A helping hand for big oil

Observations on overseas aid

There's no such thing as a free lunch - especially if you're a malnourished recipient of development aid from the British government. The Department for International Development, created in 1997, was supposed to focus aid solely on the alleviation of poverty, instead of tying it to hidden arms deals and other unsavoury contracts.

Yet it has turned out that way. According to a new report - Pumping Poverty, from Platform, Friends of the Earth and Plan B - DfID support has consistently benefited big oil at the expense of poor people and their environment. In Russia, for example, development cash was targeted not at stopping old people freezing to death in their homes, but at reforming the Kremlin's taxation system so that companies such as BP could walk away with a bigger share of the revenue pie. Many of the consultants chosen to carry out this work had commercial ties to Shell, BP, ExxonMobil, Unocal and Yukos.

Throughout the former Soviet Union, it appears that DfID has handed out grants to British companies for "pre-investment feasibility studies" - market research, in plain English - many of them in the oil sector. I say "it appears" because no one knows for sure how much money has been transferred or where it has gone: DfID's policy is to destroy its files on bilateral grants after five years.

In other parts of the world, the chain of causation is much clearer. In 2000, DfID supported a huge World Bank loan to the Chad-Cameroon oil pipeline project, on the grounds that oil development would boost development in these poverty-stricken countries - despite evidence that the "resource curse" of oil tends to worsen inequalities, social conflict and environmental degradation, as well as undermine democracy and promote kleptocratic governments. The project went ahead despite concerns about the impact it would have on the Bagyeli and Bakola "pygmy" peoples in Cameroon's coastal forests, and numerous other problems. World Bank inspectors later uncovered 21 counts of non-compliance with the bank's policies, with direct and negative effects on poverty. Rather embarrassingly, the Chadian government then spent its first tranche of revenue from the pipeline on weapons for counter-insurgency.

Yet DfID still opposed as "unduly negative" the conclusions of the World Bank's Extractive Industries Review, which recommended that the bank shift investments away from fossil fuels for all these well-understood reasons.

DfID argues that fossil-fuel projects in developing countries bring desperately needed electric power to the poor, two billion of whom lack access to modern forms of energy. However, most oil extraction, including 80 per cent of the projects financed by the World Bank since 1992, exists to bring more petrol to filling- station forecourts in the developed world. Meanwhile, renewable energy projects - small-scale, decentralised solar and biomass projects in particular, which really would help the poorest, most remote communities - are hampered by a chronic lack of funding. Thanks a million, DfID.

Mark Lynas's High Tide: news from a warming world is published in paperback by HarperPerennial

Mark Lynas has is an environmental activist and a climate change specialist. His books on the subject include High Tide: News from a warming world and Six Degree: Our future on a hotter planet.

This article first appeared in the 11 April 2005 issue of the New Statesman, Blood of innocents on his hands