111th CONGRESS Printed for the use of the 

2d Session Commission on Security and Cooperation in Europe

NATURAL RESOURCES, A NATIONAL 

RESPONSIBILITY

APRIl 15, 2010

Briefing of the 

Commission on Security and Cooperation in Europe

Washington: 2012


big-LOGO.EPS
(2)

Commission on Security and Cooperation in Europe 

234 Ford House Office Building 

Washington, DC 20515

202–225–1901

csce@mail.house.gov 

http://www.csce.gov

Legislative Branch Commissioners

HOUSE SENATE

ALCEE L. HASTINGS, FLORIDA,

Co-Chairman 

EDWARD J. MARKEY, MASSACHUSETTS

LOUISE MCINTOSH SLAUGHTER,

NEW YORK

MIKE MCINTYRE, NORTH CAROLINA

G.K. BUTTERFIELD, NORTH CAROLINA

CHRISTOPHER H. SMITH, NEW JERSEY

ROBERT B. ADERHOLT, ALABAMA

JOSEPH R. PITTS, PENNSYLVANIA

DARRELL E. ISSA, CALIFORNIA

BENJAMIN L. CARDIN, MARYLAND,

Chairman 

CHRISTOPHER J. DODD, CONNECTICUT

SHELDON WHITEHOUSE, RHODE ISLAND

TOM UDALL, NEW MEXICO

JEANNE SHAHEEN, NEW HAMPSHIRE

SAM BROWNBACK, KANSAS

SAXBY CHAMBLISS, GEORGIA

RICHARD BURR, NORTH CAROLINA

ROBERT F. WICKER, MISSISSIPPI

Executive Branch Commissioners

MICHAEL H. POSNER, DEPARTMENT OF STATE

ALEXANDER VERSHBOW, DEPARTMENT OF DEFENSE

MICHAEL C. CAMUN ̃ EZ, DEPARTMENT OF COMMERCE

(II)

(3)

ABOUT THE ORGANIZATION FOR SECURITY AND COOPERATION IN EUROPE 

The Helsinki process, formally titled the Conference on Security and Cooperation in 

Europe, traces its origin to the signing of the Helsinki Final Act in Finland on August 

1, 1975, by the leaders of 33 European countries, the United States and Canada. As of 

January 1, 1995, the Helsinki process was renamed the Organization for Security and 

Cooperation in Europe (OSCE). The membership of the OSCE has expanded to 56 participating States, reflecting the breakup of the Soviet Union, Czechoslovakia, and Yugoslavia. 

The OSCE Secretariat is in Vienna, Austria, where weekly meetings of the participating States’ permanent representatives are held. In addition, specialized seminars and 

meetings are convened in various locations. Periodic consultations are held among Senior 

Officials, Ministers and Heads of State or Government. 

Although the OSCE continues to engage in standard setting in the fields of military 

security, economic and environmental cooperation, and human rights and humanitarian 

concerns, the Organization is primarily focused on initiatives designed to prevent, manage 

and resolve conflict within and among the participating States. The Organization deploys 

numerous missions and field activities located in Southeastern and Eastern Europe, the 

Caucasus, and Central Asia. The website of the OSCE is: <www.osce.org>. 

ABOUT THE COMMISSION ON SECURITY AND COOPERATION IN EUROPE 

The Commission on Security and Cooperation in Europe, also known as the Helsinki 

Commission, is a U.S. Government agency created in 1976 to monitor and encourage 

compliance by the participating States with their OSCE commitments, with a particular 

emphasis on human rights. 

The Commission consists of nine members from the United States Senate, nine members from the House of Representatives, and one member each from the Departments of 

State, Defense and Commerce. The positions of Chair and Co-Chair rotate between the 

Senate and House every two years, when a new Congress convenes. A professional staff 

assists the Commissioners in their work. 

In fulfilling its mandate, the Commission gathers and disseminates relevant information to the U.S. Congress and the public by convening hearings, issuing reports that 

reflect the views of Members of the Commission and/or its staff, and providing details 

about the activities of the Helsinki process and developments in OSCE participating 

States. 

The Commission also contributes to the formulation and execution of U.S. policy 

regarding the OSCE, including through Member and staff participation on U.S. Delegations to OSCE meetings. Members of the Commission have regular contact with 

parliamentarians, government officials, representatives of non-governmental organizations, and private individuals from participating States. The website of the Commission 

is: <www.csce.gov>. 

(III)

(4)

NATURAL RESOURCES, A NATIONAL RESPONSIBILITY

APRIL 15, 2010

PARTICIPANTS 

Page 

Shelly Han, Policy Advisor, Commission on Security and Cooperation in Europe ................... 1

Joseph C. Bell, Partner, Hogan and Hartson; and Chair, Advisory Board, Revenue Watch 

Institute ....................................................................................................................................... 2

Karin Lissakers, Director, Revenue Watch Institute ................................................................... 4

Saleem Ali, Associate Professor of Environmental Studies, University of Vermont ................. 6

Hon. Mike McIntyre, Commissioner, Commission on Security and Cooperation in Europe .... 9

APPENDIX 

Prepared statement of Joseph C. Bell ........................................................................................... 20

Prepared statement of Karin Lissakers ........................................................................................ 22

Prepared statement of Saleem Ali ................................................................................................. 25

(IV)

(1)

NATURAL RESOURCES, A NATIONAL RESPONSIBILITY 

APRIl 15, 2010

Commission on Security and Cooperation in Europe

Washington, DC

The briefing was held at 11 a.m. in room 2325, Rayburn House Office Building, 

Washington, DC, Shelly Han, Policy Advisor, Commission on Security and Cooperation in 

Europe, moderating. 

Panalists present: Shelly Han, Policy Advisor, Commission on Security and Cooperation in Europe; Joseph C. Bell, Partner, Hogan and Hartson; and Chair, Advisory Board, 

Revenue Watch Institute; Karin Lissakers, Director, Revenue Watch Institute; and 

Saleem Ali, Associate Professor of Environmental Studies, University of Vermont. 

Ms. HAN. Good morning. 

[Off-side conversation.] 

Ms. HAN. Good morning, everyone. I’d like to welcome you to the Commission on 

Security and Cooperation in Europe’s briefing on the Natural Resource Charter. The 

commission has the mandate to monitor implementation of the Helsinki Accords, which 

were signed 35 years ago this year. 

And those accords focus on three dimensions: security, economics and the environment, and human rights. At the Commission, we tend to focus our efforts on issues that 

cut across all three dimensions. And in the case of the extractive industries, it’s a natural 

focus for us because we can see where the impact of the oil, gas, and mining sectors have 

implications for security, implications for economic development, implications for the 

environment, and implications for human rights. 

The Natural Resource Charter is aimed at giving countries the tools they need to 

fully develop their natural resources for the good of the whole country. As it was launched 

last year, I was struck by how far we’ve come in terms of bringing the sometimes very 

difficult conversation of extractive industries into the lexicon of world leaders. But I was 

also struck by how much farther we need to go to achieve real progress on development 

and improvement of human rights. 

In today’s briefing, I hope we can accomplish a couple of things: First, I’d like to come 

away with a good understanding of the charter itself—how it’s being used, how it’s being 

developed and how it’s actually going to grow in the future. And second, I hope that we 

can have a candid conversation on what gaps remain and specifically what steps the 

Commission itself, the U.S. Congress, the State Department, international organizations 

and others can take to address those gaps. 

2

Fortunately, we have an expert panel that will make what would otherwise be a 

daunting task, a walk in the park. The full bios of our three witnesses have been distributed, but let me introduce them briefly. First, we’re going to hear from two people who 

were instrumental in developing the charter from its inception. 

On my right here is Mr. Joseph Bell, who is a partner at Hogan and Hartson and 

an experienced advisor to developing countries particularly in the extractive industries. 

And then on my left is Ms. Karin Lissakers, the Director of the Revenue Watch Institute, 

who spent a number of years as the U.S. Executive Director at the IMF, as well as a luminous career at the State Department and on the Hill. 

We are pleased that we have Dr. Saleem Ali joining us via videoconference from the 

University of Vermont. Dr. Ali is a Professor of Environmental Studies and is actively 

involved in U.N. projects and most recently published a book titled, ‘‘Treasures of the 

Earth: Need, Greed and a Sustainable Future.’’

I’d like to note for the audience that we will have an opportunity for questions from 

the audience at the end of the statements here, so if you’d like to prepare in your mind 

some questions, you’ll have an opportunity to address the witnesses at that time. So Mr. 

Bell, if you could start us off with your testimony. Thanks. 

Mr. BELL. And the fact that I’m sitting here has nothing to do with alienation. 

[Laughter.] It’s simply I cannot fill the seat of the person who was here without having 

my chin on the table. [Laughter.] In any case, thank you for the invitation to talk about 

the resource charter. My colleague, Karin Lissakers, who will discuss how the charter was 

developed and its current state and how it fits in with other international initiatives. I 

will touch upon some of the just basic substantive principles incorporated into the charter. 

And the full document is part of the record. 

As we all know, natural resources—oil, gas, minerals—have been the source of many 

conflicts, much corruption and on occasion, great environmental damage. Even today, competition is fueling conflicts in the Eastern Congo, the Niger Delta, and elsewhere. But natural resources also provide an opportunity to support growth and development. There are 

successful cases: Botswana, Norway, even the history of the United States. 

Now, resource management can be a thickety challenge for developing countries with 

weaker institutions, with limited human resources and where such resources can bulk 

very large in government revenue. But success is possible and that success is not only 

a benefit to the country and its citizens, but also to the international community in 

reducing conflict, overcoming poverty and, we hope, producing a more stable international 

environment. 

The charter enhances the likelihood of success by trying to draw together what we 

know about the wise development of natural resources and to provide that information 

in a useful format to governments and societies in resource-rich countries. It’s organized 

around 12 principles. The first 10 are really directed to citizens and governments in countries having natural resource wealth and the other two are directed to the international 

community and home governments—that is, governments that host the companies that do 

the exploitation. 

Furthermore, the charter is actually elaborated at three different levels. There’s the 

general principles, which are about one sentence long. There is a second level of explanation, which is a slightly longer elaboration. And then there’s a rather important third 

level, which is much more extensive, pulling together experience in various countries and 

3

elsewhere. It is a work in progress. We are still receiving comments from many different 

groups and so the final product is still a ways out there. 

Now, under the Extractive Industries Transparency Initiative (EITI), probably known 

to most everybody in this room, there has been much focus on one important aspect of 

resource development: the transparency of payments to the government by private entities 

or by—not necessarily private entities—by producers. Now, the resource charter reinforces 

the EITI, especially with respect to the importance of transparency, but it goes beyond 

EITI by looking at the entire value chain from the decision to develop or not to develop, 

the development process itself and very importantly, how to use the resulting revenues. 

Outside the Anglo-Saxon tradition, natural resources are the property of the nation. 

And the principles begin with the basic notion they should be used to secure the maximum benefit for the citizens of the host country. The implementation of this, simply 

stated—an unexceptional idea—is, in fact, not easy. It requires many difficult decisions. 

Oil, gas, and mining projects are technologically complex, capital intensive, usually have 

very long investment lives and are affected by highly volatile commodity markets. Moreover, if not properly managed, they can impose very significant social and environmental 

costs. 

Getting these decisions right in any country requires good processes, good technical 

knowledge and, in the end, good judgment. A number of the precepts actually involve the 

technical issues of resource management: What is the role of competition? What are the 

options for the fiscal regime? What basic principles should guide state-owned companies? 

What are the social and environmental risks and how can they be mitigated? These tools 

emphasize the use of competition to maximize value to the country and the adoption of 

fiscal regimes that have flexibility to adjust to changing economic and social conditions 

over the long periods typically required for resource extraction. 

Certain of the precepts deal with process, especially the importance of transparency 

and public involvement in resource use. The history of resource exploitation is filled with 

much bad history—secret dealings, private enrichment. The charter emphasizes that these 

resources are public assets, that citizens have the right to information about their 

development. Moreover, such information is a basic element in getting policies correct and 

in building constituencies that will support such policies over the long term. 

On the expenditures side—and this is important—the charter holds that resource 

revenues should be principally devoted to promoting sustained economic growth. Resource 

development needs to be integrated with the country’s long-term development plans. And 

the additional revenues should be used to accelerate a movement along that plan. 

Now, this may seem an obvious conclusion, but there’s been much debate about how 

natural resource revenue should be saved and how much spent currently and on what. 

Some have argued that revenue should be deposited in some sort of future generations 

fund with only the interest being spent to support the budget. 

While appealing on its face, in fact, the returns on investment and social and physical 

infrastructure within the country should in most cases be much higher than the returns 

available on internationally held funds. Even more so, when one considers the vulnerability of such funds to future rating, particularly for poorer countries but also for countries such as our own, it is this internal investment that sets the foundation for prolonged 

and significant economic growth—a process which increases the welfare of both current 

and future generations of citizens. 

4

The charter’s value rely on providing good advice, hopefully wise advice based upon 

experience, as to how a country should go about this critical process of converting the 

wealth in the ground into permanent wealth for its citizens. And we will all be beneficiaries where countries are successful in this task. Thank you. 

Ms. HAN. Thank you, Mr. Bell. Ms. Lissakers? 

Ms. LISSAKERS. Thank you very much. Shelly, we really appreciate this opportunity 

to present to the Helsinki Commission on the Natural Resource Charter. My institute—

the Revenue Watch Institute—is an independent, not-for-profit organization dedicated to 

promoting effective, transparent, and accountable management of mineral resources in 

resource-rich countries. And my team and I have participated in the creation of the 

resource charter and are very much involved in carrying it forward. 

Joe Bell just summarized some of the principal elements of the charter. I’d like to 

talk to you a little bit about the process and where we go from here. The broad goals of 

the charter are twofold. The first, as Joe said, is to provide a practical guide for policymakers in resource-rich countries, particularly developing countries that struggle with the 

complexities of managing valuable, finite, capital-intensive mineral resources and meeting 

the challenges of highly volatile revenue streams these will generate. 

Now, this advice is certainly not limited to developing countries however as we’ve 

seen in the United States with the fight over royalties from minerals produced on U.S. 

Federal lands and the difficulty the Department of Interior has in collecting those royalties. The issues we address in the charter are widespread and common for mineral-producing regions. 

Second objective of the charter is to move the world toward a set of global norms for 

the management of extractive resources that will guide not only the producing countries 

but also extractive companies and their home governments in the consuming countries. 

That was really the first goal of the charter that brought the drafting group together. All 

of us—which includes a mix of legal experts, tax experts, economists, political scientists—

all of us are involved in one way or another in advising governments on extractive policy 

and working with parliamentarians and with civil society activists. 

And we found that we kept getting the same questions from the stakeholders: How 

should a country maximize its resource rents without driving away investors? What happens when prices fall? How much should we spend? How much should we set aside in 

a savings fund? What do other countries do? What are the successful models? 

So we decided that it would be useful to try to pull together our answers in one concise, but fairly detailed document. We’ve handed out hard copies. They’re also available 

on the Web site, www.naturalresourcecharter.org. But the level threes, which are the 

detailed policy prescriptions are still being revised, so they are not yet available. 

And as you will see on the cover of the hard copy of the charter, it’s labeled a draft 

for consultation. That’s because while the group that has been drafting the charter has 

both broad and deep expertise, we know we don’t know it all and there’s a wide consultation process underway with industry, with civil society activists, with economists, with the 

various IFIs that have expertise in this area. And there will be a revision and updating 

of the charter in the fall based on all these global consultations. 

Once we have an updated document, the charter group will make a big push to try 

to convince individual countries to use the charter as a policy guide. And we are very clear 

in making the point that to be really successful over the long term, countries can’t just 

5

cherry pick one or two features of the charter. You really need to follow best practice in 

all the elements in each stage of the value chain in order to maximize the long-term economic benefit for the country as a whole. 

The second goal for the charter, as I said, is to try to develop and bring acceptance 

of global norms for extractive resource management. Now, they say this may sound very 

lofty and a tad unrealistic, but we don’t agree. We think it is both highly necessary and 

doable. As Shelly Han said, there have been dramatic changes in attitudes toward 

resource governance and industry practices in the last decade. And I’ll just give you three 

examples: 

When Tony Blair launched the Extractive Industries Transparency Initiative in 2002, 

very few companies were interested in the initiative. Civil society said, nah, no country—

serious major producing country is going to volunteer or comply with a voluntary initiative. But as we have seen, there are now 32 countries in various stages of implementing 

EITI—not all of them successfully, to say the least, but there’s significant buy-in and more 

countries are joining every day. 

Major oil and mining companies strongly support EITI and are actively engaged in 

the process now. And that’s critically important. EITI has active support, funding and 

endorsement from the World Bank, the Asian Development Bank, the Inter-American 

Development Bank—all of the regional IFIs and global IFIs—the IMF and major governments—the United States, Germany, France—there is very strong buy-in. 

You can also see that companies themselves are trying to move in the direction of 

improving their own behavior and practices. Probably the most advanced is the concerted 

effort by a group of the 17 largest mining companies in the world under the International 

Council for Mining and Metals, which is developing under the guidance of their CEOs, 

a sustainable development framework for mining. 

And these guidelines are binding on all of the companies that are part of the council. 

The framework falls short, to be sure, in certain areas, but it is nevertheless a very ambitious undertaking and a very positive one. One wishes that the oil industry would organize itself along the same lines and try to develop some common guidelines. 

Finally, I would say the U.S. Congress has really been a leader in the debate on the 

question of the link between resource governance and resource security—security for 

major importing countries like the United States. And of course, has been moving—at 

least introducing—some critical legislation in this area, most notably, S. 1700, the Energy 

Security through Transparency Act, which has bipartisan sponsorship. And we hope to see 

a similar bill emerge in the House very shortly. 

Now, this bill only addresses one part of the value chain issue—the transparency of 

payments, but it would cover all of the major internationally active—virtually all of the 

internationally active mining and oil companies. So it would affect not just U.S. companies 

but would really help to move toward setting clear rules that build on what has been 

accepted and has been recognized through EITI and the various voluntary efforts. 

So all of this movement is really going in the same direction. And that’s why we 

think that it is—it will be possible with the right diplomatic outreach and activist engagement and congressional encouragement to reach a global norm. And while there’s been 

a lot of progress, there’s also I think a very big threat that many of these gains will be 

reversed as competition that we see already intensifies to control scarce nonrenewable 

mineral resources. 

6

And not all the players are playing by the same rules. That’s very clear. And we 

could very easily see a race to the bottom again, as the access to supply overrides concerns 

about proper governance and the long-term damage that abandoning a best practice will 

produce. So with the help of a prominent oversight board, we will be pushing very hard 

to have the governance of extractive resources taken up by the G–20, which is becoming 

the leading forum—international forum for globally important economic issues. 

It happens to include all of the major producing countries, both mining and oil, petroleum—the major home base of the extractive industries and the minerals importing countries. So it is an ideal forum in many ways. And we have been talking to member governments about taking up this issue and using the charter as a framework for these discussions. 

Now, we’re very often asked whether the charter could become an international 

convention. That would be, I think, pretty far down the road. We don’t know if it will 

become a reality, but what we do know, as Joe said, is that it is a matter of vital and 

mutual interest for producing countries, for consumers, for investors that there be international norms for management of the nonrenewable minerals resources upon which every 

modern industrial economy depends. The Commission titled today’s briefing, ‘‘Natural 

Resources, A National Responsibility.’’ I would add that this is also an international 

responsibility. Thank you. 

Ms. HAN. Thank you. Now we have our most eco-friendly witness [laughter] joining 

us, teleconference from Vermont. Dr. Ali, go ahead. 

Dr. ALI. Thank you so much. Respected Commissioners, congressional staff, and 

participants, we are convening this briefing in the shadow of the worst mining disaster 

to befall our country in 25 years. The failings of government’s mechanisms to ensure 

accountability of natural resource enterprises is painfully evident to the communities in 

Appalachia. Not only do they exemplify the occupational and environmental hazards of 

resource extraction, they also show how poverty can persist despite an abundance of 

resource wealth. 

However, my aim here is not to berate resource extraction but to deliberate on how 

to make resource economies work most effectively for mineral dependent communities. 

Minerals are undoubtedly an essential ingredient in developing modern economies and 

consequently a security priority as well. 

The mandate of the Helsinki Commission provides an opportunity to consider efforts 

at reforming governance systems around natural resources at multiple levels. Principle 

VII of the accords, which led to the establishment of this commission under U.S. law, support the, and I quote, ‘‘respect of human rights and fundamental freedom,’’ unquote. This 

principle coupled with the mandate to promote humanitarian activities as stipulated in 

Basket III of the accords has collectively led to the application of a so-called ‘‘human 

dimension’’ to this Commission’s activities. 

The Commission is thus in an appropriate position to provide the impetus in moving 

its 55 signatories toward improved governance of natural resources and promoting this 

vision more broadly at the international level. Two recent initiatives to promote better 

governance of natural resources deserve our attention today: the Natural Resources 

Charter and the Extractive Industries Transparency Initiative (EITI). 

Neither initiative has followed the usual path of an international convention, but 

both have merit for greater global accountability if they can be properly implemented. We 

7

have heard in more detail about the specifics of the charter from the distinguished panelists already and so I will focus my comments on some specific strengths and weaknesses 

of this effort. 

The charter aims to provide a broad framework for considering the role of natural 

resources by outlining 12 precepts and its substantive content is backed by a group of 

distinguished academics. Each precept has a technical document which is open for public 

comment and review since October, 2009. 

Much of the content in these accompanying documents, which I have reviewed 

assiduously, aims to exemplify best practices in natural resources management and derive 

considerable material from already existing material from the World Bank, the International Council on Metals and Mining and the outcomes of the Mining, Minerals and 

Sustainable Development Initiative (MMSD), which was in itself a long, deliberative 

process dating back to around 2000 to 2002. 

It is thus meant to be a synthesis document and does not appear to have any pretensions of having direct enforcement impacts as already stated. As described by the Revenue 

Watch Institute, and I quote, ‘‘The charter is a rallying point and an advocacy tool to promote natural resource extraction that is conducted ethically and to the benefit of the 

community,’’ unquote. Since the charter is not aiming to have treaty status at this time, 

it could perhaps be a bit more specific in its goals of achieving these objectives since it 

is less constrained with the imperative of ratification that treaty regimes might be encumbered with. 

For example, the precept which grapples with environmental and social aspects of 

resource extraction could consider novel techniques for valuing ecosystem services that 

may be impaired by resource extraction in a cost-benefit analysis. The charter also avoids 

clear guidance on how contentious legal notions, such as free, prior, and informed consent 

of indigenous people might be obtained and enforced—something which some mining 

companies are now even willing to consider. 

To their credit, the founders of the charter have said that it is a living document 

which can be independently improved upon and act as a clearinghouse for guidance to 

governments and companies on best practices. Its independence is thus far guaranteed by 

a funding base from nonpartisan foundations. And its anchorage in the academy would 

guarantee that to some degree. I would urge the conveners of the charter to capitalize 

on this independence and be more specific and bold in their recommendations for 

improving natural resource governance. 

Interestingly enough, the second initiative which I will talk about has its origins with 

government institutions, but is more specific and bold in its oversight recommendations. 

Focusing on the precept of transparency, the EITI had its origins in the World Summit 

on Sustainable Development in 2002 when the British Government launched it. Subsequently, the effort has been embraced by the Norwegian Government, who are now providing about a fifth of the effort’s funding and hosting its secretariat in Oslo. 

The EITI aims to get as many countries as possible to join the effort through a 

system of candidacy and milestones for achieving compliance with its founding principles 

of revenue transparency. There is also a process of validation which goes beyond the usual 

concept of an audit and this embraces a far broader view of what we may often refer to 

as the social license to operate. 

8

The compliance process for EITI is rigorous and is exemplified by the fact that as 

of April 2010, only two countries have been deemed EITI-compliant. One of these countries is Azerbaijan, which is happily also a member of the Organization for Security and 

Cooperation in Europe and thus part of the Helsinki process. The other compliant nationstate Liberia is an example of how a country beset by abject violence caused by mineral 

smuggling can recover within a decade of improved governance. 

The challenge for EITI is that it has to seek membership from individual countries 

with little international clout on its own. Therefore, some of the largest players in the 

extractive sector—Australia, Canada, the United States, Russia, and China—are not even 

candidate countries under the EITI thus far. The Helsinki Commission can help to change 

this by raising the profile of EITI more effectively. Now, this can of course be done for 

the Natural Resources Charter [sic] as well in terms of encouraging other countries to 

adhere to its mandate. 

The Commission can also play a role in making such legislators within member states 

pay more attention to revenue flight in countries with which their host corporations and 

interests engage. With the growing influence of globalization on national policies, some 

of the fears of resource dependency and its connection to corruption may be assuaged. 

For example, consider Equatorial Guinea, which has been under the same ruler since 

its independence from Spain in 1968. The country has now signed up to be a candidate 

country within the EITI, partly because of international attention to its governance that 

was highlighted by its natural resource wealth. 

After the discovery of oil in the mid-1990s, the international community became more 

engaged with this tiny country. The United States reopened its embassy in Malabo in 

2003 and the State Department asserts, and I quote, ‘‘that the U.S. intervention has 

resulted in positive developments,’’ unquote, such as—and as an example, an office to 

monitor the human rights situation in the country. 

The viability, however, of such a mechanism as a means of initiating positive change 

in Equatorial Guinea was tested by a U.S. Senate hearing and an investigation by the 

Office of the Comptroller of Currency on siphoning of funds from oil revenues to private 

banks in 2004. None of this would have happened if the salience of Equatorial Guinea 

had not been brought to the world’s attention by oil imports which the United States 

makes from that country and the worthy efforts of civil society groups to bring those 

issues to light. So trade is probably good as long as it is used with accountability. 

The United Nations Security Council undertook a similar effort at vigilance when it 

convened special panels to investigate the linkage between mineral wealth and the 

ongoing dreadful conflict in the Democratic Republic of the Congo and in Liberia to some 

extent. Yet the onus for exerting positive influence once corruption is exposed still lies 

with the international community, which needs to push for reform through scrutiny of 

natural resource wealth. Without a unified stance against violations of agreements at the 

international level, ad hoc accountability arrangements such as those initiated by the 

World Bank in the case of the Chad-Cameroon pipeline can still fail despite their noble 

attentions. 

In conclusion, I would state that minerals are an important and perhaps essential 

part of the development path in many countries. However, the international community 

needs to realize that these resources must be governed with great care and a long-term 

9

planning horizon. Natural resource endowments are an accident of geography and they 

can certainly be an essential tool for spurring economic activity. 

Even though the extraction itself may be nonrenewable timescales, it can be a catalyst for capital flows that can provide for lasting development. Efforts at improving the 

vigilance of natural resource economies urgently need strengthening and should be considered not only as a humanitarian effort but as a vital security priority. Thank you. 

Ms. HAN. Thank you. I’d like to note we have been joined by Congressman McIntyre. 

Thank you for joining us. Would you like to say something or you want to chime in when 

you’re ready? 

Mr. MCINTYRE. We’ve got so much happening today, I’ll be here for a few minutes, 

but I wanted to come by because our natural resources are such an important responsibility that we all have and that benefit all and should not be the province of just one 

group or one concern. And so I’m appreciate of the commission holding this hearing and 

wanted to come by to show my support for having an open dialogue about this and especially thank our panelists who are with us today and our other guests who are represented here. Thank you, ma’am. 

Ms. HAN. Thanks for joining us. Before we get into some of the more philosophical 

questions that the charter raises and those issues and some of the questions I think that 

Dr. Ali raised in his testimony as well. I’d like to get just a couple of questions of how 

the charter is actually operating right now and in terms of who is controlling; who actually is the charter right now? 

And is there a specific location or is it people spread out? And then what type of support are you getting from the international lending institutions or other groups in terms 

of incorporating what the charter is doing into their efforts? If you could talk a little bit 

more about the charter format. 

Mr. BELL. This is Karin’s bailiwick. 

Ms. HAN. OK. [Laughter.] 

Ms. LISSAKERS. Well, the charter is, to some degree, a virtual exercise. There is a 

group of like—I can’t even remember how many of us—led by Professor Paul Collier, who 

is probably the pre-eminent scholar and expert and policy advisor on resources, economic 

development, and conflict; we have a Nobel laureate; we have an international tax expert 

from North Carolina, Professor Robert Conrad of Duke University; Joe Bell, who has 

helped many countries negotiate extractive deals; Michael Ross, who is a political economist and expert on conflict and extractive resources and so on. 

So there’s the core drafting group, but we have broadened the group that is actively 

engaged—or we are in the process of doing so—to do two things. One is to have a more 

diverse and prominent group of champions for the charter, which is an oversight board 

that is chaired by professor and former President of Mexico, Ernesto Zedillo. Mo Ibrahim, 

the prominent African entrepreneur and philanthropist is a member of the oversight 

board. 

There are a couple of other people who we are not ready to name yet but who will 

be joining shortly. And we are also creating a technical expert group to review each of 

the precepts to make sure that they are really right. And Dr. Ali mentioned some weaknesses in the environmental and social precepts, for example, and we are very conscious, 

as I said, that there are issues in the number of the precepts, so we want to pull together 

10

more targeted expertise to address those. And that group is still in the process of formation. 

We’ve had a lot of interest from the World Bank because the World Bank has something they’re calling—well, the nickname anyway is EITI Plus Plus, which is to move 

beyond the transparency payments to other issues around the value chain. And the World 

Bank has been using the charter as a reference point in their discussions on EITI Plus 

Plus. 

We’ve had a very good response from the United States, U.K. and Australian Governments about raising these issues in the G–20 and possibly using the charter as a framework. We hope to take this forward in discussions with the government of Korea and 

which will be chairing the fall summit and talking to some people in Canada about it. 

So it’s a matter of building interest. The U.K. Government’s development arm is actually 

funding some of the consultation and dissemination process to build on the contribution 

we got from the Bill and Melinda Gates Foundation to get the project started. So I think 

there’s a lot of interest. 

I think there is recognition of a need to have a broader international dialogue around 

these issues. And as I say, we think that the framework is a good reference point, precisely because it doesn’t have any institutional identity. It’s not ideologic [sic]. It’s an 

attempt to compile, as we say, best practice that’s been developed by various groups and 

stakeholders and experts. 

Ms. HAN. Thanks. And I’m wondering if we could continue and comment more 

directly on a couple of things that Dr. Ali mentioned because I think he brings up a 

point—and I have to confess that I have not read all of level two of the charter. I have 

looked at it, but I haven’t absorbed it at the same degree of specificity as you have. But 

you know, for example, he does raise the issue of because right now you don’t necessarily 

have the political need to be so broad that so many countries or companies would be associated with it. 

So are you working on addressing things like clear guidance on—he named specifically free prior and informed consent—those types of issues, which perhaps now you could 

afford to be a bit more specific? And is that part of the technical working group that you 

all are—if you could just address that question, that would be great. 

Mr. BELL. Well, it’s, as we said, of course it’s a work in progress, but there are these 

various levels. Obviously in one-sentence summaries, you’re not going to get in great 

depth. But you know, just take an issue like free prior and informed consent. It’s not a 

simple issue. 

There are many people who have very strong feelings about it, but it’s also clear that 

there are some very complicated issues underlying this in terms of the interests of the 

citizens—you know, the country as a whole versus the citizens that are in the impacted 

areas and how those rights ought to be sorted out. And I think in certain instances, the 

best thing that the charter can do is to point out very carefully what the considerations 

are that need to be taken into account and thought through. And moreover, particularly 

in issues such as that, it very much is circumstance-specific. 

Obviously, one needs to pay a great deal of attention to indigenous communities and 

if there is relocation or changes, there is a lot that’s already in the charter about how 

that—what types of things ought to be considered and done if it is undertaken. And that’s 

11

the kind of detail, I think, that needs to be elaborated. But certain of these issues don’t 

lend themselves to a very neat black/white universal answer. 

Ms. HAN. I’m going to ask another question or maybe two more and then we’ll open 

it up for the audience. One of the things that—this is more of a—also more specific—but 

how you talk about the difference between the Federal level and the local levels and the 

idea of, you know, how revenue sharing works or who has control of the resources. And 

we see that as a big issue in places like Nigeria or even in Canada or the United States 

or somewhere else [laughter]. How does the charter currently address those types of 

issues? 

Mr. BELL. Of course, Revenue Watch itself is doing a lot of work on revenue sharing 

and perhaps Karin might want to just say a little bit about that and then I might say 

a word or two. 

Ms. LISSAKERS. Yes, this is a significant issue in many countries—Peru, Indonesia, 

Nigeria of course for a long time—had decentralized both government decisionmaking and 

revenue distribution from extraction. So there is a revenue-sharing formula. The charter, 

I don’t believe—it doesn’t now and I don’t believe it will take a position on what the formula should be. 

What is critically important in our view is that whatever sharing be done be completely transparent and that the management of the resources at the sub-national level 

where governance in previously highly centralized states tends to be extremely weak, that 

the management of those revenues be transparent and accountable to the communities 

and the citizens of those regions. 

We are working in four countries currently with sub-national projects, working with 

a Governor in the Niger Delta and with mayors in Peru and in regional governments in 

Indonesia and in Ghana to create a public monitoring process for the revenue streams 

that they get from extraction. 

I would just make a sort of general point here in response to something Dr. Ali said 

about how important it is that the international community sort of push countries to do 

the right thing. That’s certainly true, but building political support and pressure in the 

producing countries, I think, is the most important determinant of whether countries will 

have successful economic and political management or not. And dealing with the subnational issues is part of building that process. So the key is accountability, not to an IFI 

or some external organization, but government accountability to the people themselves, 

to the citizens themselves. 

Mr. BELL. I just say, I mean, like the distribution issue, it is a very complicated issue. 

Things that on the face may sound appealing may not work. I mean, Peru has this canon 

which gives a substantial percentage of the revenue directly to the affected municipalities, 

but this has also led to a situation in which you have a number of resources going into 

areas that haven’t been able to absorb it and then other areas in Peru that are totally 

bereft of resources and so that you have a great inequality developing in the country in 

terms of development potential. 

And that’s the reason I say it’s much better to have something that sets out some 

of the concerns and the things that have to be addressed and how you have to think 

through it rather than black or white answers. And then second, just underscoring what 

Karin has said, you have to have a process that’s informed and one of the principal issues 

is to make sure that the information is available to the citizens so that they can particiVerDate 0ct 09 2002 09:27 Sep 25, 2012 Jkt 000000 PO 00000 Frm 00015 Fmt 3194 Sfmt 3194 U:\WORK\041510.TXT KATIE
12

pate in that process and have political resolutions which are consistent with that citizen’s 

desires. Dr. Ali may still want to say something. 

Ms. HAN. Yes, Dr. Ali, would you like to chime in at this point on any of those issues? 

Dr. ALI. Yes, I certainly appreciate the limitations. And the approach I take is a very 

pragmatic one. I mean, I’m not one of those sort of activist academics who are just out 

there to lobby for a particular stance. All I’m saying is you need nuance within the way 

these issues are presented. 

And if you look at an issue like free prior and informed consent, there could be 

discussion of the jurisprudence around it which exists within national and international 

law. There is the U.N. Permanent Forum on Indigenous People, which has already been 

working quite hard on this. I was at a meeting in Manila last year where specifically the 

issues of extractive industries were being discussed and there were clear guidelines which 

were being proposed. 

So I’m saying we should follow a process absolutely, with care and nuance, but that, 

you know, it’s tempting to also just relegate that to the national governments. The reality 

in many developing countries is 70–80 percent of the budgets are run by international 

donors. So the amount of clout there is enormous. And to just play the sovereignty card 

very easily on that account, I think, is tempting, but will not reach the objectives we are 

trying to reach. 

The other, if we do have precedents in international law in terms of dealing with 

some of these issues even at a, sort of, this nomenclature of a charter. For example, the 

energy charter, which eventually became a treaty, is something that maybe the Natural 

Resources Charter should look into and see, you know, are there some lessons to learn 

as you evolve this institution further? 

Mr. BELL. Let me just say, Dr. Ali, I certainly agree with you that something like 

the free prior and informed consent we definitely, particularly in the level three discussion, need to point to a great deal of work that has been done on this in the international 

community and the conventions. And I certainly didn’t mean to leave the impression that 

we were just going to say, well, it concerns a nation to decide it by themselves. 

Indeed, the very value of this exercise is to try to provide information to that national 

process. And so by its very nature, it’s not just saying, well, turn this over to the country. 

Ultimately, these are political decisions that have to be made by the country. Our role 

here, though, is to try and provide as much information to the citizens and to the governments to inform these decisions as well as we can. And your point about having more 

exposition on these is very well taken. 

Ms. LISSAKERS. I would just say also, I mean, I took your comments on, for example, 

free prior and informed consent very seriously because it is certainly not the intention of 

the drafters to go for the lowest common denominator by any means. And if that’s where 

we are on some of these issues—and thus we may well be—that’s not where we want to 

be. 

On the, you know, some of the economic issues, for example, we are as a group very 

critical of the very conservative stance taken by some of the IFIs in advising governments 

that most of the money should be put away in U.S. treasuries or invested abroad. When 

you have an acute need and a low level of capitalization in the country and our message 

is very clearly, first priority should be to spend the money, invest the money at home, 

13

taking account of volatility. So are very open to changes, proposals for changes. And I 

hope we can continue this discussion. Thank you. 

Ms. HAN. A couple of things you all said were very—dovetailed into some questions 

that I’ve had myself on this whole process, not just the Natural Resource Charter, but 

EITI and many of these transparency efforts. Mr. Bell, you raised the issue of national 

processes and you mentioned the lowest common denominator. And you know, the reality 

is, a lot of these countries that we’re talking about in this conversation range from the 

barely functioning to the somewhat functioning [laughter] to the pretty solid, but have a 

lot of issues countries. 

And one of the things that we struggle with a lot is, how do you—you know, we’ve 

got these standards, and we seem to be holding—particularly in EITI, we’re holding these 

countries and asking them to participate pretty much at equal levels, even though we 

know that countries are not at equal levels politically, socially, in terms of any of the sort 

of precursors—the things that they need to have in place to make these things work. 

And so how do we address that? You know, sort of the, if they don’t have the basics 

of a civil society, or even a government that has—you know, we were talking about 

Liberia earlier—if they don’t have the basics in place of people in their parliament who 

can read a law and pass it and know what they’re doing and government officials who 

know—you know, the level. And I know that the international community is working with 

a lot of governments to up their capacity. 

But how do we address that? I mean, or should it not be addressed in these efforts, 

but maybe in other efforts, and then sort of gradually take these countries to this place? 

Or do we sort of hold it all back? It’s kind of a philosophical question that I’ve been struggling with. Wondered if you wanted to weigh in. 

Mr. BELL. Let’s talk about our capacity to——

[Cross talk.] 

Ms. LISSAKERS. I mean, the EITI has been struggling with this issue. In fact, just 

now, today, right now, there’s a big debate in the EITI international board about the 

validation process, because countries, while EITI is a voluntary process, once a country 

signs on, the rules are pretty strict about what you have to do and when you have to do 

it. And there’s a deadline to have all your processes reviewed—inspected, basically, and 

reviewed for compliance with the EITI rules. 

And a number of countries have not met the deadline for filing their validation 

reports. Now, is that a matter of lack of capacity, or is it lack of will or—and the rules 

say that there have to be circumstances beyond the government’s control, in order to have 

an extension. Otherwise, you will be delisted as a number of a countries. And my guess 

is, when we wake up tomorrow, we will see that several countries—or a number of countries will have been delisted because they didn’t meet the deadline. 

There are obviously great cases—I mean, Liberia has certainly limited capacity, but 

it has delivered. It’s done a very ambitious EITI process. It’s fulfilled the validation, and 

so on. So that’s an example to other countries. But the fact is, that if you work—we work 

a lot in Sierra Leone, for example—you can see very clearly that at the moment, the 

capacity of this government in Sierra Leone is much lower than that of even neighboring 

Liberia, even though they had pretty much the same starting point. 

So it’s very tricky. The key is capacity building is to have clear rules, clear guidelines, 

and back that up with capacity building. I mean, the Revenue Watch Institute spends an 

14

enormous amount of effort working with parliamentarians to understand the petroleum 

and mining law and the issues that will come before them for approval. We work with 

civil society and with the press in resource-rich countries to try to help them get a better 

understanding of the issues. 

We provide technical assistance to government officials. Joe Bell has done a lot of 

work in countries. And as part of the charter exercise, since there are a lot of academics 

involved, as you can see, we’re actually creating formal courses around the charter—both 

the front—the upstream issues of contract negotiation and tax structuring and so on and 

the macroeconomic issues. So there will be a package of courses, and there’s already enormous demand from governments for these kinds of trainings. The World Bank Institute 

is designing courses around the EITI Plus Plus. So there’s certainly growing recognition 

about the need to give a lot of expert and capacity support. 

Mr. BELL. It does seem to me that the charter is useful in two ways. First of all, 

for governments that do want to try to do a better job, but have capacity limitations or 

experience limitations, it’s a starting point. It’s a very—and you know [laughter] it’s the 

first thing that somebody can start, so that, to the extent that it is a useful exercise in 

providing information to the willing, that’s one part of helping with that capacity. The 

other aspect, of course, is, it’s a tool for civil society and for building their education and 

for them to, frankly, be able to utilize as they organize political constituencies in support 

of better resource management. 

I mean, one of the problems we all know about resources is, exploitation is a very 

long-term process, and we spend a lot of time in countries where they started out badly, 

locked themselves into bad deals, and now are trying to clean them up. And hopefully, 

in processes like this, people can see, up front, these problems and do a better job in doing 

it. So I think that there are ways that this will interact with these very basic development 

problems. But obviously, it’s just one of many different initiatives and activities that have 

to take place. 

Ms. HAN. Dr. Ali, did you want to say anything on that issue, or——

Dr. ALI. Well, I think most of the issues have been covered. I’m eager to hear what 

the audience also has, in terms of questions. So I don’t want to take their time. 

Ms. HAN. Yes, that’s where we’re going to go now. If there’s anyone who has a question, there’s a microphone at the end of this dais. If you could come up, state your name, 

and your affiliation and a brief question, that would be great. Yes. 

QUESTIONER. My name is Pat Korovsky. I’m an oil-cursed citizen from an oil-cursed 

country, representing——

Ms. HAN. Just 1 second. Can you hear, Dr. Ali? 

QUESTIONER. My name is Pat Korovsky. I’m an oil-cursed citizen from an oil-cursed 

country, representing an NGO called Petropolitan, that fights for oil revenue sharing. And 

I appreciate much all the efforts of EITI, the Resource Charter and all that. But when 

I [inaudible] that states very clearly, the extractive resources are public assets. And the 

[inaudible] exploitation are subject to informed public oversight, but places that completely within the realm of the government, I must object. Because I don’t see anywhere 

here the alternative that it would be the citizens managing the revenues or the raw 

extractive industries. 

The USA—the oil is private. It was used in the United States as private. And it’s 

really surprising for me to visualize something here that we are trying to gather support 

15

for oil thugs to control those resources. And there is some things there that we have to 

try to say, no to. Thanks. 

Ms. HAN. Thank you. Mr. Bell or Karin or Dr. Ali? I know, Mr. Bell, you had actually, 

in your testimony, mentioned something about Anglo-Saxon law tradition on that. 

[Laughter.] Maybe you want to comment on that? 

Mr. BELL. Let’s start at the beginning. [Laughter.] You know, some countries do have 

private ownership of resources. Some countries, like ourselves, have mixed ownership. 

Obviously, much of the natural resources in the United States are on Federal lands, have 

been treated as public resources. They have been auctioned off to private developers for 

payments to the public. 

And so they have been managed in a public process, sometimes pretty well and sometimes, perhaps, not so well. So even in the United States, we have a very mixed system. 

Obviously, if the resource is committed to private ownership, it’s in private parties. In 

most of the civil law countries—in fact, all of them that I’m aware of—underground 

resources are considered the property of the nation. Usually in the constitution itself, it 

starts out that as a basic principle. 

And you know, we have governments for the purpose, then, of making decisions about 

how to manage those resources. Now, some governments are good governments; some 

governments are bad governments. But we can’t pretend that they don’t exist, and there’s 

no way to take that asset in the ground and suddenly have it in every citizen’s pocket. 

It has to get there, either in the form of cash or in the form of services, through some 

governmental process. And I don’t see how you get beyond that. What we want to do is 

to get governments to act wisely in that respect, in terms of how they manage that so 

that the citizens see a long-term benefit. 

Ms. HAN. Dr. Ali? 

Dr. ALI. Yes, so I think this question goes back to what the level of national identity 

is for the country in question. So if you have a very strong national identity, there will 

be more willingness to have a situation where the state has ownership of the minerals. 

But in cases where—like Nigeria, where the national identity has been fractured since 

the country came into being, it’s going to lead to conflict. And that’s why you have the 

situation where you will want to have some disproportionately, you know, higher level of 

income going to the place where the oil or mineral is being extracted, in order to quell 

that level of conflict. 

I think you need a hybrid system. You will definitely need to adapt accordingly. Sovereign wealth funds are an important mechanism to do that, in terms of how that can 

be managed when the wealth comes through. In the U.S., of course, we have the example 

of Alaska, with a very unique system of how the sovereign wealth fund has been managed, where every citizen of Alaska gets a check. In other places, that may not work out. 

You may need somewhat of a hybrid mechanism. But I think there is [inaudible, background noise] for us to ponder over. 

Ms. HAN. So Karin, do you think it makes a difference, then, in terms of, if you’re 

looking just at it purely from a transparency or anti-corruption standpoint, as to who controls or who has the reins over the resources? You know, if we’re talking about local 

levels, or whatever level, do you think if a government decides to disaggregate this, do 

you think it would make a difference in terms of the ability to control the corruption or 

control the transparency? 

16

Ms. LISSAKERS. Well, who controls and what their motivations are certainly make a 

difference. I mean, we see huge variations from, you know, whether it’s, you know, 

Nigeria or Venezuela or Iran or Russia or the United States. There is a whole line of argumentation that the nature of extractive income to the state, by itself, undermines democracy and accountability because the government is independent of the people. That is to 

say, whoever controls the government in a country where the resource is, by law, the state 

property, has an independent source of income and doesn’t need to answer to the people 

through taxation. 

Now, some people would argue that the way to solve that is to distribute all of the 

resource rents to the individual citizens and then tax some portion back to recreate that 

accountability mechanism. There are others who would argue that, well, if you did that 

in the case of Nigeria, you know, the resource rent, divided among all the citizens as individual income, would do very little for the citizens and would deplete the government coffers. And not even Alaska distributes all of the rents. But there’s certainly, you know, an 

interesting argument around that issue. And some sharing of the rents with individuals 

may have—will certainly make citizens pay more attention. 

I mean, one of the phenomena we have seen until the EITI mechanism in, let’s say, 

Cameroon, for example—the civil society groups we work with say that in the past, it 

never occurred to any Cameroonian that they could or should ask what was happening 

with the oil money because it was all abstract and had nothing to do with them, because 

they never saw any information; they never had any sense of a control. 

Once the EITI numbers came out, there was an empowerment in the sense of feeling 

they should ask, and say, well, where is the money going? Even the Cameroonian parliament has asked the government, well, why don’t we have any money for X, Y, and Z? 

I mean, it hasn’t changed, yet, the economic trajectory or development trajectory of Cameroon, but it has started a process, a dialogue that was completely missing before. So 

that’s why we have so much emphasis on——

Mr. BELL. One other quick anecdote on that: Even in Nigeria, once the Ministry of 

Finance began to make public the amounts that were actually going to each of the states, 

there was a much greater demand for public services in those states by the citizens of 

those states. I mean, transparency doesn’t solve everything; that’s for sure. But without 

it, it’s practically impossible to get the forces right. 

QUESTIONER. Good afternoon, Saleem. My name is Jeffrey Davidson. I’m from Rio 

Tinto, an international mining company with headquarters in London, U.K., and Melbourne, Australia. I have a process question regarding the Natural Resource Charter. I 

was at the World Bank in March of last year when Paul Collier announced publicly this 

initiative. But it’s been a largely, kind of, invisible initiative to certain elements of the 

broad, international community. So people who know about it presumably have participated in it, and some communities of interest know more about it than others. 

And other groups that presumably have a relevance and a direct interest don’t know 

a lot about it. So for example, even I got an e-mail not so long ago [laughter.] from people 

in London saying, has anybody heard about this thing called the Natural Resource 

Charter? So my question is, you know, I know that on the Web site, you have a mechanism for people to comment; well, who’s commented? Who’s participated in the discussion? 

Does it represent—is the discussion representative of the broad community, or have only 

certain elements participated? 

17

Mr. BELL. Well, Karin can say a lot. In fact, I mean, this is a concern, and one of 

the issues has been to reach out and try to bring into this discussion. To speak very parochially, the ICMM, which represents the major mining companies, including Rio Tinto, 

actually has been involved. And Kathryn McPhail, in fact, saw early drafts of this and 

participated in seminars with the group to discuss these various issues. 

Having said that, though, I think it is a very important point. And indeed, Karin and 

others have been working, with some activity—not depending upon a Web site—but to go 

out to these various groups and get comments. We’ve circulated it very specifically to civil 

society groups that we know are active and interested in these areas and asked for their 

comments. We have, as I’ve indicated—there has been involvement with industry groups. 

There have been a number of involvements with people in the regional bank and the 

other international institutions. The World Bank and the IMF have both taken a look at 

it and written comments. And Karin, you’re much closer to the process than I am, but 

I just—the point’s well-taken, but it hasn’t been ignored. 

Ms. LISSAKERS. No, and I would say—we were talking about capacity constraints—

I mean, that’s been the issue. We now have a full-time coordinator to organize schedules 

and develop events and so on. So it’s been a bit ad hoc and off-again-on-again, because 

of the nature of the group that’s pulled this together. We will have a much more systematic approach to dissemination and public presentations and so on once we have the full 

oversight board in place and the full technical advisory committee. But point well-taken, 

and we’re conscious of it, but maybe not as conscious of this shortcoming as we should 

be. Thanks. 

Ms. HAN. Isabelle? 

QUESTIONER. Hi, I’m Isabelle Munilla. I’m Director of the Publish What You Pay 

United States Coalition. I had a three-part question, and it’s related to audiences. I think 

this approach is really interesting, and I think it’s really practical. But I was wondering, 

what does success look like? It’s a bit of a three-part question. So from your perspective, 

for the Natural Resource Charter, what does success look like, in terms of governments? 

Is it public policy forums to talk about the charter’s recommendations? What do you think 

looks like success from a government’s perspective? 

And then, from a citizen’s perspective, I like that the second section is called the citizen’s guide. And I think that’s really interesting, to frame it that way. And what would 

you see as a success from a citizen’s standpoint, in relation to the charter? How would 

citizens use it, and then work with it? And then the third one, selfishly, from the coalition’s priorities, what do you see as the U.S. Government’s role in working with the Natural Resource Charter in particular, the role of the transparency legislation that’s been 

introduced in the Senate and its ability to influence governments that may be reviewing 

the precepts within the charter? Thanks. 

Ms. LISSAKERS. Well, if you just take some of the transparency features of the 

charter, what success would look like—that major capital markets, from Hong Kong and 

Shanghai to Toronto and Melbourne and New York and Frankfurt and London have 

listing requirements for extractive companies, so that it just becomes the rule that extractive companies need to disclose their payments to governments. We would like to see other 

elements on cost, production and sales and so on be part of that package. 

And an international accounting standard would be even better, and that’s something 

we are working on, or at least, would be complementary. We would like to have governVerDate 0ct 09 2002 09:27 Sep 25, 2012 Jkt 000000 PO 00000 Frm 00021 Fmt 3194 Sfmt 3194 U:\WORK\041510.TXT KATIE
18

ments—you know, we have these precepts directed at home governments as well. The 

export credit agencies from all the major capital-exporting countries should have strict 

rules of compliance for companies and governments that benefit from those—that cover 

the transparency components, the human rights components, the environmental components. 

I mean, the IFC has moved in that direction. The export credit agencies are a bit 

all over the board. We succeeded in getting legislation for OPIC on the transparency piece, 

but there should also be a rule for ExIm. The Australian export credit agency is already 

encouraging countries where they are providing guarantees and funding to implement the 

EITI. 

We don’t think there should be a two-track dual standard—one for developing countries and one for resource-rich countries. We think the U.S. should implement the EITI, 

as Norway has done; Canada should implement the EITI; Australia should implement the 

EITI. We think that extractive companies should stop insisting on confidentiality clauses 

in the contracts, except on a very narrow, genuinely commercially sensitive information 

basis and otherwise accept that, since their counterparties are, to a large extent, governments and you’re talking about public assets in those countries, contracts governing the 

extraction of those public resources should be made public and disclosed to the citizens 

of the country—citizens who own that resource. 

QUESTIONER. Good afternoon, Jeff Goldstein from OSI Washington. One natural 

resource—not an extractive—that’s a source of a lot of tension in certain parts of the 

world today is water. And I was wondering, do you see any applicability of the terms of 

the Natural Resource Charter to water, or is the dynamic simply too different? 

Mr. BELL. Yes, go ahead, Dr. Ali. 

Dr. ALI. Yes, I think that’s an excellent question, because ultimately, in terms of scarcity, water is going to be, in terms of human needs, probably the most important parity 

issue. I think we need to think about water on two levels. There is the dynamic for what 

one might call [inaudible] or artisanal wells and so on, which would fall under this purview. But a lot of the other kinds of water—recharged aquifers, surface water—there are 

many other initiatives which we should think about, and using those to move forward on 

this. 

There’s a Human Convention on Freshwater Resources which has been under deliberation for several years. They are still 17 countries short to get that moving. So I think 

there are efforts on the water front, but with the artesian water—that’s an area where 

it has very similar characteristics as non-renewable resources, so it should encompass 

that. 

Mr. BELL. Well, I would point out that there are other resources, such as forest and 

logging, where much of this would be applicable, that are direct natural resources. Much 

of this actually could be applicable to certain parts of agriculture. I just read the precepts 

after you asked the question, and some would be applicable in a water situation, but I 

think water also sets up a whole set of other issues that are very complicated, very important—I agree with the doctor—less addressed here. 

Ms. HAN. Any other questions from the audience, or—OK, David? 

QUESTIONER. Good afternoon. My name is David Fu and I work for the Helsinki 

Commission. I did some of the preparations for this briefing today. And my question is 

that, for many countries, a truly economically optimal oil policy involves not just domestic 

19

reform, but also relations in corroboration with neighboring bodies. The exports of Central 

Asian countries, for example, rely heavily on collaborations with Russia or China for their 

oil and gas pipelines. Should the charter be addressing in further detail the economic 

impact of resource decisions regarding such international relations? 

Ms. HAN. Yes, and I should say, David did a great job in helping prepare for this 

hearing. So thank you. And part of that question, I think, that has been discussed before 

is the transport—you know, transparency of transport—of pipelines and et cetera, and so 

I think it raises a really good question. 

Mr. BELL. Well, I think it is an interesting question. I think we always envisioned 

our targets as being, in a sense, the governments and citizens of those countries, with 

significant resource wealth, and we’ve only addressed in two precepts very generally some 

of the other countries. 

There is, of course, that was already referenced here today already by someone, the 

energy charter, which is, in fact, a convention that’s intended to directly address some of 

these transshipment problems. We’re not an adherent to the energy charter. And so it’s 

an interesting question. Frankly, I’d want to reflect on whether there’s something useful 

that we could say about it. 

Dr. ALI. On transport, the energy charter is trying to develop a protocol around pipelines, specifically. And my interest there is specifically how that kind of infrastructure can 

beleaguer cooperation overall, which would tie into the Helsinki Commission’s efforts. If 

you’re interested, I have just finished a report for the Brookings Institution on the role 

of oil and gas pipelines as a source of cooperation, which will be published in a few 

months. And it grapples with these issues, especially in the Middle East. So stay tuned. 

[Laughter.] 

Ms. HAN. Now, the Revenue Watch Institute has been very actively pushing adding 

transit revenues to the EITI protocol, and in fact, the government of Ukraine committed, 

last year, as part of an IMF program, that they would do exactly that. Now, we’ll see what 

happens with the new government, but we think that transit revenues—I mean, if you 

look at the European context, it’s obviously a huge security issue. I was just in Brussels, 

and that was one of the issues we raised with the Energy Commission and with the 

Development Commission, and others. 

We think it’s both a matter of good revenue management to have this transparency, 

but also as an anti-corruption effort, and you can see all the opaque pipeline and gas deals 

that were being cut in Central Asia between Central Asia and Europe. And so we think 

this would be a very significant advance. 

Ms. HAN. All right, I want to thank everyone for joining us today. I promised to wrap 

up by 12:30, so I think we’re right on target. I appreciate everyone joining us—our witnesses and our audience—and you can look for a transcript of this briefing on our Web 

site, probably within the next 24 hours. We’ll probably also have a video of the conference 

as well, so if you’d like to pass it along to others who might be interested, thank you. 

Mr. BELL. Thank you. 

[Whereupon, at 12:30 p.m., the briefing ended.]

20

APPENDICES

PREPARED STATEMENT OF JOSEPH C. BELL, PARTNER, HOGAN 

AND HARTSON, AND CHAIR, ADVISORY BOARD, REVENUE 

WATCH INSTITUTE 

Mister Chairman, thank you for the invitation to speak to you about the Resource 

Charter. Natural resources—oil, gas, minerals—have been the source of many conflicts, 

much corruption, and on occasion great environmental damage. Even today resource competition is fueling conflict in the Eastern Congo, the Nigerian delta and elsewhere. But 

natural resources also provide an opportunity to support growth and rapid development 

as Botswana, Norway and indeed our own experience have shown. 

The Resource Charter is one tool in the effort to support governments and societies 

in the positive use of their natural resources. My colleague Karin Lissakers, the Executive 

Director of the Revenue Watch Institute, will explain to the Commission how the Charter 

was developed, its current status, and how it fits in with other international initiatives. 

In my statement I will touch upon the basic substantive principles incorporated into the 

Charter. The full document is being submitted for the record. 

Resource management can be a particular challenge for developing countries having 

weaker institutions and limited human resources and where such resources can bulk large 

in government revenue. But success is possible, and that success is not only a benefit to 

the country but also to the international community in reducing conflict, eliminating poverty, and in general producing a more prosperous and stable world. 

The Charter enhances the likelihood of success by drawing together what we now 

know about the wise development of natural resources and to provide that information 

in a useful format to governments and societies in resource rich countries. The Charter 

is organized around twelve principles or precepts. The first ten precepts or principles are 

directed to the countries which have significant natural resource endowments and the last 

two are directed to the extraction companies, home governments and international capital 

centers. 

To facilitate the Charter’s use it is also elaborated at three different levels. Level one 

states the twelve precepts in single sentence summaries. Each principle is then elaborated 

in a short policy summary, the level 2. The third level sets out in some detail the learning 

we have with respect to each principle, including references to other work, and listing 

issues that must be confronted and pointing to successful experience. I should emphasize 

that this is still a work in progress and as I speak the effort continues to be informed 

by comments by policy makers and experts from developing countries and elsewhere. 

Under the Extractive Industries Transparency Initiative (EITI), the best know international effort to date, there has been much focus on one important aspect of resource 

development—the transparency of payments to the government. The Resource Charter 

reinforces the EITI, particularly with respect to the importance of transparency, but the 

Charter also goes beyond EITI by looking to the entire value chain from the decision to 

develop (or not), the development process itself, and very importantly how best to use the 

resulting revenues. 

Outside the Anglo-Saxon legal tradition, natural resources are the property of the 

nation and the principles begin with the basic notion that they should be used to secure 

the maximum benefit for the citizens of the host country. The implementation of this 

21

simply stated and unexceptional idea is in fact not easy and requires many difficult 

decisions. Oil, gas, and mining projects are technologically complex and capital intensive, 

usually have long investment lives, and are affected by highly volatile commodity markets. Moreover, they can if improperly managed impose heavy social and environmental 

costs. Getting these decisions right in any country requires good processes, good technical 

knowledge and in the end good judgment. 

A number of the precepts involve the technical issues of resource management. What 

is the role of competition and how can it help make better decisions and maximize value 

(Precept 3)? What are the options for the fiscal regime (Precept 4)? What basic principles 

should guide state owned companies (Precept 5)? What are the social and environmental 

risks that must be accounted for and how can they be mitigated (Precept 6)? These tools 

emphasize the use of competition to maximize value to the country and the adoption of 

fiscal regimes that have flexibility to adjust to changing economic and social conditions 

over the long periods typically required for resource extraction. 

Certain of the precepts deal with process, especially the importance of transparency 

and public involvement in resource use (Precept 2). The history of resource exploitation 

is filled with much bad history of secret dealings and private enrichment. The Charter 

emphasizes that these resources are public assets. Citizens have not only a right to 

information about their development, but such information is a basic element in getting 

policies correct and in building constituencies that will support such policies over the long 

term. 

On the expenditure side, the Charter holds that resource revenues should be principally devoted to promoting sustained economic growth. Resource development should be 

integrated with the country’s long term development plan, and the additional revenues 

should be used to accelerate movement along that plan. 

This may seem an obvious conclusion, but there has been much debate about how 

much of natural resource revenue should be saved and how much spent currently and on 

what. Some have argued that revenues should be deposited in some sort of ‘‘future generations’’ fund with the only the interest being spent to support the budget. While appealing 

on its face, in fact the returns to investment in social and physical infrastructure within 

the country should in most cases be much higher than the returns available on internationally held funds, even more so when one considers the vulnerability of such funds 

to future ‘‘raiding.’’ Particularly for poorer countries—but also for countries such as our 

own—it is this internal investment that sets the foundation for prolonged and significant 

economic growth, a process which increases the welfare of both current and future generations. 

The Charter’s value lies in providing wise advice based on experience as to how a 

country should go about this critical process of converting a country’s wealth in the 

ground to permanent wealth for its citizens. We are all beneficiaries when countries are 

successful in this task.

22

1 Commission on Growth and Development: The Growth Report: Strategies for Sustained Growth and Inclusive Development. Washington, D.C.: World Bank 2008

PREPARED STATEMENT OF KARIN LISSAKERS, DIRECTOR, 

REVENUE WATCH INSTITUTE 

Chairman, Members of the Helsinki Commission, 

I thank you for the opportunity to talk to you about the Natural Resource Charter—

an effort by an independent group of experts to create a road map for countries to manage 

their mineral resources for the long term economic benefit of their people. 

The Revenue Watch Institute is an independent, not for profit organization dedicated 

to promoting effective, transparent and accountable management of mineral resources in 

resource rich countries. My team and I have participated in the creation of the Resource 

Charter and are involved in its dissemination. 

My colleague Mr. Joe Bell has summarized the principle elements of the Charter. I 

would like to tell you a bit about what is being done with the Charter and how it can 

evolve as an instrument for national and international policy. 

The goals of the Charter group are two-fold. The first is to provide a practical guide 

for policy makers in resource rich countries, particularly developing countries, who 

struggle with the complexities of managing valuable, finite, capital-intensive mineral 

resources well and meeting the challenges of highly volatile revenue streams that these 

will generate. Of course, as we have seen in the United States with the fight over royalties for mineral production on US federal lands and the difficulty the Interior Department 

has in collecting them, these challenges are not limited to poor developing countries. 

The second objective for the Charter is to move the world toward a set of global 

norms for the management of extractive resources that will guide not only producing 

countries but also extractive companies and their home governments. 

The first goal helped bring the Charter group together. All of us involved in drafting 

the Charter are actively working in resource rich countries, with governments, with parliaments, with civil society activists. One of the principal motivations for writing the 

Charter was that we found we kept getting many of the same questions from officials we 

were helping: How do we maximize our share of resource rents without driving away 

investors? What happens when prices fall? How much should we spend, how much to set 

aside in a fund? What do other countries do? What are the successful models? We decided 

that it would be useful to pull together the answers, the best wisdom and experience in 

one place, one document. 

Professor Paul Collier is perhaps the preeminent scholar on the relationship between 

mineral wealth, development and conflict and advises governments the world over as well 

as international institutions like the World Bank. The idea of a Charter is his. Nobel laureate Michael Spence led the Commission on Growth and Development,1 that found the 

key distinction between fast growing developing countries and slow growing developing 

countries was the huge difference in capital investment rates. If well managed, mineral 

resources in periods of high prices should generate ample revenues for producers to 

greatly increase their capital investment in the non-minerals sector, including investing 

in human capital. On the other hand, tax expert Robert Conrad and Joe Bell have worked 

in countries from Mongolia to Liberia where decades of large scale mineral exports have 

23

yielded limited or no revenue for the state, and have failed to provide jobs or technical 

skills transfers. The Charter seeks to help countries rectify that imbalance. 

You will note that the Charter is still a ‘‘draft for consultation.’’ While the authors 

of the Charter among them have both broad and deep expertise on the issues the Charter 

addresses, we do not think we know it all. The authors have laid out a clear set of guiding 

principles, but have also tried to pull together state of the art guidance from multiple 

sources including government practitioners, industry, international financial institutions 

like the World Bank and IMF, academics, NGOs. We want to be sure we have it right, 

so the Charter is being put through a series of consultations at various fora around the 

world, from the annual meetings of the Asian Development Bank and the EBRD to the 

African Union meeting of heads of state, discussions with the International Council for 

Mines and Metals, major petroleum companies, the Publish What You Pay international 

conference, meetings of development economists. There will be a conference in Oxford this 

fall to discuss and revise the Charter based on the consultation results. A grant from the 

Bill and Melinda Gates Foundation has supported the first stage of work on the Charter; 

the UK government’s DFID is funding the consultation and dissemination stages. 

Once the Charter has been revised following consultations, there will be a concerted 

effort to have individual governments consider adopting the Charter as an overall policy 

guide for their resource sectors. 

The second goal for the Charter, creating global norms for extractive resource 

management, may seem lofty and a tad unrealistic. We don’t agree. We see it as both as 

highly necessary and as doable. There have been dramatic changes in attitudes toward 

resource governance and industry practices in past decade. To give just three examples. 

When UK Prime Minister Tony Blair launched the Extractive Industries Transparency 

Initiative to make company payments and government receipts from extraction public, few 

companies were interested and civil society doubted that any governments would sign on 

to a voluntary scheme. Eight years later, 32 countries, more than half the resource rich 

countries in the world, have signed on and are in various stages of issuing payment and 

revenue reports. Many of these candidate countries have fallen short of EITI’s schedule 

and requirements, but this is still significant progress. The major Western oil and mining 

companies now support EITI. All of the major international financial institutions 

including most recently the Asian Development Bank have endorsed EITI. 

In the mining sector, the CEOs of the seventeen largest companies have banded 

together in the International Council on Mining and Metals (ICMM) to develop binding 

guidelines for their members to promote sustainable mining practices, including transparency, that will benefit the source countries as well as the companies and their shareholders. While their Sustainable Development Framework falls short in some regards, it 

is encouraging that the leaders of these important companies recognize that responsible 

practices are good for the bottom line. 

The U.S. Congress has led the US debate on the link between resource governance 

and energy security. As reflected by the bi-partisan sponsorship of S1700 the Energy 

Security Through Transparency Act (S1700), there is growing recognition that these 

cannot be separated. We look forward to passage of this important bill through both the 

Senate and the House this session. This legislation is fully supportive of and consistent 

with the principles and purposes of the Natural Resource Charter. I was recently in Brussels and I can tell you that the European Parliament and EU Commissioners are following 

these developments with great interest. 

24

While these developments are very encouraging, we still live in a multi-track world 

where resource policies are concerned. There is a very serious risk that as competition 

to control access to resources intensifies with the global economic recovery, voluntary good 

practices will go out the window. (One of the reasons a legal listing requirement is important.) We need common standards and global acceptance of core principles and practices, 

otherwise we are likely to see a race to the bottom again. To make sure that progress 

continues, we are promoting the Charter as a framework for a global dialogue on sustainable resource policies and practices. It has guidelines not only for producing countries, but 

also for the extractive industries and for the consuming and investing countries and their 

governments. 

With the help of the Charter Oversight Board chaired by former Mexican President 

Ernesto Zedillo and including African philanthropist and entrepreneur Mo Ibrahim, we 

are campaigning to have resource management issues taken up by the G20 later this year 

or next. The G20 is becoming the premiere forum for discussing and taking concrete 

actions on economic issues of global importance, which resource management certainly is. 

It also happens to include the most important minerals producing, importing and 

investing countries. Successful mining and oil countries like South Africa and Brazil can 

be engaged and encouraged to exercise important leadership on these issues. China, Korea 

and India must be brought into the dialogue as their governments and companies are 

increasingly important in the extractive sectors around the world. They are leading members of the G20, and Seoul will host the November summit. 

It is possible that the Natural Resource Charter could eventually become a formal 

international convention, with signatories and an adherence mechanism under the United 

Nations or some other inter-governmental organization. We do not know if that will 

become a reality. What we do know is that it is a matter of vital, mutual interest for producing countries, consumers and investors that there be international norms for the 

management of the non-renewable mineral resources upon which all modern industrial 

economies depend. 

The Commission titled today’s briefing ‘‘Natural Resources, a National Responsibility’’. I would add that it is also an International Responsibility.

25

PREPARED STATEMENT OF SALEEM ALI, ASSOCIATE PROFESSOR OF ENVIRONMENTAL STUDIES, UNIVERSITY OF 

VERMONT 

Respected Commissioners, congressional staff and participants, we are convening this 

Briefing in the shadow of the worst mining disaster to befall our country in twenty five 

years. The salience of governance mechanisms to ensure accountability of natural resource 

enterprises is painfully evident to the communities in Appalachia. Not only do they exemplify the occupational and environmental hazards of resource extraction, they also show 

how poverty can persist despite an abundance of resource wealth. However, my aim here 

is not to berate resource extraction but to deliberate on how to make resource economies 

work most effectively for mineral-dependent communities. Minerals are undoubtedly an 

essential ingredient in developing modern economies and consequently a security priority 

as well. 

The mandate of the Helsinki Commission provides an opportunity to consider efforts 

at reforming governance systems around natural resource extraction at multiple levels. 

Principle VII of the accords which led to the establishment of this commission under U.S. 

law, support the ‘‘respect of human rights and fundamental freedom.’’ This principle coupled with the mandate to ‘‘promote humanitarian activities’’ as stipulated in Basket III 

of the accords has collectively led to the application of a so-called ‘‘human dimension’’ to 

this commission’s activities. The Commission is thus in an appropriate position to provide 

the impetus in moving its 55 signatories towards improved governance of natural 

resources and promoting this vision more broadly at the international level. 

Two recent initiatives to promote better governance of natural resources deserve our 

attention today: The Natural Resources Charter and The Extractive Industries Transparency Initiative. Neither initiative has followed the usual path of an international 

convention but both have merit for greater global accountability if they can be properly 

implemented. We will hear in more detail about the specifics of the Natural Resource 

Charter from two members of its technical group and so I will focus my comments on 

some specific strengths and weaknesses of this effort. The Charter aims to provide a broad 

framework for considering the role of natural resources in development by outlining 

twelve precepts and its substantive content is backed by a group of distinguished academics. Each precept has a technical document which has been open for public review 

since October 2009. Much of the content in the accompanying documents aims to exemplify best practices in natural resources management and derives considerable material 

from already existing documents from the World Bank, The International Council on 

Metals and Mining and the Mining, Minerals and Sustainable Development Initiative 

(MMSD). It is thus meant to be a synthesis document and does not appear to have any 

pretentions of having direct enforcement impact. As described by the Revenue Watch 

Institute, the charter is ‘‘a rallying point and an advocacy tool to promote natural resource 

extraction that is conducted ethically and to the benefit of the community.’’ Since the 

charter is not aiming to have treaty status, it could perhaps be a bit more specific in its 

goals of achieving these objectives, since it is less constrained with the imperative for 

ratification that treaty regimes might be encumbered with. For example, the precept 

which grapples with environmental and social aspects of resource extraction could consider novel techniques for valuing ecosystem services that may be impaired by resource 

extraction in a cost benefit analysis. The charter also avoids clear guidance on how 

26

contentious legal notions such as ‘‘free prior and informed consent’’ of indigenous people 

might be obtained and enforced. 

To their credit, the founders of the Charter have said that it is a ‘‘living document’’ 

which can be indefinitely improved upon and act as a clearinghouse for guidance to 

governments and companies on ‘‘best practices’’ in natural resource governance. Its 

independence is thus far guaranteed by a funding base from nonpartisan Foundations and 

its anchorage in academe. I would urge the conveners of the charter to capitalize on this 

independence and be more specific and bold in their recommendations for improving natural resource governance. 

Interestingly enough, the second initiative which I will talk about has its origins with 

government institutions but is more specific and bold in its oversight recommendations. 

Focusing on the precept of transparency, the extractive Industries Transparency Initiative 

had its origins in the World Summit on Sustainable Development when former British 

Prime Minister Tony Blair announced its launch. Subsequently, the effort has been 

embraced by the Norwegian government who are now providing about a fifth of the efforts 

funding and hosting its secretariat in Oslo. The EITI aims to get as many countries as 

possible to join the effort through a system of candidacy and milestones for achieving 

‘‘compliance’’ with its founding principles of revenue transparency. There is also a process 

of validation which goes beyond the usual concept of an ‘‘audit’’ and embraces a far 

broader view of what we often refer to as the ‘‘social license to operate.’’ The compliance 

process for EITI is rigorous which is exemplified by the fact that as of April 2010, only 

two countries have been deemed EITI compliant. One of these countries, Azerbaijan is 

happily also a member of the Organization for Security and Cooperation in Europe. The 

other compliant nation-state, Liberia is an example of how a country beset by abject 

violence caused by mineral smuggling can recover within a decade of improved governance. The challenge for EITI is that it has to seek membership from individual countries 

with little international clout on its own. Therefore, some of the largest players in the 

extractive sector, Australia, Canada, the United States, Russia and China are not even 

candidate countries under the EITI thus far. The Helsinki Commission can help to change 

this by raising the profile of EITI and effectively branding the process just as it can help 

with branding The Natural Resources Charter. 

The Commission can also play a role in makings sure legislatures within member 

states are paying attention to revenue flight in countries with which their host corporations and interests engage. With the growing influence of globalization on national policies, some of the fears of resource dependency and its connection to corruption may be 

assuaged. For example, consider Equatorial Guinea, which has been a under the same 

ruler since its independence from Spain in 1968. The country has now signed up to be 

a candidate country with EITI, partly because of international attention to its governance 

that was highlighted by its natural resource wealth. After the discovery of oil in the mid1990s, the international community became more engaged with this tiny country. The 

United States reopened its embassy in Malabo in 2003, and the State department asserts 

that U.S. ‘‘intervention has resulted in positive developments,’’ such as an office to monitor the human rights situation in the country. The viability of such a mechanism as a 

means of initiating change in Equatorial Guinea was tested by a U.S. Senate hearing and 

an investigation by the Office of the Comptroller of Currency on siphoning of funds from 

oil revenues to private bank accounts in 2004. None of this would have happened if the 

salience of Equatorial Guinea had not been brought to the world’s attention by oil imports 

27

which the US makes from that country and the worthy efforts of civil society groups. So 

trade is probably good as long as it is used with accountability. 

The United Nations Security Council undertook a similar effort at vigilance when it 

convened special panels to investigate the linkage between mineral extraction and conflict 

in the Democratic Republic of the Congo and in Liberia to a limited extent. Yet the onus 

for exerting positive influence once corruption is exposed still lies with the international 

community, which needs to push for reform through scrutiny of natural resource wealth. 

Without a unified stance against violations of agreements at the international level, ad 

hoc accountability arrangements such as those instituted by the World Bank in the case 

of the Chad-Cameroon pipeline, can still fail, despite their noble intentions. 

In conclusion, I would state that minerals are an important, and perhaps essential, 

part of the development path in many economies. However, the international community 

needs to realize that these resources must be governed with great care and a long-term 

planning horizon. Some key points to consider in this regard include: 

• The full range of livelihoods that may be available to the community for capital 

generation based on the area’s ecology and geographic constraints. The opportunity costs 

of various prospects need to be compared with community consultation through deliberative processes. Principles of free prior and informed consent can be effectively implemented through mechanisms such as referenda that are preceded by a detailed educational program from nonpartisan institutions. 

• The processes that will be used for extraction and whether ecological restoration 

would be possible afterwards. This is especially important for nonrenewable resources so 

that communities can still use the land productively after extraction is finished. Ecosystem service valuation techniques and metrics from industrial ecology such as life cycle 

analysis may be helpful in comparing product economies derived from these resources. 

• The establishments of trust funds and other revenue management systems by 

donors and corporations. In the nascent paradigm of ‘‘corporate social responsibility’’, it 

is not enough to shift the blame to the government but rather to ensure that the funds 

are appropriately managed. International institutions, such as EITI need to be strengthened to ensure that state sovereignty is not used to trump effective revenue management 

regimes. 

• Some level of state ownership to ensure appropriate wealth transfer to local populations may be advisable but not as a blanket exercise in protectionism. Foreign capital 

and partnership with multinationals usually have an important role to play earlier on in 

the exploration and development cycle but eventually, as institutions develop, some level 

of state ownership is usually beneficial to protect the interests of local populations. 

• Communities that bear the impact of extraction must be the first to reap the 

rewards. If wealth is being extracted from one region of the country, the development plan 

must give preference to that region in terms of poverty alleviation even if demographic 

indicators may suggest giving preference to other more populous part of the country. This 

can avoid regional conflicts such as those observed in the Niger Delta region of Nigeria 

or in the Baluchistan region of Pakistan. 

• The speed of mineral extraction must be calibrated with the capacity to manage 

the revenues effectively and to restore the land that has already been mined. Mineral 

resources, in particular, are fixed stocks whose value can only increase with scarcity in 

the future. Hence a rush to extract is not justifiable unless ecological constraints of impact 

28

and revenue management are ensured or if there is an imminent development imperative 

that cannot be met by other economic activities. 

Natural resource endowments are an accident of geography, and they can certainly 

be an essential tool for spurring economic activity. Even though the extraction itself may 

be nonrenewable on human timescales, it can be a catalyst for capital flows that can provide for lasting development. Efforts at improving the vigilance of natural resource economies urgently need strengthening and should be considered not only as a humanitarian 

effort but as a vital security priority. 

Æ

This is an official publication of the Commission on 

Security and Cooperation in Europe.

★★★

This publication is intended to document 

developments and trends in participating 

States of the Organization for Security 

and Cooperation in Europe (OSCE).

★★★

All Commission publications may be freely reproduced, 

in any form, with appropriate credit. The Commission 

encourages the widest possible dissemination of its 

publications.

★★★

http://www.csce.gov

The Commission’s Web site provides access 

to the latest press releases and reports, 

as well as hearings and briefings. Using the 

Commission’s electronic subscription service, readers are 

able to receive press releases, articles, and other 

materials by topic or countries of particular interest.

Please subscribe today.