For over a decade, a global campaign to promote government accountability in resource-rich states--some of which are dictatorships and, more to the point, kleptocracies (like Equatorial Guinea)--has been underway. The name of the campaign, as well as its premise, is simple: Publish What You Pay (PWYP). The idea is that if oil and mining companies reveal what they pay to governments for the right to extract natural resources, the veil of secrecy that often facilitates corruption will be lifted. The people of the state--and the governments of other states--will be in a better position to compare government expenditures on education, health, and other social goods to the income the government derives from the sale of natural resources that are also national resources.
As I have often noted here, Teodoro Obiang of Equatorial Guinea has spent thirty-three years in power amassing a fortune for himself and his family while the country as a whole remains mired in poverty as bad as any in Africa. Obiang's son--less discreet in his spending than his father, whom he is being groomed to succeed--is under investigation in the United States, France, and Spain for corruption. In the U.S., a $30 million mansion in Malibu, a $38 million jet, and a $2 million collection of Michael Jackson memorabilia are at stake in a Justice Department lawsuit. In France, a $180 million estate has been seized by authorities. The staggering dimensions of Equatorial Guinea's corruption are, in large measure, a product of its petroleum wealth, which, in the 1990s, launched the Obiang family into the ranks of the super-rich (and super-corrupt). The American oil companies that have operated in Equatorial Guinea for the past twenty years have not been required to reveal what they pay in royalties to the Obiang family (also known as the Equatoguinean government)--until now.
Two weeks ago, on August 22, the Securities Exchange Commission (SEC) issued rules required by the Cardin-Lugar Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Amendment, cosponsored by Sen. Benjamin Cardin (D-MD) and Sen. Richard Lugar (R-IN), is also called the Extractive Industries Disclosure Provision. (For the text of the amendment as enacted, go here.) Under the SEC's new rules (available here), all companies involved in resource extraction (oil production and mining) that are required to file reports with the SEC--all publicly traded companies involved in extractive industries, in other words--must "include in an annual report information relating to any payment made by the issuer [the company], a subsidiary of the issuer, or an entity under the control of the issuer, to a foreign government or the Federal Government for the purpose of the commercial development of oil, natural gas, or minerals." The data provided must be broken down by payee, project, and type of payment and must be presented in a format that facilitates automated search functions.
Intense lobbying by oil companies delayed the rules for sixteen months beyond the deadline mandated by Congress. The companies claimed that disclosure was not permitted in some of the countries where they operate and that the cost of data collection and reporting would be prohibitive. These arguments were undercut by the fact that some companies--including Newmont Mining, an American company, and Norway's Statoil--voluntarily disclose the information being required by the SEC rules with no apparent effect on either operations or profits. (James North, writing in The Nation, has more on industry opposition to the rules.)
Rather than putting American corporations subject to the reporting requirements at a competitive disadvantage, there are indications that the SEC's PWYP rules will establish an international standard that will be adopted by other resource-importing countries. In May 2011, the G8 Summit in Deauville, France expressed support for mandatory reporting rules for extractive industries. In October 2011, the European Commission proposed legislation for the European Union similar to the Cardin-Lugar Amendment. There are proposals for similar rules in Canada and Australia. In this respect, American leadership in the promotion of transparency in the resource sector may mirror the experience with the adoption of the Foreign Corrupt Practices Act of 1977, which led to a global movement to ban the payment of bribes. In any event, the decision to put the weight of the United States government behind the international effort to promote transparency in extractive industries is a welcome addition to the global campaign against corruption.