Matthew Smith & Naing Htoo, energy security: security for whom?

AuthorKrishnamurthy, Vivek
PositionReply to article in this issue, p. 217
  1. INTRODUCTION

    Conducting resource extraction in failed states, conflict zones, and countries with poor human rights records (collectively, "regions of concern") raises a number of profound moral and ethical concerns. Not only might human rights abuses be committed in the resource recovery process (such as by the displacement of local populations or the use of forced labor), but royalty payments by extractive industry corporations might also bankroll oppressive governments and their military machines.

    In their article, Matthew F. Smith and Naing Htoo (1) document the many abuses committed by the military juntas that have ruled Burma since 1962--both in their efforts to cling to power, as well as in exploiting the country's significant hydrocarbon reserves. Energy royalties contributed at least U.S. $1 billion to the junta's coffers in 2006; (2) and incidents of forced labor and forced migration along the route of the Yadana gas pipeline are well documented. (3) Similar dilemmas confront energy companies doing business in Sudan, where royalty payments are widely suspected of fueling the atrocities in Darfur. (4)

    This paper will offer some practical ideas on how best to address the human rights dilemmas arising from energy exploration in regions of concern, with a specific focus on Burma and Sudan. Starting from the premise that energy exploration in regions of concern is inevitable, I reject the pullout strategy championed by many human rights advocates as ineffective. Instead, I argue that getting industry to take corporate social responsibility (CSR) seriously offers the best prospects for improvement. In the long run, this entails convincing energy companies from the developing world, particularly from China, to start respecting human rights in their overseas operations. This may sound like a tall order when many such countries do not respect human rights at home, but there are some reasons for optimism.

    In the short run, however, the best available solution is to encourage Western energy companies that have embraced the CSR agenda to invest in, rather than pull out from, energy projects in regions of concern. This suggestion may strike many in the human rights community as heretical, but I argue that it is the only viable option in the difficult current geopolitical context.

  2. THE GEOPOLITICS OF ENERGY

    For better or worse, energy exploration in regions of concern will continue for the foreseeable future, given the growing demand for oil at the same time as supply is peaking.

    Between 1996 and 2006, global oil consumption rose seventeen percent, from 71.5 to 83.7 million barrels per day. (5) Some thirty-eight percent of this increase is attributable to China and India. (6) Meanwhile on the supply side, we can see some of the implications of the controversial "peak oil" hypothesis, which theorizes that more hydrocarbons have been pumped out of the ground than still remain. (7) Not only has the price of oil surged from U.S. $12 a barrel in 1998 to over U.S. $140 today, but the rate of discovery has also slowed considerably. (8) And of those large fields that remain highly productive, almost all are located in member states of the Organization of Petroleum Exporting Countries (OPEC) where "National Oil Companies" (NOCs) control most production. (9)

    With large fields outside the OPEC countries mostly in decline, (10) non-OPEC energy companies are being forced to drill in increasingly inhospitable environments--both in terms of geology and political geography. Thus we see Chevron exploring for oil five miles beneath the Gulf of Mexico, (11) Shell investing nearly U.S. $13 billion in the Canadian tar sands, (12) and, of course, Chevron and Total operating in pariah states like Burma.

    The problems of surging demand and shrinking supply are felt even more acutely by developing countries that are latecomers to the international energy game. Given the importance of oil to their economic development, China and India have been busy creating state-owned energy companies to "lock up" any available energy supplies. (13) Lacking the technology of the Western-based "supermajors" (14) to exploit reserves located in difficult geological conditions, the path of least resistance for the newcomers is to exploit conventional oil reserves in regions of concern. Thus, it is no surprise that Chinese and Indian companies are among the leading investors in both the Burmese and Sudanese oil patches. (15)

  3. THE TROUBLE WITH PULLING OUT

    The recent rush of energy sector investment raises serious questions about the effects and the effectiveness of the divestment campaigns that have been the main response of the international human rights community to abuses occurring in regions of concern. All divestment campaigns use the same means, though different campaigns vary in their ends. The common means is to put pressure on companies operating in regions of concern by encouraging investors to sell their shares. The ends are either to force the company to pull out (divestment simpliciter), or to push it to improve its human rights record (targeted divestment).

    This paper takes issue with the first tactic, which must be judged a failure. Despite the best efforts of divestment campaigners, Sudan's oil...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT