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Scent of oil brings corruption to a tiny African country

Scent of oil brings corruption to a tiny African country
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First Published: Tue, Jul 03 2007. 09 27 PM IST
Updated: Tue, Jul 03 2007. 09 27 PM IST
A decade ago, geologists found signs that one of Africa's least-known countries, the tiny island nation of Sao Tome and Principe, might hold a king's ransom in oil.
The first drop of oil has yet to be produced. But these days, little Sao Tome may have attracted ample supplies of something else, federal investigations suggest -- oil-related corruption.
All of this might not seem unusual in Africa, where oil and corruption often go hand in hand. However, Sao Tome, a former Portuguese colony that lies off the coast of Nigeria, was supposed to be different. In recent years, a steady stream of activists like the Columbia University economist Jeffrey D. Sachs have gone there to try to make sure that any energy boom benefits its150,000 people, rather than politicians and companies.
"Oil can be a blessing or a bane for a country," Sachs said. "The theory was to help Sao Tome avoid the resource curse."
Things, however, have not quite worked out that way.
The recent Justice Department indictment of William J. Jefferson, a Democratic representative from Louisiana, contends, for example, that he demanded a bribe from a company seeking his help in connection with an oil-related dispute involving Sao Tome.
Federal authorities are investigating a small Houston-based company whose only assets are large holdings in Sao Tome to determine if it bribed officials there. On another front, a powerful Nigerian businessman who is the chairman of that company, ERHC Energy, is under investigation in his country for insider oil dealings.
All those involved -- Jefferson, ERHC, and that company's chairman, Emeka Offor -- deny that they did anything wrong.
Still, the experience of Sao Tome, a poor country that supports itself by selling cocoa and commemorative stamps featuring celebrities like Elvis Presley and Brigitte Bardot, shows how just the hint of oil can set off a scramble for riches. Along with Sachs, those who sought to help included George Soros, the billionaire-turned-philanthropist, and a high-powered Washington lawyer, Gregory Craig, who defended President Bill Clinton during the Monica Lewinsky scandal.
"In West Africa, the scent of oil alone may be enough" to produce corruption, said Joseph C. Bell, another Washington lawyer who has traveled to Sao Tome to work on new oil laws.
The report concluded that the bidding process “was subject to serious procedural deficiencies and political manipulation.” In addition, the report found that some large multinational oil companies were so suspicious of ERHC that they had decided not to bid, and added that ERHC ”may have made improper payments to government officials.”
ERHC has disputed those findings. It said in a statement that it had received its rights legitimately and that it had made numerous concessions to São Tomé.
”We care about perceptions of ERHC Energy and we have been working to fully understand any concerns expressed about our activities,” the company said.
Whatever the case, ERHC has emerged so far as the biggest winner in São Tomé. Over the past year, it has sold off, like speculative real estate, various rights to its holdings in São Tomé, making tens of millions of dollars.
Despite earlier predictions of vast oil finds, it is unclear whether waters off São Tomé will ever produce oil in commercial quantities. Last year, Chevron drilled the first exploration well there but failed to find much oil, and it has no immediate plans to drill again. ERHC and a partner plan to drill next year.
The new oil and anticorruption statutes drafted by consultants like Bell, the Washington lawyer, have become law. But with all the obscurity and intrigue that has now descended onto São Tomé, he, like others, question whether it will make any difference.
”The game is not lost yet,” Bell said. ”But it is a very uphill game.”
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First Published: Tue, Jul 03 2007. 09 27 PM IST