Does Sri Lanka Deserve the Blessing of Oil?

by Michael Patrick O'Leary

This article appeared in the February 2008 edition of Lanka Monthly Digest (LMD)



Each year, Sri Lanka imports nearly 30 million barrels of oil at a cost of some US$ 2.2 billion, which is used to generate electricity as well as for transport. Add to this the cost of subsidies, the knock-on effect of transport costs on prices and the never-ending cost of war – and one can see why the Government would like to have its own oil.


Azerbaijan’s ambassador to Sri Lanka recently announced that his country could help Sri Lanka develop its oil production and, in August 2007, Petroleum Resources Development Minister AHM Fowzie met a slew of representatives of oil companies on a junket to Baku. According to Fowzie, Sri Lanka may be able to produce oil by 2010 and the Government has demarcated eight exploration blocks in the Mannar Basin, two of which have been earmarked for India and China.


But before we rejoice, let’s see how other oil-rich countries have fared. In Azerbaijan, President Geidar Aliyev promised to cut poverty and create 200,000 jobs, but about half his country’s population still lives below the poverty line. A dynasty has been established and oil-rich families from the clan networks of Nakhichevan retain their power base by resorting to arrests, torture and suppression of media freedom.


Oil generates US$ 17 billion each year for Nigeria -which, if shared, would provide 15 years of wages for every man, woman and child. Instead, the proportion of Nigerian households living on less than one US Dollar a day rose to 66 per cent in 1996. Around 70 per cent worked in agriculture, but oil has stifled diversity and agricultural production has not kept pace with the increase in population. In 1962, agriculture contributed 78 per cent of the nation’s revenue; in 1977, it contributed just above one per cent. The contribution of crude oil rose from 13.3 per cent to 98.9 per cent over the same period.


Nigerian President Olusegun Obasanjo was praised in the West for rooting out corruption. Two rear admirals were imprisoned for effectively hijacking a tanker full of oil, while over 100 customs officials were sacked and the Inspector-General of Police resigned. However, Nigerians were not impressed by the PR spin from the likes of GoodWorks International, an Atlanta-based US company that benefits from investment in African kleptocracies. Out of36 Nigerians state governors, 3l have been investigated by the Economic and Financial Crimes Commission. Halliburton, a company linked to US Vice-President Dick

Cheney, admitted paying US$ 2.4 million in bribes to a Nigerian tax official.


Oil-related conflict brings thousands of violent deaths each year to the Niger Delta, which region is emulating Chechnya. The residence of the Vice-President of Nigeria, in Bayelsa State, was destroyed by the Movement for the Emancipation of the Niger Delta (MEND). Elections in Nigeria are low-intensity armed struggles in which thugs mobilized by rival politicians clash in the streets and polling stations trying to gain the upper hand engage in competitive rigging’.


Nigeria has graphically demonstrated that oil can bring poverty, corruption, environmental damage, conflict, foreign exploitation, and an erosion of human rights and media freedom.


Over the past 25 years, Venezuela earned US$ 300 billion from petroleum – yet, more than half its population live in poverty, unemployment averages 25 per cent and over 200,000 children have survived by begging, while a small number of families accumulated wealth and influence.



Angola received around three to five billion US Dollars from oil in 2001, but a quarter of Angolan children die before the age of five and one million internally-displaced people remain dependent on international food aid.


Equatorial Guinea has oil revenues of US$ 500 million a year, but 65 per cent of its approximately 500,000 population live in extreme poverty and the country is placed third from the bottom on the UN human-development index.



Prof. Michael Ross of the University of California in Los Angeles has produced a chart which maps oil sales against literacy and malnutrition rates. In it, every five per cent rise in oil exports was matched by a three month fall in life expectancy and a one-point rise in childhood malnutrition.


Oil and corruption are natural partners. The ever-expanding Saudi royal family has squandered around one trillion dollars, but done little to develop its country. The West is complicit in this. The UK’s Serious Fraud Office uncovered huge bribes being paid to Saudi princes over British arms deals.  Former Prime

Minister Tony Blair had the investigation stopped.


President Nursultan Nazarbayev of Kazakhstan has deposited millions of dollars in illegal commissions from Chevron and Mobil in overseas banks for his own benefit. The brutal regime of President Obiang Nguema of Equatorial Guinea has millions of dollars of blood-stained money at Riggs Bank, which is situated close to The World Bank in Washington D.C.


In Angola, Western oil companies pay secret bonuses into offshore accounts for the benefit of executives of the state oil corporation, Sounagol. The International Monetary Fund has confirmed that US$ 1.7 billion of annual Angolan oil revenue went missing between 199l and 2001, and millions of dollars went to President José Eduardo dos Santos himself.


Oil revenues from the Chad-Cameroon pipeline have been difficult to estimate because Cameroon’s ‘Perpetual President’ Paul Biya regarded them as his personal income and did not include them in government budgets. Biya is an amateur compared to the oil corporations, which will receive 7I per cent of the estimated profit of US$ 8 billion, while Cameroon will only receive seven per cent and Chad 22 per cent.


Oil companies jettison moral principles in virtually all countries where they operate. Mobil Oil was accused by Business-Week of complicity in massacres close to its installations in Indonesia and the company admitted supplying food, fuel and equipment to soldiers. In Burma, the French company Total and its American partner Unocal joined with Myanmar Oil and Gas to exploit the Yadana gas deposits and build a pipeline. The junta uses slave labour and summary executions to get the work done. BP provides the Colombian army and police with arms and training.


Oil causes resentment among local people and disruption of their way of life, livelihood and environment. The US occupation of Iraq is only an extreme example of a foreign power seizing a nation’s sovereignty for the sake of oil, but it happens all over the world.



Militant groups target pipelines in furtherance of their own agendas. In Colombia, guerrillas bombed a single pipeline 178 times in 2001 and pipelines were attacked more than 1,000 times in 13 years, spilling 2.9 billion barrels of crude oil. Even in Canada, between 1997  and 1998, there were 160 attacks on pipelines. Recently, an LTTE aircraft dropped two bombs on petroleum facilities near Colombo.


There has long been a link of anxiety in Sri Lanka between petroleum, terrorism and the environment. There was opposition to building a massive refinery near wildlife-rich areas such as Bundala and feeding grounds of flamingos and other waterfowl, as well as beaches frequented by egg-laying marine turtles.

Now, there may be drilling in the seas off Hambantota.


As far as Sri Lanka goes, the ‘easy oil’ has already been discovered – so, new explorations are costly and involve environmentally-sensitive areas. Seismic vibrations damage buildings and noise displaces wildlife, and chemicals and river warming deplete aquatic life. Soil and water are contaminated when a well blows out and emissions of flammable hydrocarbon cause fires, making land infertile and retarding photosynthesis. Ruptured pipelines, instrument failures and sabotage cause pollution.


Employment for locals is not necessarily guaranteed, even if oil exploration in Sri Lanka proves to be successful. The number of local people employed after the construction phase of the Chad-Cameroon

pipeline was negligible in Cameroon and around 350 in Chad. In Ecuador, 50.000 new jobs every month were promised, but there have been only 9,000 new jobs so far – mostly unskilled and temporary.



A nation heavily dependent on oil sees its currency soar, making it harder for local manufacturers to export. Skilled workers leave manufacturing and agriculture to service the rich. Using oil as collateral, governments incur foreign debts and squander national funds to buy support. Profits go to the elites and existing power imbalances are further compounded. The elites see no advantage in sharing the benefits of oil with the poor. Oil enables clannish elites to become even richer and establish dynastic kleptocracies that cling to power.


It increases the risk of conflict – particularly where there are separatist tendencies and ethnic tensions

– and gives terrorists targets for sabotage. The need to protect installations against terrorists brings repression and the desire of the elites to protect their ill-gotten gains threatens freedom of speech and human rights in general.



So, does Sri Lanka want to be a nation where foreigners call the shots – a nation plagued by poverty, inequality and ethnic conflict; where corruption, dynastic elites and nepotism compromise good governance and erode human rights?



Does Sri Lanka deserve the ‘blessings’ of oil?