By Hayley Elszasz
Large oil companies like ExxonMobil often fund corrupt regimes in Sub-Saharan Africa through their business involvements in countries such as Angola, Chad, Equatorial Guinea, and Nigeria. The Cardin-Lugar Amendment, which was proposed as a way to provide more transparency into this process, was repealed this past February before it could go into effect. The close partnership that has developed between oil companies and U.S. foreign policymakers—affirmed by the repeal of the Cardin-Lugar Amendment and embodied by former CEO of ExxonMobil Rex Tillerson’s ascension to Secretary of State—can have harmful effects on U.S. efforts to counter what is known as the “resource curse,” corruption funded by the exploitation of natural resources.
Also known as Section 1504 of the Dodd-Frank Act, the Cardin-Lugar Amendment mandated that any gas, mining, or oil company traded on the U.S. stock exchange publish their payments to foreign governments. This rule was first put forward by the Security and Exchange Commission in 2012 and later revised in 2016 to help fight corruption in the natural resources industry. Since then, it has become the standard by which the majority of oil and mineral companies operate; all companies in Canada and the European Union adhere to regulations similar to those outlined in Cardin-Lugar Amendment. The nullification of Section 1504 is a mark of the prominent role that special interests, especially in the natural resource industry, play in U.S. foreign policy.
The resource curse is particularly pernicious in Sub-Saharan Africa, which is home to more resource-rich states than any other region in the world. In fact, 20 countries in the region boast oil and mineral deposits. Notably, approximately 70 percent of these resource-rich countries are autocratic. An Africa Center for Strategic Studies (ACSS) special report on the subject singles out the failure of “home countries,” such as the United States, “to regulate the overseas activities of corporations” as a key driver of the resource curse. To alleviate the deleterious effects, ACSS recommends that home countries mandate their companies to list payments made to foreign governments—exactly what the Cardin-Lugar Amendment would have done.
According to Senators Ben Cardin and Richard Lugar, it is in U.S. interests to counter the resource curse phenomenon in countries like Chad and Nigeria where inequality is great and violent extremism is on the rise. The resource curse, whereby the presence of valuable oil or mineral deposits funds corrupt governments and perpetuates poor governance, often breeds poverty and instability. They affirm that the “Cardin-Lugar [Amendment] is our most affordable and effective means to make a difference in many underdeveloped nations.” The publication of this cash flow would allow citizens of resource-endowed countries to better monitor how much their governments are profiting from resources and to track the use of these funds. By helping fund corrupt regimes, oil companies effectively fuel poor governance and instability, which, aside from being immoral, also runs counter to U.S. strategic interest in regional stability. Publishing these funds, however, would help create accountability between African governments and their populations.
Beyond the already powerful symbolism of placing a former Exxon CEO at the head of the State Department, repealing Section 1504 plays into the hands of oil companies and further weakens the United States’ voice against a kleptocracy. Secretary Tillerson vehemently opposed the Cardin-Lugar Amendment while he was at Exxon; shortly after his nomination as Secretary of State, the nullification of this rule comes as an affirmation of the friendship between big oil companies and US foreign policy.
By placing Secretary Tillerson as the head of U.S. foreign policy, and by nullifying this pro-transparency regulation, the United States is turning a blind eye to how U.S. oil profits contribute to poor governance in Sub-Saharan Africa. The Cardin-Lugar Amendment would have been a relatively easy way to promote accountability in the extractive industry sector. With its current policy, the United States is putting oil companies ahead of its objectives to improve governance and reduce corruption globally. The United States should be a global leader in this arena rather than the exception and should put people ahead of special interests in its foreign policy.
Hayley Elszasz is an Africa Fellow at Young Professionals in Foreign Policy (YPFP). She is also a Program Associate at World Learning. Hayley earned her BA in Political Science and Global Studies from Williams College in 2016.