persuaded, to address 

the issue, economists, policy reformers and the international financial institutions have offered a number of promising prescriptions, 

most of them based on the principle of transparency. Azerbaijan 

and Nigeria serve as examples of the importance of political commitment to improved transparency. Political commitment of their 

presidents has facilitated institutionalization of organizations having positive impacts. 

Extractive industry transparency runs from the issuance of contracts to extract oil, gas and minerals, through payments from companies to governments, and on to transparency of government management of the proceeds. The premise of transparency promotion is 

that a small amount of money can be leveraged by donor governments to ensure that large amounts of money in government coffers are used prudently. 

In several countries that staff visited, the rewards of donor-driven transparency efforts were evident. For example in Peru, USAID 

and the World Bank have partnered in a $450,000 program to bolster technical capacity for EITI and the broader transparency agenda; with the recent availability of Ministry of Finance budget figures online, a wellspring of support was created for a massive 

crackdown on public corruption. 

Since the passage of the Foreign Corrupt Practices Act, transparency in the dealings of U.S. businesses abroad has been seen to 

be aligned with long-term U.S. national security and economic interests. Likewise, transparency in extractive industries abroad is in 

our interests because mineral wealth breeds corruption, which 

dulls the effects of U.S. foreign assistance; inequitable distribution 

of mineral revenues creates civil unrest, threatening political and 

energy instability and adding a price premium to commodities such 

as oil and gas; and energy rich countries can become emboldened 

militarily. 

Staff found that a strong case can be made that transparency is 

in the interests not only of the donor community but also of international companies operating in developing countries and of the developing countries themselves. U.S. energy companies benefit when 

contract and revenue transparency is required in countries of operVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
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12Most information from EITI documents or website, except for that on the U.S. role in EITI, 

which is based on previous CRS research and a conversation with a State Department official. 13 EITI website http://eitransparency.org/ 

ation. American oil companies often have the best technical capabilities and operate most efficiently. With a level and transparent 

playing field, they will have an advantage over firms that resort to 

shadowy accounting or corrupt practices to gain a foothold in a 

country of operation. In fact, corrupt firms not subject to international accounting standards have the most interest in maintaining non-transparent operating environments. Moreover, civil unrest 

can pose a serious threat to the profits of international and national oil companies, as has happened in the Niger Delta for years. 

For resource rich countries, a transparent operating environment 

should also be a matter of self-interest. A good business climate attracts foreign direct investment and can lower the cost of market 

capital. These countries will also be eligible to secure attractive 

project financing from the World Bank. Most of all, transparency 

helps diminish the chances of civil unrest. However, host governments are often unfamiliar with what is required to ensure extractive industry transparency. As staff witnessed, some resource rich 

developing countries are not stepping up to the plate for EITI. In 

fact, several countries that seem to have the highest risk are the 

most reluctant to sign-up. Staff repeatedly heard country officials 

cite their lack of capacity to implement transparency reforms as 

their reason for avoiding the EITI program. 

For example, transparency may be the single most powerful 

weapon the Government of Iraq has to combat its pervasive, systemic corruption. Stability in Iraq depends on denying terrorists 

safe haven, strengthening the institutions of state to ensure territorial and regional stability, and uniting and reconciling the country’s internal divisions. Oil is an absolutely essential lynchpin in 

reaching these objectives. But, it must be shared equitably and 

used to the benefit of all Iraqis or it will cause further strife. 

In principle, better governance and less corruption thanks to 

greater transparency should result in a more favorable investment 

climate, improved fiscal management and ultimately better economic performance. While some interlocutors offered anecdotal evidence to support such reasoning, at this early stage in the progress 

of extractives transparency, it is difficult to find conclusive empirical data showing that greater transparency for resource rich countries leads to higher GDP growth. However, it is clear that transparent countries have better credit ratings and pay lower interest 

rates as a result. Staff noted that anecdotal evidence indicates that 

transparency is positively correlated with development indicators 

such as life expectancy and infant mortality. 

THE EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE 12

The major international transparency effort is the Extractive Industries Transparency Initiative (EITI) which aims to strengthen 

governance by improving transparency and accountability in the 

extractives sector. The EITI sets a global standard for companies 

to publish what they pay and for governments to disclose what 

they receive.13

14 

EITI is an effort initiated by the United Kingdom in 2002 following advocacy efforts by a non-governmental effort called the 

Publish What You Pay campaign. This campaign seeks the mandatory disclosure of taxes, fees, royalties and other payments by oil, 

mining and gas companies to governments. The objective of EITI 

is to encourage and aid efforts by governments to require the public 

release of accurate information regarding all types of such extractive industry state revenue receipts. EITI efforts seek to achieve 

that goal for all countries rich in extractive industry commodities 

like oil and gas, particularly those in the developing world. EITI 

also seeks to encourage other countries to endorse, fund, or otherwise support such efforts. 

Key EITI goals are to promote public fiscal transparency and political accountability; prevent revenue-related corruption; promote 

the prudent use of national natural resource wealth to support sustainable economic growth, development, and poverty reduction; and 

avoid negative socio-economic impacts resulting from mismanagement of such wealth. EITI’s revenue data release requirement is intended to provide citizens and civil society groups with basic but 

crucial information necessary to effectively monitor government 

stewardship of natural resource revenues; hold decision-makers accountable for the use of public funds; prevent various ‘‘resource 

curse’’-related phenomena; and signal investors that a given country offers a transparent, rule of law-based business environment. 

EITI also supports efforts to establish and foster partnerships between governments, civil society, and the private sector in EITI signatory countries in order to ensure cooperation and effective, 

shared efforts by these stakeholders to achieve accountability. 

Operation. Members of the EITI are governments, companies, 

civil society groups, investors and international organizations. The 

primary mechanism for implementing EITI is a voluntary agreement signed by a country to abide by EITI principles and criteria 

contained in the EITI Validation Guide. Once a country voluntarily 

signs on, reporting by all extractive companies operating in that 

country becomes mandatory. 

A signatory country must implement four sign-up criteria as certified by the EITI Board. It must formally commit to implement 

EITI goals, work with civil society, and private sector stakeholders 

to meet those goals, and appoint an EITI country implementation 

leader. It must also produce an implementation Work Plan approved by a country’s EITI stakeholders and issue certain other 

documents. It then becomes a Candidate country. There are currently 23 EITI candidate countries: Azerbaijan, Cameroon, Cote 

d’Ivoire, Republic of Congo, Democratic Republic of the Congo, 

Equatorial Guinea, Gabon, Ghana, Guinea, Kazakhstan, 

Kyrgyzstan, Liberia, Madagascar, Mali, Mauritania, Mongolia, 

Niger, Nigeria, Peru, Sao Tome and Principe, Sierra Leone, TimorLeste, and Yemen. 

A Candidate country has two years to fully implement all EITI 

requirements and processes listed in the Validation Guide. Core requirements are that a Candidate country government appoint a 

credible, independent administrator; publish and disseminate information on all state revenues from the oil, gas and mining sectors; 

and substantively engage with its national stakeholder group. If it 

15 

14 A firm selected from a small pool of qualified firms that were chosen by the EITI Board 

through an international competitive bid process in 2007. There are currently seven qualified 

Validators. 

is certified or ‘‘validated’’ by an EITI Validator14 as having fulfilled 

these goals, it then becomes an EITI Compliant country. To remain 

compliant, it must continue to implement EITI validation procedures and attempt to improve its EITI and resulting transparency 

processes by implementing lessons learned during validation. 

No countries have been validated by EITI yet, though there is expectation that Azerbaijan and Nigeria will be validated in the next 

year. 

Organization and Funding. The EITI process is supported by a 

small Secretariat headquartered in Oslo, Norway and is accountable to the EITI Board. It is made up of a head, four policy advisers, a communications manager, an executive secretary, and a 

three person administrative support staff. The Secretariat oversees 

implementation activities generally and provides advice to and 

consults with implementing countries; houses and disseminates information about EITI, country compliance activities, and the implementation process; and promotes revenue management and transparency practices. In September 2006, an ad hoc entity, the EITI 

International Advisory Group (IAG), presented a range of policy 

recommendations on promoting EITI, assessing EITI country compliance, and creating EITI processes and organizational structures 

and functions. One recommendation was that the initial Secretariat 

staff serve for up to three years, for a term ending in October 2009. 

If taken up, it is unclear what will happen to the Secretariat. 

EITI is financed, in part, through a World Bank-administered, 

primarily donor government-supported Multi-Donor Trust Fund 

(MDTF). The activities funded by the MDTF are approved by a 

Management Committee made up of the World Bank and DTFfunding governments that have provided over $0.5 million to the 

MDTF. The MDTF supports efforts by implementing countries to 

meet the EITI criteria, although such countries or their bilateral 

donors must fund their own EITI activities wherever possible. EITI 

principles are also being promoted in World Bank country programs generally. The EITI Board meets several times a year to 

consider and recommend EITI procedures and strategies for consideration by the biennial EITI Conference. The Board also oversees 

and directs the Secretariat and assesses the EITI compliance status of implementing countries and firms. Its members are chosen 

by the EITI Conference based upon proposals from EITI implementing and donor countries, and civil society groups and private 

sector entities party to EITI. 

United States support for EITI has included repeated pushes for 

it to be taken up in G-8 forums (on G-8 commitments, see below) 

and in bilateral diplomatic engagement advocates that countries 

participate, endorse, or fund EITI. On occasion, the U.S. helps 

countries undertake steps to comply with EITI requirements. The 

United States also participated in the EITI International Advisory 

Group (IAG). 

The United States is an active member of the EITI Board, but 

has not funded the activities of the EITI secretariat or contributed 

to the MDTF. Thus, it is not a member of the MDTF Management 

16 

Committee and has no influence over the distribution of the trust’s 

funds. That may change in FY 2008 because the State Department 

plans to provide $3 million in Economic Support Funds (ESF) to 

the MDTF, in compliance with the joint explanatory statement accompanying P.L. 110-161. 

In FY 2006 and FY 2007, respectively, the United States allocated $1 million in bilateral economic support funds (ESF) for use 

in assisting countries to implement EITI. The United States also 

funds a wide range of other transparency and accountability efforts 

that may support EITI goals, but are not necessarily dedicated specifically to EITI implementation. 

Within the Board, key U.S. goals are to ensure that the Secretariat focuses on assisting Candidate countries to undergo EITI 

validation and become Compliant counties and that it not engage 

in ‘‘mission creep’’ activities, such as broadening the types of commodities (e.g., tropical forest wood) covered under EITI. A second 

goal is to work with the Secretariat to define a set of recommended 

legal documents and structures that would govern and more clearly 

define the roles of various EITI entities. 

EITI currently lacks a charter and formal legally binding rules. 

This makes it difficult for the U.S. delegate to the Board to formally undertake some functions, such as participating in the ‘‘direction’’ or governance of the Secretariat when acting as a member 

of the EITI Board, due to U.S. legal requirements that govern U.S. 

participation in international organizations. Establishing a charter 

would also clarify the roles and relative powers regarding EITI governance matters held by the Board and the Secretariat. Also, U.S. 

representation at the EITI board is at a lower level than other 

board members. These factors give the U.S. an arms-length relationship to EITI that contributes to the perception that the United 

States is a reluctant participant in the extractives transparency 

movement generally. 

A common criticism of EITI is that it only addresses revenues 

from extractive companies to governments and is not useful in ensuring that revenues are not lost to corruption or ineptitude after 

they are received by the government. Staff at the EITI Secretariat 

are sensitive to this criticism but say that, while their program 

may not be the full answer to extractive industry transparency, it 

is a critical part of the solution. 

Now that a number of countries have signed up for EITI, committee staff believe that the EITI Secretariat should focus more on 

the actual implementation of EITI. Staff recommends that the Secretariat develop a standardized disclosure procedure so that EITI 

country information is comparable. This would enable international 

companies to set up consistent systems and would prevent resource-rich countries from having to ‘‘reinvent the wheel’’ by setting 

up country specific disclosure procedures. 

In general, staff was surprised that in a number of resource-rich 

countries, there was not enough information about the benefits of 

extractive industry transparency and little awareness of EITI within governments, some U.S. embassies, and with bilateral donors. A 

senior minister in one country remarked that he thought G-8 members had given up on EITI since they did not talk about it anymore. 

17 

UNITED STATES

The United States government, at the G-8 and in other fora, formally supports the EITI and other transparency and anti-corruption measures, such as the OECD anti-bribery convention and the 

U.N. Convention Against Corruption. One of the five ‘‘key objectives’’ for U.S. foreign assistance is to ensure that recipient countries are ‘‘governing justly and democratically,’’ which for developing countries means that foreign aid is directed to ‘‘support policies and programs that accelerate and strengthen public institutions and the creation of a more vibrant local government, civil society, and media.’’ Through USAID and other agencies the U.S. 

funds programs related to good governance, rule of law, capacitybuilding for fiscal management, etc. And the United States has for 

30 years, under the Foreign Corrupt Practices Act, outlawed bribery of foreign officials by American corporations even while, for 

much of that time, European firms were allowed to write off bribes 

as a regular business expense. Most recently, in the summer of 

2008 the State Department, under a provision of the FY2008 State 

appropriations bill, issued new guidance to embassies to revoke or 

deny visas to high-level foreign officials involved in extractive industries corruption. In September 2008, the U.S. voted for a proEITI resolution at the United Nations. 

Nonetheless, staff found that U.S. Government attention overseas to ‘‘resource curse’’ matters is sporadic, and that support for 

extractives transparency measures often appears half-hearted. At 

the State Department, there is no clear direction from the top to 

make the issue a priority. Staff found, for instance, that in some 

countries, including Cambodia, and Nigeria, U.S. embassy and AID 

personnel were actively promoting EITI and other anti-resource 

curse measures, while in other countries U.S. engagement on these 

specific issues was absent. For example, transparency is critically 

important in Equatorial Guinea, yet the United States has extremely limited personnel and financial resources dedicated to the 

issue. Meanwhile, directed funding—often to specific programs—reduces flexibility to respond to transparency-promoting opportunities and frequently distracts the attention of our embassies. 

The U.S. representative on the EITI board is the State Department’s Director of the Office of International Energy and Commodity Policy while other countries send representatives two or 

more ranks higher, at the level of deputy assistant secretary. Rank 

matters in international diplomacy, as does ability to demonstrate 

management authority over a breadth of issues in the area, such 

as budgeting and revenue management. Staff found unpersuasive 

State’s argument that a higher-level official would not give EITI 

sufficient attention. At the EITI board, the U.S. has concentrated 

on what outsiders consider arcane legal issues rather than more 

substantial matters, such as technical assistance for countries 

seeking to implement the reporting and accounting requirements. 

The U.S. only recently committed to donate to the EITI MultiDonor Trust Fund at the World Bank, and there is some perception 

that until 2005, the Bush administration was dragging its feet on 

EITI because of oil company opposition. Following a legislative directive to deposit $3 million with the EITI Multi-Donor Trust 

18 

Fund, the Senate Foreign Relations Committee received a notice on 

July 31, 2008 from USAID stating its intention ‘‘to obligate 

$2,976,000 in FY 2008 ESF to contribute to the Extractive Industries Transparency Initiative (EITI) Trust Fund.’’ The committee 

has expressed strong support for this funding. 

Similarly, the U.S. appeared reluctant at the United Nations, 

where a resolution was introduced in support of EITI, which its 

backers hope will have a similar impact to the U.N. resolutions 

supporting a certification system for ‘‘blood diamonds’’ that helped 

lead to the successful Kimberley Process. The U.S. voted for the 

resolution in September 2008, when it was passed, but did not join 

Britain, Italy, Germany and France (among others) as a co-sponsor. 

Deputy Secretary of State John Negroponte, in an earlier communication informing the committee that the U.S. would vote in favor, 

gave no specific reason for declining co-sponsorship. In a separate 

communication with the committee, State officials called the resolution ‘‘premature’’ and not ‘‘useful.’’ 

The U.S. has supported the repeated G-8 endorsements of EITI, 

but follow-up has been weak. The recent ‘‘Accountability Report: 

Implementation Review of G-8 Anti-Corruption Commitments’’ details U.S. support for a number of good governance and transparency initiatives at the World Bank and other development 

banks, and notes the anti-corruption component in many of the 

Millennium Challenge Corporation’s activities. But with respect to 

EITI, it states only, ‘‘The United States provided a total of 

$990,000 in FY06 funds to support civil society participation in 

EITI implementation in Peru, Nigeria, and the Democratic Republic of Congo, and FY07 funding provides for approximately the 

same level of support.’’ 

Some elements of the government have wholly embraced extractives transparency. The Overseas Private Investment Corporation 

(OPIC), for instance, signed on to EITI principles in 2006 and incorporates EITI into its project selection and design. It will not, for 

example, finance a project if the host country prohibits disclosure 

of revenues and contracts. Although only a handful of OPIC’s 

projects are in the extractives field, staff found OPIC to be an excellent example of how U.S. agencies should be integrating EITI. 

Staff found that the Treasury Department’s Office of Technical 

Assistance (OTA) has made important contributions to transparency efforts and has potential for greater reach. Funded partially by Treasury funds and partially by other U.S. assistance programs, OTA helps host governments improve financial management, develop clear budgeting procedures, and in general build the 

populace’s confidence in government fiscal processes. It sends resident advisors to work directly in a ministry of finance to develop 

the needed systems and procedures. Staff found that this could be 

highly useful for resource-rich developing countries needing assistance in managing and accounting for revenues. While OTA has 

worked in such countries as Chad, Nigeria and Azerbaijan, it does 

not have a specific focus for extractive industry countries. Staff 

found several constraints on OTA advisors doing more work in extractive industry countries, including a small budget and difficulty 

in finding countries with sufficient political will and commitment 

to undertake recommended reforms. The biggest single constraint 

19 

15Definition of Resource Rich: 1) average share of hydrocarbon and/or mineral fiscal revenues 

in total fiscal revenues at least 25% over the period or 2) average share of hydrocarbon and/ 

or mineral export proceeds in total export process of at least 25%. Source IMF (2007) Guide on 

Resource Revenue Transparency, Appendix I 

appears to be that neither OTA nor the Treasury Secretary has 

made extractives transparency a priority. Doing so would raise the 

U.S. profile on the issue and contribute to U.S. policy objectives of 

reducing resource-related corruption, enhancing the effectiveness of 

U.S. foreign aid, and improving energy security. 

Staff identified a number of other government agencies that have 

international programs that could be brought to bear on various 

parts of the extractives ‘‘value chain.’’ For example, the U.S. Geological Survey helps assess world-wide deposits of non-fuel minerals, helping to make the global market more transparent; the 

Minerals Management Service provides foreign technical assistance 

on oil leasing procedures and revenue management; and the U.S. 

Forest Service provides assistance to countries combating illegal 

logging through such means as satellite monitoring and wood certification. However, staff found that these various programs are undertaken with little coordination or strategic direction, and few officials involved in them had even heard of EITI, much less used it 

to inform their policies. Staff found that neither the State Department nor USAID nor the Treasury Department nor the National 

Security Council has the lead on extractives transparency. Staff 

found that without more forceful and vigorous direction, U.S. 

progress in battling the resource curse, improving energy security 

and enhancing global stability will fall short of its potential. 

During their travels, staff also heard many foreign officials ask 

why the United States itself has not signed up to have its considerable oil and gas revenues (the U.S. is the world’s third largest oil 

producer) ‘‘validated’’ by an outside party as the developing countries are required to do under EITI. Technically, the United States 

is not a ‘‘resource rich’’ 15 extractive industry country because extractives revenues make up a relatively small part of its government revenues and exports. Because EITI involves some infringement of sovereignty, such skepticism is to be expected. Staff were 

further told that even some countries which have signed up for 

EITI feel it is being imposed upon them by the West, which doesn’t 

play by the same rules. 

Staff found that compliance with EITI’s reporting requirements 

should be fairly easy because the U.S. Government already collects 

and publishes nearly all the required data. Bureau of Land Management and Minerals Management Service (MMS) officials said 

that all the terms of leases are published, including royalty release 

clauses, all bids, including losing ones, are released, flow data is 

published, and even proprietary seismic studies are made public 

after 25 years. Compared to other countries, very little is kept secret in U.S. oil leasing, MMS said. Providing that the agencies involved would not have to change any of their procedures, submitting tallies in EITI’s revenue categories would be inexpensive. By 

voluntarily agreeing to go through the EITI validation process, the 

U.S. could take a very low-cost step that would pay large transparency benefits. It would be an important example to developing 

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16 In mid-2008, members of the Publish What You Pay Coalition proposed to ′′strengthen′′ the 

voluntary element of extractive industries revenues reporting with a mandatory reporting requirement on oil companies. Under legislation they helped draft which was introduced in the 

House by Rep. Barney Frank (D-MA) as H.R. 6066 and in the Senate by Senator Charles Schumer (R-NY) as S. 3389, all oil, gas and mining companies, American and foreign, with securities 

listings in the United States would be required to report their payments to foreign governments 

as part of their regular filings with the Securities and Exchange Commission. 

ing of others, defuse the charge that it is discriminating against 

poor countries, raise the U.S. profile regarding the transparency 

agenda, enhance EITI’s credibility, and ultimately support reformers in developing countries who want to bring their nations under 

the EITI regime. 

MANDATORY SECURITIES REPORTING

United States and multilateral efforts to promote extractive industries transparency are intended to work within the bounds of 

the political will and technical capacity of the resource-rich countries. With their revenue windfall, some of these nations are increasingly intransigent in resisting outside pressure. This has led 

some to urge that the U.S. should take steps domestically to promote transparency overseas, much as the Foreign Corrupt Practices Act was U.S. domestic legislation to thwart corruption abroad. 

One such proposal is to mandate revenue reporting for companies 

listed with the Securities and Exchange Commission and working 

in extractives abroad.16

Backers of EITI, particularly the extractive companies, have long 

stressed the virtue of its voluntary nature. Countries are persuaded 

to join and to submit their books to outside review because it is in 

their self-interest to do so, not because the developed countries or 

the IFIs punish them if they do not. (EITI ‘‘candidate’’ countries require all extractive companies operating on their territory, including their own national oil companies, to report revenue, and so far 

no oil company has refused to comply.) A small number of international oil companies, notably BP and Norway’s Statoil, report 

country-by-country payments even where it is not required. 

Those who support a mandatory reporting strategy argue it 

would expand the benefits of transparency and disclosure to countries currently outside EITI and other voluntary initiatives and 

would provide useful information to investors. These claims have 

some merit. Experience with the Foreign Corrupt Practices Act is 

instructive. After the U.S. Government issued written guidelines 

for company behavior under FCPA, industry representatives reported that it strengthened the hand of those firms who sought to 

resist pressure for payoffs or other corrupt acts from host governments and officials. And in general, host governments have not 

seen this U.S. domestic legislation as violating their sovereignty. In 

a global environment in which oil and gas resources are coming 

under increased state control, promoting revenue transparency as 

a key element of improved governance may also prove useful for investors, as evidenced by this being one component of credit rating 

scores. Proponents of the SEC approach also claim it would not be 

burdensome because the companies should have the data readily at 

hand, nor would it be competitively disadvantageous to U.S. firms 

since a large number of foreign energy and mining companies have 

or are seeking U.S. listings. 

21 

17http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/ 

0,,contentMDK:21727813pagePK:64257043piPK:437376theSitePK:4607,00.html 

However, staff found that others have reservations about the 

mandated SEC approach, and in some cases flatly oppose it. Two 

principal concerns emerged. First, the number of foreign companies 

covered is not as broad as supporters say, leading to a situation in 

which U.S. firms are at a competitive disadvantage. More important from an anti-corruption perspective, it could encourage corrupt 

governments to seek contracts with firms not covered by the legislation, in effect driving the more transparent companies from the 

field. Some foreign firms could simply delist rather than comply. 

Second, some believe that such a requirement would undermine 

rather than strengthen EITI (one interlocutor said it would ‘‘kill 

EITI.’’) They argue that producing countries would react negatively 

to this forced disclosure as an infringement on their sovereignty. 

They would see it as violating the voluntary aspect that is at the 

core of EITI and walk away from the initiative. 

Staff concluded that establishing mandatory reporting requirements on a multilateral basis would be preferable to the United 

States doing so unilaterally, providing it is clear that it would not 

undercut EITI. This could be done through the G-8, where repeated 

endorsements of EITI and revenue transparency have not been followed up with concrete action. The SEC could seek to harmonize 

such reporting requirements among major global stock exchanges 

through the International Organization of Securities Commissions. 

ADDITIONAL MULTILATERAL EFFORTS

Extractive Industries Transparency Initiative Plus Plus (EITI ++) 

Building on EITI’s revenue transparency agenda, the World 

Bank has sponsored a program called EITI++ which is designed to 

cover the entire breadth of the resource chain, from extraction, to 

other stages such as processing, managing revenues, and promoting sustainable and efficient utilization of resource wealth. 

EITI ++ seeks to support committed governments, notably in Africa, in implementing good policy and practice throughout the whole 

process of natural resource utilization.17

EITI++ would address criticism that EITI is focused on only one 

part of the revenue chain—company payments to governments. 

However, the name EITI++ has generated confusion about how it 

will work with EITI. Such confusion is understandable, since the 

World Bank’s EITI++ program is not at all related to the EITI organization. Some countries have wondered if it is worth signing up 

for EITI given that EITI++ is being launched. 

Staff universally considered the revenue-reporting element of 

EITI as limited and the potential value of broadening EITI to include the elements of EITI++ as an essential next step in achieving 

the intended improvements in governance and outcomes for developing countries. 

G-8 

While the G-8 cannot directly impose honest government, their 

actions to support accountability, transparency and anti-corruption 

efforts in developing countries with extractive industries such as oil 

22 

and gas could have a significant impact on the energy market. 

Where there is instability, there are higher prices. Foreign aid investments to support development in oil exporting regions can help 

quell discontent and help assure a stable energy supply. While the 

G-8 has made more than twenty transparency commitments over 

the past five years, there is a clear failure to implement. Rhetoric 

without action is not sufficient for responsible diplomacy or policy. 

In order to maintain credibility, the G-8 countries must meet the 

very standards that they press for the world. Russia is the only G8 country reliant on extraction of oil and gas for a significant part 

of its economy. While Russia, as a G-8 member, has supported the 

extractive industry transparency initiative (EITI), it has failed to 

enlist. Some in Russia have argued that the country does not participate in EITI because the initiative is mainly for developing 

countries while others note that, given Russia’s status, EITI should 

be a reasonable standard that it could reach and surpass. 

In fact, the rest of the G-8 should also sign up for EITI and subject themselves to the transparency required. As discussed in the 

United States section of this report, given the level of disclosure already practiced in the United States, that would be an easily 

achievable goal. 

The G-8 issued an accountability report on their anti-corruption 

efforts following the 2008 Summit that serves as an initial step towards transparency, which should be expanded and given much 

greater detail in the future. It is hardly comprehensive, and its 

lack of detail makes it hard for parliaments and civil society to 

hold their leaders to task. 

As noted in the mandatory reporting discussion of this report, 

the G-8 countries should develop harmonized listing requirements 

for extractive companies to disclose their payments to governments. 

Also, G-8 financial regulators could encourage influential credit 

rating agencies and commercial banks to take explicit account of a 

country’s transparency record in making their evaluations of creditworthiness and sovereignty risk. 

International Monetary Fund 

The International Monetary Fund (IMF) first published the 

Guide on Resource Revenue Transparency (the IMF Guide) in 2004 

as a supplement to its other publications on fiscal transparency, 

the Code of Good Practices on Fiscal Transparency (the IMF Code) 

and Manual on Fiscal Transparency (the IMF Manual). The purpose of the IMF Guide is to provide more specific guidance to countries that are rich in natural resources so that they can implement 

the practices on fiscal transparency described more generally in the 

other volumes. The IMF Guide focuses on natural resource revenues because they tend to be large and more complicated than 

other types of revenue and are often associated with poor governance and weak economic growth. Furthermore, the IMF Guide is 

used as a framework for the IMF to assess fiscal transparency in 

resource-rich countries under the Reports on the Observance of 

Standards and Codes (ROSCs). The IMF and the World Bank undertake ROSCs, at the request of member countries, to summarize 

the extent to which they observe certain internationally recognized 

23 

18 As defined by the IMF, based on exports and revenues from the years 2000–2005. 19For a complete list of fiscal transparency ROSCs, see http://www.imf.org/external/np/rosc/ 

rosc.asp?sort=topic#FiscalTransparency. 

standards and codes. Fiscal transparency is one of twelve areas in 

which ROSCs are performed. 

The IMF Guide provides detailed fiscal transparency ‘‘best practices’’ for resource revenue management, including examples of national experiences. It also discusses work being done by other international agencies, including the EITI, and incorporates this work 

into its recommendations. It closely follows the format and prescriptions of the IMF Code. It is really an expansion of the Code 

as regards natural resource-specific issues. 

Like the IMF Code, the Guide is broken down into four main 

parts. These address: (1) clarity of roles and responsibilities; (2) 

open budget processes; (3) public availability of information; and (4) 

assurances of integrity. EITI figures heavily into the third part, 

public availability of information. The first part, clarity of roles and 

responsibilities, focuses on the legal framework governing the relationship between the government, national resource companies 

(NRCs), and international companies. It offers guidance for the 

basic legal framework, including the allocation of resource rights, 

tax and revenue issues, ownership of NRCs, and intra-government 

revenue sharing. In each case, countries are encouraged to proceed 

with the specific laws that work best under their existing legal 

framework, but they are also encouraged to make the laws transparent, simple, and leave little or no room for discretion. The second part, open budget processes, recommends transparency of 

budget processes, integrating any resource-related funds into the 

overall fiscal policy framework, and planning to smooth the impact 

of volatile revenue flows to ensure long-term fiscal stability. 

The IMF Guide is designed to be a key resource guiding governments’ reporting on financial matters beyond current revenue 

transactions (the purview of EITI) including spending of such revenue, resource reserves, and debt against resource collateral. The 

Guide describes the EITI criteria and reporting requirements in 

this section, and also gives examples of countries that have adequate resource revenue transparency outside of the EITI, such as 

the Chilean mining industry. The fourth and final part, assurances 

of integrity, examines some requirements for establishing good 

practice in areas such as data quality, internal controls, and independent external audit. 

Adherence to the IMF Guide is tracked through the ROSCs on 

fiscal transparency. As of March 2007, the IMF had performed fiscal transparency ROSCs on 86 countries, or about half of its members. The following resource-rich countries18 have had a fiscal 

ROSC published on the IMF website: Algeria, Azerbaijan, Cameroon, Colombia, Equatorial Guinea, Gabon, Indonesia, Iran, 

Kazakhstan, Mexico, and Russia.19 Additionally, the following EITI 

candidate countries have had a fiscal ROSC published on the IMF 

website: Ghana, Mali, Mauritania, Mongolia, and Peru. The following EITI candidate countries have not had a fiscal ROSC published on the IMF website, although they may have had other 

ROSC reviews: Congo (Brazzaville), Democratic Republic of Congo, 

Guinea, Liberia, Madagascar, Niger, Nigeria, Sao Tome and PrinVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00029 Fmt 6633 Sfmt 6633 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
24 

cipe, Sierra Leone, Timor-Leste, and Yemen. Given the voluntary 

nature of the IMF resource revenue guidelines, there is no clear 

tool to encourage resource-rich countries to actually implement 

them. 

The IMF regularly evaluates member countries’ economies and 

fiscal policies in Article IV consultations. Of concern to staff was 

the uneven examination of extractive industry issues in Article IV 

reports. In some resource rich countries consultation reports, extractive industry transparency issues were not mentioned at all. In 

others, the IMF board discussion was inconsistent with the reports. 

For instance, Angola ($40 billion in oil revenues in 2007) was recently applauded by the IMF even though an IMF study showed 

major failures in good governance criteria. 

World Bank and the Regional Development Banks 

The World Bank Group undertakes various activities to prevent 

corruption in all of its projects, including those in the extractive industries. The Extractive Industries Review (EIR) is the World 

Bank’s main tool to address all the potential problems associated 

with supporting projects in the extractive industries, and preventing corruption figures high on the list. 

The World Bank Group management initiated the Extractive Industries Review (EIR) after the Annual Meetings in 2000. At those 

forums, a group of nongovernmental organizations (NGOs) requested that the World Bank stop supporting extractive industries 

because they believed the resulting adverse impacts far outweighed 

any positive development impact. The EIR was an independent review process to evaluate the impacts of World Bank activities in 

the natural resource sectors, and make recommendations about the 

future involvement of the World Bank in these sectors. As part of 

the review process, research was commissioned, project site visits 

were made, and regional consultations were undertaken with industry, government, and civil society representatives. The EIR advisory group presented its final report to the World Bank in January 2004, and in September 2004 the World Bank Group management issued its final response to the EIR. The Board of Directors 

agreed that the Bank would conduct an annual review of progress 

toward achieving the objectives outlined in the management response. The last such review was published in February 2008. 

The basic question asked by the EIR was whether extractive industries projects could be compatible with the World Bank’s goals 

of sustainable development and poverty reduction. The EIR found 

that there could be a positive role for the World Bank in the extractive industries, but only if it was possible for the World Bank to 

contribute to poverty alleviation through the extractive industries, 

which could only happen with certain conditions in place. The main 

conditions necessary for extractive industries to have a positive 

contribution to sustainable development found by the EIR are: 

‘‘pro-poor governance, including proactive planning and management to maximize poverty alleviation through sustainable developVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00030 Fmt 6633 Sfmt 6633 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
25 

20Striking a Better Balance: The World Bank Group and the Extractive Industries. The Final 

Report of the Extractive Industries Review. December 2003. 

ment; much more effective social and environmental policies; and 

respect for human rights.’’20

The World Bank and its private sector arm, the International Finance Corporation, do not finance extractive activities unless companies commit to making revenues paid to the government transparent. Despite endorsement of EITI from the Asian Development 

Bank and the African Development Bank, the European Bank for 

Reconstruction and Development is the only other MDB that requires such a commitment. The remaining regional development 

bank, the Inter-American Development Bank has not yet endorsed 

EITI. With the view that the international donors who give aid to 

resource-rich countries should focus their efforts on improving revenue management and fighting corruption, staff recommends that 

all regional development banks adopt the World Bank/IFC transparency requirement. Relatively small amounts of assistance could 

thus help channel large amounts of countries’ own funds toward 

poverty reduction. Staff also recommends that, when possible, the 

multilateral development banks promote transparency before the 

resource revenues actually start flowing from extractive industries. 

Staff recommends that the multilateral development banks condition loans on progress on transparency. Staff also recommends 

that the multilateral development banks promote transparency before the resource revenues actually start flowing from extractive industries. 

EXTRACTIVE COMPANIES

Energy and mining companies expressed clear interest in supporting transparency in resource-rich countries. One investor noted 

that ‘‘the lack of revenue transparency has translated into a lack 

of real governance and lack of delivery of services.’’ Many 

businesspeople noted that stable governance and concrete improvement in the quality of citizens’ lives led to stability which is critical 

for the business environment. One person noted ‘‘what investors 

hate most is uncertainty. Transparency and certainty go hand in 

hand.’’ 

Staff heard from several extractive companies becoming weary of 

having to serve as de facto host governments, providing social services and looking after countries’ populations, when the government’s elites fail to use newfound wealth to provide social services. 

In some cases, extractives companies are being particularly proactive. While still in nascent stages, Newmont Mining in Ghana 

has joined a public-private partnership with USAID to improve 

governance of extractive resources at the local level. 

Equatorial Guinea provides a stark example of how, under certain circumstances, private industry can markedly improve transparency promotion efforts, including signing up for EITI. 

ExxonMobil in particular played a pivotal role in advocating Equatorial Guinea’s accession to EITI candidate country status, building 

knowledge of EITI within the government and civil society, and assisting in persuading officials to attend meetings. 

26 

Some companies enjoy an enhancement in reputation, especially 

among socially responsible investors, when seen to push EITI; the 

role of reputation-conscious oil majors was cited as a major impetus 

for Azerbaijan signing up for EITI. 

International energy companies can face difficult choices in balancing a pro-transparency stance and potentially damaging their 

relations with host governments. Angola is a case in point. While 

companies have an interest in transparency as relates to bidding 

processes, contract enforcement, and wider certainty in doing business, Angola with all its flaws is still a relatively attractive investment destination. The 2001 government rebuff of BP’s transparency efforts continues to cast a shadow. These companies also 

face strong competition from a range of international and national 

oil companies. Yet it is also evident that extractive companies, particularly with backing from their home governments, could be more 

proactive in transparency promotion. The Foreign Corrupt Practices Act has proven useful. With U.S. Government guidelines for 

company behavior, the Angolan government has been responsive to 

this home country regulation. 

Some companies are reluctant to engage directly with countries 

on EITI specifically and even more concerned about raising concerns about government budget transparency, which is currently 

outside the EITI parameters. They told staff that they did not want 

to jeopardize their relationships with government officials since 

there were plenty of other companies without a ‘‘transparency 

agenda’’ waiting in the wings to secure extractive contracts. 

Several groups have called for public disclosure of contracts, and 

numerous U.S. Government officials and private industry representatives suggested they sawno reason why basic contractual information should not be made public. In some countries, certain information in contracts is understandably considered to be proprietary. Yet provisions related to transfer of funds to the federal government, payments to localities including in-kind contributions, 

and agreements for governments to take a specified amount of 

product all should be made public. An international standard for 

disclosing contractual information should be adopted. 

RESOURCE REVENUE AND SOVEREIGN WEALTH FUNDS

Significant oil revenues are both a burden and a blessing for oil 

producing nations. The burden is the necessity to manage and calibrate the proper use and investment of such revenues for the citizens of that country. Resource revenue funds can be a useful tool 

for countries to manage revenues in a manner that staves off 

‘‘Dutch disease.’’ For some countries, the establishment of a resource revenue fund allows for more political transparency and 

third-party surveillance. It may be appropriate for those countries 

to segregate resource revenues for future generations, thereby insulating money from current political appeals for popular support 

that are often wasteful. In others, diversion of extractive revenues 

into a separate account can result in a political fund that is vulnerable to misuse since it is outside the normal budgeting process. 

What truly matters is that the resource accounts be designed and 

managed prudently. The IMF is expected to issue best practice 

guidelines for sovereign wealth funds during the fall of 2008 which 

27 

21 Abraao Fernandes de Vasconselos, Banking & Payments Authority General Manager 

should establish how to design a fund to best benefit the citizens 

of a resource rich country and to ensure that the funds’ external 

investments are based on economic, not political, considerations. 

Of the 21 countries examined by staff for this project, at least 12 

had sovereign wealth instruments with various management strategies from conservative low-interest holdings to more outgoing investment strategies: Azerbaijan, Chile, China, Equatorial Guinea, 

Kazakhstan, Nigeria, Norway, Russia, Saudi Arabia, Timor-Leste, 

and United Arab Emirates. Many of the other countries had resource revenue funds at the state or community level. The size and 

management of many of these funds remain opaque and some predecessor instruments have collapsed with little indication of reform 

or improved management. 

Staff found that many burgeoning sovereign wealth funds and 

local resource revenue funds face absorption capacity problems— 

they are not equipped to effectively invest their sovereign wealth 

funds in their own country or abroad. 

In some countries, staff identified a lack of political will to successfully manage revenues for future generations. For example, in 

Chad, the government failed to implement the World Bank-supported Revenue Management Program, resulting in a vacuum of 

transparency and accountability for oil revenues. In contrast, 

Timor-Leste has established an Investment Advisory Board to advise the Minister of Finance on investment strategy, performance 

benchmarks, and performance for its Petroleum Fund, which is audited annually by an internationally-recognized audit firm.21

Staff observed, in countries such as Norway and Chile, that successful sovereign wealth funds were operating in countries with 

strong governance and prudent fiscal management and that transparency has shored up support for these funds’ existence. Staff also 

noted that local resource revenue funds, in countries such as Chad, 

Nigeria and Peru, lacked the technical capacity to effectively spend 

their revenues in a transparent manner. 

Much attention has focused lately on the impact of sovereign 

wealth funds on international financial markets and geopolitics. 

The U.S. Treasury Department estimates that the number of sovereign wealth funds doubled between 2000 and 2005. As oil prices 

remain well above $100 per barrel, the incomes of oil exporting nations are soaring. By some estimates, these national investment reserves now hold close to $3 trillion. Russia has about $130 billion 

in its Stabilization Fund, and Abu Dhabi Investment Authority’s 

value is estimated to be between $300 and $900 billion. According 

to Treasury Under Secretary David McCormick, sovereign wealth 

fund assets are ‘‘larger than the total assets under management by 

either hedge funds or private equity funds and are set to grow at 

a much faster pace.’’ 

While aggressive investment strategies pose certain concerns, 

sovereign wealth funds have infused helpful liquidity into international financial markets and, in some cases, promoted beneficial 

local development. Yet they are not ordinary investors because 

their ties to foreign governments create the potential that they will 

be used to apply political pressure, manipulate markets, gain acVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
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22 ‘‘The Foreign Policy Implications of Sovereign Wealth Funds,’’ testimony from Professor 

Daniel Drezner at June 11, 2008 Senate Foreign Relations Committee hearing entitled Sovereign Wealth Funds: Foreign Policy Consequences In An Era of New Money. 

cess to sensitive technologies, or undermine economic rivals. Some 

observers have argued that the primary goal of sovereign wealth 

fund managers will almost always be to produce a good return on 

invested assets. Consequently, they are unlikely to engage in political or economic manipulation. But we have witnessed, in recent 

years, numerous instances of nations using or threatening to use 

their energy assets for political purposes. 

As Professor Daniel Drezner testified before the Senate Foreign 

Relations Committee, ‘‘the biggest effect of sovereign wealth funds 

on American foreign policy is their effect on democracy promotion 

efforts.’’ He argued that ‘‘democratization is a much more difficult 

policy for the United States to pursue when the target government 

is sitting on trillions of dollars in assets to buy off discontented domestic groups. Authoritarian governments in the Middle East and 

East Asia will be more capable of riding out downturns that would 

otherwise have threatened their regimes.’’ Drezner added that 

‘‘looking at the long term, sovereign wealth funds are one component of an alternative development path, suggests a possible rival 

to liberal free-market democracy. In state-led development societies, governments could use sovereign wealth funds, state-owned 

enterprises and banks, national oil companies, extensive regulation, and other measures to accelerate economic development, buy 

off dissent and promote technology transfer. If this model proves 

sustainable over the long run—and this is a big if—it could emerge 

as a viable challenger to the liberal democratic path taken by the 

advanced industrialized states.’’ 22

The U.S. Treasury Department has responded to concerns regarding the potential political and economic power of the huge sovereign wealth funds by undertaking efforts to balance the country’s 

need for foreign investment with prudent safeguards. Domestically, 

it has been working to improve accountability within the Committee on Foreign Investment in the United States for review of 

foreign government-controlled transactions, and it is creating a 

working group on sovereign wealth funds. Globally, the Treasury 

Department is supporting the International Monetary Fund and 

the World Bank in their development of voluntary best practices 

for sovereign wealth funds. It also has proposed that the Organization for Economic Co-operation and Development identify best practices for countries that receive foreign government-controlled investment. In addition, the Securities and Exchange Commission requires that sovereign wealth funds disclose holdings of 5% or more 

in a public company and the Federal Reserve imposes a number of 

regulations on sovereign wealth fund investments in U.S. banks. 

COUNTRY REVIEWS BY REGION

Africa 

Angola 

Angola has an estimated population of 16.4 million and a per capita income of $2,360. The average Angolan has a life expectancy 

of 42 years, and the infant mortality rate is estimated at 260 

29 

23 IMF, ‘‘Angola: Selected Issues and Statistical Appendix,’’ IMF Country Report No. 07/355, 

October 2007. 24 IMF, ‘‘Angola: Selected Issues and Statistical Appendix,’’ IMF Country Report No. 07/355, 

October 2007. 

deaths per 1000 births. Angola’s 2007 estimated oil export revenues were approximately $44 billion, comprising approximately 

72% of its GDP. 

Recovering from a 27-year civil war that left the economy in 

shambles and ended only in 2002, the Angolan government has 

been focused on consolidating peace among rival forces, demobilizing combatants, resettling displaced populations, and rebuilding 

devastated infrastructure. These tasks are complicated by stark 

poverty with only half of Angolans enjoying access to clean water 

and extreme economic inequality—easily palpable when one travels 

beyond the capital Luanda’s crowded commercial center. Relations 

with the United States are made difficult by the fact that the U.S. 

Government supported the political forces now in the Angolan opposition. 

Angola has been an oil producer since the 1960s. Despite the 

devastation wrought by the civil war, the energy sector continued 

to flourish throughout the war years and left Angola well-positioned to capture the benefits of the last five years of the global 

run-up in oil prices, although hydrocarbon revenues are expected to 

soon plateau. On the back of petroleum exports, which totaled an 

estimated $44 billion in 2007, Angola has been Africa’s fastest 

growing economy since 2005 and one of the fastest growing in the 

world at 23.4% in 2007. The primary symptom of Dutch Disease, 

currency appreciation, has been strongly felt in Angola, with inflation reaching heights of 300% in recent years. 

Angola’s national oil company Sociedade Nacionale de 

Combustiveis de Angola, Sonangol, has negotiated contracts with 

international oil companies that allow the government to capture 

a greater proportion of the revenues as global oil prices rise, which 

in today’s energy markets leaves Angola financially well-positioned 

compared to many of its peers. In addition to oil, Angola is positioned to become a significant exporter of Liquefied Natural Gas 

(LNG). Natural gas exports are expected to get a boost in the years 

ahead when the new Soyo LNG facility comes online. Diamonds are 

also a big business in Angola, with the parastatal Endiama having 

control over both production and regulation. IMF data cites over 

one billion dollars in revenue from diamonds in 2006 from over 9 

million carats exported.23 These two extractive industries dominate 

Angolan exports (petroleum 95.9 % and diamonds 3.6%), and petroleum exports account for nearly 80% of government revenues.24

Transparency is critical for Angola’s own ambitions to gain international respect. Macroeconomic reform, economic development, 

and participatory governance all rely upon improved dissemination 

of information in order for the government to be more effective and 

to enable civil society to play a productive role in increasing accountability of Angolan officials. For years, serious concerns have 

been raised about billions in revenues going unaccounted. Good 

governance of the country’s resources and revenues goes far beyond 

the issue of transparency. With the reality that extractives revenues will plateau, and eventually dry up, the Angolan government 

30 

faces the challenge of leveraging today’s resources for long-term 

economic sustainability. 

The most striking illustration of the difficulty of transparency in 

Angola occurred in 2001, when the Angolan government lambasted 

BP for making a public commitment to disclose its payments to the 

government. From that low point, Angola has made impressive 

progress, most vividly illustrated in monthly Ministry of Finance 

internet disclosures of exports in revenue and physical quantity 

from petroleum (block by block) and diamonds. This is a particularly significant step, as related by Endiama officials, given that 

such disclosure was previously prohibited as a matter of law. The 

government engages external auditors such as KPMG and publishes at least some of their reports which do include criticisms of 

the government. Angola participates in Article IV consultations 

with the IMF, and is undertaking other review mechanisms despite 

past disagreements. Likewise, the government of Angola has joined 

with the U.S.G. and World Bank in transparency related technical 

assistance, and it has joined the NEPAD peer review mechanism. 

Angola is not an EITI candidate country, although it has been an 

observer and has participated in international meetings. One Ministerial-level official commented that he ‘‘saw no reason’’ for Angola 

to not sign up for EITI, but another explained that its rejection of 

EITI candidacy was ‘‘purely an issue of political sensitivity’’ based 

upon the assertion that Angola’s domestic politics do not allow for 

policy and legislation to be driven from the outside. Interviews reinforced public statements that there is not currently political will 

for EITI candidacy. Nor, according to a senior Angolan official, 

have G-8 members in the country actively advocated the initiative. 

A few interviewees outside the government commented that Angola actually publicizes more information as an EITI observer than 

do EITI candidate countries. Yet, published data tends to be general or difficult to verify. There is not a clear public consolidated 

accounting of the variety of revenue streams associated with contracting for extractive rights or for in-kind payments and community investments. Nor are the terms of contracts made public. Signature bonuses up to and exceeding $1 billion are well-known, but 

they are not included in regular revenues reporting. There are also 

widely discussed ‘‘back room’’ agreements related to companies or 

governments offering bonuses and non-energy related in-kind payments for preferential access in bidding for drilling rights. 

International oil companies sometimes have community development funding built into their contracts. Implementation of such 

projects have to be directed through Sonangol, creating opportunities for corruption while also creating a parallel funding stream not 

reported in published budget documents. 

Angola has made important progress in improving its budgetary 

process and publicizing its budget, and it is working with the 

World Bank, IMF, U.K. Department for International Development 

(DFID) and the U.S. Government in this area. Budget documents 

are available on the internet, although they lack useful detail. The 

government is now putting in place a new computerized platform 

that will facilitate better planning and cross-ministry accounting 

and will allow monthly budget reports. The Angolan government is 

considering the establishment of a sovereign wealth instrument, 

31 

and it is being courted by major international investment groups. 

Currently, excess reserves are held in a treasury reserve fund in 

Angola’s National Bank. 

Despite the challenges faced by U.S. diplomacy, U.S. interests in 

Angola are strong, and the Angolan government has made clear 

their desire for broader cooperation to be built upon the foundation 

of energy trade. However, the government is keenly aware of U.S. 

historical involvement in Angola and its anti-reform elements are 

emboldened by surging oil revenues. The current U.S. Embassy 

team in Luanda has made remarkable progress in forming a productive relationship with the Popular Movement for the Liberation 

of Angola (MPLA)-dominated government. Increased activity, particularly in support from Washington, is needed. Staff did not miss 

the irony that while they can come to Angola with a specific mandate to examine transparency issues, Embassy Luanda reported it 

was left to terminate its transparency capacity building program 

due to lack of funds. U.S.G. assistance for good governance in Angola is limited by competition for funds with our humanitarian objectives in the country and constraints on spending set by Congress 

and the administration. Close to 90% of fiscal year 2008 funding 

is dedicated to health, humanitarian, and demining activities. The 

remaining 10% of funds support a broad remit of good governance 

programs—from supporting elections to transparency to civil society support to judicial reform. Of note was the country team’s recognition of the key value U.S. assistance could bring to a nation 

flush with new wealth but lacking technical and knowledge capacity. Nonetheless, funding for good governance in 2008 decreased, 

eliminating future funding for transparency programming. 

Chad 

Chad has a population of nearly 11 million people and average per capita income is $1,230. Average life expectancy is 50.4 years 

with an infant mortality rate of 208 deaths per 1000 births. Total 

hydrocarbon revenues for 2007 were approximately $1.2 billion, 

which constituted 17% of GDP, and will be dwarfed in 2008. 

Chronic insecurity is the defining feature of Chad, affecting state 

activity and international involvement. Neighboring Sudan is a 

haven for rebel forces seeking to bring an end to Chadian President 

Deby’s eighteen years in power and has sent a quarter of a million 

refugees across the border from the conflict in Darfur. The February 2008 rebel assault on Chad’s capital, N’Djamena, virtually 

stopped all government function and international assistance programs. A ‘‘bunker mentality’’ prevailed which has only slowly started to lift. 

Chadians are among the poorest people in the world. Prospects 

for Chadians improved when oil began to flow to world markets 

through the World Bank supported Chad-Cameroon pipeline in 

2003, running from Doba in southern Chad through Cameroon to 

an off-shore loading platform at Kribi. With surging global oil 

prices, Chad has thus far realized over $2.5 billion in revenues 

from oil production—an amount originally expected to take 25 

years to achieve. Although surging global prices create an unexpected windfall now, those revenues will plateau and begin diminishing in the foreseeable future. Although the economy is still oneVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
32 

third dependent on agriculture, global oil prices are now the principle driver of GDP growth, exposing the country to economic volatility. 

Current oil production is from three fields in Doba, which are operated and owned by Esso Exploration and Production Chad, Inc., 

a consortium led by Esso (ExxonMobil) with Chevron and Malaysia’s state-owned oil company Petroliam Nasional (Petronas). Relations with the government are productive but not easy. The government regularly attempts to lodge new fees on oil companies and 

had a protracted tax disagreement with Chevron and Petronas that 

led to their expulsion from the country. President Deby has publicly called for Chad to gain a 60% stake in the Esso-led consortium. 

Nominally, Chad maintains a surprisingly progressive set of institutions and international agreements for transparent management of its extractive revenues. Chad has a number of institutions 

built into its government infrastructure that could play useful roles 

in financial management and auditing. Overall, however, these institutions do not have the political (as opposed to legal) mandate 

to function effectively and largely lack expertise necessary to fulfill 

their duties. Transparency in oil revenue reporting is to be commended in Chad. The Esso-led consortium, with the two pipeline 

owners, publishes expansive reports from job generation, to land 

use compensation, to environmental impacts. These reports contain 

quarterly and aggregate payment data broken into general categories of royalties, pipeline income, corporate income tax, and miscellaneous. Conducted quarterly during the construction phase and 

biannually thereafter, these reports are subject to World Bank 

verification. Reports are available on the internet and printed in 

English and French. Although the style of document gives the impression of a public relations brochure, it contains the most thorough reporting found in the five countries staff visited in Africa. 

The Chadian government is pursuing candidacy in EITI, yet 

progress on this too was delayed by the February 2008 conflict. The 

Chadian government has formally expressed interest in candidacy, 

and held a World Bank supported conference on the subject in August 2007. This was followed by a December 2007 decree ordering 

creation of a ‘‘high council’’ to make progress on EITI qualification, 

but, according to an official, it was delayed due to the February 

conflict and has not yet gotten back on track. The effort is meant 

to be coordinated out of the Ministry of Petroleum, but has not received any budget support although it is reported that the African 

Development Bank may provide financial backing. 

In exchange for World Bank participation in the petroleum development and pipeline project, the Chadian government agreed to a 

Revenue Management Program, as the World Bank’s direct involvement in oil revenue management is known, consisting of conditions on management of revenues and guidance on spending of 

85% of royalty and dividend revenues (and eventually 100%). Those 

revenues were to be deposited into an escrow account held at 

Citibank in London (a prudent debt service mechanism for a risky 

country), and expenditure projects had to be approved by independent multi-stakeholder College. This arrangement was aimed to 

minimize opportunities for corruption and spending outside of deVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6633 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
33 

velopment priorities, and provide for a longer time horizon for revenues. 

However, that law was effectively gutted by the President’s 

amendment in December 2005 to eliminate the Future Generations 

Fund (thus shifting approximately $36 million to Chad’s general 

treasury) to expand priority sectors to include territorial administration and security, and to shift directed spending in favor of the 

general treasury. Declaring a breach of contract, the World Bank 

exercised its rights to halt its activities and freeze the Citibank escrow account in January 2006. With more than the first quarter of 

2008 consumed by the February conflict—including the government 

pulling monies from the country’s reserve fund to replenish the 

military—it is unlikely that the government will meet targets for 

2008 agreed in a subsequent negotiations with the Bank. In the 

judgment of staff, the World Bank should reengage in its revenue 

management efforts immediately and restore its presence on the 

ground. 

U.S. Government assistance to the country favors humanitarian 

aid and security cooperation. These are necessary priorities, but 

U.S. interests in the country will be strengthened by more consistent demonstration of a broader agenda which will also require 

reinstitution of an economic officer position at the Embassy. Despite the mixed record on revenue management, Chadian officials 

expressed gratitude that staff visited Chad to discuss topics beyond 

humanitarian action and security. Skeptical views of Chadian government sincerity to reform are understandable. However, receipt 

of oil revenues in excess of one billion dollars per year, which could 

support economic and social development, makes it all the more urgent that the United States seeks to bolster reform-minded individuals and activities in Chad. 

Equatorial Guinea 

Equatorial Guinea has an estimated population of approximately 

515,000 and an average life expectancy of 50.7 years. The infant 

mortality rate is 205 deaths per 1000 births and the average per 

capita income is $10,150. This is a deceiving statistic given the vast 

poverty of the majority of Equatoguineans—income is clearly not 

distributed evenly in the country. The total hydrocarbon revenue in 

2007 was an estimated $3 billion, which is approximately 29% of 

its GDP. 

This tiny African country of Spanish-speaking people is comprised of five islands—the capital Malabo is situated on the island 

of Bioko—and a sliver of territory, Rio Muni, on the African mainland. With oil export revenues over $3 billion annually, hydrocarbon export has fundamentally altered Equatorial Guinea’s economic environment and dramatically increased its prospects. The 

means—human resources, processes, and organizations—of translating such massive wealth into economic and social development 

are extremely limited. The historical record of the government’s political repression, corruption, and disregard for service delivery 

leaves many observers cynical at the prospect for the 

Equatoguinean government committing to meaningful development, let alone political and social opening. Yet recent overtures of 

34 

the country’s president and government give reason for optimism, 

no matter how guarded. 

The Equatoguinean government is sharply criticized for near 

stagnant social development indicators even as GDP has soared. 

Between 2002 and 2006 the country experienced an average real 

annual growth of 15.8%. Economic development in Equatorial 

Guinea has thus far concentrated on major infrastructure. The 

Equatoguinean government is quick to point out that infrastructure collapsed along with the economy after the departure of the 

Spanish in 1968 and subsequent authoritarian rule by President 

Francisco Macias. 

Equatorial Guinea exhibited few economic prospects prior to the 

discovery of the offshore Zafiro oil field in 1995, and rare international attention on the country focused on the dire human rights 

situation and corruption. Today Equatorial Guinea is the third 

largest oil producer in Africa, providing a substantial gain of new 

production and investment in a region increasingly critical for the 

global diversification of oil sources. With current oil sales well in 

excess of $3 billion, Equatorial Guinea now ranks in the global top 

ten GDP per capita (PPP) at $44,100. A new state of the art liquefied natural gas (LNG) terminal outside the capital Malabo positions Equatorial Guinea to play an independent and useful role in 

an increasingly global natural gas market as well. 

Transparency is fundamental—albeit a first step—to improving 

Equatorial Guinea’s domestic governance and international reputation, including in the financial sector which the government is relying on for foreign investment and financing. Power, which is synonymous with information about and control over finances, remains 

highly concentrated under President Obiang. His nod is required 

for any appreciable progress, and government ministries outside of 

energy have had little reason to build internal capacity, let alone 

take initiative to deliver on the needs of its citizens. Nonetheless, 

President Obiang has signaled incremental devolution of power and 

greater economic and political openness. The trajectory of improvements is unlikely to be linear, and the extent of his commitment 

will be tested over time. Yet simply more development projects, including those aimed at meeting social needs, will not be sufficient 

for President Obiang to demonstrate genuine change in the governance of his country. Transparency in Equatoguinean accounts, 

budgeting, and expenditures are minimum threshold markers for 

change. In fact, opposition leaders largely agreed with this statement, affirming transparency’s importance on the same level with 

free and fair elections. 

Equatorial Guinea is an EITI candidate country. EITI’s strength 

in Equatorial Guinea is derived from the fact that Equatorial Guinea’s candidacy was made by personal decree of President Obiang, 

though attention to EITI from the members of his government has 

been uneven. It is likely helpful that the government coordinator 

and assistant coordinator also occupy significant positions within 

the key offices of the Finance Ministry and the prime minister’s office, respectively. EITI will be funded from the state budget. Funding mechanisms will need to be closely monitored in order to ensure that government financing does not impinge on the freedom 

of associated civil society groups to operate. In the short-term, 

35 

international assistance in funding for civil society is likely to be 

necessary. 

In terms of promoting transparency in the extractive industries 

and EITI in particular, the familiarity of U.S. energy company staff 

to the Equatoguinean government has allowed the private entities 

to be effective advocates. ExxonMobil, in particular, played a pivotal role in advocating Equatorial Guinea’s accession to EITI candidate country status, building knowledge of EITI within the government and civil society, and assisting in persuading officials to 

attend meetings. Corporate commitment to continuing progress will 

be essential for EITI to have impact. 

Energy is the only sector bringing significant economic activity to 

the country, and its income per capita is so large that Equatorial 

Guinea is not eligible for lending from international financial institutions. International energy companies are required to invest 

heavily in community projects and have made strong contributions 

particularly in health and education. The ministries, particularly 

the energy ministry, have a great deal of say in selecting projects, 

but projects are carried out directly by the companies. This leaves 

little value-added in fostering planning and infrastructure capacity 

to implement projects. 

As a member of Banque des Etats de l’Afrique Centrale (BEAC), 

Equatorial Guinea is legally obliged to deposit excess revenues 

with that institution, although it is known that government accounts are held in other countries with no official reporting. Currently, there are two separate accounts at the BEAC. The first account consists of the country’s primary reserves, which are said to 

be worth over half of total reserves in BEAC, and another fund 

sometimes referred to as the ‘‘Generations Fund’’ intended for future government expenditure. Both funds are said to yield less 

than 3%, and even this is an increase from reforms over the last 

couple of years. Current data on total reserves is not available. 

Currently Equatorial Guinea is not in a position to establish and 

manage its own sovereign wealth instruments, but these are services that could be contracted out in relatively short order and will 

attract suitors world-wide. This may be an attractive option in 

order to keep revenues from flooding the economy (a hedge against 

Dutch Disease-like impacts), and help bring Equatorial Guinea 

closer in line with international financial norms. The U.S. is in a 

relatively weak position to offer assistance in this area given the 

continued unease with how the Riggs Bank episode unfolded, which 

has hampered further financial activities by the Equatoguinean 

government in the United States. 

A future resource in the nascent stage of development and utilizing Equatoguinean government resources is the Social Development Fund (FSD), an E.G.-U.S. Government cooperative endeavor. 

Created by a Memorandum of Understanding signed April 11, 

2006, the FSD is an agreement for U.S. technical experts to work 

with the Equatoguinean government in the areas of health, education, women’s affairs and the environment. The pace and performance of this endeavor has been closely monitored for 

Equatoguinean government sincerity. The agreement quickly ran 

into difficulties due to misunderstanding between the two governments in interpreting the agreement. Not unexpectedly in a counVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
36 

try with severely limited institutional capacity, the Equatoguineans 

preferred turn-key projects while capacity building and host government partnership were the watchwords for USAID. This impasse, however, is reported to have largely passed. At the time of 

the staff visit, 45 projects valued at more than $87 million over 

three years had been approved but were awaiting final authorizations to proceed. The U.S. Government should continue its firm 

backing for this program for its development benefits and because 

it is the first significant devolution of spending authority from the 

President. 

The United States’ diplomatic footprint in Equatorial Guinea is 

miniscule. In 1995, the U.S. embassy was closed and our diplomatic 

relationship was managed out of Embassy Yaounde in Cameroon. 

The general sentiment behind closure of the embassy was that the 

Equatoguinean government showed little reason to hope for 

progress, U.S. interests were too small, and the costs of maintaining our embassy too high compared to the opportunities available. 

The regrettable decision to pullout from Malabo has left diplomatic 

relations on soft ground. The first resident Ambassador since 1995 

was confirmed in 2006, and he is supported by just two Foreign 

Service Officers and one American USAID contractor. Progress has 

been made in rebuilding understanding between our governments 

in the last year and half, but many obstacles still exist. 

Ghana 

Ghana has a population of approximately 22.5 million people and 

an average life expectancy of 59.1 years. With about 78.5% of the 

population living under $2/day, the infant mortality rate is 112 

deaths per 1000 births. Ghana has a per capita income of $2,640. 

Ghana is a country on the threshold of economic stability and 

growth. Many Ghanaians fear that the new discovery of oil and its 

attendant revenues may overwhelm the nascent institutions and 

positive reforms and derail economic growth. These recent reforms 

and accompanying economic success have led to predictions that 

Ghana may, with accelerated growth as a driver, achieve the historic milestones of achieving the Millennium Development Goals 

and middle-income status by 2015. The growth rate necessary to 

deliver on such prognostications would have to be fueled by a number of positive inputs including donor assistance, which appears to 

be waning; non-concessional loans which have been made possible 

by improved risk perceptions; sustained fiscal responsibility; conservative monetary policy; and continued investment in infrastructure and institutional capacity. Such a future appears to be within 

their means, according to the IMF, if the 2008 election cycle machinations do not play havoc with their fiscal discipline and the energy crisis of 2006-2007, caused by low rainfall and mounting demand, do not coincide to sap what excess growth the country has 

generated of late. 

Ghana has achieved growth that is the envy of other African 

countries and has improved governance and policy to achieve remarkable milestones reflected in its eligibility for debt relief, significant private sector loans, a Millennium Challenge Corporation 

(MCC) Compact, and growing investor confidence. Nonetheless, it 

remains tarred with a legacy of corruption that has toppled several 

37 

post-independence governments and that surveys indicate remains 

a considerable problem at the national and particularly at the local 

and district level. Ghana also suffers from challenging institutional 

capacity hurdles that will require considerable time and technical 

assistance to build to levels capable of administering effective management and oversight of its extractives, particularly hydrocarbons. 

The prospects for Ghana’s development were made more evident 

in May 2007, when the IMF published an extremely positive 2007 

Article IV Consultation and predicted that the country could 

achieve middle-income status by 2015. A month later, after 111 

years of exploration, , Ghana announced the discovery of an oil 

field that may contain well over a billion barrels. At this point, 

Ghana receives little in oil revenues, producingonly 700 b/d. By 

2010 Ghana expects to be pumping significantly more from the new 

oil fields and its budget has incorporated gradual increases in revenue beginning in 2009. 

Formerly known as the Gold Coast, Ghana also has a long history of mining experience and has relied on significant exports of 

gold, as well as manganese, bauxite, diamonds and a valuable export cocoa crop to drive its effort toward middle-income status. 

Many in the country, distressed by perceived over-generosity in 

contract terms and exploitation by mining companies, believe that 

Ghana has prospered in spite of extractives, not because of them. 

Ghana, an EITI candidate country, and established Ghana-EITI 

(GEITI) to address transparency in the existing mining sector, 

since it was formed prior to any substantial oil discovery. GEITI 

is one of various initiatives working to enable transparency in 

Ghana. It draws its strength from political buy-in rather than law 

or institution thus far. In fact many people pointed to the fact that 

there is already substantial legislation and other institutions that 

are empowered to pursue transparency and accountability. It was 

evident to staff that GEITI was accepted across the government 

but in a rather narrow focus upon the major mining industry and 

companies. Little reform has been accomplished in the informal/ 

small mine slice of the sector which employs 80% of laborers. 

GEITI appears to have begun expansion of its mandate to the expenditure side rather than limiting itself to revenue as other countries have. GEITI was quite clear on the necessity of such scrutiny 

in order to achieve their goal of effective resource revenue governance and management for the country. Nonetheless, despite unanimous GEITI Board concurrence on expenditure scrutiny, this purpose is contingent upon their ability to scrutinize at both national 

and local levels both of which present their own obstacles. Their efforts to date have been primarily directed at the local level where 

they believe the most immediate problems exist. 

GEITI and associated stakeholders are at a point where they 

must decide whether or not to institutionalize by statute, as Nigeria has done, or to make themselves more independent from government. There is considerable political support under the current 

administration behind GEITI, with representation from key offices, 

including a representative from the Vice President’s office who 

said: ‘‘the fact that I am here shows the political importance of this 

work; I can take recommendations to the Presidency.’’ 

38 

Despite Ghana’s considerable accomplishments in establishing 

macro-economic stability and improving budget management, 

Ghana faces daunting challenges to ensure that oil revenue is managed in a manner that will benefit current and future generations. 

As a young democracy with large trade and fiscal deficits and extensive infrastructure and development needs, Ghana will be challenged to exercise fiscal discipline and strike a balance between 

current and future spending. 

The overall control of the petroleum sector is vested in the Ministry of Energy, but it is the state oil company, the Ghana National 

Petroleum Corporation (GNPC), which has practical authority over 

the sector according to laws established in the 1980’s. GNPC has 

been granted exclusive responsibility for commercial petroleum operations as well as regulatory and enforcement responsibilities. Petroleum agreements are subject to cabinet and parliamentary ratification. Some Ghanaian officials believe that ‘‘the technical capacity does not exist anywhere else in the government to effectively 

manage GNPC’s current responsibilities.’’ The officials further 

noted that Ghana would require significantly more engineers and 

hydrocarbon expertise. The U.S. Government and international 

community have many reasons for supporting the stability and sustainability of Ghana’s economic and political improvements. Traditional U.S. Government assistance in Ghana emphasizes health 

and education programs, and the MCC programs helpfully broaden 

assistance, in particular to agriculture which is vital to building up 

ahead of potential Dutch Disease impacts once oil revenues start 

to flow. Beyond concurrence with Ghana’s Growth and Poverty Reduction Strategy, the U.S. Mission Strategic Plan already identifies 

Democracy and Governance as the primary focus in our assistance 

strategy. However, the resources to adequately meet that priority 

are extremely limited. As Ghana’s economy accelerates, foreign assistance will continue to diminish. Education and health are sectors that Ghana can and should fund from its own resources. U.S. 

assistance should fill critical gaps in those important sectors while 

concentrating efforts to build technical capacity for government institutions to manage and guide government policy-making and decisions and deliver effective oversight. Oversight will also require 

substantial investment in civil society. Ghana has a head start but 

will be scrutinized closely both by its own citizens as well as its 

neighbors, in the hope that the resources become a blessing for the 

country. 

Nigeria 

Nigeria has a population of 144 million and a per capita income 

of $1,050. Life expectancy is 46.5 years and the infant mortality 

rate is 194 deaths per 1000 births. About 92.4% of the population 

lives under $2/day and the number of people living in poverty has 

actually been increasing. Estimated oil export revenue in 2007 was 

$57 billion, constituting about 34% of GDP. 

Nigeria is a key ally and economic partner of the United States. 

Nigeria plays a major role in advocating peace and democracy in 

Africa, from helping resolve political disputes in Togo and Cote 

d’Ivoire to providing peacekeeping forces in Liberia and Sudan. Nigeria is a chief trading partner in Africa for the United States, is 

39 

among the top suppliers of oil to the United States, and has the 

potential to be an engine of economic opportunity in Africa. Its 

laudable economic reform program has facilitated 7% growth, 

major debt has been eliminated, inflation is below 6%, while fiscal 

reserves and the banking sector are strong. 

Underscoring the importance of oil and gas to Nigeria, Nigeria’s 

‘‘Energy Minister’’ is the President himself, and hydrocarbons export is the linchpin of Nigeria’s economy. This also points to the potential for political influence—both good and bad. According to the 

World Bank, oil and gas production account for 85% of government 

revenues, and 99% of export earnings. The discovery of hydrocarbons in the Niger Delta in 1956 began a prolonged period of oil 

and gas production that has delivered over an estimated half trillion dollars in income. Yet Nigeria’s historical inability to effectively use oil revenues—including $57 billion in 2007 alone—for 

broad development speaks against the Nigerian government’s goal 

of being a global economic leader. Soaring global energy prices, persistent instability in the Middle East, and steadily increasing global demand all work to commend Gulf of Guinea oil and natural gas 

as an attractive source of energy import diversification for world 

markets. Long at the fore of regional oil and gas production, Niger 

Delta instability has recently caused Nigeria to lose its lock on production leadership in the region and has roiled global oil markets. 

Failure to effectively use hydrocarbon revenues for development 

has propagated Niger Delta insecurity, in turn rendering Nigeria 

unable to realize the full value of its resources. Shut-in production, 

stolen oil, and oil and gas lost due to attacks by militant groups 

onshore and at sea—let alone labor disputes—have removed as 

much as 1 million barrels of production at various points in time. 

Efforts to promote transparency and improved governance of fiscal resources in Nigeria is set against a legacy of manifest corruption, political volatility, and slow institutionalization of regulatory 

processes and oversight bodies. Corruption and mismanagement by 

a succession of military governments interspersed by occasional 

weak civilian governments have been the norm in the 48 years 

since independence. Corruption is rampant, government procedures 

are opaque, and new state and federal legislation is needed on public procurement, fiscal responsibility, and freedom of information. 

Whilst the political environment around elections remains contentious and significant problems of governance persist, Nigeria’s institutional capacity to deal with political volatility, judicial confidence, and legal remedy on fiscal issues is notably improving. 

The Nigerian economy has been wracked for decades by a failure 

to effectively manage and account for revenues, especially those 

from the petroleum industry. However, until 1970 when oil income 

began to markedly increase, the scope of mismanagement and theft 

was limited by the national income. At the close of the Biafran civil 

war, oil income was just $250 million, but by 1974 due to the 

OPEC oil embargo it had soared to $11.2 billion, dominating the 

economy and lavishing those in power with untold opportunities for 

malfeasance with little scrutiny. Although the massive income 

would wax and wane, the mismanagement and theft became entrenched. 

40 

In Nigeria’s case there are two distinct repositories for the income derived from oil—the Federation Account and the Excess 

Crude Account. The Federation Account holds funds for use of the 

federal government, the 36 state governments, and 774 local government councils then draw their respective proceeds for general 

budget execution. The formula for each governing entity’s share is 

developed by the Revenue Mobilization, Allocation, and Fiscal Commission (RMAFC). According to the formula, the federal government currently receives 48.5% of oil and gas revenue, states receive 

24%, and local governments 20%—a minimum of 13% of revenue 

accruing to the RMAFC account is stipulated to be returned to the 

oil-producing states. The remaining 7.5% is intended to be set aside 

but it is unclear for what purpose. The ultimate use of the finances 

that are distributed at all levels was beyond the means of staff to 

assess. However, all officials with whom staff spoke echoed the 

sense that without scrutinizing the budget expenditure side of the 

federal and state and local levels there would be little chance of reducing waste, fraud and corruption. Budget management is limited, 

however. In 2003 only 36% of the national budget was met. By 

2006 the effectiveness of implementing the budget had improved to 

89%, although in 2007 there was a dip to 70% according to government estimates. 

Revenues collected above the projected year’s budget outlays, or when oil was in excess of the $54/barrel budgeting benchmark in 

2008, flow into the Excess Crude Account. This Account was setup by President Obansanjo’s administration in 2003. Great dissension exists between the federal government and the states as to 

what should be done with this fund. Some have indicated that despite the federal management of the Excess Crude Account, the 

Constitution stipulates that the proceeds of natural resources belong to all the states, and thus should be moved to the Federation 

Account. Others have recommended prudent investment of the Excess Crude Account and use for infrastructure projects throughout 

Nigeria. 

The emphasis on reform of Nigerian governance began during 

President Obasanjo’s term in office and led to significantly more 

U.S.G. interest in engaging Nigeria. The reform effort was focused 

on greater transparency and counter-corruption, which included 

providing investigative mechanisms that could wield considerable 

authority. President Obasanjo established the Economic and Financial Crimes Commission (EFCC) as well as the Independent Corrupt Practices and Other Related Offences Commission (ICPC). 

Through high-profile prosecution of corruption allegations, and despite accusations of their use for political ends by the Obasanjo administration, these organizations have served to raise awareness of 

the prevalence of corruption at the highest levels of the government. 

Nonetheless, in late December 2007, after President Obasanjo 

left office, Nigeria’s Inspector General of Police announced the 

transfer of EFCC head Nhuru Ribadu to the state of Jos to attend 

a one-year course at a Nigerian policy institute, raising questions 

of the new government’s commitment to reform in its present form. 

The EFCC was also placed under the authority of the Minister of 

Justice, possibly limiting its effectiveness. Staff visited with then 

41 

25 Revenue Watch Institute, Policy Brief, Leaving A Legacy of Transparency in Nigeria, April 

2007. 

acting head of the EFCC, Ibrahim Lamorde, who maintained that 

‘‘there would be no letdown’’ in the effective investigation and pursuit of corrupt officials. The EFCC’s momentum does not appear to 

have diminished though their resources are still limited and their 

efforts are helping to reveal and remedy a plainly systemic corruption problem. The EFCC’s work has brought information to the 

fore; what is done with that information and how capable the actors are in making best use of it is an opportunity for international 

technical and other assistance to help. 

President Obasanjo indicated his intent to pursue greater transparency by naming a reform-minded Finance Minister and pursuing implementation of the Extractive Industries Transparency 

Initiative (EITI). By 2004 Obansanjo had launched the Nigerian 

version (NEITI), and had established a committee to guide the 

group called the National Stakeholders Working Group (NSWG), 

made up of 28 representatives from federal and state governments, 

civil society and industry. A subsequent call for more civil society 

representation brought the Civil Society Steering Committee into 

existence as a consultative body to the NSWG. 

The most influential outcome of these formative efforts is the 

Hart Group audit of Nigeria’s oil industry between 1999 and 2004. 

The audit issued in December 2006 was groundbreaking for Nigeria in revealing information about the petroleum sector. The most 

important findings were not specific monetary losses but failed accounting and capacity to account for resource transfer up and down 

the production line that left broad opportunities for theft. The Hart 

audit points to the weaknesses in accountability within the Nigerian National Petroleum Company, the Department of Petroleum 

Resources, and the Federal Inland Revenue Service.25 Several observers commented that the most remarkable finding was that revenues were largely accounted for and, therefore, that monies were 

being stolen after they reached the treasury—hence needed emphasis on budgeting, expenditure, and procurement. There is little 

doubt that billions in income have been lost to Nigerians over the 

years. Indeed, the NEITI process has produced the unintended consequence of enabling the government to collect on previously 

missed payments by private industry and has empowered the federal government to respond to blame by states that it is not providing them with sufficient resources. There is validity to the concern that state and local capacity to properly utilize appropriations 

is wanting. 

Of the countries that have now endorsed EITI, Nigeria joins only 

Azerbaijan to have undertaken most of the essential EITI steps (established multi-stakeholder committees, identified an individual 

within the government to lead the process, drafted national work 

plans, selected auditors) and have published audited and reconciled 

EITI reports. NEITI has been proactive in public outreach ‘‘road 

shows’’ and has an extended mandate to audit product movement 

as well as finances. There are some reservations as to whether the 

independence of the institution will be maintained and whether it 

will be properly funded. NEITI was in limbo through the presiVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
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26 Civil Society Perspectives and Recommendations on the Extractive Industries Transparency 

Initiative, Publish What You Pay/Revenue Watch Institute Report, October 2006. 

dential transition, and only recently was a director named. Observers recognize that the senior official first chosen to chair NEITI, 

Obiageli Ezekwesili (now at the World Bank), possessed a close 

working relationship with President Obasanjo, a factor which appears crucial in generating internal momentum behind EITI implementation.26

Improved governance of extractive industries resources is fundamental to U.S. Government policy priorities in the country—from 

poverty alleviation, to improved security environment, to democratic consolidation—as well as in meeting the new President’s 

goals of electrification, gas development, and Niger Delta conflict 

resolution. The Nigerian government has substantial financial and 

personnel resources, but needs technical support. Indeed, requests 

for such assistance were frequently raised in staff meetings. No 

economic development effort in Nigeria is more important than the 

Niger Delta. Insecurity in the Delta hampers Nigeria’s own ability 

to capture the benefits of its hydrocarbons production, and it is a 

direct threat to the U.S. economy. The Niger Delta is also of significant international concern should a full-blown conflict emerge causing the collapse of the region which would likely prompt a very difficult and expensive international peacekeeping response. General 

sentiment in Abuja now seems to be that the situation can only be 

solved through development instead of military intervention, and 

the U.S.G. should act decisively to promote this viewpoint. U.S. embassy personnel are unable to visit large areas of the delta due to 

broad criminality and insecurity that has prompted restrictive security procedures and the high costs of security personnel and 

transport. Lack of a persuasive strategy for U.S. assistance to the 

Delta impinges U.S. interests in the country and economic interests 

in oil prices. 

Some within the donor community and Nigerian officials indicate 

that failure to improve governance will undermine sustained development thus thwarting the government’s own ambition to be in the 

top twenty economies in the world by 2020. 

ASIA 

Cambodia 

Cambodia is slightly smaller than Oklahoma and has a population of 14.2 million. Average life expectancy is 61.7 years, and infant mortality is about 57 deaths per 1000 births. The average per 

capita income of a Cambodian is $1,690 with 77.7% living under 

$2/day. 

Cambodia still suffers from the legacy of intermittent civil war 

between 1970-1990, which included U.S. bombing raids, the Khmer 

Rouge genocide, and a 10-year occupation by Vietnam. The Khmer 

Rouge having eliminated its educated classes, Cambodia emerged 

with very low civil and institutional capacity but enjoys relative political stability today with impressive GDP growth of 9.5% in 2007. 

Cambodian Prime Minister Hun Sen, a former Khmer Rouge commander, is the longest serving prime minister in Asia (23 years), 

and was recently returned to office in an election that observers 

43 

say failed to meet international standards. Cambodia boasts a generally free press, vibrant civil society, and a multi-party political 

system, though impunity for political killings, election intimidation, 

and land-grabbing cases are prevalent. Corruption is rampant in 

Cambodia (one USAID-funded study concluded that ‘‘only 25% of 

potential tax was collected from the private sector in 2005’’). Staff 

heard repeatedly that many government officials’ salaries are so 

meager that they are forced to take second jobs or resort to bribes. 

Cambodia views itself in competition with its regional rivals 

Vietnam and Laos and is aware that it could be left behind. On the 

economic front, Cambodia is focused on further developing its successful garment industry, expanding tourism, beginning to exploit 

its hard minerals and recently-discovered offshore oil resources, 

fighting endemic corruption, and petitioning donors for debt forgiveness. 

Though Cambodia is believed to have significant deposits of gold, 

copper, bauxite, oil, and natural gas, no commercial exploitation is 

yet underway and no significant revenues are being created. 

Whereas timber was formerly a revenue-creating industry, it has 

come under great scrutiny by the NGO community for corrupt practices, and all timber exports have since been banned. 

In 2002, Chevron was granted a petroleum agreement for offshore exploration near the Thai border and successfully located deposits in the Pattani and Khmer basins in 2005. The deposits are 

in small pools, as opposed to a single reservoir, and it is still unclear how viable extraction will be. Moreover, the Pattani basin lies 

in the Overlapping Claims Area with Thailand, and negotiations to 

resolve the border dispute are ongoing. The Cambodian government has signed agreements for five additional offshore blocks with 

several international oil companies, whose fiscal terms remain undisclosed; no exploration has yet taken place in these fields. Several onshore exploration contracts have also been signed, particularly in the ecologically- and agriculturally-rich Tonle Sap (Great 

Lake) basin in central Cambodia, with seismic tests now underway. 

Due to these uncertainties, international oil companies and Cambodian officials cautioned against high expectations. Staff is aware 

of revenue expectations ranging from $60 million/year (Cambodian 

National Petroleum Authority) to $150 million/year (Cambodian 

Ministry of Economy and Finance) to $1 billion/year (Congressional 

Research Service) to $1.7 billion/year (Global Witness) from the oil 

and gas sector if extraction goes forward, with fields coming online 

in 2011-2012 at the earliest. 

Several international mining companies, including BHP Billiton 

and Oxiana, have signed mining exploration contracts for copper, 

iron, gold, and bauxite, but no revenues are yet being created. No 

international bidding occurs for mining concessions, and the concessions themselves are not disclosed. Cambodian Ministry of 

Mines officials told staff that private companies could release whatever they wanted, but the Ministry of Mines would not divulge any 

contract details. 

Cambodian Prime Minister Hun Sen has often noted that corruption and lack of transparency have inhibited growth but few tangible anti-corruption measures have been undertaken. Many analysts agree that the government has pushed anti-corruption measVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
44 

ures with little zeal, usually only far enough to keep donor money 

flowing in. For example, international donors and civil society have 

been united in advocating passage of an anti-corruption law that 

has been in the works for 13 years. It has ultimately stalled in the 

Council of Ministers because of its misgivings about an overzealous 

anti-corruption commission, provisions requiring a declaration of 

assets held by government officials, and harmonization with the 

penal code. Instead, the Council of Ministers has created a weak 

anti-corruption body, which international donors have ceased funding. As is often the norm in foreign assistance debates, U.S. officials maintain that other international donors have no leverage 

over the government on these issues because other donors have 

consistently provided increasing amounts of direct budget support 

despite Cambodian obstinacy on anti-corruption measures. 

Staff found that all Cambodian officials were well-versed in the 

EITI concept and, in general, positively disposed to the broad principles of EITI. However, officials were hesitant because of the 

present lack of revenues, failure of Asian peers to sign up, and a 

severe lack of technical capacity to implement an EITI-like regime. 

Cambodia has sent delegations to Norway, East Timor, and Azerbaijan to study their experience with oil wealth. 

Cambodia is the third largest recipient of U.S. aid in Southeast 

Asia. Officials from the U.S. Embassy to Cambodia were very familiar with EITI, and Ambassador Mussomeli appears to have 

made advocacy of EITI a U.S. priority in Cambodia. Transparency, 

anti-corruption and natural resource management seemed to touch 

on most high priorities of the U.S. Embassy. As one U.S. official 

noted, ‘‘You have to approach every issue here from an anti-corruption angle.’’ 

The U.S. Government has been part of the international coordinating group for passage of the anti-corruption law and had a lawyer at post to provide counsel on the law; USAID worked in a similar capacity to provide technical assistance for the drafting of a 

freedom of information act. The Embassy has also trained 22 journalists in investigative reporting to help expose corruption. USAID 

launched the Mainstreaming Anti-Corruption for Equity (MAE) 

program in 2006, which builds public capacity to police mismanagement of public land and resources. 

The U.S. Government has no programs that directly deal with 

extractive industry capacity building, though the MAE program 

has brought together several NGOs interested in transparency in 

extractive industries. These NGOs formed a group called Cambodians for Resource Revenue Transparency in January 2008, 

which is still harmonizing its positions on many critical issues of 

revenue management. 

China 

With a land mass slightly smaller than the United States, China 

has approximately 1.3 billion people. The infant mortality rate is 

approximately 21 deaths per 1000 births, and average life expectVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
45 

27Figures for life expectancy and infant mortality throughout this report are from the United 

Nations Development Program, Millennium Development Goal data (http://www.undp.org/mdg/ 

). 28Figures for per capita income are from the World Bank, World Development Indicators 

(http://web.worldbank.org) 29 ‘‘China Energy Profile’’ Energy Information Administration August 2008. 

ancy is 73 years.27 The per capita income of the average Chinese 

is $44,050.28

China is still a developing country, despite its GDP ranking 

fourth in the world after only thirty years of reform. China’s land 

is crucial to food production, yet China has only 9% of the world’s 

arable land and 22% of the world’s population. China is also short 

on fresh water due to its large population; fresh water per capita 

is less than one fourth of the world’s average. According to government officials, China’s top policy priority is to focus on the peaceful 

and equal development of relations with other countries in terms 

of culture, politics, and trade and improving the standard of living 

within China. 

In 2006, China’s GDP from extractives totaled $152.7 billion, and 

employment in these industries was 7.84 million. China’s extractive 

industry production amounts to less than 5% of the country’s GDP 

due to the incredible size of their economy. China produces significant amounts of the following commodities: iron ore, mercury, tin, 

antimony, manganese, tungsten, aluminum, lead, zinc, molybdenum, gold, uranium, copper, vanadium, lead, and magnetite. 

Last year, China produced around 2.3 billion tons of coal, making 

it the world’s largest producer and consumer of coal, as well as the 

world’s largest producer of tin. China’s natural gas supply, however, is less than 1% of the world’s total production and aluminum 

is only 2% of the world’s total. China’s extractive industries have 

recently boomed in order to satisfy its large population as well as 

the rest of the world’s demand: China’s 2006 growth rate of output 

was 49% for coal, 77% for oil and gas, 42% for metal and ores. 

China’s total oil production in 2007 was 3.9 millions of b/d and 

their consumption was 7.58 million b/d. They ranked 5th in 2007 

in both total oil production and crude oil production, as well as second in consumption.29

According to an official from Shanghai Institute of International 

Studies, a think tank in China, most extractive revenues go to the 

central government since most of the companies are State Owned 

Enterprises (SOE). The companies can help the local governments 

develop water, electricity, housing, schools, and transportation in 

order to sustain their economic development and create a good investment environment for foreign direct investment. The SOEs 

have a monopoly over the extractives industry and pay a tax to the 

government for their rights. World Bank officials noted that the 

mining industries are usually small and locally operated, and 

therefore, the revenue goes into the local economy; however, the 

central government is attempting to consolidate this industry. One 

government official stated that some of the inland provinces are 

rich in natural resources and develop those industries for their 

benefit. One stated that most of the fiscal revenue in the local government of Wuhan goes towards helping the local people through 

cultural exchanges and educational development. The extractive 

46 

30 China’s Sovereign Wealth Fund information came from Michael Martin’s January 22, 2008 

CRS report. 

revenues are reportedly not invested in China’s sovereign wealth 

fund. 

China stated that it has just begun SWF investment and is in 

an experimental stage. China claims it has suffered the loss of billions of U.S. dollars, stressing that SWFs are simply for commercial interest and that it is up to the corporations themselves on 

what sectors they make investments in. China established its SWF, 

the China Investment Corporation (CIC) on September 29, 2007, 

with an initial investment of $200 billion.30 China currently has 

over $1.5 trillion in foreign exchange reserves, and therefore allegedly created the CIC to improve the rate of return and to get rid 

of excess liquidity. 

CIC has been criticized because the initial investments were apparently political in nature, even though the top management denies these claims. Concern has grown from U.S. officials about the 

large amount of money in CIC as well as potential investments in 

major U.S. investment banks like Citigroup. The Fund has invested 

in U.S. Treasury bonds and, on December 19, 2007, the CIC purchased ‘‘around 9.9%’’ of Morgan Stanley which amounted to $5 billion. Morgan Stanley stressed that the CIC will have ‘‘no special’’ 

rights of ownership and no role in corporate management.’’ 

World Bank officials said there has been very limited dialogue on 

EITI with the Chinese government. Since extractives are such a 

small part of their GDP it would be difficult to apply any serious 

pressure on China to become engaged in EITI. China would benefit 

from EITI but it would be too complex to implement because the 

payments are mostly done at a local level rather than the national 

level. 

The World Bank has been trying to improve budget transparency 

in China, but representatives said this was difficult and that most 

successes have been at the local or municipal level. Transparency 

became more of a key issue following the recent earthquake in 

China. According to both U.S. officials and Chinese officials, China 

passed anti-corruption laws in conjunction with joining the WTO 

and passed anti-bribery laws after becoming a signatory on the UN 

Convention. The U.S.-China Strategic Economic Dialogue has been 

the primary forum for U.S. officials to raise issues relating to 

transparency and economic management with Chinese officials. For 

example, agreements have been reached to increase energy security 

for oil importing countries in the event of a supply disruption by 

cooperating with one another and in conjunction with the International Energy Agency. Other agreements include civil aviation to 

approve non-stop flights between the two countries and tourism 

agreements. U.S. officials asserted that they have engaged with 

China on supporting transparency through their investment in resource-rich companies, though it is not clear if these discussions 

have resulted in any changes. The United States and China have 

discussed consumer product safety, intellectual property rights, and 

working to expand U.S. exports to China. As U.S. embassy officials 

explained, transparency will continue to expand, but at China’s 

own pace; the U.S. has little leverage to push these types of issues. 

47 

In the end, Embassy officials said that the most important thing 

is consistency. 

Indonesia 

Indonesia has a population of over 230 million. Annual per capita income is $3,580 while the percent of the population living under 

$2/day is 52.4%. Indonesia’s total revenue from hydrocarbons in 

2005 was $15.8 billion which was 5.5% of GDP. 

The Asian financial crisis severely affected the Indonesian economy, causing per capita GDP to plummet. The economy has since 

bounced back with increasing foreign investment, but growth is expected to slow to 5.9% in 2008 from 6.3% in 2007, due predominately to increasing fuel and food prices. Indonesia still faces issues 

of corruption that deter further foreign investment, but the nation 

has taken substantial steps to promote democracy. 

In 2006, Indonesia was the 21st largest oil producer. As an oil 

producer, Indonesia has been on the decline. This reduced profile 

as an oil producer led Indonesia to recently announce its withdrawal from the Organization of Petroleum Exporting Countries 

(OPEC) at the end of 2008. Indonesia was responsible for approximately 1.3% of the world’s daily oil production in 2006 with 

1,005,810 b/d of petroleum crude and condensate; in 2007 Indonesian production fell to 912,000 b/d. Indonesia’s proven oil reserves are approximately 4.44 billion barrels, according to official 

data. 

However, there is great untapped potential in gas reserves. Indonesia ranks eighth in world gas production and is the world’s second largest LNG exporter, with proven reserves of 88.5 trillion 

cubic feet (Tcf) in 2006. Proven reserves fell 9% in 2006 compared 

with 2005. Indonesia produced 2.97 Tcf in 2006, down 1% from 

2005. Indonesia lost its status as the world’s largest exporter of 

LNG to Qatar in 2006. Indonesia produced 22.4 million tons of 

LNG in 2006, the same year the government announced a policy 

to re-orient natural gas production to serve domestic needs. As a 

result, Indonesia’s share of the world LNG market has shrunk from 

18.8% in 2004 to 14% in 2006. Rapid rates of new production in 

Qatar, Australia and Russia are likely to continue to erode Indonesia’s position. 

Indonesia is the largest exporter of thermal coal and also has 

large deposits of copper, gold, nickel, and silver. Mining investment 

fell almost 66% from 1998 to 2005, largely due to regulatory uncertainty. Mining policy challenges include resolving conflicts between 

mining and forestry laws to prevent disputes with local communities that cause additional financial burdens to mining companies. 

Oil and gas revenues are channeled to the Non-Tax Revenue Department, Ministry of Finance and are audited internally with an 

external auditor working through the Indonesian audit board 

(BPK). Hydrocarbon revenue is included in the national budget and 

re-allocated according to separate formulas for oil and gas to the 

regional governments. Due to devolution of power and revenue authority to regional governments, a persistent problem has been the 

misunderstanding of the calculations of oil and gas revenues by 

sub-national government officials, which has led many regional administrations and their citizens to overestimate the value of future 

48 

31 Ibid 32 ‘‘Tackling Corruption, Transforming Lives,’’ United Nations Development Program, June 12, 

2008. 

transfers. To clarify the regions’ share of oil and gas revenues, the 

Ministry of Finance began the practice in 2005 to issue a yearly decree estimating the allocation of oil and gas revenues to all of the 

provinces, regencies, and cities. Indonesia does not have a sovereign wealth fund (SWF). There is consideration of establishing a 

SWF from the ‘‘SOE pooling fund.’’ However, it is not yet clear how 

the SWF would be structured.31

The prospects for development of a long-term environment conducive to transparency and combating corruption in Indonesia are 

uncertain. Since transition to democracy in 1998, Indonesia has 

made progress in anti-corruption reform, notably with institutional 

reform during the Yudhoyono administration. Yet, while a plethora 

of transparency and anti-corruption initiatives have been launched 

by Indonesian governmental leaders, with the encouragement of 

civil society, progress is slow. 

Since ascending to the top office in Indonesia, the President has 

continually pressed on the corruption front, and can point to ‘‘over 

100 public officials, including governors, regents and former ministers, (having) been jailed for corruption since. . . . 2004.’’ However, the recently released United Nations Development Program 

(UNDP) Asia-Pacific Human Development Report, ‘‘stresses that 

while anti-corruption efforts too often focus on exposing the ‘big 

fish,’ it is ‘small fry’ corruption, which causes more day-to-day suffering and could severely hamper the Region’s goal of achieving the 

Millennium Development Goals—the eight internationally—agreed 

targets aimed at halving poverty by 2015.’’ 32 In March of this year, 

the Indonesian Parliament (DPR) passed a ‘‘Freedom of Information’’ act which reflects the Indonesian government’s commitment 

to transparency. While passage of the law reflects commitment to 

transparency, actual implementation of the law will be the longterm test. 

Indonesia is not an EITI candidate country. Timeliness of action 

by President Yudhoyono advancing EITI will be an integral determinant as to whether EITI, and other transparency initiatives, 

gain momentum so that the people of Indonesia may realize direct 

benefit from extractive industries. There appears to be a general 

lack of information in the public sphere on how EITI works. EITIrelated reforms were part of the massive 2008-2009 structural reform package released by Coordinating Minister for Economic Affairs Dr. Boediono before he became Central Bank Governor. Implementation of these reforms remains uncertain. 

USAID is funding over $100 million of transparency and good 

governance projects in Indonesia, and as possible, enlists other donors to contribute and participate in the projects. U.S. Attorney 

General Mukasey recently visited Indonesia where he was able to 

view U.S. Department of Justice (DOJ) programs already in place. 

Along with Indonesian Attorney General Hendarman Supandji, Mr. 

Mukasey signed a Memorandum of Understanding (MOU), providing $750,000 in U.S. Government assistance to help establish an 

anti-corruption task force at the Attorney General’s Office (AGO), 

49 

33 U.S. Embassy, Jakarta, June, 2008. 

modeled on the U.S. AGO’s Anti-Terrorism and Transnational 

Crimes Task Force.33

Timor-Leste 

Timor-Leste has a population of approximately 1 million people. 

The average life expectancy is 59.7 years, and the infant mortality 

rate is 61 deaths per 1000 births. The total hydrocarbon revenue 

for 2005 was $116 million or 38.8% of GDP. 

Timor-Leste was created in May of 2002, following independence 

from Indonesia. During the secession movement, an estimated 75% 

of the population was displaced and nearly 70% of all buildings, 

homes, and schools were ruined by a campaign of violence carried 

out by militia groups following their 1999 vote for independence. 

Between 1999 and 2002, over 5,000 (8,000 at peak) UN peacekeeping troops were sent to help rebuild the nation. Conflict again 

broke out in March 2006 resulting in another UN peacekeeping 

mission in Timor-Leste and the resignation of Prime Minister 

Alkatiri. Violence again erupted surrounding the April 2007 presidential elections, and in February 2008, one of the leaders of the 

March 2006 violent protests, Major Reinaldo, led an unsuccessful 

assassination attempt and coup against the elected President and 

Prime Minister. Violence and peacekeeping troops have been persistent forces in defining the newly independent nation, not only 

due to military-related violence but also gangs of unemployed 

youths. Unemployment and underemployment are thought to be as 

high as 70%. According to a 2007 estimate, inflation is approximately 7.8%. 

In 2000, as Timor progressed toward independence under UN 

auspices, complex and politically controversial negotiations began 

with Australia regarding overlapping claims on gas and oil resources of the Timor Sea. The result was the signing of the Treaty 

on Certain Maritime Arrangements in the Timor Sea (CIMATS) on 

January 12, 2006, which increased Timor-Leste’s share of hydrocarbon revenues from 18% to 50% for the Greater Sunrise oil field. 

In the years 2005–2006, Timor-Leste earned a combined $360 million in hydrocarbon revenues. Timor-Leste is also currently receiving revenue in a 90%-10% sharing agreement (in favor of Timor) 

from an earlier agreement on the Bayu-Udan field, which contains 

approximately 400 million barrels of oil and 3.4 Tcf of gas. 

According to World Bank reports, revenues from oil and gas already comprise 50% of the country’s GNI and supply more than 

90% of its government revenues. All of this is derived from offshore, upstream development, with downstream processing done in 

other countries. It is the hope of many Timorese, including the 

Timor-Leste government, that Timor-Leste will soon receive revenues from downstream (refining, processing and gas liquefaction. 

The most likely near-term possibility for this is an undersea pipeline from the Greater Sunrise gas field to the shore of Timor-Leste, 

50 

34 ‘‘Sunrise LNG in Timor-Leste, Dreams, Realities and Challenges,’’ A report by La’o 

Hamutuk, Timor-Leste Institute for Reconstruction Monitoring and Analysis, p. 3, February, 

2008. 35 Economics@ANZ, Timor-Leste, June 2007. 36 Abraao Fernandes de Vasconselos, Banking & Payments Authority General Manager. 37Quarterly Report, Petroleum Fund of Timor Leste. 38 Ibid. 39 Ibid. 40 Abraao Fernandes de Vasconselos, Banking & Payments Authority General Manager. 

with a Liquefied Natural Gas (LNG) liquefaction plant and tanker 

port to process the gas and ship it overseas.’’ 34

‘‘Oil and gas revenues are expected to accelerate sharply in com- ing years. Petroleum Fund assets have the potential to exceed $12 

billion by 2020.’’ 35 Hydrocarbon revenues are channeled into the 

Petroleum Development Fund, which was established in 2005 and 

is managed by the Banking and Payments Authority (BPA). The 

BPA is a distinct autonomous public entity, accountable directly to 

the Prime Minister. The highest decision body of the BPA is the 

Governing Board. The BPA does not receive instructions when 

making decisions that relate to areas under its responsibility, e.g. 

approving licenses for banks or insurance companies. The Petroleum Fund Law provides clear lines of responsibility between the 

BPA, the Ministry of Finance and the Parliament.36

The assets of Timor-Leste’s Petroleum Fund are approximately $3 billion. The return on the Fund for the year to March 31, 2008 

was 9.1%. During the first quarter of this year, the capital of the 

Fund grew from $2,086.16 to $2,629.96 million.37 The BPA continues to invest all funds received according to the investment 

mandate agreed with the Ministry of Planning and Finance in 

which a benchmark index of United States Treasury Securities 

with maturities up to five years is specified together with defined 

performance measures.38 The BPA continues to invest all funds received according to the investment mandate agreed with the Ministry of Planning and Finance.39

Timor-Leste President Jose Ramos-Horta noted that credit for establishing the Petroleum Development Fund should be given to the 

Norwegians, the World Bank and the IMF, which have provided 

advice to the government of Timor-Leste on this project. He also 

praised former Prime Minister Mari Alkatiri for his initiative in 

setting up the fund. It produces quarterly reports that are released 

to the public. 

The Petroleum Fund law gives the Minister of Finance authority 

to make investment decisions after receiving advice from the Investment Advisory Board (an advisory body set up to advise the 

Minister on issues related to investment strategy, performance 

benchmarks, and performance of the investment managers). The 

Petroleum Fund is audited annually by an internationally-recognized audit firm (presently Deloitte), and the BPA and Minister of 

Finance audit offices also conduct regular auditing, required every 

six months.40

Leaders of Timor-Leste are committed to transparency in governance. One example is a special project informing the public as to 

the success of individual Cabinet members with budget execution. 

Unfortunately, the limited capacity of GOTL institutions point to 

weaknesses in fiscal policy, including budget execution and program implementation and monitoring. The government does not 

51 

41 Interview between Keith Luse and Mr. Alkatari, June 17, 2008. 42 Ibid. 43 ‘‘East Timor Ignores Economic Warning,’’ BBC News, July 31, 2008. 44 U.S. Embassy, Dili, May, 2008. 45 USAID News Release, ‘‘USAID, AusAid Sign Agreement to Continue Supporting Independent Media,’’ March 26, 2008. 

have the capacity to fully and completely fund and plan these 

projects, and large amounts of funds have been carried over from 

year-to-year and there is no clear tracking system for how the 

money is spent. 

Timor-Leste has signed up for EITI and is an outstanding model 

of implementation. Former Prime Minister Mari Alkatiri announced Timor-Leste’s commitment to EITI in 2003 and consulted 

with Norwegian officials, among others, to determine the best way 

forward. The former Prime Minister has conveyed his hope that 

Timor-Leste develops an EITI program that is ‘‘a Norwegian plus 

model.’’41 Currently, Timor-Leste EITI does not include mining as 

there is presently no mining activity in the country. However, ‘‘we 

have left room for mining to join the Working Group in the event 

there is an activity in that area.’’ 42

However, more recently, concern has been expressed regarding 

the Timor-Leste government’s plans to reportedly increase government spending in the next budget by over 120% to assist in subsidizing high food and fuel prices. ‘‘Opponents say these subsidies 

risk dampening East Timor’s nascent non-oil economy. ’’43

U.S. objectives in Timor-Leste include strengthening the country’s democracy and free markets. U.S. foreign assistance primarily 

supports job creation through accelerated economic growth and 

strengthening key foundations of good governance, with particular 

emphasis on developing a functioning justice system and professional media sector.44 While U.S. officials have not been actively 

promoting EITI in Timor-Leste, part of USAID’s portfolio encourages greater transparency in government. U.S. advocacy for EITI 

is unnecessary given the full endorsement of the project by top levels of the Timor-Leste government as well as key parts of the business community. There is opportunity for the United States to express its support to the civil society players who are on the front 

lines, interacting with Timor-Leste officials. Along with AusAid, 

USAID is funding a project to strengthen independent media in 

Timor-Leste. There is specialized training for journalists from local 

media outlets and organizations, to help the media produce and 

distribute high quality news to as many people as possible.45

Vietnam 

Vietnam has a per capita income of $3,300. Vietnam’s total hy- drocarbon revenues in 2005 were approximately $3,878 million, or 

7.4% of its GDP for the year. Vietnam’s population is 84 million 

with a life expectancy of 73.7 years and an infant mortality rate 

of 19 deaths per 1000 births. 

Vietnam is a market-oriented Communist country, not unlike its 

neighbor China. It launched a similar opening up (doi moi, or ‘‘renovation’’) process in the mid-1980s, stumbled in the 1990s amid the 

Asian financial crisis, and has since experienced high economic 

growth rates, 7.3% annually for a decade, coupled with improved 

relations with the United States. Its 15-year economic growth and 

52 

poverty-reduction record has been called ‘‘a spectacular success 

story’’ by the World Bank. Competition with China is a driving 

force. The signing of a bilateral trade agreement with the U.S. in 

2001 and especially entry into the WTO in January, 2007, marked 

a major shift in international perceptions and resulted in an unexpected influx of foreign direct investment (FDI), remittances and 

development assistance. That, combined with soaring world food 

and energy prices, has led to raging inflation, expected to top 30% 

this year (after averaging 5% annually for much of the decade.) 

The extractives transparency agenda in Vietnam is only just getting underway. Very few government officials have heard of EITI, 

and the United States, despite significant interaction on governance and administrative reform issues, is not a player. By contrast, 

an anti-corruption agenda is in full swing. Corruption is an openlydiscussed issue, both in the media and among government officials 

and donors, though the government has reined in reporters who 

have exposed malfeasance in the higher reaches of government. 

The country passed an anti-corruption law in 2005, and has a highlevel National Anti-Corruption Steering Committee headed by the 

Prime Minister himself. There is a long-standing Government 

Inspectorate which has been given donor support to improve its effectiveness, and the State Audit of Vietnam was given its independence in 2006 and reports to the National Assembly. Nonetheless, Vietnam does poorly on the Transparency International index, 

ranked 123 in the world, the same as Nicaragua, East Timor and 

Zambia. At a certain level, state budgets are public: until 1998 they 

were a state secret, and in 2005, the entire budget was disclosed 

to the public for first time. 

Vietnam is a significant but low-profile oil producer. Vietnam has 

been a net oil exporter since the early 1990s, and with production 

starting to slow, the recent boom is largely due to the run-up in 

oil prices. Staff was told that oil and gas revenues in 2008 are likely to be 140% higher than in 2007. Production in 2007 was about 

360,000 b/d, about half that of Malaysia, and a bit more than Thailand, making it Asia-Pacific’s sixth largest oil producer. All of Vietnam’s oil is produced offshore, and many other offshore areas have 

been unexplored or undeveloped owing to territorial disputes in the 

Spratley Islands and elsewhere with Thailand, China, Taiwan, and 

other neighbors. Fields currently under development could come 

online soon and reverse the production decline, and some believe 

the unexplored areas are highly likely to contain oil or gas as well. 

Natural gas production has been going up as oil production has 

declined, rising by a factor of four since 2000 to more than 160 billion cubic feet. All the gas, also offshore, is piped onto land for use 

in electric power or fertilizer plants, and it appears the government 

will not allow gas to be exported, even though the international oil 

companies producing it say they could make much more money if 

they did. Chevron has been trying for 10 years to commercialize a 

large gas find of 4 Tcf, a resource sufficient to supply 20% of the 

country’s electricity needs. 

Since the mid-1990s, Vietnam has greatly increased its coal production and its exports (mostly to Japan and China). But coal exports are only 1/10 of crude oil exports by value, and by 2013, Vietnam expects to be a coal importer as it increases coal use to meet 

53 

growing electricity demand. The major new extractive on the horizon is bauxite (aluminum). Large commercial deposits (world’s 

fourth biggest, by one estimate) have been found in the Central 

Highlands, but they will require massive infrastructure investments to develop. 

The dominant extractives company is PetroVietnam, a wholly 

state-owned oil company, which through either production-sharing 

contracts or joint ventures has a stake in all oil production. From 

its opulent new 19-story headquarters in Hanoi, it controls directly 

or indirectly most aspects of the petroleum and gas business in 

Vietnam. On the one hand, PetroVietnam acts like a commercial 

company: it publishes an annual report, gets loans from international banks, floats bonds on international markets, publishes 

audits, regularly turns over its profits to the treasury after keeping 

some for itself, as set by law. On the other hand, much of 

PetroVietnam’s operations remain behind a curtain which few dare 

to draw back. For instance, when we asked a Foreign Ministry official what were the perceptions of the company regarding corruption, he smiled and shrugged his shoulders: ‘‘Not much is known 

about what goes on there.’’ 

Transparency of oil revenues could curb the power of 

PetroVietnam by giving other power centers in the government a 

chance to scrutinize, and criticize, its priorities. It could also help 

improve macroeconomic management with better data on cash 

inflows into the treasury, and more realistic budgeting. For instance, staff were told that last year the National Assembly kept 

asking, in the budget, what the projected oil price would be. Finally, the government said that for 2008, they would assume an average $63 a barrel (at a time when oil was already in the $80-$90 

range). The extra money does not appear to go through the normal 

budgetary processes. There appears to be little discussion and no 

appetite in Vietnam at the moment for a sovereign wealth fund for 

oil or other extractive revenues. 

EITI is unlikely to be adopted anytime soon, for several reasons. 

First, the concept is still largely terra incognita, and much more 

education is needed. Second, the government is pre-occupied with 

the inflation crisis. Third, oil company officials are either not EITIsavvy, or are preoccupied with other pressing issues. Companies 

are dealing with the fallout of recent demands by China that one 

major international oil company stop doing exploration work in a 

Vietnamese block that is also claimed by China. Because so much 

of Vietnam’s promising areas lie in contested waters, this has 

roiled Vietnam’s petroleum community, driving EITI far down the 

priority list. Fourth, the U.S. is pushing a variety of other transparency and governmental reform issues. Fifth, no other donors, 

except Norway, appear to be promoting EITI. It is absent from the 

World Bank and ADB agendas. Finally, EITI’s image in Vietnam 

is hurt by the fact that no other country in the region has signed 

up. 

The overarching U.S. policy toward Vietnam is to continue the 

process of normalizing relations that only formally began in 1996, 

after being frozen for many years following the Vietnam War. The 

main focus is on trade, as the US has quickly become Vietnam’s top 

export market. Promoting governance reform and transparency is 

54 

a major USAID focus, and the primary vehicle is a comprehensive 

technical assistance and capacity building effort for legal reform 

called ‘‘Support for Trade Acceleration II,’’ or STAR. However, EITI 

is nowhere part of this effort. Launched originally to help Vietnam 

meet its obligations under the Bilateral Trade Agreement (BTA) 

and World Trade Organization (WTO), the project is helping Vietnam cut red tape, develop an administrative procedures law, and 

implement other reforms to help improve the investment climate, 

reduce corruption and boost competitiveness. The government of 

Vietnam has embraced regulatory and administrative reform, 

under a program it calls Project 30, as an element of its ambitious 

economic growth strategy, which aims to achieve middle-income 

country status by 2010. 

EUROPE AND CENTRAL ASIA 

Azerbaijan 

Azerbaijan has a population of 8.5 million people with an average 

life expectancy of 67.1 years and an infant mortality rate of 74 

deaths per 1000 births. Over one-third of Azerbaijan’s population 

lives under $2/day. Azerbaijan’s total oil export revenues in 2007 

was $5.27 billion or 20% of GDP. 

Azerbaijan is located in a difficult neighborhood along the energy 

rich Transcaucasian corridor linking the Caspian Sea to Turkey 

and Russia to Iran. The United States and Azerbaijan have cooperated strategically and economically on energy development and 

transport, which also has reinforced the sovereign independence of 

Azerbaijan. President Ilham Aliyev has made commendable 

progress in the transparent management of oil revenues, establishing Azerbaijan as a global leader in reserves fund management. 

Yet the ongoing challenges of corruption and issues of poverty pose 

substantial challenges. Azerbaijan is also locked in a frozen conflict 

with Armenia over Nagorno-Karabakh. 

Fuelled by the oil sector and construction, Azerbaijan’s GDP 

growth rate for 2006 was, by many estimates, the highest in the 

world at 34.5%. Several indicators point to an onset of ‘‘Dutch disease’’ in Azerbaijan. Inflation hovers near 1%. Export-driven industries are suffering as the local currency experiences steady appreciation (13% against the dollar in 2005-2006), despite currency 

interventions of approximately $1 billion by the Azerbaijan government. In 2006, the Azerbaijan government increased fiscal spending by a reported 80%. 

Azerbaijan became one of the first world oil producers after crude 

was found in the mid-1800s. Since its independence in 1991, its oil 

sector has again surged as offshore Caspian fields have come online. Azerbaijan’s oil revenues were $5.27 billion in 2007, constituting 20% of GDP; revenues are expected to climb to $19.4 billion 

by 2010, constituting over 43% of GDP. While Azerbaijan has undergone a massive infusion of oil wealth over the last decade, oil 

revenues are expected to peak in only a few years (2010-2012). Natural gas revenues have the potential to increase substantially over 

the coming two decades. However, lingering uncertainty over the 

Nabucco pipeline project leave prospects for development—and 

price expectations—of Azerbaijani gas unclear. 

55 

Perhaps the most important development for the energy wealth 

outlook for Azerbaijan was the completion of two U.S.-supported 

pipelines allowing Azerbaijani oil and gas to reach global markets. 

The Baku-Tbilisi-Ceyhan (BTC) pipeline transports crude oil from 

the Caspian Sea to the Turkish port of Ceyhan on the Mediterranean, and the South Caucasus pipeline (SCP) currently transports 

gas to Georgia and Turkey with onward ambition to Vienna. The 

BTC pipeline should ensure that Azerbaijan remains a major energy conduit for years to come: in 2007, revenues for use of the 

BTC totaled $16.5 million for Azerbaijan. These pipelines facilitated investment in new production, and onward routes will be necessary to develop more natural gas production in the coming years. 

Likewise, trans-Caspian energy transport from Central Asia for onward delivery through Azerbaijan to world markets would provide 

a stable revenue stream from transport fees. 

Azerbaijan is a candidate country for EITI and has been involved 

with EITI since its inception. Azerbaijan has until March 9, 2010 

to complete the EITI validation process. Azerbaijan was the first 

country to submit EITI reports to be scrutinized by an independent 

audit firm and is a leader in allowing civil society to help implement EITI. Azerbaijan has submitted a total of 8 reports on its oil 

and gas revenues to date. Azerbaijan has done a great deal to improve revenue transparency, but it ranks relatively poorly in measures of corruption compared to both its oil deprived neighbors in 

the Caucasus and even many oil-rich countries in the developing 

world. However, most estimates indicate that Azerbaijan ranks 

with Nigeria as making the most progress along the EITI path of 

oil revenue transparency. Yet as corruption and development challenges in both those countries indicate, revenue transparency will 

not bring development or political reform. The key question is how 

that information will be used—and if the government will allow it 

to be used through civil society, media, and political representation—by the people of Azerbaijan to hold their government accountable. 

Several reasons have been posited to explain why a country 

known for tightly controlled politics and corruption would embark 

on a relatively progressive transparency agenda. First, Azerbaijan 

decided to sign up when oil revenues were meager, so the requisite 

accounting was still at a relatively simple stage. Second, international financial institutions, especially the IMF and World Bank, 

were very influential in Azerbaijan at the time and convince Azerbaijan to establish the State Oil Fund for the Republic of Azerbaijan (SOFAZ) for macroeconomic stability. Third, Azerbaijan was 

led by several Western-educated officials, one of whom set up 

SOFAZ. Fourth, the establishment of the BTC pipeline received 

much international political attention, which spilled over into general interest in the management of Azerbaijan’s oil revenues. Fifth, 

the primary oil companies were Western majors with serious concerns with their international reputation and, thus, felt greater 

pressure to push EITI. 

In 1999, President Heydar Aliyev created the State Oil Fund for 

the Republic of Azerbaijan (SOFAZ), a sovereign wealth fund which 

holds assets overseas in a mix of currencies. As of April 2008, the 

Fund reported assets of $3.35 billion. SOFAZ expects $5–10 billion 

56 

46 ‘‘Kazakhstan: Country Analysis Brief’’ Energy Information Administration, February 2008. 

in revenue for 2008, up to $30 billion accumulated in three years, 

and $150–200 billion over the life of the fund. Apart from oil and 

gas sales, SOFAZ receives revenues from royalties payments, investment returns, and rental fees from firms using state property. 

SOFAZ employs Deutsche Bank and Clariden Bank as external 

asset managers, and has a domestic staff of approximately 80 persons. SOFAZ’ guiding principle, ‘‘solving the most important national problems,’’ is laudable if not amorphous. Fund managers indicate a preference for infrastructure projects. In effect, these expenditures represent a funding stream outside the normal budget, 

and as such receive soft criticism in terms of fiscal management. 

SOFAZ does not receive revenues from SOCAR, which constitutes 

SOFAZ’ primary weakness in terms of transparency. Despite need 

for improved expenditure and investment criteria at SOFAZ, it 

seems most payments made thus far have been applied to projects 

to improve the lives of Azerbaijanis in real need. The Economist Intelligence Unit notes that SOFAZ has become ‘‘the most transparent government body in Azerbaijan.’’ Indeed, managers of the 

fund are rightly proud of having received a United Nations Public 

Service Award in 2007. 

The United States was a strong proponent of the construction of 

the BTC and SCP pipelines to diversify dependence away from 

Russian-controlled infrastructure. The U.S. Government and our 

allies have a profound interest in extending this project to include 

nations of Central Asia and Europe. U.S. Government assistance 

has also been heavily focused on the development of the non-oil 

sector with over $7 million targeted for macroeconomic stability, 

trade and investment, private sector competitiveness, and financial 

sector reform. The United States has also provided assistance to 

bolster Azerbaijan’s maritime security forces, assisting in oil production security. The emerging orientation of Azerbaijan towards 

close cooperation with Western countries is a significant strategic 

achievement richly rewarding to the United States, and provides a 

strong framework through which the U.S. Government is able to 

advocate critical governance reforms. 

Kazakhstan 

Kazakhstan has a per capita income of $7,780 and a population 

of 15.3 million people. Infant mortality is 73 deaths per 1000 

births, life expectancy is 65.9 years, and over 16% of the population 

lives under $2 a day. In 2005, Kazakhstan brought in approximately $3.6 billion of hydrocarbon revenue, comprising 6.3% of 

GDP. 

Kazakhstan is the largest energy producer in the Caspian region, 

having staked claim to vast oil and gas fields offshore. Power in the 

country is centered around President Nursultan Nazarbayev. 

Kazakhstan has been a productive partner of the United States in 

key areas of cooperation, even as it balances the concerns of its 

large neighbors Russia and China. Kazakhstan’s economic growth 

has been robust, approaching 10% in 2007, and its oil sector accounts for approximately 38% of total government revenues and 

half of Kazakhstan’s exports.46

57 

Kazakhstan is rated by Freedom House as not free, due to increased pressure on civil society. In 2007, President Nazarbayev 

announced sweeping constitutional amendments to allow him to remain president. Many interlocutors believe that he could easily win 

any free election, although no elections have yet been so judged. 

Kazakhstan ranks 73rd out of 177 countries on the United Nations 

Human Development Index, higher than regional rivals Uzbekistan 

and Turkmenistan. 

Kazakhstan’s oil production has boomed since 1999. In 2007, it 

produced 1.45 million barrels per day of oil, of which 1.2 million 

were exported. Total reserves are estimated at 40 billion barrels. 

As the Tengiz field is expanded and when the new Kashagan field 

comes online, Kazakhstan’s oil production is expected to increase 

dramatically. Kazakhstan also has large natural gas reserves with 

estimated reserves of 106 trillion cubic feet. Production, most 

prominently in the Tengiz and Karachaganak fields, was estimated 

at 1,037 billion cubic feet in 2007, an increase of over 8% on 2006 

levels. Kazakhstan consumes most gas it produces but may become 

a net exporter of natural gas in 2008. The primary conduit for gas 

is the Central Asian Center pipeline, which is under expansion and 

travels from Turkmenistan and Uzbekistan through Kazakhstan to 

connect with the Russian network. Pipeline routes to China are 

also under discussion. 

Kazakhstan is also the largest Central Asian producer of coal, 

producing 102 million short tons in 2006 and exporting just under 

30 million short tons. Kazakhstan also has significant deposits of 

other minerals, including uranium, chromium, lead, zinc, and others. Next to Canada and Australia, Kazakhstan is the third largest 

producer of uranium. 

Kazakhstan is in the process of considering a range of energy 

transport infrastructure options to meet and diversify its own export needs and to balance the concerns of the United States, Russia, and China. Most importantly for U.S. Government interests, a 

recent law authorized shipment of crude oil by tanker across the 

Caspian to the Baku terminal of the Baku-Tbilisi-Ceyhan (BTC) 

pipeline, which flows to the Mediterranean coast in Turkey. The 

United States advocates construction of a trans-Caspian pipeline to 

diversify Kazakhstan’s oil export routes and reduce dependence on 

infrastructure on Russian soil. Kazakhstan also exports crude 

across Russia to the Black Sea port of Novorossiysk through the 

Caspian Pipeline Consortium, a pipeline in need of expansion but 

seeing little progress in that regard due to Russian concerns; crude 

is also transported northward to Russia via the Atyrau-Samara 

pipeline. The Astasu-Alashankou network takes Kazakh crude to 

China, while Kazakhstan conducts energy swaps with Iran. 

Kazakhstan has made many positive strides in the area of fiscal 

and oil revenue transparency. Kazakhstan endorsed EITI in June 

2005 and has until March 2010 to become compliant. It has created 

a National Stakeholders’ Council to coordinate EITI and hosted its 

first EITI implementation conference with stakeholders in February 2008. To date, Kazakhstan has submitted one Reconciliation 

Report for EITI in January 2008, but this report came under some 

criticism for not including all oil companies operating in 

Kazakhstan. 

58 

47Goldman Sachs, ‘‘In Defense of Sovereign Wealth Funds,’’ Global Economics Paper No 167. 

With oil prices on the rise since 2000, the Kazakhstan government has become more assertive with oil contracts, passing a law 

in 2007 that allowed it to break contracts with any international 

oil company with only two months notice and to reserve the right 

to renegotiate contracts and levy fines against companies found to 

be in breach. These moves were contemporaneous with contracting 

difficulties for the exploitation of the Kashagan field. As the 

Kazakh government asserts a greater stake in the direct operation 

and profit-taking from the oil and gas sector, the inclusion of 

Kazmunaigaz in transparency standards should be a particular 

point of emphasis for the U.S. Government. 

In 2000, Kazakhstan set up the National Oil Fund for the Republic of Kazakhstan to manage its oil wealth. As of May 2008, the 

fund contained approximately $18 billion and was managed by the 

Ministry of Finance.47 From the outset, the Fund has come under 

criticism from transparency watchdogs for having been set up by 

presidential decree and not an act of parliament. Oversight of the 

Fund is carried out by the Management Council comprised of the 

President, Prime Minister, and members of Parliament. Thus, the 

President ultimately controls the disbursements, and the public 

has little involvement. 

U.S. assistance to Kazakhstan is highly focused on expanding the 

non-oil sector of the economy with $7.7 million targeted towards 

private sector competitiveness, financial sector reform, and macroeconomic foundation and growth. USAID programs have also 

helped to develop regional energy markets to link Central and 

South Asian markets and enable greater energy trade with South 

Caucasian states, Turkey, Europe, and global markets. Many economic assistance programs are cost-shared between the U.S. and 

Kazakhstan governments. In the political-military sphere, the 

United States has agreed to a five-year military plan with the government of Kazakhstan that incorporates funding to boost Caspian 

security. 

Norway 

Norway has a population of 4.6 million people. The average life 

expectancy for a Norwegian is 79.8 years old and the infant mortality rate is 4 deaths per 1000 births. The total spend on hydrocarbon in 2005 was approximately $38.4 billion (13% of GDP). The 

per capita income of Norway is $43,820. 

Norway is seen as the leading country on EITI. Since Norway is 

a social democratic republic and many of the extractive countries 

share a similar view of the role of the state, their state-owned oil 

company seems to have particular influence when suggesting policy 

actions. Some felt that the Europeans, particularly the Norwegians, 

could be more effective because they were seen as friendly nations 

whereas the U.S. was seen as a threatening country with an ulterior motive. 

Many refer to the ‘‘Norwegian model’’ as one worth replicating. 

In Norway, the government was democratic and fiscally disciplined 

before the discovery of oil. The state, which controls the oil industry, has set up a resource management system which includes an 

59 

open budget process, a public long term fiscal policy strategy, and 

a sovereign wealth fund. 

Some in Norway saw sovereign wealth funds as a framework 

rather than a tool. One noted that ‘‘accumulation of cash in a weak 

institution is not a recipe for success,’’ while another noted that a 

fund can help decouple revenues from spending and help a country 

avoid inflation. Norway’s sovereign wealth fund was first set up in 

1990 but the first allocations to the fund were only in 1996. 15-20% 

of Norway’s GDP goes to the sovereign wealth fund to be used for 

future generations. Now, roughly 4% of the Fund goes to the government’s budget. 

In Norway, transparency is important to retain domestic trust 

and helps the government stick to an investment strategy even 

when markets are turbulent. Norwegians stressed that an informed 

public with a clear sense of ownership was critical. The Norwegians 

suggest that other countries: 1) devise comprehensive budget policy 

frameworks so they can see total resources and prioritize; 2) may 

or may not need to develop a sovereign wealth fund; and 3) build 

good credible institutions to manage money—regardless if they 

have a fund or not. They repeatedly stressed that a sovereign 

wealth fund was no substitute for sound fiscal management. 

Most interlocutors stressed the importance of securing support 

for EITI from the Chinese and Indian governments. It was reported 

that Chinese companies are already reporting through EITI in Nigeria and Mauritania. A few people suggested that China be 

brought into the International Energy Agency framework. 

Russia 

The Russian Federation has a population of 142.4 million. Average life expectancy is 65 years, and over 12.1% live on less than 

$2 a day. The average per capita income is $11,630, and infant 

mortality is 18 deaths per 1000 births. Russia collected over $55.8 

billion in hydrocarbon revenues in 2005, approximately 7.3% of its 

GDP. 

Russia has been focused on promoting political and economic stability following many years of turbulence. These priorities have resulted in a crackdown on civil society and increased pressure on opposition parties to operate freely. Many interlocutors and observers 

are cautiously optimistic about the recent election of President 

Dmitri Medvedev. He has publicly spoken about the need for increased transparency, although he has not provided any details 

about how he will proceed. He announced the appointment of 

former President Vladimir Putin as his Prime Minister as soon as 

he was elected, which has led to some debate about who will lead 

Russia. 

Despite the recent economic recovery, which brought prosperity 

to some of the Russian people, 15% still live below the official poverty line set by the Russian government (compared to 38% in 

1998). Quality of life indicators paint a mixed picture. The population is relatively well-educated and has a literacy rate of nearly 

100%, but since the 1990s, the health of the Russian people has 

been in decline. Russian workers continue to have high levels of 

under- and unemployment in pockets of the country, although 

60 

48See CRS Report RL33407 Russian Political, Economic, and Security Issues and U.S. Interests, by Stuart Goldman; and CRS Report RL33212 Russian Oil and Gas Challenges, by Robert 

Pirog. 

there is a growing middle class and labor shortages exist in some 

high-skilled job markets. 

The energy sector has been identified by the Kremlin as important to bringing improved living conditions to the millions of Russians who still live in poverty. Perhaps more importantly, many 

Russians see energy as a means to regain the power and prestige 

they enjoyed prior to the collapse of the Soviet Union. There are 

numerous concerns about the way the energy sector is managed in 

Russia. The government has taken control of much of the country’s 

energy supplies. In addition, the government has moved to nationalize and take control of several private corporations. 

Over the last several years, Moscow has used energy as a geopolitical weapon and foreign policy tool on numerous occasions. It 

has cut off or threatened to cut off oil and gas supplies to several 

neighbors to intimidate or pressure governments to bend to Russia’s will. Targets of this political intimidation have included 

Ukraine, Georgia, Estonia, Lithuania, Belarus, and Czech Republic. 

Some observers are concerned that Russia’s energy extraction is 

inefficient, and could be more productive with newer technology. 

Others suggest that without significant improvements in recovery 

and transportation Russia will be hard-pressed to meet its current 

contract commitments. Many multinational and international energy corporations have expressed skepticism about prospects for 

success in Russia. Nevertheless, these same entities are quick to 

add they do not have a choice and must take their chances given 

Russia’s reserves. The investment climate in Russia is reportedly 

improving, but there have been complaints about limitations on foreign investor participation. Many are hopeful that the recent 

change in Russia’s government may improve the situation. 

Russia is a large player in the international oil and gas markets, 

with the largest proven natural gas reserves in the world. The Russian economy is heavily dependent on oil and gas, which account 

for 63% of its exports and 50% of total state revenues.48 From 1999 

to 2007, Russia’s real GDP grew at an annual rate of 6.7%, and 

Russia virtually eliminated its public foreign debt, which equaled 

100% of GDP in 1999. 

Oil and gas revenues first go into a Reserve fund (which was formerly called the Stabilization Fund). When the reserve fund 

reaches 10% of Russia’s gross domestic product in a given year, the 

additional revenue goes into the National Welfare Fund. In some 

circumstances, money is transferred from the Reserve Fund to the 

general budget to cover spending gaps that non-oil and non-gas 

revenues cannot fill. It is important to note that this system was 

established this year, it is unclear how well the process will work. 

Some interlocutors gave the impression that the Russian government has relatively responsible and transparent fiscal policies, including collecting and spending oil and gas revenues. One interlocutor said that revenues are taxed because they are by nature more 

transparent, and it is easier for companies to miscalculate profits 

for the purpose of avoiding paying taxes. The government does not 

tax profits because it does not trust the companies to be honest 

61 

49 EITI sets a global standard for companies to publich what they pay and governments to 

disclose what they receive in the extractive industriesw. More information can be found at http:// 

www.eitransparency.org/. 

about them. The main problems voiced about the government concern the lack of judicial independence and respect for rule of law 

in general. These problems increase the risks and therefore the 

costs of doing business in Russia, and dampen foreign investment. 

A few interlocutors claimed that detailed budget information is not 

available from the government, especially for extractive revenues. 

Most interlocutors gave the impression that Russia would not 

readily become an EITI candidate country.49 Russians consider 

EITI to be an initiative for developing countries with greater problems than Russia. Even those people who admitted that Russia’s 

problems are very large were hesitant to embrace EITI as a viable 

initiative for Russia, mainly because they saw EITI as something 

that merely scratched the surface of Russia’s complex governance 

problems. Furthermore, many interlocutors expressed a sense that 

transparency in Russia is improving because of international financial market conditions, and pushing EITI would not help move to 

greater transparency. 

An exception to this reluctance about EITI came from Transparency International which has been encouraging EITI in Russia. 

Reportedly, TNK-BP and Lukoil expressed interest in EITI two 

years ago and then backed down after receiving no support from 

the government or other companies. Transparency International 

representatives said that a briefing from a high-level G-8 delegation could help convince them to consider implementing EITI. The 

organization is publishing a report on EITI in Russia to raise 

awareness of how EITI could benefit Russia. 

Most of the private sector interlocutors agreed that Russian oil 

and gas companies, including Rosneft and Gazprom, are becoming 

more transparent for their own reasons. These companies need to 

access international capital markets, and in order to do so they 

need to adhere to a higher standard of transparency. They therefore can get a lower cost of capital, participate in joint ventures 

with international firms, and be listed on international exchanges. 

They also want to be considered among the best and biggest companies in the world. There are some concerns that Russian firms 

could slide back to old practices if economic conditions change and 

capital markets become looser. Some interlocutors suggested that 

the more Russian firms become entrenched in international markets, the more difficult it will be for them to backslide in transparency. Others thought that the Russian firms are beginning to 

see the benefits of transparency in and of itself, and will not go 

back to being less transparent. Some observers believe that they 

are as transparent as necessary for international markets, but not 

necessarily for the Russian public. There are others who believe 

that Russian firms in the extractive industries are still not transparent by western standards. 

Some interlocutors said that as more Russian people become 

stockholders, and as major Russian pension funds invest in Russian companies, they will demand more information from the companies and this will lead to greater transparency. The Russian people do not hold the companies or government accountable because 

62 

current economic conditions are so much better than just a few 

years ago. Russian firms want to be held to the same standards as 

firms around the world, but they do not want to be held to higher 

standards. They understand that Russia has a reputation for corruption, but they do not want to be punished for it by being required to jump through hoops that western firms can bypass. 

Energy, including transparency issues, is a standard agenda 

topic in meetings between the U.S. and Russians. Presidents Bush 

and Putin was discussed it in April in their meetings at Sochi. 

Under the Framework Agreement the two presidents signed the 

US and Russia will initiate a number of economic dialogues. Moscow and Washington have made good progress in the governmentto-government dialogue and energy transparency was discussed at 

the inaugural meeting in late April in Washington. The next meeting is scheduled for September in Moscow and energy will again be 

on the agenda. 

United Kingdom 

The United Kingdom has a population of roughly 60.9 million 

people. Life expectancy is about 78.9 years old and their infant 

mortality rate is 5 births per 1000 deaths. 

Generally in Europe, there is a growing interest in transparency 

and governments as a development measure. While the United 

Kingdom was the first Western country to push transparency in extractive industries as an international initiative, Norway is viewed 

as the model of prudent management of extractive revenues and is 

home to the EITI Secretariat. Some sense that the focus on anticorruption and transparency by the British has diminished in the 

wake of the BAE scandal and due to less focus on Africa generally. 

Some say that DFID is not getting political backup on transparency. 

The next two years are critical in determining whether or not 

EITI will really work. A number of people pointed out that the 

more stable and predictable framework for oil producing countries, 

the more stable the energy supply. One argument for EITI is that 

it uses small money to ensure the big money is used well. 

Investors became interested in EITI because they saw the ‘‘potential for the resource cures to bite the companies’’ themselves. 

They see EITI as a tool to promote stability which would in turn 

reduce work stoppages or supply disruptions. The investors are 

concerned that there are no definitive studies showing that good 

governance results in a better cost of capital. They asserted the 

need for compelling examples of developing countries where extractive resources were put to good use. The EITI process is seen as 

leveling the playing field for non-corrupt companies. The major oil 

companies appear more engaged on EITI than the ‘‘second-tier’’ 

companies and many of the companies that are pushing EITI are 

companies that had a bad experience with corruption or poor governance. 

There is a UN General Assembly resolution supporting EITI, 

similar to the one passed on the Kimberley Process, that Azerbaijan is spearheading. Many argued that countries like India, 

China and Brazil will be more likely to embrace EITI. A range of 

interlocutors suggested that it would be helpful for the US to sign 

63 

onto and promote the UN resolution. A number of people praised 

World Bank involvement with EITI but expressed concern that the 

regional development banks were not as engaged. They suggested 

that all the regional development banks, particularly the African 

Development Bank, incorporate EITI into their projects. 

Some suggested that China would be more open to transparency, 

influence and reputational impacts than many expect. They encouraged the U.S. to develop an engaged approach. Some suggested 

that the Chinese sovereign wealth fund may become more interested in transparency issues given their exposure to extractive investments. Almost everyone asserted that the wrong way to promote extractive industry transparency with China was to be critical 

of the country. One person said ‘‘finger-wagging doesn’t work.’’ 

Among EITI experts in these countries, the United States is seen 

as being somewhat supportive of EITI, however, more supportive in 

policy than in funding. The U.S. has not contributed funding to the 

EITI because of the legal structure of the EITI Secretariat is not 

finalized. The U.S. currently has a seat on the EITI board but will 

give it up shortly in the every two year board rotation. There are 

three seats on the Board from supporting countries, 5 seats from 

EITI countries and 5 from companies. The U.S., once its contribution is made to the Multi-donor Trust Fund, will maintain its seat 

on the MDTF Board which gives funding for EITI capacity building. 

The U.S. is viewed by many insiders as a focusing force with 

EITI. The current U.S. representative to EITI is seen as capable, 

bright, and active; however, given his rank at the State Department, many think that the U.S. needs a representative with more 

clout. While U.S. staff at embassies in extractive countries are engaged on EITI, there is apparently little action on EITI with the 

staff at our embassies in donor countries. Many suggested that it 

would be very motivating and influential of the United States 

signed onto EITI as a candidate country. Several interlocutors suggested that the U.S. help encourage companies to make more emphatic attempts to support EITI, increase political will and support 

capacity building. 

In addition, many felt that the U.S. Government, particularly 

through foreign assistance programs, could do more directly to encourage extractive countries to sign onto EITI by the U.S. increasing or shifting funds for extractive countries for transparency efforts. EITI is consistent with Foreign Corrupt Practices Act so the 

more compliance of foreign companies to EITI, the more level the 

playing field for U.S. companies. 

LATIN AMERICA 

Brazil 

Brazil has a population of 192 million, approximately. Average 

life expectancy is 72.5 years with an infant mortality rate of 27 

deaths per 1000 births. The average per capita income is $5,910, 

while 21.2% of the population lives under $2/day. Total hydrocarbon revenues for 2007 were $87.5 billion or 5 per cent of GDP. 

With the recent discovery of two new offshore oil fields (Tupi and 

Carioca), Brazil is in a position to become a significant political and 

64 

economic power not just in the Western Hemisphere, but on the 

world stage. Brazilians are anxious to be considered a global power 

independent of South America, an emerging economic market on 

par with India. However, besides their leadership of the common 

market area in Latin America (MERCOSUR), membership in other 

regional agreements, and their work to advance peace in Haiti, 

Brazil has been reticent to take a larger role in global affairs. 

In Brazil, sectors within the country exist that could be defined 

as first, second and third world, highlighting the tremendous disparity between rich and poor that still exists. Over 50 million Brazilians live in poverty and there are over 600 Brazilian municipalities that have poverty levels similar to some of the poorest African 

countries. One percent of the population controls 45% of the farmland. In addition, disparity of opportunity and representation in 

the formal and ‘‘white collar’’ sectors of Brazil’s economy continues 

for Afro-descendents, as well. 

Despite these challenges, Brazil has experienced steady economic 

growth that reached 4.5% in 2007 as well as a significant rise in 

exports. Brazil still suffers from high real interest rates but in 

early 2008 it received an investment-grade sovereign debt rating. 

Brazil is rich in natural resources including oil, iron ore, manganese, and others. It has 14% of the world’s renewable fresh 

water. The Government of Brazil (GOB) has undertaken an ambitious program to reduce dependence on imported oil. In the mid1980s, imports accounted for more than 70% of Brazil’s oil and derivatives needs; the net figure is nearing zero. The recent discovery 

of the Tupi and Carioca oil fields could yield reserves upwards of 

40 billion barrels. Output from the existing fields combined with 

the new discoveries could make Brazil a significant global oil exporter by 2015. 

Brazil produces approximately 1.59 million b/d of oil and produces 9.37 billion cubic meters of natural gas. In 2007, Petrobras 

generated revenues of $41.6 billion from oil and gas (sold internally 

and externally) and $87.5 billion from all sales of hydrocarbons. 

These figures are expected to increase to $65 billion and $111 billion in 2008, respectively. 58% of revenues are reinvested directly 

into exploration and production. Although much of the revenues go 

to domestic and international development of its oil fields and refineries, as well as R&D, Petrobras paid an estimated $36 billion 

to the Brazilian state in taxes in 2007. Although it is listed on 

Bovespa and is partially publically-owned, the government and the 

state development bank own 37.5% of Petrobras’s preferred and 

common shares, and about 56% of the voting shares. In the recently-approved 2008 federal budget of Brazil, state enterprises accounted for $62 billion of fiscal receipts, Petrobras making up over 

half that figure. 

Brazil is also one of the world’s leading producers of hydroelectric 

power and a global leader in biofuels—especially ethanol from sugarcane—its production and promotion. Demand for Brazil’s abundant minerals, notably iron ore and bauxite, has been booming 

largely due to demand from China. All extractive industries are impacted by environmental controls from relevant GOB Ministries. 

As a result of potential earnings, at the time staff visited Brazil 

Finance Ministry officials were expecting President Lula to forward 

65 

a legislative proposal to congress establishing an ‘‘investment fund’’ 

or ‘‘fiscal savings fund’’ of about $10 to 20 billion, exact timing remains unclear at the writing of this report. 

Brazilian Finance officials asserted that Brazil was unique in 

that the rationale for this fund was not based on commodity revenues, but on its robust reserves and good fiscal position, and therefore was not comparable to other countries’ sovereign wealth funds. 

GOB statements that the fund could draw on oil revenues from 

PetroBras’ recent finds in three to five years to create a $200-300 

billion does not take into account that these fields are not expected 

to generate revenue in the immediate future. Officials indicated 

that Singapore had come to Brazil and explained its sovereign 

wealth fund, and that Brazil’s Finance Ministry had discussed sovereign wealth fund structures with relevant Gulf States, as well. 

They underlined that reserves were off the table as a funding 

source for the fund, and that Brazil hoped to increase the primary 

surplus target by 0.5% of GDP (or about $13 billion per year) to 

fund this mechanism. 

Brazil is not yet a candidate country for the EITI. The Ministry 

of Mines and Energy indicated that they would have to have direct 

feedback from extractive industries to persuade them of EITI’s utility and relevance for Brazil. GOB diplomatic interlocutors felt that 

the idea had merit but indicated it was important for the U.S. to 

demonstrate commitment as well if it wished to persuade others. 

Petrobras, the largest oil company, supports EITI, but EITI reportedly reflects what they are already doing and complements company goals and operations. Both Vale, the largest mining company, 

and Petrobras are publicly traded, with financial data publicly 

available on their websites and results submitted to Brazil’s equivalent of the Securities and Exchange Commission (the Commissao 

de Valores Mobiliμrios). 

Brazil’s use of the phrase ‘‘Transparancia Publica’’ (public transparency) is omnipresent in the Lula administration, and a website 

exists with a transparency portal to track all government spending. 

Staff is satisfied with Brazil’s transparency efforts regarding earnings revenues since tax revenues are public and accessible on the 

internet. 

Brazil’s relationship with the U.S. has been generally positive although there is relatively little of substance in the bilateral agenda; the Bush administration signed an Executive branch agreement 

on biofuels, but there is no guarantee that this agreement will continue during the next administration. 

Efforts to deepen this relationship could begin with passing into 

law an improved agreement on biofuels and eliminating the tax on 

Brazilian ethanol currently in place. Other policies could include, 

negotiating a Tax Treaty and beginning negotiations for a limited 

market access agreement with MERCOSURs full member countries 

(Brazil, Argentina, Paraguay, and Venezuela). 

Chile 

Chile has a population of 16.3 million people approximately and 

an average life expectancy of 78.3 years. Chile’s infant mortality 

rate is 10 deaths per 1000 births and per capita income is $11,270, 

66 

with 5.6% of the population living under $2/day. Total hydrocarbon 

revenues for 2005 were $25.4 billion or 22% of GDP. 

Today, Chile has fewer pressing domestic problems than in its 

recent past, and the bureaucracy and markets generally function 

well. Private property and the rule of law are respected and the 

public actively demands accountability of its officials. When cases 

of corruption do arise, they are denounced and investigated. 

Chile is a leader among upper middle income countries on measures of competitiveness and quality of life. Chile has embraced 

globalization and is highly dependent on international trade, having become an active participant in the Doha round of trade negotiations. Between 1990 and 2006 the poverty rate fell from 38.6% 

to 13.7%; the indigence rate from 12.9% to 3.2%. 

Chile is the world’s leading copper producer and exporter, constituting about 35% of world output. Chile also produces molybdenum, gold, and silver. Copper production and investment in 

Chile increased sharply during the 1990s and the consequent increased production seems to have been responsible for a large drop 

in the international market price. 

Since 2002, (at the time this report was written) the copper price 

has resumed an upward trend, mainly because of growing demand 

from the large Asian economies. The Chilean copper mining sector 

is both state-owned and privately owned, so Chile benefits from receiving fiscal resources directly and through taxes and royalties on 

private enterprise. High copper prices have led to increased investment in funds to finance pension reform and for economic contingency funds to stabilize the economy during economic downturns. 

In 2007 copper production by state owned entities was 28.5% and 

71.5% by privately owned mines. 

Though Chile is a net oil importer, it produced approximately 

11,600 billion b/d in 2007. Oil revenues have been relatively steady 

over the last several years and oil exploration activities in Chile 

are ongoing in the Magallanes region in the south, the only part 

of Chile where hydrocarbons have been discovered. 

Chile is examining steps to reduce its dependence on foreign oil, 

including the expansion of research on alternative energy sources, 

such as wind, solar and nuclear energy. In this regard, staff noted 

the need for the United States and Chile to pursue exchanges 

where U.S. scientists and energy professionals can work with the 

Chilean government, academic and private sector actors to help establish the necessary technical capacity so Chile can develop a sustainable domestically-based energy infrastructure. 

Chile is not an EITI candidate country and few government officials were familiar with the EITI concept. However, Chile has a 

very transparent revenue management system, and staff believes 

that Chile already has policies in line with EITI. Due to widespread fears of corruption in the copper industry, Chilean officials 

have taken numerous steps to maintain transparency and improve 

public confidence in the use of extractive revenues. 

To ensure that fiscal surpluses generated by the extractive industry are properly invested, Chile established mechanisms to regulate 

their use in 2006 through the Fiscal Responsibility Law. Two sovereign funds were created through this legislation: the Pension Reserves Fund (FRP) to cover for future pension payments and the 

67 

Economic and Social Stabilization Fund (FEES) to reduce economic 

instabilities during periods of uncertainty. Chile’s Central Bank 

has hired JP Morgan Chase as a custodial bank to manage these 

funds and produce performance assessments and reports on the 

FEES and FRP funds. Reports on these funds and on revenues are 

published by the Ministry of Finance and readily accessible to civil 

society and international financial institutions. Reports and recommendations provided by the Advisory Financial Committee are 

also accessible to the public. The United States has no assistance 

programs relating directly to transparency or extractive industries 

with Chile. 

The U.S. Government enjoys positive and expanding relations 

with Chile that are focused on deepening the U.S.-Chile free trade 

agreement. Breaking with traditional diplomacy, in an example of 

innovation, Chile has pursued relations with several U.S. states, 

including California, in the areas of energy cooperation and educational exchange programs. 

Peru 

Peru has a population of 28 million. Average life expectancy is 70.7 years with over 30.6% of the population living under $2/day. 

The infant mortality rate in 2005 was 27 deaths per 1000 births. 

The total hydrocarbon revenues for 2007 were $855 million or 1 per 

cent of GDP. Per capita income was $6,080. 

Peru is a country in transition following over 20 years of political 

and economic turmoil. While the Government of Peru (GOP) has 

earned an enormous amount of revenues from extractive industries, 

the technical capacity to transform wealth into development remains a challenge. President Alan Garcia took office in July 2006 

for a five year term. Although there was initial skepticism because 

of the economic chaos and hyperinflation that occurred under his 

first term as a result of his populist policies (1985 to 1990), he has 

taken steps to get the Peruvian economy back on track and to encourage private investment and exports. He has recast himself as 

a moderate in his second term and has continued the economic 

policies of his predecessor, Alejandro Toledo. GDP is expanding 

rapidly (7% in 2007) due to mining and export growth as well as 

an increase in private investment. The government has had success 

with recent international bond issuances, resulting in ratings upgrades. 

Peru is rich in natural resources such as iron ore, copper, gold 

and silver, which make up 3% of fiscal revenue, 1.5% of GDP, and 

over 60% of export revenue according to the IMF. At the time this 

report was written, rising mineral prices were contributing to an 

increase in revenues from exports. Peru is the second largest producer of silver in the world, and the sixth largest of gold and copper. Peru also produces a significant quantity of zinc and lead. The 

U.S. purchased 23% of Peru’s exports, mainly gold and copper in 

2007. 

Extractive industry transparency is important in Peru because it 

is still a very poor country despite the massive influx of revenues 

it is beginning to receive from extractives. Peru is now the only 

country in the Western Hemisphere that has signed up for EITI. 

Peru has an extremely complex, yet transparent, system regarding 

68 

extractive industry payments to the government. First, half of all 

mining revenues are by law redistributed back to the regions, 

where extraction takes place; these revenues are used primarily for 

social infrastructure projects. The law dictating this process is 

called Canon law and the resulting revenues are referred to as 

‘‘canon.’’ 

Given Peru’s increasing exports, vast amounts of resources are 

being transferred to the regions: in 2007, canon resources totaled 

5.1 billion soles ($1.8 billion). However, the unequal distribution of 

canon is one of the hottest topics of political debate in Peru. 

Second, through the aporte voluntario or ‘‘voluntary contribution,’’ 47 out of 49 mining companies give money to a solidarity 

fund managed by a committee comprised of representatives from 

NGOs, the mining companies, local governments and civil society. 

The role of the committee is to decide how to best invest the resources. Experts estimate that in 2008 the fund will generate 540 

million soles ($193 million). 

Third, approximately 50% of the bid or tender is invested 

through a fideicomiso (trust fund) into social programs focusing on 

health and education to benefit the communities where extractive 

activity takes place. The goal of the trust fund is to ensure that the 

benefits of extractive company investments are long-term and continue helping future generations of Peruvians. Fideicomisos are established during the projects’ exploration phases. The trust fund is 

administrated through a council made up of representatives from 

the company, the Government, and civil society. 

All of the financial data on Canon law, voluntary contribution, 

and trust funds are published on the internet. However, staff heard 

from several people about the contrast in transparency between the 

large international companies and the smaller domestic companies. 

Whereas the large international and multinational companies follow international standards and practices regarding transparency, 

smaller indigenous companies disclose less information. 

Peru has also made strides in advancing an anti-corruption and 

transparency agenda, though a fragmented government structure 

with four independent sub-national levels of government complicates coordination. A freedom of information law was approved 

by the Peruvian Congress approximately five years ago. The Peruvian Government and civil society have been increasingly open and 

forthcoming in sharing information, a few pitfalls notwithstanding. 

Transparency has also resulted in a massive crackdown on corruption because the country’s budget is now available online through 

the Ministry of Economy and Finance. Specific information and figures are broken down by years, as well as by federal, region, province, and district. This has allowed government officials to be held 

to account at all levels in Peru. 

Peru became an EITI candidate country in September of 2007. It 

has until March 2010 to become a compliant country. Peru established an EITI working group in the country comprised of representatives from the Government of Peru, civil society, and extractive companies. Although Peru was one of the first countries to sign 

up for EITI, the progress toward implementation has been extremely slow. The working group was slow to organize and the 

companies do not want to release disaggregated figures on their 

69 

taxes paid. This is especially true of the medium and small sized 

companies who are mostly domestic Peruvian companies. 

International donors are contributing approximately $2.2 million 

for implementation of EITI in Peru. USAID granted the World 

Bank’s International Finance Corporation $450,000 to set up a 

well-regarded program to bolster technical capacity to implement 

EITI. The program will provide assistance to local officials on how 

to design projects that meet legal requirements and will include a 

civic oversight component to inform citizens about the measures 

taken by their authorities. USAID remains in an advisory role for 

this initiative. The Peruvian Government has also appointed two 

senior level ministers to sit on the working group, the Vice Minister of Energy and the Vice Minister of Mines. 

Apart from this USAID-IFC partnership, the United States has 

promoted transparency through provisions in the U.S.-Peru Trade 

Promotion Agreement, which requires regulatory transparency. 

Regulative authorities must use open and transparent administrative procedures, consult with interested parties before issuing regulations, provide advance notice and comment periods for proposed 

rules, and publish all regulations. The financial services chapter of 

the agreement also includes provisions on transparency of domestic 

regulatory regimes. Other U.S. foreign policy priorities in Peru include promoting democratic governance; countering the 

transnational threat of narcotics trafficking; and ensuring that the 

benefits of economic growth reach the poor and marginalized. 

Technical capacity could actually be a larger problem than transparency in Peru. Despite the Peruvian Government’s reserves 

(Peru’s Net International Reserves (NIR) amounted to 34.78 billion 

dollars as of July 25, 2008), the Government has no plans for much 

needed large scale national development projects which would include major transportation infrastructure, roads, rail and ports, to 

take full advantage of the recently enacted U.S.-Peru Trade Promotion Agreement. In the rural areas, there is a lot of interest and 

good will, but capacity for the formulation and implementation of 

basic economic development projects by local governments is lacking. Though the Peruvian Government’s system is transparent 

enough that people can track budget surpluses and put pressure on 

politicians to perform, local Peruvian Governments do not have the 

technical capacity to use these surplus funds effectively and the expectations of regular Peruvians regarding their Government are 

low. This is creating a degree of social conflict and an increasing 

sense of frustration among the Peruvian people who have not seen 

ground-level benefits of this economic windfall in the form of services, health, education or infrastructure to improve their everyday 

lives. This has resulted in a sense of distrust of both the mining 

companies as well as the national Government. Many Peruvian analysts believe that if the Garcia administration does not show a 

real improvement in the everyday lives of regular Peruvians in key 

areas of the country, an anti-free market leader might gain the 

presidency in 2011 and all the progress that has been made during 

presidents Toledo and Garcia will be lost. 

70 

50Oil figures provided by the U.S. Department of State, current as of 23 July 2008. 51For more, see JUDGE RADHI HAMZA AL-RADHI, former Commissioner, Iraq Commission on 

Public Integrity, testimony at House Committee on Oversight and Government Reform hearing 

‘‘The Status of Corruption in the Iraqi Government.’’ October 04, 2007. 52 Bennett, Adam. Senior Advisor, Middle East and Central Asia Department, International 

Monetary Fund. Statement on the International Compact with Iraq, Stockholm, Sweden, May 

29, 2008. 53Source: email exchange with USAID staff, May 1-5, 2008. 

MIDDLE EAST 

Iraq 

A study by UNDP and the Iraqi Government suggest that onethird live in poverty, while according to Oxfam International, 43% 

of Iraqis are in ‘‘absolute poverty.’’ Unemployment is calculated 

from 25-40%, although the Government of Iraq’s (GOI’s) estimate 

is 17.5%. Infant mortality, measured in 2006 and reported by 

UNICEF is 37. Per capita GNI is $2,170. Iraq has an infant mortality rate of 125 deaths per 1000 births. Total hydrocarbon revenue in 2005 was $8.8 billion, which is approximately 69.5% of 

GDP. Revenue estimates for 2006 were $31.3 billion and for 2007 

were $41.0 billion and projected revenue for this year exceeds $70 

billion.50

Iraq is emerging from decades of tyranny and corruption that 

pervaded all levels of government. As the GOI chips away at the 

complex series of challenges it faces, it remains behind the expectation curve in nearly every measurable aspect. Where competent 

governance lags, criminality, powerful militias, and incompetence 

compete to replace the institutions of the Saddam era. Transparency International’s ‘‘Corruption Perceptions Index’’ put Iraq 

among the worst in the world—only Burma and Somalia rank 

worse. While Iraq has made some grand gestures, such as joining 

EITI and working closely on planning with UN and IMF, it has not 

yet changed. Senior Iraqi officials are not required to declare their 

income, investments or net worth. Oil terminals are not metered. 

Anti-corruption officials are undermined in their work by the highest officials in the Government.51

Despite the widespread poverty and unemployment, Iraq’s 

macro-economy shows some health. According to the IMF, over the 

past year, inflation has fallen from 64.8% at the end of 2006 to 5% 

at the end of 2007, a rate that has been sustained in 2008. IMF 

predicts growth in 2008 will be 7%, driven by rising oil prices, economic reforms and surging foreign exchange reserves. Sovereign 

debt, estimated in 2003 to be between $125 and $140 billion, has 

been cut in half. Fuel subsidies have been all but eliminated.52

Attempts to improve financial management through computerizing data and reporting have been hit and miss. The FMIS (Financial Management Information System), an accounting and reporting system has been put in place by USAID for all Iraqi ministries to use. The GOI is using the system and has started to pay 

for Internet connectivity for all FMIS sites throughout the country. 

Training continues for the MOF and other government staff. Nevertheless, use has not been standardized and laws and directives 

are not in place to stipulate accounting procedures.53 Iraq has established mechanisms to investigate and fight corruption, but they 

have proven largely ineffective. The clearest reason for this is inVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00076 Fmt 6633 Sfmt 6633 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
71 

54 International Compact with Iraq, Annual Review Conference Report, dtd 29 May 2008, p. 

49. 55 ‘‘Al-Shahristani Expects First Service Contracts To Be Signed In June,’’ Middle East and 

Africa Oil and Gas Insights, May 1, 2008. 

timidation. Judge Rahdi, Iraq’s one time leading anti-corruption official has fled the country for fear of his life. 

In 2008, Iraq’s crude oil exports have increased from 2007 levels 

by 22%. Iraq has exported an average of 1.92 million b/d this year, 

with the bulk (approximately 1.5 million b/d) coming from southern 

Iraq. Iraq’s reserves have long been ranked third in the world, with 

estimates ranging from 100-116 billion barrels, but with only a 

small portion of its fields producing. However, great challenges remain to maintain or further boost this capacity. Within the oil industry in Iraq, which accounts for 64% of GDP and 84% of the national budget,54 smuggling, corruption, looting, and graft are rife; 

production (lift and transfer) is hampered by decrepit infrastructure, the challenges posed by surface and subsurface water, poor 

security, corrosion, poor reservoir management, the flight of intellectual capital competency, and more. The World Bank estimates 

that to simply sustain current levels of production, Iraq needs to 

invest $1 billion annually. In 2007, according to end of year data 

from the Iraqi Ministry of Finance, the Ministry of Oil expended 

only $36.1 million of its $2.5 billion budget. 

In May, Iraq’s Minister of Oil Hussain al-Shahristani announced 

that the first five two-year technical service contracts (TSCs) with 

Royal Dutch Shell, ExxonMobil, Chevron, BP and Total would be 

signed. These contracts were to have been completed by now, but 

domestic Iraq politics and the lack of an oil law continue to complicate matters. Iraq is hoping that by using short-term TSCs to reconstruct established fields such as Rumailah—Iraq’s largest and 

the fourth largest oil field in the world—it can increase its oil production by 500,000 b/d and give the political establishment time to 

finalize a new oil law, and enable actual investment.55 In the 

Kurdish region, more than twenty contracts have been reportedly 

signed, but this has all been done without pledged transparency. 

No major international oil companies have signed contracts in the 

Kurdish region. 

The international companies have a tremendous amount of 

leverage—if not than a great deal of influence—when it comes 

to promoting transparency now in Iraq but they have not been 

pressing the case. One oil industry executive told staff, ‘‘EITI 

has not come up in talks with the Iraqis. . . .’’ and stated further that neither the U.S. Government nor the British Government have supported EITI. 

Iraq’s natural gas reserves, according to the Oil and Gas Journal 

are 112 trillion cubic feet (Tcf), making it the tenth largest in the 

world. Probable reserves may be closer to 275-300 Tcf. The EIA’s 

annual report notes that natural gas production has declined steadily over the last 15 years along with oil production and deteriorating processing facilities. According to the January 2007 report 

from the Special Inspector for Iraqi Reconstruction (SIGIR), the 

value of the gas that is flared or injected back into wells is approximately $4 billion annually. Experts suggest that if Iraq captured 

and piped that gas, it could provide for much of Iraq’s domestic fuel 

72 

56See: http://www.oil.gov.iq/ for Iraq MO reports and http://www.state.gov/p/nea/rls/rpt/ for 

USG reports. 

needs and enable Iraq to export crude. Plans to build the necessary 

infrastructure to capture and pipe the gas have been announced, 

but so far have been tabled for future consideration. Estimates to 

build the necessary infrastructure are in the $2 billion range. The 

Oil Ministry has not made the investments to capture the gas, 

whether for domestic use or export. 

The Government of Iraq has established a Committee of Financial Experts (COFE) to serve as an independent monitor of fiscal 

activities. COFE has worked closely with the International Audit 

and Monitoring Board (IAMB), which is responsible for monitoring 

the Development Fund for Iraq (DFI), the UN-mandated repository 

for Iraq’s oil revenues. COFE will assume the duties of the IAMB 

when it and the DFI mechanism are dissolved, which could come 

as early as January 2009, when the current UN mandate expires. 

The IAMB and COFE’s most recent DFI report, a summary audit 

of 2007 activities, noted 13.8 million barrels of oil produced but unaccounted for last year. 

Over the past year, the Ministry of Oil has begun to report 

monthly export figures on its website and in a national newspaper, 

including export quantities and destinations, and revenues garnered.56 Furthermore, the Ministry of Finance is publishing quite 

a bit of fiscal data, including what they are sending to the Kurdish 

Regional Government (KRG) every month, but there is not the 

least bit of transparency on the part of the KRG, who some locals 

say are ‘‘selling Iraqi oil down the river.’’ KRG finances are, in the 

words of one close observer ‘‘a complete black hole.’’ This compromises transparency efforts by the central government as well, 

and U.S. officials and oil companies cannot ignore it forever. Nevertheless, the lack of reliable mercantile infrastructure forces many 

transactions to continue to occur in cash. In 2006, the GAO estimated that about 10% of Iraq’s refined fuel and 30% of its imported 

fuels were being stolen. Industry analysts quietly question discrepancies between sales and export figures, with some placing Iraq’s 

‘‘slippage’’ at as much as 200,000–300,000 b/d, although coalition 

officials have often said that the fuel/smuggling theft problem is 

less than 10% of fuel supply and much of that stays domestic and 

is sold on the black market, and so is not often seen as a major 

problem. The Iraq Oil Ministry’s Second Transparency Report 

‘‘Smuggling Crude Oil and Oil Products,’’ also from 2006 provided 

clear indicators the Ministry is aware of its problems, but it has 

not issued a subsequent report, suggesting it has made no progress. 

A U.S. Government official familiar with the reports, stated to staff 

that indeed, ‘‘. . . it’s fairly the same story.’’ 

Without laws to govern the oil and gas sector, with good governance and overall ministerial capacity wanting, transparency may 

be the single most powerful weapon the Government of Iraq has to 

combat pervasive, systemic corruption. A transparent, efficient and 

equitable legal framework for the management of oil and gas resources is perhaps the most important benchmark under discussion 

in Iraq. If done right, it could be the genesis for true national 

unity. In meetings with U.S. and Iraqi officials in Iraq and in 

73 

57 International Advisory and Monitoring Board on Iraq (IAMB), Third Interim Report Covering the Year 2007. 58Special Inspector General for Iraq Reconstruction, Quarterly Report to the US Congress, 

April 30, 2008, p. 117. 59Saudi Arabia also possesses 240 trillion cubic feet of proven natural gas reserves. This 

amount represents roughly 4% of the global total, the fourth largest proven reserve in the world. 

In 2006, Saudi Arabia produced 2.6 trillion cubic feet of natural gas. 

Washington, staff heard no end to the frustration about the lack 

of progress towards political milestones, including the development 

of a package of laws to regulate the hydrocarbons industry. Embassy officials and U.S. policy makers recognize this, and must continue to work steadfastly with the parties to ensure this becomes 

a reality. Nevertheless, as with many things in the new Iraq, it is 

more important that it is done right than it is done fast. Across the 

board, progress on political reform is slow because the parties in 

control of the system benefit from it and a general mistrust among 

major factions persists. Progress on the hydrocarbons laws is no 

different. 

In addition to transparency, metering would seem a simple and 

sensible fix. The Iraqi Government has indicated that they are 

committed to install, fix, and/or regulate oil flow meters at all oil 

production and distribution facilities by the end of 2007, progress 

has been slow. Some metering has been installed at oil terminals, 

such as Basra and the Gulf Oil Platforms, but no metering is being 

done in the oil fields.57 U.S. funds supported the installation and 

renovation of the meters at the Al Basra Oil Terminal, however according to the U.S. Corps of Engineers, ‘‘the new meters are still 

not being used for custody transfer.’’ The meters are being used to 

check ship’s ullage readings, which determine the custody transfer 

amount.58

In a February 21, 2008 letter to the EITI Secretariat, the Government of Iraq indicated its commitment to formally sign up to 

EITI. This action followed several years of Iraqi interest in EITI, 

including attendance at EITI annual conferences and including it 

as an economic benchmark in the International Compact with Iraq. 

U.S. officials that staff met with for this project have reacted favorably towards the Government of Iraq’s actions towards EITI, toward anti-corruption efforts and transparency. But, achieving results will require much more than simple statements. 

One U.S. official admitted that extractive industry transparency 

‘‘is not in the top fifty’’ of U.S. priorities with respect to Iraq. The 

Iraqis have not begun to submit reports to EITI or to the IMF, and 

no financial outlays have been made for EITI. 

Saudi Arabia 

Saudi Arabia is home to a population of more than 28 million 

people. With the price of oil skyrocketing, Saudi oil revenues increased from $85 billion in 2003 to $194 billion in 2007, a 128% 

increase in just four years.59 In 2007, Saudi oil revenues constituted approximately 52 per cent of GDP. Saudi Arabians have a 

per capita income of $16,260, a life expectancy of 72.2 years, and 

an infant mortality rate of 26 deaths per 1000 births. 

Saudi Arabia has seen some political and economic reform over 

the last several years in response to escalating domestic problems. 

In 2005, King Abdallah continued his cautious reforms to increase 

74 

60http://www.transparency.org/policy—research/surveys—indices/cpi. 61 Ibid 

political participation through nationwide elections for half of the 

members of the municipal councils; the remaining members were 

appointed by the monarch. Terrorist attacks in 2003 also provoked 

a strong political campaign against domestic terrorism and extremism. Dependence on petroleum output and prices, aquifer depletion, high unemployment among a growing population (nearly 40% 

of which are youths under the age of fifteen) remain challenges. In 

reaction to the largely uneducated youth population, the Saudi 

Government has significantly increased spending on job training 

and education, infrastructure development, and government salaries. 

According to the Energy Information Administration, Saudi Arabia’s proven oil reserves are 259.8 billion barrels. This amount represents 22% of the global total, and the largest in the world. In 

2007, Saudi Arabia produced 8.7 million b/d of oil with an estimated production capacity of 10.5—11.0 b/d. Oil accounts for 70- 

90% of Saudi state revenues. 

Saudi Arabia releases timely, but not highly-detailed budget information. Overall, the level of transparency in Saudi Arabia is improving but still lacking according to most international standards. 

The information provided by the Saudi Government lacks important details, and publicly available numbers are too generalized to 

identify specific programs or even budgets for specific ministries. 

Furthermore, the lack of specificity and transparency provide an 

environment where corruption can flourish. According to Transparency International’s Corruption Perceptions Index, Saudi Arabia 

ranks 79th out of 179 countries with a ranking of 3.4 (0 = highly 

corrupt and 10 = highly clean).60 From a regional perspective, this 

rank gives Saudi Arabia the worst ranking of the six members of 

the Gulf Cooperation Council, including Bahrain, Kuwait, Oman, 

Qatar, and the UAE. Most observers, though, believe Saudi Arabia 

is managing this enormous inflow of cash in a relatively responsible manner. The Government has utilized its oil wealth to make 

qualitative improvements to the country’s social and physical infrastructure and has focused its expenditures in five areas: education 

and manpower development; health and social affairs; water, agriculture and infrastructure; transportation and telecommunications; 

and municipality services.61

Saudi Arabia has expressed no desire to join EITI. Average 

Saudis express numerous economic concerns, but the relative lack 

of transparency in the extractive industries does not appear to be 

a leading source of frustration. While the Saudi Government could 

clearly improve its level of transparency and could benefit from 

joining EITI, the Saudis have already taken steps towards additional disclosures. In fact, since June 2006, Saudi Arabia has observed the International Monetary Fund-endorsed standards and 

codes related to banking supervision, monetary and financial policy 

transparency, and payments systems. 

In December 2007, Saudi Arabia announced its 2008 $106 billion 

budget, roughly twice the 2002 budget and Saudi Arabia’s largest 

75 

62 John Sfakianakis, ‘‘And the boom continues.High revenues, robust budget, growth,’’ The 

Saudi British Bank (12 December 2007). 63Sfakianakis, ‘‘And the boom continues . . .’’ 64 Ibid. 65 ‘‘Join the club; Saudi Arabia launch a formal sovereign-wealth fund,’’ The Economist Intelligence Unit (May 1, 2008). 

in history.62 In 2007, Saudi Arabia also accrued a $47.6 billion 

budget surplus, its fifth consecutive year of budget surpluses. To 

put this surplus in perspective, it is more than twice as big as Lebanon’s GDP and equal to the total value of Qatar’s Investment Authority. The Saudis have used a majority of this budget surplus to 

accumulate foreign assets at the Saudi Arabian Monetary Agency 

(SAMA) and to reduce debt.63 SAMA controls approximately $271 billion in foreign assets (some estimates are as high as $330 billion). The value of SAMA’s foreign assets has increased fivefold 

since 2003, and with a projected budget surplus for 2008 of more 

than $40 billion, this rapid growth in the value of Saudi foreign assets is likely to continue.64

The Saudi Government recently confirmed that it plans to launch 

a more traditional sovereign wealth fund. The Secretary-General of 

the Saudi Public Investment Fund (PIF), Mansour al-Maiman, says 

the new fund is expected to begin with an authorized capital of 

$5.3 billion, a relatively small sum compared to the current worth 

of Kuwait’s fund of about $200 billion and of the UAE’s fund of 

around $500 billion. According to Maiman, the PIF will retain 

100% ownership of the new fund, but the fund will feature an independent management team. One of the objectives for the new fund 

is to improve Saudi Arabia’s financial services sector by building a 

national asset management base.65 While Saudi embassy officials 

emphasize the domestic focus of this fund, the fund’s desire to 

maximize long-term returns will almost certainly result in equity 

investment abroad, including the United States. The fact that Mr. 

Maiman has cited Norway’s fund as a potential model suggests the 

Saudis may plan to run their SWF in a transparent manner. 

While the U.S. and Saudi Arabia have a long-standing bilateral 

relationship, the U.S. has few tools to press the Saudis for more 

transparency in its extractive industry. The U.S. would be wise to 

promote transparency in Saudi Arabia’s extractive industries and 

its new SWF through consistent discrete diplomatic exchanges. 

Such an approach is most likely to yield positive results without 

jeopardizing the dollar peg or Saudi investment in the U.S., which 

are important the U.S. economy. 

United Arab Emirates 

The United Arab Emirates (UAE) has a population of 4.6 million. 

The average life expectancy is 78.3 years and the infant mortality 

rate is 9 deaths per 1000 births. The per capita income is $23,990. 

Between 2003 and 2007, UAE oil revenues almost tripled, ballooning from $22.9 billion to $63 billion or 33 per cent of GDP in 

2007. 

The UAE is a federation of seven principalities, including the oilrich capital, Abu Dhabi, and the commercial center, Dubai. The 

UAE has seen little political reform, but in December 2006, it held 

limited elections for half of the 40-seat Federal National Council 

(FNC). Despite these elections, citizens do not have the right to 

76 

66 ‘‘Implementing the Extractive Industries Transparency Initiative: Applying Early Lessons 

from the Field,’’ The World Bank. 2008. 67http://www.transparency.org/policy_research/surveys_indices/cpi. 

form political parties, and other civil liberties are limited. The UAE 

enjoys political stability and a robust free-market economy, though 

challenges in the area of terror financing and human trafficking remain. Despite diversification, oil exports still account for one-third 

of the UAE’s federal budget. Favorable terms for foreign investors 

and low taxes have helped augment the oil-driven economy, and 

GDP growth reached approximately 7.4% in 2007. Inflation remains a challenge at 11% in 2007. 

The UAE possesses some of the world’s largest reserves of oil and 

natural gas. The UAE enjoys the world’s sixth largest proven oil reserves at 97.8 billion barrels, representing 8% of the global total. 

In addition to the UAE’s large reserves of oil, the UAE has 214 trillion cubic feet of proven natural gas reserves. This amount represents over 3% of the global total, giving the UAE the sixth largest proven reserve of natural gas in the world. In 2006, the UAE 

produced 1.7 trillion cubic feet of natural gas. Between 2000 and 

2005, oil and natural gas provided 66% of the UAE’s fiscal revenue.66

Roughly 90% of the oil and natural gas reserves are located in 

the emirate of Abu Dhabi. In the UAE, an emirate’s resources belong to the emirate as opposed to the entire country so any discussion of extractive industry revenue and the UAE must focus on 

Abu Dhabi. Numerous foreign energy companies, such as BP, 

Exxon Mobile, Shell, and Total, operate in Abu Dhabi; however, the 

Government of Abu Dhabi owns a majority stake in all oil concessions. More specifically, with only a few minor exceptions, the Government of Abu Dhabi owns a 60% stake in oil concessions in the 

country. 

The UAE’s record of extractive industry transparency and corruption is mixed. Abu Dhabi has taken some measures to improve 

transparency and the general trajectory is positive. The UAE has 

ratified the United Nations Convention Against Corruption but 

lags behind in implementation. It has not joined EITI, unlike its 

neighbor Yemen. According to Transparency International’s Corruption Perceptions Index, the UAE ranks 34th out of 179 countries with a rank of 5.7 (0 = highly corrupt and 10 = highly 

clean).67 In short, while transparency in the UAE is improving, 

critics suggest that it is not at a level to certify that all extractive 

revenues are reported or arrive in Abu Dhabi’s treasury. 

For budgeting purposes, Abu Dhabi’s Department of Finance gets 

a projection of expected oil revenues. When revenues exceed the 

projected amount, the difference has been sent to the Abu Dhabi 

Investment Authority (ADIA)—the Government’s sovereign wealth 

fund (SWF). If actual revenues are less than expected, then ADIA 

covers the revenue shortfall. Recently, since ADIA has done so well 

with its investments, the Abu Dhabi Investment Council (ADIC)— 

which focuses on regional and domestic investments-reportedly now 

serves as the destination for Abu Dhabi’s budgetary surpluses. 

The large reserves of oil and natural gas controlled by the UAE— 

combined with the ballooning price of both commodities over the 

last decade—have resulted in significant budgetary surpluses in 

77 

the UAE. Abu Dhabi has directed these extraordinary surpluses to 

the emirate’s sovereign wealth fund. 

ADIA represents one of the largest SWFs in the world. While the 

lack of transparency makes it difficult to accurately estimate the 

amount of investments owned, ADIA’s value is estimated to be between $300 and $900 billion. Recently, ADIA paid $7.6 billion for 

a 4.9% stake in Citigroup, becoming the biggest shareholder in the 

world’s biggest bank. In September 2007, ADIA also invested $1.35 

billion in the private equity company Carlyle Group, obtaining a 

7.5% ownership stake. In order to assuage the fears of some, ADIA 

agreed to forgo any management role. ADIA and Abu Dhabi officials insist that Abu Dhabi’s SWFs seek solely to maximize returns. 

Some skeptics of this official Emirati line point to the lack of transparency as evidence of ulterior and potentially political motives. 

Admittedly, the U.S. does not know with any level of accuracy how 

much the assets of ADIA are worth and cannot identify all ADIA 

investments in the United States. While Abu Dhabi has worked 

with the U.S. Department of Treasury in developing a mutually acceptable ‘‘philosophy’’ for the operation of SWFs, Abu Dhabi has resisted Treasury’s calls to make specific disclosures or provide a list 

of investments. 

Some commentators have remarked, ADIA’s investment in the 

U.S. economy is a ‘‘natural evolution of globalization.’’ Much of the 

money ADIA is investing in the U.S. is simply a recycling of the 

trillions of dollars the U.S. has paid for low cost imports and Middle Eastern oil. This dynamic rests at the heart of globalization. If 

the U.S. seeks to remain faithful to its long-term interest in promoting trade and reducing protectionism in order to gain access to 

foreign markets, the U.S. must continue to allow foreign investment in the U.S. Allowing foreign investors to invest in the U.S. 

often involves some level of risk, but these risks are often overblown and exploited for political purposes. The U.S. must balance 

its national security interests with its desire to welcome the muchneeded capital infusion that SWFs like ADIA are eager to provide. 

(79) 

A P P E N D I X E S 

Appendix I: Administration Responses to 

Questions From Senator Lugar 

Senators often ask witnesses and nominees follow-up questions, 

i.e. questions for the record, on topics addressed in hearings. Below 

are administration responses such questions for the record, selected 

for their relevance to topics covered in this report. 

FEBRUARY 13, 2008—QUESTIONS FOR SECRETARY OF STATE

CONDOLEEZZA RICE

Senator LUGAR. Funding for the Multilateral Donor’s Fund for 

the Extractive Industries Transparency Initiative was authorized 

in legislation signed by the President in December 2007. What is 

the State Department’s policy on contributing to the Fund? 

Secretary RICE. We support EITI, participate actively on the 

EITI board and assist with EITI implementation directly through 

our embassies. Our financial support to date has been: 

• FY06—$990,000 in total funds ($1 million before rescissions) to 

support civil society participation in EITI implementation, administered by USAID 

• Peru—$445,000 for catalyzing EITI planning and stronger civil 

society participation in EITI 

• Nigeria—$445,000 to expand civil society oversight of EITI 

• Democratic Republic of Congo (DRC)—$100,000 to expand civil 

society and private sector engagement in EITI 

• FY07—$1 million to support civil society participation in EITI 

implementation. USAID is currently determining the recipient 

countries. 

• FY08—The FY08 funding estimate is $3 million. The Foreign 

Operations Conference Report directs that no less than this 

amount be provided to the EITI multi-donor trust fund at the 

World Bank; however, the final determinations on the amount 

and destination of the money are subject to 653(a) negotiations 

on FY08 allocations. 

MAY 14, 2008—QUESTIONS FOR STATE DEPARTMENT DEPUTY

SECRETARY OF STATE JOHN NEGROPONTE

Senator LUGAR. Chinese companies are playing a growing role in 

extractive industries (such as oil, gas, minerals and timber) in developing countries. Do Chinese companies operate differently than 

companies from other countries? If so, how? 

80 

Are Chinese companies held to similar anti-bribery standards 

that U.S. companies are held to through the Foreign Corrupt Practices Act? 

Deputy Secretary of State John NEGROPONTE. Overseas investments by Chinese firms in extractive industries are a response to 

China’s rapid economic growth. Like their OECD counterparts, 

Chinese companies are profit-maximizing corporations whose actions are guided primarily by commercial considerations. However, 

Chinese companies are bound by fewer national legal restrictions 

than companies from OECD countries and are not yet party to 

international agreements on overseas business practices. Many of 

the Chinese companies engaged in pursuing contracts for extractive 

products are state-owned or state-operated companies, meaning 

that the companies receive political support from the Chinese Government for their overseas activities, including tied development 

aid, and business decisions may take into account some political 

goals as well as purely commercial factors. 

There is no legislation in China that is the equivalent of our Foreign Corrupt Practices Act (FCPA). In recognition of China’s importance in global commerce and the need to level the playing field by 

addressing the issue of foreign bribery, the U.S. and partners at 

the OECD are hopeful that China will sign the OECD’s Convention 

on Combating Bribery of Foreign Public Officials in International 

Business Transactions, which requires legislation making the payment of bribes a criminal offense and eliminating tax breaks for 

bribing foreign officials. The desire to address the problem of bribery and corruption is one of the reasons why the OECD has called 

for Enhanced Engagement with countries like China, with the aim 

of having these countries adopt common standards on the way to 

eventual OECD membership. 

Senator LUGAR. How is the administration engaging with the 

Chinese Government on issues around extractive industry transparency? At what level and through what agencies is the engagement? Is the administration encouraging the Chinese Government 

to support the Extractive Industry Transparency Initiative (EITI)? 

If so, how? 

Deputy Secretary NEGROPONTE. Senior Department of State officials have, on a number of occasions, encouraged interlocutors 

within both China’s Foreign Ministry and the National Commission 

for Development and Reform (NDRC) to consider China’s participation in EITI as a ‘‘supporting country.’’ This is the same status that 

the U.S. holds in EITI. Such support by China would reflect China’s growing weight and influence as an important investor in the 

extractive sectors of many developing countries. 

Senator LUGAR. A number of countries are supporting a UN General Assembly draft resolution in favor of EITI—A/62/L.41. Some 

have suggested that a UN resolution encouraging EITI will help 

pave the way for Chinese and Indian support for the initiative. 

Given the administration’s support for EITI, does the administration expect to support this resolution? Why or why not? 

Deputy Secretary NEGROPONTE. The pursuit of transparency is a 

high-profile foreign policy objective which cuts across numerous 

USG departments and organizations. State participates in interVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00086 Fmt 6601 Sfmt 6601 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
81 

national and bilateral efforts such as EITI to encourage resourcerich developing countries, as well as countries that invest in them 

(including China and India), to implement transparency throughout the extractive industries value chain. Resource revenue transparency contributes to effective use of public resources by enabling 

oversight. It is encouraging to see that other countries, including 

those who have proposed and sponsored the current UNGA draft 

resolution in favor of EITI (A/62/L.41), agree and are willing to encourage increased participation in the initiative. Although the US 

does not anticipate formally co-sponsoring the resolution, we have 

no objections to the current wording, and expect that the administration will support it. 

JULY 18, 2008—QUESTIONS FOR TREASURY DEPARTMENT DEPUTY ASSISTANT SECRETARY KENNETH PEEL AND NOMINEE FOR U.S. EXECUTIVE DIRECTOR OF THE EUROPEAN BANK FOR RECONSTRUCTION AND

DEVELOPMENT

Senator LUGAR. What is the European Bank for Reconstruction 

and Development’s (EBRD) current assessment of the Extractive 

Industry Transparency Initiative (EITI)? How, if at all, is the 

EBRD currently integrating EITI into their operations? What steps 

have been taken? What will be your role in promoting EITI? 

Deputy Assistant Secretary Kenneth PEEL. The EBRD supports 

the EITI and is participating in the work of the EITI. For all natural resource projects, the EBRD requires its project sponsors to 

publicly disclose their material project payments to the host government, regardless of whether the government is a member of the 

EITI. The EBRD is actively involved in the EITI consultative process, including through providing input into the development of 

technical mechanisms for reporting (templates, aggregation of data, 

etc.). The EBRD promotes transparent revenue reporting, as well 

as increased financial and organizational transparency, with the 

draft EITI reporting guidelines providing a useful starting point for 

even greater revenue transparency. The EBRD is working in cooperation with other international financial institutions and the 

participating private financial institutions to promote governance 

and transparency initiatives in the financial community. The 

EBRD is helping to build capacity in countries of operation to enable them to implement the objectives of the EITI. Two countries, 

Azerbaijan and the Kyrgyz Republic, have been in the forefront on 

this, and may be among the first countries to achieve full EITI 

compliance. In Mongolia, the EBRD is helping the country to implement the EITI through its work with mining companies. 

My role would be to monitor EBRD activities in this area and 

also to engage upstream with Bank staff and management to promote the related objectives identified in recent legislative guidance 

on IFI extractive industry projects. Accountability and transparency are key to the mandate of the EBRD to promote transition 

to market economies. 

Senator LUGAR. Given your current position as Deputy Assistant 

Secretary for International Development Finance and Debt, what is 

the Asian Development Bank’s current assessment of the Extractive Industry Transparency Initiative? How, if at all, is the Asian 

82 

Development Bank currently integrating EITI into their operations? 

Deputy Assistant Secretary Kenneth PEEL. The Asian Development Bank (AsDB) endorsed the EITI on February 29, 2008. The 

AsDB has five member states that have already agreed to comply 

with EITI principles: Azerbaijan, Kazakhstan, the Kyrgyz Republic, 

Mongolia, and Timor Leste. All of these countries are at the EITI’s 

‘‘candidate’’ stage. 

The AsDB already promotes transparency and anti-corruption efforts in its projects and its developing member countries through 

projects and initiatives. These efforts will be strengthened by the 

endorsement of EITI, which is a natural complement to these existing activities. Also, the AsDB is currently revamping its safeguards 

policies and our expectation is that extractive industries, and the 

principles of the initiative, will be part of that. 

Senator LUGAR. Also, what is the World Bank’s assessment of the 

Extractive Industry Transparency Initiative? How is the World 

Bank currently integrating EITI into their operations? 

Deputy Assistant Secretary Kenneth PEEL. The World Bank formally supported EITI in December 2003 as a global initiative, 

which aims to support good governance and transparency in resource-rich countries through the publication of payments and revenues from oil, gas, and mining in a multi-stakeholder process. 

EITI is achieving strong momentum globally and has become an established standard for transparency. There are EITI programs in 

23 candidate countries, 21 of which have active Bank programs. In 

addition, there are several countries that have publicly stated their 

intention to join EITI and others who are in contact with the World 

Bank Group about the EITI process. 

The World Bank Group role, led by the Oil, Gas, and Mining Policy Division (COCPO), is to support EITI implementation at the 

country-level and globally. COCPO’s Technical Assistance programs 

on EITI are supported by a multi-donor trust fund (MDTF). The 

MDTF seeks to broaden support for the EITI principles and process 

through the establishment of extractive industries transparency 

initiatives in countries that have signed on to EITI through programs of cooperation among the Government, the private sector, 

and civil society. The MDTF is instrumental in funding the EITI 

work programs and grants in 10 countries and 7 additional programs are in negotiation. The World Bank Group also has special 

funds dedicated to supporting civil society groups working on EITI 

through the Development Grant Facility. Following strong U.S. 

leadership during negotiation of the fifteenth replenishment of the 

International Development Association (IDA) in 2007, the World 

Bank expressed a continued commitment to enhance transparency 

of revenue flows to governments from extractive-industry projects. 

World Bank Group support for EITI includes making EITI consultants and advisors available to governments to assist them in 

implementation and sharing international best practice. The Bank 

also works with client governments on EITI issues as part of broader Bank-supported programs on extractive-industries reform, natural resource management, and good governance/anti-corruption. 

Aside from the MDTF, the Bank has also provided financial supVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00088 Fmt 6601 Sfmt 6601 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
83 

port from its own funds to a number of civil society groups involved 

in EITI implementation. 

JULY 18, 2008—QUESTION FOR MS. MIMI ALEMAYEHOU, NOMINEE FOR

U.S. EXECUTIVE DIRECTOR OF THE AFRICAN DEVELOPMENT BANK

Senator LUGAR. What is the African Development Bank’s assessment of the Extractive Industry Transparency Initiative? How, if at 

all, is the bank currently integrating EITI into their operations? 

What steps have been taken? What will be your role in promoting 

EITI? 

Ms. ALEMAYEHOU. African Development Bank (AfDB) President 

Kaberuka endorsed the EITI in October 2006. Since then, I understand that the Bank has developed an implementation framework 

to guide the Bank’s operations to help African countries improve 

resource management of extractive industries. The framework is 

results-oriented and includes both short and medium term measures to help countries strengthen transparency and accountability 

in the management of extractive industries. The approach includes 

technical and financial assistance for countries which have demonstrated political will by endorsing the EITI and for those countries participating in EITI++, advocacy and outreach activities to 

encourage resource rich countries to improve governance, and 

mainstreaming the EITI principles in the Bank’s own natural resources operations. The AfDB has worked with the Liberian Government to develop its EITI work plan, and has assisted Madagascar to become an EITI candidate country. The Bank is also financing efforts by the Central African Republic, Botswana and 

other countries to become EITI candidates. 

I believe that it is very important that every appropriate measure is taken to ensure that all people in resource rich countries 

benefit from the extraction of resources, and not just a well-connected few. 

As U.S. Executive Director, I will actively promote the Bank’s involvement in achieving the important transparency and accountability objectives of the EITI in the Bank’s borrowing member 

countries. Furthermore, I would work to block any support by the 

Bank for the extraction and export of certain natural resources unless the government of a country has in place functioning systems 

which meet three broad standards on revenue accounting, independent auditing of accounts and transparency. 

JULY 18, 2008—QUESTION FOR MR. MIGUEL SAN JUAN, NOMINEE FOR

U.S. EXECUTIVE DIRECTOR OF THE INTER-AMERICAN DEVELOPMENT

BANK

Senator LUGAR. What is the IDB’s current assessment of the Extractive Industry Transparency Initiative? How, if at all, is the IDB 

currently integrating EITI into their operations? What steps have 

been taken? What will be your role in promoting EITI? 

Mr. SAN JUAN. The Extractive Industries Transparency Initiative 

(EITI) was launched in 2003 to promote transparency in resource 

rich countries through the reporting and publication of company 

payments and government revenues from oil, gas and mining operations. EITI is implemented through multi-stakeholder partnerVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00089 Fmt 6601 Sfmt 6601 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
84 

ships (government-industry-civil society) that adhere to a series of 

20 voluntary steps embodied in a ‘‘validation grid.’’ Countries are 

deemed to be EITI compliant if they have met all 20 steps, and 

EITI candidates if they have met the first four ‘‘sign up’’ steps. To 

date, no country is compliant; 23 countries are candidates (Peru is 

the only candidate from Latin American and the Caribbean). Candidate countries have two years to achieve compliance (implement 

the 20-steps). The United States, through the State Department, 

sits on the EITI Board of Directors, which sets broad policy for the 

initiative. The U.S. recently contributed around $3 million to the 

EITI trust fund administered by the World Bank, and has provided 

nearly $2 million in bilateral support to help countries to implement EITI. 

The U.S. has actively pressed the IFIs to support EITI through 

their policy dialogue, lending and technical assistance programs, 

and analytical work. 

The IDB has not yet formally endorsed EITI, despite encouragement by the USG to do so. However, bank management has indicated that they are preparing a proposal regarding EITI which will 

be submitted to the Board shortly. Steps for integrating EITI into 

operations will depend on the outcomes of the consultations with 

the Board. 

If confirmed, I will work with IDB management and the Board 

to integrate EITI into their operations and also engage upstream 

with Bank staff and management to promote the related objectives 

identified in recent legislative guidance on IFI extractive industry 

projects. 

JULY 18, 2008—QUESTION FOR MR. PATRICK J. DURKIN, NOMINEE TO

BE A MEMBER OF THE BOARD OF DIRECTORS OF THE OVERSEAS PRIVATE INVESTMENT CORPORATION

Senator LUGAR. Please describe OPIC’s policy regarding the Extractive Industry Transparency Initiative. How is OPIC integrating 

EITI into its policies and operations? How is implementation proceeding? 

Mr. DURKIN. As I understand it, in 2006 OPIC included the Extractive Industries Transparency Initiative (EITI) in its initiative 

to combat corruption and improve transparency. Under the policy 

announced by OPIC President Robert Mosbacher, OPIC will encourage its investors to abide voluntarily by EITI guidelines to ensure that revenues from extractive industries projects contribute to 

sustainable development and poverty reductions and not individual 

enrichment. Implementation of EITI has been a high priority and 

OPIC is working with the EITI Secretariat to encourage compliance 

with other multilateral organizations and OPIC counterparts. I understand the OPIC Board of Directors has approved the first OPICsupported project where the agency’s commitment to greater transparency in reporting on royalty payments to host governments on 

extractive projects has been realized. Additionally, OPIC’s pending 

reauthorization legislation would formalize OPIC support for EITI 

principle 

85 

68This appendix is based on a background memo entitled ‘‘The ‘Resource Curse’: Literature 

Survey Paper Summary’’ prepared by Danielle Langton and Nicolas Cook from the Foreign Affairs, Defense, and Trade Division of the Congressional Research Service. 

Appendix II: U.S. Legislation Pertaining to EITI 

and Related Extractive Industry Issues68

U.S. legislation pertaining to EITI and related extractive industry issues includes the following: 

P.L. 110–161 (formerly H.R. 2764) [110th] 

Title: Consolidated Appropriations Act, 2008 

Sponsor: Rep. Nita Lowey (introduced 6/18/2007) 

Relevant sub-element of this omnibus legislation: The Department of State, Foreign Operations and Related Programs Appropriations Act, 2008 (Reported in Senate) 

P.L. 110–161 itself does not mention the Extractive Industries 

Transparency Initiative. However, accompanying House Report 

110–197 recommends $1 million in Economic Support Funds (ESF) 

for ‘‘Extractive Industries Transparency’’ 

Senate Report 110-128, which accompanied P.L. 110–161, states 

that: 

Environmental Security and Sustainability- The committee 

recognizes the work of the Foundation for Environmental Security and Sustainability [FESS] to address critical national security issues, including regional instability arising from resource scarcity and management practices, natural hazards, 

and other environmental stresses. The committee recognizes 

the importance of the Foundation’s conflict management and 

mitigation programs, particularly initiatives to develop regional and global approaches to combat corruption, implement 

extractive industries’ best practices, and promote effective reconstruction of post-conflict countries to promote stability and 

security. The committee recommends continued support to 

FESS for these activities. 

As originally reported in the Senate, the measure, The Department of State, Foreign Operations and Related Programs Appropriations Act, 2008, [H.R. 2764.RS] stated that of Economic Support Fund appropriations: 

‘‘. . . not less than $3,000,000 shall be made available for a 

United States contribution to the Extractive Industries Transparency Initiative Trust Fund . . .’’ 

Under the heading ‘‘Surplus Commodities’’ (Sec. 614), with regard to extractive industry commodities but not issues of transparency, it stated that: 

‘‘The Secretary of the Treasury shall instruct the United 

States Executive Directors [. . . multiple multilateral development banks and funds . . .] to use the voice and vote of the 

United States to oppose any assistance by these institutions, 

using funds appropriated or made available pursuant to this 

Act, for the production or extraction of any commodity or mineral for export, if it is in surplus on world markets and if the 

86 

assistance will cause substantial injury to United States producers of the same, similar, or competing commodity.’’ 

Under the heading Environment and Energy Conservation 

Programs/ Extraction of Natural Resources (Sec. 676 [c]), it stated 

that: 

‘‘. . . (1) The Secretary of the Treasury shall inform the managements of the international financial institutions and the 

public that it is the policy of the United States that any assistance by such institutions (including but not limited to any 

loan, credit, grant, or guarantee) for the extraction and export 

of oil, gas, coal, timber, or other natural resource should not 

be provided unless the government of the country has in place 

functioning systems for: (A) accurately accounting for revenues 

and expenditures in connection with the extraction and export 

of the type of natural resource to be extracted or exported; (B) 

the independent auditing of such accounts and the widespread 

public dissemination of the audits; and (C) verifying government receipts against company payments including widespread 

dissemination of such payment information, and disclosing 

such documents as Host Government Agreements, Concession 

Agreements, and bidding documents, allowing in any such dissemination or disclosure for the redaction of, or exceptions for, 

information that is commercially proprietary or that would create competitive disadvantage. 

(2) Not later than 180 days after the enactment of this Act, 

the Secretary of the Treasury shall submit a report to the 

Committees on Appropriations describing, for each international financial institution, the amount and type of assistance provided, by country, for the extraction and export of oil, 

gas, coal, timber, or other national resource since September 

30, 2007, and whether each institution considered, in its proposal for such assistance, the extent to which the country has 

functioning systems described in paragraph (c)(1). . . .’’ 

The managers statement for P.L. 110–161 (Division J, Department Of State, Foreign Operations, And Related Programs Appropriations) appropriated $3 million in ESF funds for ‘‘Extractive Industries Transparency’’ and designated that these funds be used as 

a U.S. contribution ‘‘to the Extractive Industries Transparency Initiative Trust Fund’’ (presumably a reference to the World Bank-administered, primarily donor government-supported Multi-Donor 

Trust Fund for EITI). 

Under a provision entitled Environment and Energy Programs 

(Sec. 684), the managers state that ‘‘the amended bill modifies a 

provision similar to that proposed by the House and Senate. There 

are technical modifications to the language, modifications to the 

funding level, and modifications to the Extractive Industries report.’’ 

Under the heading Anti-Kleptocracy (Sec. 699L) it stated that: 

‘‘(a) In furtherance of the National Strategy to Internationalize Efforts Against Kleptocracy and Presidential Proclamation 7750, the Secretary of State shall compile and maintain a 

list of officials of foreign governments and their immediate 

family members who the Secretary determines there is credible 

87 

evidence to believe have been involved in corruption relating to 

the extraction of natural resources in their countries. 

(b) Any individual on the list submitted under subsection (a) 

shall be ineligible for admission to the United States. 

(c) The Secretary may waive the application of subsection (a) 

if the Secretary determines that admission to the United 

States is necessary to attend the United Nations or to further 

United States law enforcement objectives, or that the circumstances which caused the individual to be included on the 

list have changed sufficiently to justify the removal of the individual from the list. 

(d) Not later than 90 days after enactment of this Act and 

180 days thereafter, the Secretary of State shall submit a report, in classified form if necessary, to the Committees on Appropriations describing the evidence considered in determining 

involvement pursuant to subsection (a). 

P.L. 109–102 (formerly H.R. 3057) (109th) 

Title: Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2006 

Sponsor: Rep. Jim Kolbe (introduced 6/24/2005) 

This legislation included the following provision on the extraction 

of natural resources: 

SEC. 585. [. . .] (c) EXTRACTION OF NATURAL RESOURCES.— 

(1) The Secretary of the Treasury shall inform the managements of the international financial institutions and the public 

that it is the policy of the United States that any assistance 

by such institutions (including but not limited to any loan, 

credit, grant, or guarantee) for the extraction and export of oil, 

gas, coal, timber, or other natural resource should not be provided unless the government of the country has in place or is 

taking the necessary steps to establish functioning systems for: 

(A) accurately accounting for revenues and expenditures in 

connection with the extraction and export of the type of natural resource to be extracted or exported; (B) the independent 

auditing of such accounts and the widespread public dissemination of the audits; and (C) verifying government receipts 

against company payments including widespread dissemination of such payment information, and disclosing such documents as Host Government Agreements, Concession Agreements, and bidding documents, allowing in any such dissemination or disclosure for the redaction of, or exceptions for, information that is commercially proprietary or that would create competitive disadvantage. 

(2) Not later than 180 days after the enactment of this Act, 

the Secretary of the Treasury shall submit a report to the 

Committees on Appropriations describing, for each international financial institution, the amount and type of assistance provided, by country, for the extraction and export of oil, 

88 

69See: (1) OPIC, Transparency Initiative: http://www.opic.gov/about/Transparency; (2) OPIC, 

Anticorruption & Transparency Initiative Fact Sheet: http://www.opic.gov/about/Transparency/ 

documents/transparencyfactsheet0906.pdf; (3) OPIC, Anti-Corruption Policies And Strategies 

Handbook: http://www.opic.gov/about/Transparency/documents/opicanticorruptionhandbook0906.pdf; (4) See also: U.S. Embassy Deputy Chief of Mission Praises Opening of EITI Resource 

Center in Liberia: http://monrovia.usembassy.gov/eiti.html 

gas, coal, timber, or other national resource since September 

30, 2005. 

H.R. 2798 [110th, Passed/agreed to in House] 

Title: Overseas Private Investment Corporation Reauthorization 

Act of 2007 

Sponsor: Rep. Brad Sherman 

This legislation would have governed OPIC reauthorization. Note 

that OPIC has agreed to abide by the EITI principles.69

The House-passed version of the bill included these provisions: 

[. . .] (b) EXTRACTION INVESTMENTS.— 

(1) PRIOR NOTIFICATION TO CONGRESSIONAL COMMITTEES.— 

The Corporation may not approve any contract of insurance or 

reinsurance, or any guaranty, or enter into any agreement to 

provide financing for any project which significantly involves 

an extractive industry and in which assistance by the Corporation would be valued at $10,000,000 or more (including contingent liability), until at least 30 days after the Corporation notifies the Committee on Foreign Affairs of the House of Representatives and the Committee on Foreign Relations of the 

Senate of such contract or agreement. 

(2) COMMITMENT TO EITI PRINCIPLES.—The Corporation may 

approve a contract of insurance or reinsurance, or any guaranty, or enter into an agreement to provide financing to an eligible investor for a project that significantly involves an extractive industry only if— 

(A) the eligible investor has agreed to implement the Extractive Industries Transparency Initiative principles and 

criteria, or substantially similar principles and criteria; or 

(B) the host country where the project is to be carried 

out has committed to the Extractive Industries Transparency Initiative principles and criteria, or substantially 

similar principles and criteria. 

(3) PREFERENCE FOR CERTAIN PROJECTS.—With respect to all 

projects that significantly involve an extractive industry, the 

Corporation, to the degree possible and consistent with its development objectives, shall give preference to a project in 

which both the eligible investor has agreed to implement the 

Extractive Industries Transparency Initiative principles and 

criteria, or substantially similar principles and criteria, and 

the host country where the project is to be carried out has committed to the Extractive Industries Transparency Initiative 

principles and criteria, or substantially similar principles and 

criteria. [. . .] 

It also contained these definitions: 

89 

(A) EXTRACTIVE INDUSTRY.—THE TERM ‘‘EXTRACTIVE IN- DUSTRY’’ REFERS TO AN ENTERPRISE ENGAGED IN THE EX- PLORATION, DEVELOPMENT, OR EXTRACTION OF OIL AND GAS

RESERVES, METAL ORES, GEMSTONES, INDUSTRIAL MINERALS, OR COAL. 

(B) EXTRACTIVE INDUSTRIES TRANSPARENCY INITIATIVE

PRINCIPLES AND CRITERIA.—The term ‘‘Extractive Industries Transparency Initiative principles and criteria’’ 

means the principles and criteria of the Extractive Industries Transparency Initiative, as set forth in Annex A to 

the Anti-Corruption Policies and Strategies Handbook of 

the Corporation, as published in September 2006. 

The version of the bill reported in the Senate replaced the House 

language and contained this provision: 

(b) EXTRACTION INVESTMENTS.— 

(1) PRIOR NOTIFICATION TO CONGRESSIONAL COMMITTEES.— 

(A) IN GENERAL.—The Corporation shall provide notice of 

consideration of approval of a project described in subparagraph (B) to the Committees on Foreign Relations and Appropriations of the Senate and the Committees on Foreign 

Affairs and Appropriations of the House of Representatives 

not later than 60 days before approval of such project. 

(B) PROJECT DESCRIBED.—A project described in this 

subparagraph is a Category A project (as defined in section 

237(q)(3)) relating to an extractive industry project or any 

extractive industry project for which the assistance to be 

provided by the Corporation is valued at $10,000,000 or 

more (including contingent liability). 

H.R. 3221 [110th; Passed/agreed to in House; Motion to proceed 

to consideration of measure withdrawn in Senate. However, the bill 

was incorporated into omnibus energy legislation, H.R. 6 (Energy 

Independence and Security Act of 2007) and passed as P.L. 110– 

140] 

Title: New Direction for Energy Independence, National Security, 

and Consumer Protection Act and the Renewable Energy and Energy Conservation Tax Act of 2007 

Sponsor: Rep. Nancy Pelosi 

Note: The legislation supports diverse measures to support the 

Extractive Industries Transparency Initiative (EITI) and authorizes the appropriation of # million for this purpose. The following 

summary of EITI provisions in P.L. 110–140 is excerpted from CRS 

Report RL34294, Energy Independence and Security Act of 2007: A 

Summary of Major Provisions, by Fred Sissine, Coordinator, et al.): 

Section 935 has the stated purpose of improving national energy 

security by promoting anti-corruption initiatives in oil and natural 

gas rich countries and of improving global energy security by promoting programs such as the Extractive Industries Transparency 

Initiative (EITI) that aim to increase transparency and accountability into extractive resource payments. The sense of Congress is 

expressed that global energy security should be furthered by enVerDate Aug 31 2005 09:22 Oct 17, 2008 Jkt 000000 PO 00000 Frm 00095 Fmt 6602 Sfmt 6602 H:\DOCS\POV-RPT.TXT sfrela2 PsN: MIKEB
90 

couraging further participation in EITI by eligible countries and 

companies and by promoting the effectiveness of the EITI program 

by ensuring that a robust and candid review mechanism is put in 

place. The Secretary of State is required to report to Congress on 

progress made in promoting transparency in extractive industries 

resource payments. An authorization of $3 million is provided to 

support U.S. contributions to the Multi-Donor Trust Fund of EITI. 

H. AMDT .762 to H.R. 3221 [110th; offered 8/4/2007, Agreed to 

by voice vote] 

Sponsor: Rep. Alcee L. Hastings 

Title: Amendment requires the Secretary of State to submit to 

Congress a report on progress made in promoting transparency in 

extractive industries resource payments. 

Amendment Purpose: An amendment numbered 20 printed in 

Part B of House Report 110-300 to make findings regarding fuel 

supplies and expresses the Sense of Congress that the U.S. should 

further global energy security and promote democratic development 

in resource rich foreign countries by encouraging further participation in the Extractive Industries Transparency Initiative and other 

international initiatives. 

Related bill: 

H.R. 1886 [110th; introduced in the House] 

Title: To prevent public financing of oil or gas field development 

projects, surveying or extraction activities, processing facilities, 

pipelines, or terminals, or other oil and gas production or distribution operations or facilities, and for other purposes. 

Sponsor: Rep. Maurice D. Hinchey 

H.R. 1886 would prevent U.S. funding of extractive industry 

projects and activities. It does not mention transparency specifically related to EITI or EITI itself, but does reference the Extractive Industries Review (EIR) of the World Bank Group (commissioned in 2001), which deals with issues generally related to issues 

that EITI also seeks to address. 

CRS Summary of the bill, as introduced, from the Legislative Information System: 

Amends the Export-Import Bank Act of 1945 to prohibit the 

Export-Import Bank of the United States from guaranteeing, 

insuring, or extending credit: (1) in connection with an oil or 

gas project; or (2) to any entity that may use the guarantee, 

insurance, or credit to finance such a project. 

Amends the Foreign Assistance Act of 1961 to prohibit the 

Overseas Private Investment Corporation from issuing any 

contract of insurance or reinsurance or any guarantee, or entering into any financing agreement for an oil or gas project, 

or to taking such actions respecting any person who will insure 

or finance such project. 

Amends the International Financial Institutions Act to direct 

the Secretary of the Treasury to use U.S. influence to oppose 

91 

multilateral development institution assistance to gas or oil development projects. 

H.R. 6066 [110th, Introduced in the House] 

Title: Extractive Industries Transparency Disclosure Act 

Sponsor: Rep. Barney Frank 

This legislation would amend Section 13 of the Securities Exchange Act of 1934 (15 U.S.C. 78m) to require companies to file an 

annual report with the Securities and Exchange Commission (SEC) 

disclosing payments made to foreign country governments for natural resources in a foreign country. The legislation would also require the SEC to compile the information from all companies and 

publish it publicly on its website. 

93 

70This appendix is based on a background memo entitled ‘‘The ‘Resource Curse’: Literature 

Survey Paper Summary’’ prepared by Danielle Langton and Nicolas Cook from the Foreign Affairs, Defense, and Trade Division of the Congressional Research Service. 71See Ella Kokotsis, ‘‘All G7/8 Commitments, 1975-2006,’’ G8 Research Group, [http:// 

www.g8.utoronto.ca/evaluations/G8_commitments.pdf ]. 

Appendix III: Summary of G-8 Commitments on 

Extractive Industry Transparency70

The Group of 8 (G-8) has made numerous statements and commitments to increasing and promoting transparency and accountability related to Extractive Industries Transparency Initiative industry relations with and revenue payments to governments, 

among many other related good governance commitments.71 Below 

are excerpts of the main G-8 Extractive Industries Transparency 

Initiative industry relations commitments, beginning with the G-8 

meeting in Kananaskis, Canada in 2002, the year when EITI was 

initiated. Key terms are highlighted. 

G-8 SUMMIT HOKKAIDO TOYAKO, JAPAN, JULY 7–9, 2008

World Economy (Summit Leaders Declaration July 8, 2008) 

15. To promote improved transparency, accountability, good governance and sustainable economic growth in the extractive sector, 

and to address the natural resource dimensions of armed conflict 

and post-conflict situations, we: 

(a) continue to support initiatives such as the Extractive Industries Transparency Initiative (EITI) and call for its full implementation and for candidate countries to complete the validation process in a timely manner. We encourage emerging 

economies and their companies to support the initiative; 

(b) promote improved resource management including fiscal 

transparency and legislative oversight by resource-rich countries through supporting international financial institutions’ efforts to develop international standards and codes to be voluntarily adopted by those countries, and technical assistance, as 

appropriate; and 

(c) support international efforts to respond more effectively 

to the natural resource dimensions of conflict and post-conflict 

situations, and would welcome additional analysis on the issue 

by the OECD Development Assistance Committee (DAC), the 

United Nations Secretary General, and the World Bank. 

16. We affirm the importance of open raw materials markets as 

the most efficient mechanism for resources allocation. We call on 

our trading partners to strictly comply with WTO rules and to enhance the transparency and predictability of their measures in this 

area. 

[. . .] 51. Reaffirming that principles of ownership and partnership are essential for African development, we agree that the following points, inter alia, are critical both to generating private sector-led economic growth and achieving the MDGs: 

[. . .] 

94 

72Source: http://www.g8.utoronto.ca/summit/2007heiligendamm/g8-2007-africa.pdf 

(c) improvement of domestic revenue generation capacity by African countries and of transparency in the use of resources [. . .] 

G-8 SUMMIT HEILIGENDAMM, GERMANY, JUNE 6–8, 2007

Growth and Responsibility in Africa (Summit Declaration June 8, 

2007)72

[. . .] 11. We will also continue to strengthen efforts such as the 

Extractive Industries Transparency Initiative Industries Transparency Initiative (EITI) as appropriate to enhance good financial 

governance on the revenue side. In this context, we support African 

states in their efforts to increase the transparency and predictability of expenditure flows and encourage more African participation in EITI. Transparency principles could also be extended to 

other sectors, where appropriate. [. . .] 

33. [. . .] The G-8 will encourage sustainable investment through 

African private sector networks, including support for the UN Global Compact and the UN Principles for Responsible In-vestment. 

The G-8 will also strengthen their dialogue with emerging donors 

on international initiatives for responsible investment and financial 

transparency (such as EITI). [. . .] 

Responsibility for Raw Materials: Transparency and Sustainable 

Growth [. . .] 

80. Raw materials produced by the Extractive Industries Transparency Initiative sector are a key factor for sustainable growth in 

industrialised, emerging and developing economies. They are a particularly valuable asset for sustaining growth and reducing poverty 

in many of the poorest countries in the world. It is in our common 

global interest that resource wealth be used responsibly so as to 

help reduce poverty, prevent conflicts and improve the sustainability of resource production and supply. We firmly agree that significant and lasting progress in this area can only be achieved on 

the basis of transparency and good governance. Against this background, we support increased transparency with regard both to the 

Extractive Industries Transparency Initiative sector and the subsequent trade and financial flows. In doing so, we will work closely 

together with resource rich economies as well as important rawmaterial consuming emerging economies. 

82. Mineral resources have a great potential to contribute to poverty alleviation and sustainable development. In some cases, nonetheless, extraction and processing of resources are associated with 

misuse of revenues, environmental destruction, armed conflict and 

state fragility. We firmly agree on the need to further enhancing 

the contribution of mineral resources to sustainable growth and 

will continue to support resource rich countries in their efforts to 

further expand their resource potential while promoting sustainable development and good governance. To this end we will build 

capacity for good governance of mineral resources consistent with 

social and environmental standards and sound commercial practices by reducing barriers to investment and trade, through the 

95 

provision of financial, technical and capacity building support to 

developing countries for the mining, processing and trading of minerals. Based on sound life cycle analyses, we will also encourage 

conservation, recycling and substitution of raw materials, including 

rare metals, for sustainable growth. 

83. Increased transparency in the Extractive Industries Transparency Initiative sector, is of crucial importance for achieving accountability, good governance and sustainable economic growth 

worldwide. We welcome the proposal of the G-8 Presidency to convene in 2007 a global conference on transparency in the Extractive 

Industries Transparency Initiative sector with the participation of 

governments, business, civil society and science from 

industrialised, emerging and developing economies. 

84. The development of a consolidated set of principles and 

guidelines that apply to the international mining sector in developing countries would help ensure that the sector contributes to development while at the same time providing a clear and more predictable set of expectations for investors. It is important that all 

stakeholders be involved in a process to build consensus around a 

set of recognised principles and guidelines in the mining sector. In 

order to encourage such a consensus among key stakeholders we: 

—reaffirm our support of the OECD Guidelines for Multinational Enterprises as important international benchmark for 

corporate social responsibility, 

—will promote wider understanding of and support for the 

following standards, tools and best practices for the mining 

sector: the OECD Risk Awareness Tool for Multinational Enterprises in Weak Governance Zones, the Voluntary Principles 

on Security and Human Rights and the International Finance 

Corporation (IFC) Performance Standards, 

[. . .] 

85. Certification systems can be a suitable instrument in appropriate cases for increasing transparency and good governance in 

the extraction and processing of mineral raw materials and to reduce environmental impacts, support the compliance with minimum social standards and resolutely counter illegal resource extraction. Therefore, we reaffirm our support for existing initiatives 

such as the Kimberley Process, Green Lead, the Intergovernmental 

Forum on Mining, Minerals, Metals and Sustainable Development, 

the International Council on Mining and Metals or the International Cyanide Management Code, and encourage the adaptation 

of the respective principles of corporate social responsibility by 

those involved in the extraction and processing of mineral resources, 

86. The artisanal and small-scale mining sector provides important livelihoods to many people in developing countries, and also 

contributes to global production of minerals. We are concerned that 

these activities often are conducted in an informal manner and do 

not meet minimum social and environmental standards which 

apply to the Extractive Industries Transparency Initiative sector. 

In order to better support the development of sustainable livelihoods and positive developmental impacts associated with artisanal 

and small-scale mineral production, we 

96 

—encourage collaborative partnerships between public, civil 

society and private actors in the mining sector in order to develop systems for the transparent use of funds for local development from mining companies and donors, consistent with aid 

effectiveness principles, 

—support a pilot study, in co-operation with the World Bank 

and its initiatives, concerning the feasibility of a designed certification system for selected raw materials. In taking this initiative we will focus on the artisanal and small scale mining 

sector and work in close partnership with governments from 

mineral resource rich developing countries as well as industry 

on the basis of their voluntary commitments. The pilot study 

shall strive on the basis of the existing principles and guidelines, in order to comply with internationally recognised minimum standards by verifying the process of mineral resource 

extraction and trading. We invite major emerging economies to 

work with us on this issue, 

—encourage support for the Communities and Small-scale 

Mining (CASM) initiative, housed at the World Bank, and for 

the multistakeholder Diamond Development Initiative (DDI), 

which emerged from the Kimberley Process to strengthen the 

developmental impacts associated with artisanal diamond mining in Africa, [. . .] 

87. We emphasise our determination to fight corruption and mismanagement of public resources in both revenue raising and expenditures. As part of our ongoing efforts to foster transparency 

with regard to resource-induced payment flows, we will continue to 

support good governance and anti-corruption initiatives, such as 

the Extractive Industries Transparency Initiative (EITI), and we 

—commit to provide continuous assistance to strengthen 

EITI, as appropriate through financial, technical and political 

means. Equally, we invite all stakeholders to provide support 

for the implementation of the EITI, 

—call on implementing countries and companies participating in EITI to implement the Initiative and comply with 

their disclosure commitments. Equally, we encourage further 

countries to participate in EITI as appropriate, 

—welcome the fact that an independent validation-process 

has been initiated to monitor the national implementation 

measures. We encourage prompt application and further development of the validation methodology, 

—welcome the fact that a number of large banks have already signed the United Nations Environmental Program 

(UNEP) Finance Initiative and the Equator Principles. We call 

on further major banks to follow suit to adopt the Equator 

Principles for project finance and implement the International 

Finance Corporation (IFC) standards, particularly those standards that relate to transparent payments and contracts in the 

Extractive Industries Transparency Initiative sector, and finally 

—initiate, within the framework of the 2007 global conference on transparency, a dialogue with the major emerging 

97 

73Source: http://www.g-8.de/Content/EN/Artikel/_g8-summit/anlagen/chairs-summary,templateId=raw,property=publicationFile.pdf/chairs-summary 74Source: http://www.g8.utoronto.ca/finance/g8finance-africa.pdf 

economies to enlist the governments and especially the stateowned companies domiciled in these countries as participants 

in EITI. 

G-8 SUMMIT HEILIGENDAMM, GERMANY, JUNE 6–8, 200773

Chair’s Summary 

[. . .] Freedom of Investment, Investment Environment, and Social Responsibility: We concluded our discussion on investment 

with a strong commitment to the freedom of open and transparent 

investment. 

[. . .] Open markets need social inclusion. We therefore agreed on 

the active promotion of social standards, of corporate social responsibility, and on the need to strengthen social security systems in 

emerging economies and developing countries. 

RESPONSIBILITY FOR RAW MATERIALS—TRANSPARENCY AND SUS- TAINABLE GROWTH: We discussed the situation on world commodity 

markets and recent price increases and reaffirmed our commitment 

to free, transparent and open markets. We will support increased 

transparency and build good governance in developing countries 

with social and environmental standards. We therefore express our 

continuous support for EITI and we will launch a certification pilot 

project. We acknowledge that promoting a consolidated set of principles and guidelines that apply to the international mining sectors 

in the developing countries would help ensure that the sector contributes to development. 

GOOD GOVERNANCE AND THE REFORM-PARTNERSHIP WITH AFRICA: 

We paid tribute to the Regional and Pan-African institutions, especially the African Union (AU), and underlined our strong intention 

to further support African institutions at the pan-African and regional level. [. . .] The G-8, together with their African partners, 

also welcomed the Extractive Industries Transparency Initiative 

Industries Transparency Initiative (EITI) and agreed to implement 

an Action Plan for Good Financial Governance. 

G-8 FINANCE MINISTERS’ MEETING IN POTSDAM, GERMANY, MAY 19, 

200774

G-8 Action Plan for Good Financial Governance in Africa 

[. . .] This plan outlines ten areas for action drawing on the principles of the Paris Declaration on Aid Effectiveness and on ongoing 

initiatives to support the reform of public finance systems in Africa. 

[. . .] 

5. Increasing accountability for revenues from Extractive Industries 

Transparency Initiative industries 

We give our full backing to the Extractive Industries Transparency Initiative Industries Transparency Initiative (EITI) and 

support it in its efforts to optimise its implementation and monitoring mechanisms and to contribute to enhanced participation by 

all stakeholders. We encourage other resource-dependent countries 

98 

75Source: http://www.g8.utoronto.ca/summit/2006stpetersburg/africa.html 76Source: http://www.g8.utoronto.ca/summit/2006stpetersburg/energy.html 

and industries from the Extractive Industries Transparency Initiative sector, especially from emerging market economies, to participate in the EITI. We welcome the fact that an independent validation process has been initiated to monitor the national implementation measures. We encourage a prompt application of arrangements 

to identify countries which have achieved the target levels of transparency and those which are making progress towards them. The 

applicability of EITI principles to other sectors should be examined 

more closely. Moreover, measures could be considered to use revenues from Extractive Industries Transparency Initiative industries 

for the long-term benefit of the respective countries by establishing 

stabilisation funds or funds for future generations. 

G-8 SUMMIT, ST. PETERSBURG, RUSSIA, JULY 15–17, 2006

Update on Africa (St Petersburg, July 16, 2006)75

Our commitments: [. . .] 

PROMOTING GOOD AND RESPONSIVE GOVERNANCE: We have, 

with our international partners, secured the entry into force of 

the UN Convention against Corruption in December 2005: 22 

African and 3 G-8 countries are among those who have ratified. 25 African countries have signed up to the African Peer 

Review Mechanism and 3 have completed the process. Good 

progress has been made in improving transparency and accountability including in the oil and gas industries through the 

Extractive Industries Transparency Initiative Industries 

Transparency Initiative (EITI), in which 15 African countries 

and 23 companies take part. We have successfully completed 

work at the OECD to strengthen significantly anti-bribery requirements for those applying for export credits and credit 

guarantees. [. . .] 

Continuing work 

We have made substantial progress since Gleneagles. Our key 

steps over the next year include: [. . .] encouraging wider implementation of the EITI and other resource transparency programmes in resource-rich African countries; 

G-8 SUMMIT, ST. PETERSBURG, RUSSIA, JULY 15–17, 2006

Plan of Action on Global Energy Security76

I. Increasing Transparency, Predictability and Stability of 

Global Energy Markets 

4. As a critical tool in the fight against corruption, we will also 

take forward efforts to make management of public revenues from 

energy exports more transparent, including in the context of the 

Extractive Industries Transparency Initiative Industries Transparency Initiative (EITI) and the IMF Guide on Resource Revenue 

Transparency (GRRT). 

[Note: Apart from the above excerpt, other provisions of the Plan 

of Action on Global Energy Security may be of interest] 

99 

77Source: http://www.g8.utoronto.ca/summit/2006stpetersburg/civil8/cg8060310-trade.html 78Source for entire document: http://www.g8.utoronto.ca/summit/2005gleneagles/communique.pdf. Source for sub-portion, Communique on Africa: http://www.g8.utoronto.ca/summit/ 

2005gleneagles/africa.pdf. See also: Related unofficial document by G8 Research Group, ‘‘A Comparison between the Recommendations of the Commission for Africa Report and the G8 Commitments,’’ http://www.g8.utoronto.ca/summit/2005gleneagles/africa_g8-vs-cfa.pdf. 

Unofficial View Non-Governmental Groups Statement on Sidelines 

of G-8 Summit, St. Petersburg, Russia, July 15–17, 2006 

TRADE, FINANCE FOR DEVELOPMENT AND AFRICA: RECOMMENDATIONS

TO THE G-8 SUMMIT

Civil G-8 International NGO Forum, March 9-10, 2006, Moscow77

[ . . .] The G-8 should take firm steps to implement mandatory 

codes of conduct that ensure responsibility by private enterprise. At 

the same time, good governance is an important aspect to addressing building stable and secure societies. We support all countries 

ratifying and implementing the provisions in the UN Convention of 

Corruption, and support the Extractive Industries Transparency 

Initiative Industries Transparency Initiative. 

G-8 SUMMIT, GLENEAGLES, SCOTLAND, UNITED KINGDOM, JULY 6–8, 

2005

Gleneagles Communique on Africa, Climate Change, Energy and 

Sustainable Development, with leaders’ signatures78

Communique on Africa 

[. . .] Promoting Good and Responsive Governance 

13. We welcome African institutions’ engagement in promoting 

and enhancing effective governance, including NEPAD’s strong 

statements in support of democracy and human rights. Well-governed states are critical to peace and security; economic growth and 

prosperity; ensuring respect for human rights and promotion of 

gender equality and the delivery of essential services to the citizens 

of Africa. We will support African countries’ efforts to make their 

governments more transparent, capable and responsive to the will 

of their people; improve governance at the regional level and across 

the continent; and strengthen the African institutions that are essential to this. 

14. In response to this African commitment, we will: 

(d) As part of our work to combat corruption and promote 

transparency, increase support to the Extractive Industries 

Transparency Initiative Industries Transparency Initiative and 

countries implementing EITI, including through financial and 

technical measures. We call on African resource-rich countries 

to implement EITI or similar principles of transparency and on 

the World Bank, IMF and regional development banks to support them. We support the development of appropriate criteria 

for validating EITI implementation. Transparency should be 

extended to other sectors, as the G-8 is doing in pilot projects. 

100 

79Source: http://www.g8.utoronto.ca/summit/2004seaisland/poverty.html 80Source: http://www.g8.utoronto.ca/summit/2004seaisland/corruption.html 

G-8 SUMMIT, SEA ISLAND, GEORGIA, UNITED STATES, JUNE 8-10, 2004

G-8 Action Plan: Applying the Power of Entrepreneurship to the 

Eradication of Poverty Sea Island (June 9, 2004) 79

[. . .] The G-8 will work with developing countries to develop pilot 

projects and support actions to: 

18. Promote adoption of measures to improve transparency 

in fiscal policy and public procurement, to improve the climate 

for investment and responsible use of government resources. 

Fighting Corruption and Improving Transparency (Sea Island, 

June 10, 2004) 80

[. . .] Country-led Transparency Compacts Launched 

G-8 governments are working with a number of developing countries with a view toward building voluntary partnerships to assist 

their efforts to increase transparency and thereby to use public resources wisely. These efforts will focus on transparency in public 

budgets, including revenues and expenditures, government procurement, the letting of public concessions and the granting of licenses. 

Special emphasis will be given to cooperation with countries with 

large Extractive Industries Transparency Initiative industries sectors. These partnerships will be put in place through voluntary 

compacts that lay out commitments on both sides in support of 

country-owned strategies and in full complementarity with ongoing 

initiatives and programs. 

The Governments of Georgia, Nicaragua, Nigeria and Peru 

have come forward with the first such compacts to achieve 

these important goals. Other interested countries are actively 

pursuing compacts. We task our relevant ministries to develop 

in partnership with these countries implementation plans. 

Partner governments have specified, in concrete terms, what 

they intend to do to bring greater transparency and accountability to the management of public resources. 

Participating G-8 countries will support them by providing 

bilateral technical assistance and political support. With each 

compact partner, participants will develop action plans that set 

forth our joint efforts to achieve measurable improvements in 

these areas. 

Participating G-8 governments will work with partner countries to enlist the support and engagement of private companies, organizations and civil society, as well as international 

institutions. 

For partner countries rich in oil, natural gas, and mineral 

resources, the compacts will pay particular attention to the 

transparency of revenue flows and payments in these sectors, 

while protecting the necessary confidentiality of business operations. Our shared goal is to help combat the harmful effects 

on development when national resources and revenues are misused. Complementary efforts to promote transparency are also 

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81Source: http://www.g8.utoronto.ca/summit/2004seaisland/summary.html 82On these compacts, see: http://www.g8.utoronto.ca/summit/2004seaisland/road.html 83Source: http://www.whitehouse.gov/news/releases/2004/06/20040610-31.html 84See various parts of the document, but especially the excerpt herein. Source: http:// 

www.g8.utoronto.ca/summit/2003evian/corruption—en.html 

dustries Transparency Initiatives Industry Transparency Initiative. 

Chair’s Summary (Sea Island, June 10, 2004) 81

[. . .] We supported progress in the multilateral effort against 

corruption and welcomed the completion of Comprehensive AntiCorruption Compacts with Georgia, Nicaragua, Nigeria, and Peru. 

We noted the role information technology can play in promoting 

transparency.82

Related U.S. Document: 

Fact Sheet: Fighting Corruption and Improving Transparency, 

June 10, 200483

G-8 Summit, EVIAN-LES-BAINS, FRANCE, JUNE 1–3, 2003 

Chair’s Summary 

1. Strengthening Growth World-Wide 

[. . .] we therefore reaffirm our commitment to: 

strengthen investor confidence by improving corporate governance, enhancing market discipline and increasing transparency; 

the principles of our Declaration on Fostering Growth and 

Promoting a Responsible Market Economy, accompanied with 

specific actions to improve transparency and to fight corruption 

more effectively, including a specific initiative on Extractive Industries Transparency Initiative industries. 

Fighting Corruption and Improving Transparency: A G-8 Declaration84

5. We recognise the importance of promoting Transparency in 

Government Procurement and the Awarding of Concessions. To 

this end, we will: [. . .] 

6. Consistent with these principles and recognizing the importance of revenues from the Extractive Industries Transparency Initiative industries (oil, gas and mining), we have 

agreed to pilot on a voluntary basis an intensified approach to 

transparency. To this end, we will: 

6.1. encourage governments and companies, both private and 

state-owned, to disclose to the IMF or another agreed independent third party such as the World Bank or Multilateral 

Development Banks, in a consistent fashion and common format, revenue flows and payments from the Extractive Industries Transparency Initiative sectors. This information should 

be published at an aggregated level, in accessible and understandable ways, while protecting proprietary information and 

maintaining contract sanctity. 

102 

6.2. work with participating governments to develop and implement agreed action plans for establishing high standards of 

transparency with respect to all budget flows (revenues and expenditures) and with respect to the awarding of government 

contracts and concessions 

6.3. assist those governments that wish to implement this 

initiative with capacity building assistance; 

6.4. encourage the IMF and the World Bank to give technical 

support to governments participating in the initiative and to 

develop linkages with other elements of this Action Plan. 

G-8 Summit, Kananaskis, Alberta, Canada, June 26–27, 2002 

G-8 Africa Action Plan 

[. . .] I. Promoting Peace and Security 

[. . .] We are determined to make conflict prevention and resolution a top priority, and therefore we commit to: 

1.5 Working with African governments, civil society and others to address the linkage between armed conflict and the exploitation of natural resources—including by: 

Supporting United Nations and other initiatives to monitor and address the illegal exploitation and international 

transfer of natural resources from Africa which fuel armed 

conflicts, including mineral resources, petroleum, timber 

and water; 

Supporting voluntary control efforts such as the Kimberley Process for diamonds, and encouraging the adoption 

of voluntary principles of corporate social responsibility by 

those involved in developing Africa’s national resources; 

Working to ensure better accountability and greater 

transparency with respect to those involved in the import 

or export of Africa’s natural resources. 

103 

Appendix IV—Excerpt from Accountability Report: Implementation Review of G-8 on AntiCorruption Commitments 


g8-1.eps
104 


g8-3.eps
105 


g8-25.eps
106 


g8-26.eps
107 


g8-27.eps
108 


g8-28.eps
109 


g8-29.eps
110 


g8-30.eps
111 

Appendix V—Extractive Industry Transparency 

Initiative U.N. Resolution 


UNGA1-1.eps
112 


UNGA1-2.eps
113 

Appendix VI—World Oil Consumption and 

Production, by Country 


aa-1.eps
114 

Appendix VI—World Oil Consumption and 

Production, by Country—(continued) 


aa-2.eps
115 

Appendix VII—Origins of U.S. Imports 

of Crude Oil 


aa-3.eps
117 

Appendix VIII—Acronyms and Abbreviations 

ADIA — Abu Dhabi Investment Authority 

AfDB — African Development Bank 

AGO — Attorney General’s Office 

AsDB — Asian Development Bank 

AU — African Union 

AusAid — Australian Government Aid Program 

BEAC — Banque des Etats de l’Afrique Centrale 

b/d — barrels per day 

BIC — Bank Information Center 

BP — British Petroleum 

BPA — Banking and Payments Authority 

BTA — Bilateral Trade Agreement 

BTC — Baku-Tbilisi-Ceyhan 

CASM — Communities and Small-scale Mining 

CIC — China Investment Corporation 

CIMATS — Certain Maritime Arrangements in the Timor Sea 

COCPO — Oil, Gas, and Mining Policy Division 

COFE — Committee of Financial Experts 

D.C. — District of Columbia 

DFI — Development Fund for Iraq 

DFID — United Kingdom’s Department for International Development 

DOJ — Department of Justice 

DPR — Indonesian Parliament 

DRC — Democratic Republic of Congo 

EBRD — European Bank for Reconstruction and Development 

EFCC — Economic and Financial Crimes Commission 

E.G. — Equatorial Guinea 

EIA — Energy Information Administration 

EIR — Extractive Industries Review 

EITI — Extractive Industry Transparency Initiative 

EITI++ — Extractive Industry Transparency Initiative Plus Plus 

ENAP — Chilean National Oil Company 

ESF — Economic Support Funds 

Exim — Export Import Bank of the United States 

FCPA — Foreign Corrupt Practices Act 

FDI — Foreign Direct Investment 

FEES — Economic and Social Stabilization Fund 

FESS — Foundation for Environmental Security and Sustainability 

FMIS — Financial Management Information System 

FNC — Federal National Council 

FRP — Pension Reserves Fund 

FSD — Social Development Fund 

118 

FY — Fiscal Year 

GEITI — Ghana-EITI 

GDP — Gross Domestic Product 

GNP — Gross National Product 

GOB — Government of Brazil 

GOI — Government of Iraq 

GOP — Government of Peru 

GOTL — Government of Timor-Leste 

G-8 — Group of Eight (Canada, European Union, France, Germany, 

Italy, Japan, Russia, United Kingdom, United States) 

H.R. — House Resolution 

IAG — International Advisory Group 

IAMB — International Audit and Monitoring Board 

ICI — International Compact with Iraq 

ICPC — Corrupt Practices and Other Related Offences Commission 

IDA — International Development Association 

IDB — Inter-American Development Bank 

IFC — International Finance Corporation 

IFI — International Financial Institution 

IMF — International Monetary Fund 

IOSCO — International Organization of Securities Commissions 

KRG — Kurdistan Regional Government 

LNG — Liquefied Natural Gas 

MAE — Mainstreaming Anti-Corruption for Equity 

MCC — Millennium Challenge Corporation 

MDB — Multilateral Development Bank 

MDTF — Multi-Donor Trust Fund 

MERCOSUR — Common Market of the South 

MMS — Minerals Management Service 

MOF — Ministry of Finance 

MPLA — Popular Movement for the Liberation of Angola 

NEPAD — New Partnership for Africa’s Development 

NEITI — Nigeria-EITI 

NDRC — National Commission for Development and Reform 

NGO — Non-Governmental Organization 

NRC — National Resource Companies 

NSWG — National Stakeholders Working Group 

OECD — Organization for Economic Co-operation and Development 

OPEC — Organization of the Petroleum Exporting Countries 

OPIC — Overseas Private Investment Corporation 

OTA — Office of Technical Assistance 

PDVSA — The Venezuelan Oil Company 

PIF — Public Investment Fund 

P.L. — Public Law 

PPP — Purchasing Power Parity 

119 

ROSC — Report on Standards and Codes 

SAMA — Saudi Arabian Monetary Agency 

SCP — South Caucasus pipeline 

SEC — Securities and Exchange Commission 

SIGIR — Special Inspector for Iraqi Reconstruction 

SOCAR — State Oil Company for Azerbaijan 

SOE — State Owned Enterprises 

SOFAZ — State Oil Fund for the Republic of Azerbaijan 

SWF — Sovereign Wealth Fund 

Tcf — trillion cubic feet 

TSC — Technical Service Contracts 

UAE — United Arab Emirates 

UK — United Kingdom 

UN — United Nations 

UNDP — United Nations Development Program 

UNEP — United Nations Environment Program 

UNICEF — United Nations Children Fund 

U.S. — United States 

USG — United States Government 

USAID — United States Agency for International Development 

WTO — World Trade Organization 

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