The Next Fix

African oil is sweeter and lighter than Middle Eastern crudes and in recent years it has begun to look increasingly desirable. For political reasons, it became especially attractive after 9/11, and today the US imports more oil from Africa than from the entire Persian Gulf. But there is competition: China now imports more than a quarter of its oil from African countries and Angola has overtaken Saudi Arabia to become its chief supplier. In Poisoned Wells: The Dirty Politics of African Oil, Nicholas Shaxson argues that these developments are alarming. While the people who live in Africa’s big oil-producing countries are getting poorer and angrier, their leaders ‘have a rising tide of money at their disposal’ and are ‘fit for mischief’. He warns of a ‘cosy post-colonial complacency’ blinding Westerners to the fact that African oil isn’t a threat only to the people who live in the countries where it’s produced: it’s also ‘spreading poison deep into the fabric of the international financial system and the rich world’s democracies’.

To tell his complicated tale of oil greed, dictatorship, tax evasion, extreme wealth and extreme poverty, Shaxson draws on an eccentric cast of characters: a former Trotskyite ex-Christian Nigerian who has become a revolutionary Muslim and named his son Osama; a French spy with a Resistance past; a disreputable clan of Corsican Gaullists, one of whom is a Freemason known as ‘Monsieur Afrique’; a Moscow-born Israeli businessman who holds Angolan, French and Canadian passports and whose son owns Portsmouth Football Club; and a bookish magistrate from Norway who attempts to take on the French establishment and wrecks her marriage as a result.

Poisoned Wells concentrates on six states on the oil-rich Gulf of Guinea and opens in Nigeria: from here Shaxson leads us along his own career path as a journalist, first in Equatorial Guinea, then south to Angola, back up into Gabon and down again to Congo (Brazzaville), before a final visit to the tiny archipelago of São Tomé e Principe, where oil is yet to be drilled. All the other states he discusses are cursed by their valuable natural resource, which accounts in most cases for more than 90 per cent of export earnings. Before the years of oil dependency, Equatorial Guinea, a tiny country, produced 40,000 tons a year of the finest cocoa, while Nigeria was the world’s second biggest exporter; Angola was the fourth largest exporter of coffee. Today, local agriculture has collapsed, life expectancy is low and child mortality – like corruption, conflict and debt – is high. Most people in these oil-producing states are becoming poorer. Nigeria is Africa’s leading oil exporter and enjoys oil revenues of $350 billion, but more than 90 million Nigerians now live below the poverty line. Equatorial Guinea dropped ten places on the UN Human Development Index between 1990 and 2000, even though per capita income rose from $368 to $2000.

Shaxson provides some vivid glimpses into the misery of these seemingly rich nations, but his real concern is to explain how and why they have failed so badly. He is sceptical of the left-wing tendency to see the problem in terms of ‘Big Oil’, arguing that ‘white people and their companies no longer pull the strings in Africa.’ Given the growing competition from China, Western multinationals couldn’t put an end to the ‘resource curse’ that afflicts oil-rich countries even if they wanted to. Shaxson also dislikes moralising critiques of African leadership, and suggests that politicians there take their jobs more seriously than many in the West imagine. The key culprits are the ‘corrupting, poisonous substance’ itself and ‘the system’, that secretive world of tax havens, shell companies, pricing schemes and shielded trusts which operates in the Square Mile, Geneva, Washington, Paris, the Cayman Islands and other ‘Dracula zones’. This deterministic view sits uneasily alongside the evidence, presented later in the book, that seems to suggest it is a mistake to exonerate greedy businessmen and politicians, whether they are Western or African.

Having being warned by a friend that he was about to visit the ‘queerest little place in Africa’, Shaxson first went to Equatorial Guinea as a reporter in 1993. The country had just entered the oil age and a small American wildcat company, Walter International, was already pumping and exporting crude. It was also pumping tens of thousands of dollars into the pockets of President Obiang Nguema’s son to pay for his studies – and more – in Southern California. By the mid-1990s, Big Oil was moving in. Mobil (now ExxonMobil) got lucky offshore and, thanks to a deal struck by the previous operator, was making an extraordinary profit. The World Bank described the contract as ‘excessively generous’ to the operating company and Obiang resolved that any new oil deals would have to involve loans from the contractors. In other words, oil companies started behaving ‘like giant banks, lending money at implicit interest rates of up to 19 per cent, and possibly more’; foreign bankers followed, inviting Obiang and his circle to stash their new wealth offshore. This set in motion what Shaxson sees as the cycle of addiction, typical of all the states he considers: ‘Just as heroin addicts lose interest in work, health, family and friends and focus increasingly on the next fix, so politicians in oil-dependent countries lose interest in their fellow citizens, as they try to get access to the free cash.’

In 2003, ExxonMobil and another US company, Amerada Hess, were reported by the Los Angeles Times to be paying Equatorial Guinea’s oil revenues into a special account controlled almost single-handedly by Obiang, at the Washington-based Riggs Bank. In July 2004, when the Senate Permanent Subcommittee on Investigations convened for hearings on the matter, it transpired that the account had a balance of around $750 million. In total, Riggs had set up 60 accounts for Equatorial Guinea, including ‘a shell company owned by Obiang in the Bahamas, whose account took deposits in suitcases of cash in plastic-wrapped bundles’. Staff at the bank hadn’t bothered to read the 2001 IMF reports that detailed missing revenues in their client’s country or to comply with money-laundering laws by establishing the origins of the cash. The Senate found that US companies had been renting houses from Obiang’s family, funding children from elite families to study abroad, and paying huge sums into the bank accounts of individuals, including a 14-year-old relative of Obiang’s. And yet, to Shaxson’s dismay, it was held that ‘these practices do not infringe the US Foreign Corrupt Practices Act’ or amount to bribery under US law. Riggs, which was taken over by the PNC Bank in 2005, was fined $25 million and the accounts were closed.

The so-called ‘wonga’ coup attempt in Equatorial Guinea was mounted in 2004 and led to the arrest of Mark Thatcher in South Africa and the jailing of the British mercenary Simon Mann in Zimbabwe. Shaxson toys with the idea that the US (and possibly Spain and Britain) encouraged the attempted coup. The US would have had good reason to welcome a change of regime. Obiang’s son, Teodoro Nguema, owns an airline, a large timber concession, and a rap record company in Beverly Hills, and keeps ‘a stable of Lamborghinis, Ferraris, and other sports cars in an underground garage in Hollywood’. He is also feared by American oil companies, whom he accuses of ‘ripping off’ his country. They have certainly done so: at the time of the failed coup, Equatorial Guinea was recovering just 26 per cent of the value of its oil compared to 45 per cent (at the time) in Angola and 90 per cent in Nigeria. Were Teodoro to succeed his father, who has ruled the country since 1979, he might well decide to teach the Americans a lesson and look for new oil partners. Now the Americans are all over Obiang; in 2006, Condoleezza Rice welcomed her ‘good friend’ to Washington, much to the dismay of Obiang’s opponents, who claim that torture is frequently used in Equatorial Guinea.

Oil may be wrecking lives in Africa, but according to Shaxson it is equally damaging – possibly more so – to Western countries, leading, as he puts it, to ‘nothing less than the subversion of French democracy’. To make his point Shaxson takes us into a ‘rabbit warren’ which he enters in Libreville in Gabon, where he is collected from the airport by a man wearing ‘aviator sunglasses’ and driven in a red sports car to meet a mysterious French businessman called Alain Autogue. Autogue escorts him to a fancy beach bar called Coco Loco. During the meal, the young reporter is introduced to ‘a dazzling dirty-blonde woman in a bikini’ who sips at cocktails while the two men talk. Shaxson is well behaved and won’t even talk to her. He nonetheless accepts the mobile phone that Autogue presses on him as a gift, and finds for the first time in an African country that every time he uses it to ask for an interview, the response is favourable. ‘I felt like Alice in an African wonderland.’

Wonderland is about right: Shaxson scampers down a time-tunnel from present-day Gabon to discuss the dreams of Jacques Foccart, ‘a master manipulator’ employed by De Gaulle and known as ‘the White Sorcerer’. De Gaulle set up Elf Aquitaine in order to try and crack the hegemony of the Anglo-Saxon oil companies and Elf Gabon, one of its subsidiaries, proved crucial. Foccart operated by creating tight networks across Africa that served to bind the former colonies into France. The success of the scheme depended on loyal African leaders, such as Omar Bongo, who became president of Gabon in 1967 at the age of 31 and was never under any illusions about his country’s relationship with the former colonial power. ‘Africa without France,’ he said, ‘is a car without a driver. France without Africa is a car without petrol.’

Bongo, Africa’s longest serving leader, has held onto office by ensuring that money and power are distributed among different ethnic groups, but he has also relied on local traditions such as the Bwiti secret societies. Knowing that Europeans would never be accepted into these groups or even wish to join them, Foccart turned to the Western equivalent – the Freemasons. Most top Elf officials were Masons and Bongo was encouraged to establish his own lodges in Gabon in order to foster solidarity with Elf. Bongo’s loyalty to the Gaullist party and Elf was so strong that when Mitterrand came to power in 1981, the Gabonese leader threatened to switch to US oil partners. In the end a compromise was reached – Mitterrand agreed not to interfere with the Elf networks – and the French left joined ‘the Clan’, as the Franco-Gabonese elite was known.

It took another twenty years, and the biggest fraud investigation in Europe since the Second World War, for the scale of Franco-Gabonese corruption to come to light. The investigation did not tackle what Shaxson calls ‘the wholesale bribery’ of African politicians or Elf’s payments to African rebel groups, but it did reveal that Elf officials were shamelessly enriching themselves and that French politicians were accepting kickbacks. Even Roland Dumas, the head of France’s Constitutional Court, was found to have Masonic links with Bongo. The investigation also implicated the US banking system: in the 1970s Citibank had accepted millions of dollars from Bongo and set up shell corporations for him in several countries. Staff at the bank became nervous; the account was eventually closed and the international press lost interest, though, as one expert who testified to Eva Joly, the Norwegian-born French magistrate, put it, ‘the US has become the largest repository of ill-gotten gains in the world.’

You might commiserate with the Gabonese: one child in every seven is malnourished, two-thirds of the population live in poverty and the country is struggling to pay off $4 billion of debt. Yet Shaxson’s sympathies lie with the French voters. ‘The real damage,’ he says of the Elf Gabon affair, ‘was done to French democracy.’ Nine days after becoming president, Nicolas Sarkozy met Bongo at the Elysée Palace; it was the first meeting the new head of state held with a foreign leader. Sarkozy’s minister of justice, Rachida Dati, a popular figure with the press because she is a woman of Algerian and Moroccan descent, is a former Elf Aquitaine accountant.

Shaxson was a little unnerved by Arcadi Gaydamak, the Israeli businessman with the deck of passports, when they met in Moscow. Gaydamak is in his fifties and does two hours of kung-fu every day. He has freed ‘aid workers’ in Dagestan and rescued French pilots in Bosnia. He’s also an influential financier whose role in rescheduling $5 billion of Angolan debt, enabling the government to fund its war against Jonas Savimbi, led the French justice system to issue an international warrant for his arrest in 2000. Working alongside Gaydamak on Angola were his friend Pierre Falcone, Mitterrand’s son Jean-Christophe, and Jean-Bernard Curial, who advised the French Socialist Party in the 1980s and was an old associate of the Angolan president, José Eduardo dos Santos. Another key figure was Charles Pasqua, who tried to run for the presidency in 2002. Sarkozy and Pasqua have a long-standing relationship and, in Gaydamak’s view, ‘today, French internal policy . . . is just a continuation of Angolagate. And Angolagate is a pure product of French internal politics.’

Poisoned Wells provides many more examples of how French and US policies are intertwined with Africa’s oil-producing nations. It’s a thorough and engaging account, but there are inconsistencies. Early on Shaxson states his intention to ‘expose Africa’s oil as a threat to liberty, democracy and free markets’. Yet with the possible exception of Gabon’s Bongo, the real power behind African oil is European and North American. There is no doubt that African elites have taken full personal advantage of it, but the detail of Shaxson’s book makes clear how keen Western businessmen and officials have been to get their hands on African crude.

Shaxson’s defence of what he calls the ‘normally functioning free market’ is also puzzling. After several months on the Reuters oil desk, he learned that the oil trade is all about information and secrecy and that ‘corruption abounds.’ Currently ‘half of all the world’s cross-border trade involves structures for concealing money’ and the cost to governments – $250 billion a year – is double the entire aid budget for the developing world. So why is he so eager to defend ‘the normally functioning free market’ threatened by African oil? To develop his own analogy, if African governments have become oil junkies, their most dependable dealers are surely the oil companies and the foreign bankers and accountants based in the City of London, Paris, Geneva and Washington.

Oil Wars, edited by Mary Kaldor and others, came about after Kaldor was invited to the BP Christmas party in 1998. She didn’t know why she’d been asked until she started talking to the managing director. He explained that because BP was getting some bad press for its ‘behaviour’ in Colombia, it had taken the decision to become a ‘human rights company’. This prompted Kaldor and her fellow editors to explore what such a commitment might amount to in practice – a task they seek to combine with a look at the relationship between oil and war, sketching solutions that might help policy-makers in oil-rich states avoid conflict.

Using six case studies – Nigeria, Angola, Chechnya, Azerbaijan, Indonesia and Colombia – Oil Wars explores the extent to which massive rents from oil can destabilise states and contribute to conflict. Typically, because governments in oil-rich states depend on oil for taxable income, the wealth of local citizens ceases to matter. Untaxed citizens, for their part, don’t have many ways of holding their governments accountable; elites become richer and majorities become poorer, and violence – expressed in terms of ethnic, religious or regional difference – is almost inevitable. ‘Oil wars,’ the editors conclude, ‘are rentier wars’ and might be prevented if rent-seeking were restricted by the rule of law, democracy and transparency. There’s nothing wrong with any of this, except that it’s not clear how this transformation of oil-rich states into model democracies will come about. In their concluding chapter, Kaldor and Yahia Said offer a fanciful wish list of proposals that lays bare the inherent weakness of Oil Wars: the editors’ apparent fear of upsetting the oil industry executives who helped them formulate their policy recommendations. They stress the importance of ‘multilateral’ approaches involving, inevitably, never-ending ‘dialogue’ among ‘stakeholders’, who seem to include everyone from people living on less than two dollars a day to the leaders of the great powers.

Even when Oil Wars appears to make its case, it sometimes does so on the basis of inaccurate information. In his chapter on Angola, Philippe Le Billon says the country is currently producing 832,000 barrels of oil a day: in fact it’s twice that amount. He also mentions Dos Santos’s ‘commitment not to run in the next presidential elections’ as a possible factor in the ‘institutionalisation of more democratic politics’. There is barely a single analyst of Angolan politics who believes the president will not still be in power after the next elections.

A similarly ill-founded optimism informs John Ghazvinian’s Untapped: The Scramble for Africa’s Oil. ‘Between the “scramble for African oil” and the “paradox of plenty”, there is bound to be a happy medium,’ he concludes. ‘And between the red roasting sun that cracks up its soil and the Devil’s excrement that bubbles up from below, there might just be – if we learn to look for it – a god for us all.’ But by Ghazvinian’s own admission, people in the US ‘go through oil like it’s water’, approaching their personal comfort as they’d approach an ‘extreme sport’. They don’t care where oil comes from so long as they get it: the US consumes more than 20 million barrels a day (China is the world’s second highest consumer at 7.3 million).

Unlike Shaxson, who has spent nearly 15 years trying to understand six African countries, Ghazvinian spent six months charging through 12 to prepare for this book. He kicks off in the world’s twelfth largest oil producer, Nigeria, speeding by boat into the heart of the Niger Delta, where 27 million people live within 27,000 square miles, making it one of the most densely populated places on the planet. Initially vital to British interests because of palm oil, the delta became even more valuable when Royal Dutch Shell struck oil in 1956. The juxtaposition of ‘Stone Age squalor’ with the oil companies’ multi-million dollar air-conditioned facilities and vast pipelines sparked local protests, but instead of investing in local communities the oil companies simply paid village chiefs to bring their disillusioned youth to heel. The chiefs kept the cash and the youth became angrier. A thousand people die every year in the Niger Delta conflict, and foreign oil workers – Ghazvinian describes them as ‘oilfield trash’ – are kidnapped with increasing regularity. The curse, he concludes, is oil, and Africa’s other producers are all watching ‘the behemoth Nigeria, and asking themselves if they, too, will be so unlucky’.

There’s no magic to the curse of oil: it draws its power from the consumer and no one shows any sign of overcoming their addiction. Ghazvinian’s account of the Washington ‘petro-evangelists’ in the orbit of the Bush administration who believe that the African oil industry has become a key national strategic interest as a result of instability in the Gulf – by far the best bit of his book – confirms this. ‘We have to get it from somewhere,’ he writes. Indeed, but if petrol remains the lifeblood of North America, why does Untapped end on such a fatuous note of optimism?

Shaxson, by contrast, suggests raising taxes on oil and gas, which makes sense until you think back to September 2000, when a price hike in Britain almost brought the country to a standstill; no American politician would attempt this. He also advocates ‘a few well-aimed legislative strokes’ to bring an end to offshore secrecy, an ambition that sets his book far ahead of the others, even if he admits that it couldn’t work without an extraordinary level of political commitment. His third and favourite idea is grassroots resource redistribution: dividing oil revenues among the populations of Africa’s producer nations and handing out cash to each citizen. African countries, he argues, already distribute money on a comparable scale in the form of civil service salaries. He omits to add that these wages are often delayed for months, sometimes years. With or without international pressure, it is hard to imagine governments in developing nations agreeing to such a plan. In March 2007, the Angolan government informed the IMF that its services were no longer required. Thanks largely to Chinese loans, oil-rich African states are now in a position to circumvent Western-dominated institutions.