Global Policy Forum

Fraction of Oil Profits Sought for Poorest Nations


By Thalif Deen

Inter Press Service
August 24, 2006

The world's 50 poorest nations -- ranging from Cape Verde and Haiti to Nepal and Sierra Leone -- are turning to the major oil-producing nations for urgently needed assistance for development.

Anwarul Karim Chowdhury, U.N. under-secretary-general for Least Developed Countries (LDCs), has proposed that oil-producing nations should consider earmarking just 10 cents per barrel from their rising incomes for infrastructure development in LDCs in the next 10 years. "This is a part of our efforts to secure new sources of development finance for LDCs," Chowdhury told IPS. "We need an expressed willingness on the part of producers and companies directly involved in oil production." "If major charities like the Gates Foundation, Bennet Foundation, Turner Foundation and Soros Foundation can decide in recent years to focus on the neediest countries, why not oil producers, whose revenues have multiplied in a big way?" Chowdhury said.

The 50 LDCs, described as the poorest of the world's poor, include 34 countries in Africa, such as Angola, Benin, Burkina Faso, Burundi, Comoros, Malawi, Mali, Liberia, Rwanda and Somalia. As oil incomes generate massive currency reserves in countries like Saudi Arabia, Kuwait, Qatar and Iran, the United Nations says that gross export revenues in the Middle East alone are expected to reach over 400 billion dollars in 2006 compared with 307 billion dollars in 2005. This is based on an average price of about 57 dollars per barrel, according to a U.N. study released last April. But since then, oil prices have hit over 70 dollars per barrel -- tripling since 2001.

If the world's top 17 oil producing countries -- including Algeria, Canada, Venezuela, China, Norway, Mexico, Indonesia and the United States -- earmark 10 cents per barrel for LDCs, the amount per month could reach as high as 17.6 million dollars on a total income of 176.6 million dollars, according to a chart prepared by Chowdhury's office.

Chowdhury told IPS there is already a precedent set by the Organisation of Petroleum Exporting Countries (OPEC), whose "remarkable action" in favour of LDCs in the mid-1980s resulted in a decision to "pick up the tab for the contribution of all LDCs to the newly-created Common Fund for Commodities (CFC) based in Amsterdam." He said the OPEC Fund is still continuing to do this. "LDCs already have many un-funded or under-funded infrastructure projects which could be supported by new money, when available," he added.

Chowdhury, who made the formal proposal at a recent meeting of the U.N. Economic and Social Council (ECOSOC) in Geneva, is hoping for a positive reaction from oil producers. But there have been no firm commitments so far. One Arab diplomat told IPS that Qatar, a country rich in oil and gas reserves, initiated a special fund last year to help the 132 members of the Group of 77 developing nations, which includes the 50 LDCs. "But most of the Middle Eastern oil-producing nations are currently preoccupied helping the reconstruction of war-devastated Lebanon," he added.

Arun Karki, president of LDC Watch based in Nepal, told IPS he "strongly supports" the proposal made by Chowdhury. "This will help raise a special fund without affecting any other earmarked development funding." He said there should also be other "innovative sources of funding" for LDCs development. "One good example is the current surcharge on airline tickets," he added.

Bill Fletcher, Jr., a visiting professor at Brooklyn College in the City University of New York and former president of TransAfrica Forum, told IPS that in the 1970s, the oil shock devastated many non-oil producing countries in the global South, including some countries that stood in solidarity with the Arab oil embargo of 1973. "This devastation had a long-lasting impact on the living standards in the global South. It is, therefore, correct today to ask of the oil producing countries that they do put aside a certain percentage of oil income to assist development in the global South," he added.

Fletcher pointed out that Venezuela's President Hugo Chavez has demonstrated how oil can be a vehicle for support rather than strangulation. "At the same time we must recognise that it is the largely the oil companies that must be scrutinised. The massive profits they have gained in the last year -- as prices continued to increase -- demonstrate the completely amoral attitude that oil companies take toward the world's peoples and issues of energy necessity," he added. Most political parties and institutions will rhetorically go after the oil companies but shy away from any significant practical steps to recoup even a portion of the massive gains that these companies have secured, he said.

Anuradha Mittal of the Oakland Institute said that hunger and poverty in poorer nations is really a paradox in a world of plenty. "The latest U.N. proposal for oil-producing nations to earmark a mere 10 cents per barrel for infrastructure development in the LDCs is an attempt to address growing inequities. However, one has to be cautious given the past record," she told IPS.

As far back as the 1970s, the U.N. General Assembly urged the world's 22 richest countries to provide 0.7 percent of their gross national product (GNP) as overseas development assistance (ODA) to developing nations, but only five countries have met this target: Norway, Denmark, Sweden, the Netherlands and Luxembourg.

She said the United States, which spends 0.1 percent of its GNP on aid, has not even provided a timeframe to reach the U.N. target, or set goals for interim targets, putting Washington last among the 22 major nations. Also, aid as a fraction of rich country income is not a meaningful measure of the adequacy of aid flows. "It would be far better to estimate aid needs by starting on the recipient side with a meaningful model of how aid affects development," she added.

Meanwhile, in report to the next session of the General Assembly in September, U.N. Secretary-General Kofi Annan says that despite improved economic performance, "Extreme poverty appears to be decreasing in very few of the LDCs, and increasing in many." "In unprecedented reversal of historical trends, life expectancy is declining in several LDCs, most affected by HIV/AIDS and civil strife." He also points out that climate change is emerging as "a new challenge to sustainable development of the LDCs, in particular those in Africa and the small islands."

Prepared by the Geneva-based U.N. Conference on Trade and Development, the 27-page report says that most LDCs are constrained by many factors: structural weaknesses of their economies; limited human, institutional, technical, trade and productive capacity; inadequate infrastructure and unsustainable external debt.



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