#12 power
Lena Guesnet

Oil for Arms: How Oil Revenues Strengthen Authoritarian Rule in Chad

2003 marked the beginning of oil exploitation in Chad. At the end of 2012, 454 million barrels of oil had been brought to market and US $10,231 million in revenues accrued by the Chadian government (ESSO, 2012: 83). Originally planned as a model project in which oil revenues would alleviate poverty, oil income is now infamous for bolstering military strength and enabling a firm grip on power by the authoritarian government.

“The development of the crude oil will benefit the entire Chadian nation. (…) The Chadian oil will serve peace in Chad (…). (…) I say that this Chadian oil must be a source of harmony and reconciliation between the sons and the daughters of Chad.” [1]

Oil for peace and development — that was the message from Chadian President Déby at the Oil Valve Opening Ceremony on 10 October, 2003. Ten years on, these promises have not materialized. Instead, Chad continues to be a “poor, undemocratic and conflict-ridden country” (Frank and Guesnet, 2009: 7). Chad currently ranks 184 out of 187 countries on the UNDP Human Development Index [2]. President Déby has established an authoritarian rule which bases its hold on power on a patronage system and military strength. The oil money enables the President to pay for this strategy of regime survival (Maoundonodji, 2009; Gary and Reisch, 2005; ICG, 2009; Frank and Guesnet, 2009).

The scramble for power in Chad

The struggle between ethnic, political and military elites [3] for access to state power has been on-going since Chad gained independence. No president has yet been replaced by elections. Instead the country is subjected to a “cycle of violent power struggles in which presidents are brought down by an armed opposition and replaced by the leader of that armed group” (Frank and Guesnet, 2009: 11).
Current President Déby came to power in 1990 by means of a coup d’état. He has since given his rule a democratic touch. But the elections held have not lived up to democratic standards and have therefore been contested and boycotted by the political opposition, revealing a crisis of legitimacy and of participation (Maoundonodji, 2009). That is why numerous politico-military groups are resorting to violent means to come to power: “Without the perspective of power alternation via the ballot box in free and transparent elections, numerous Chadians think that the only way to change the situation is to resort to violence” [4] (ibid.: 331). This is an important reason why rebellions continue to be a common feature in Chadian politics.

Development of the Chadian oil sector

Turning Chad into an oil exporting nation required an initial investment of US $4.2 billion (Gary and Reisch, 2005: 6). This was needed to exploit the oil in the Doba Basin and to construct a pipeline to ship the oil to the Cameroonian Atlantic coast — 1,070 kilometres away — to be loaded onto oil tankers. The managing consortium, consisting of Exxon Mobile (40 percent), Petronas (35 percent) and Chevron Texaco (25 percent of private equity) [5], would not have realized this investment without the political backing of the World Bank. Exxon made clear that it would only go ahead with the support of the World Bank “to help defray risks and complications” (Runyan, 2000: 10 cited in Gould and Winter, 2012: 321).

With the involvement of the World Bank, the Chad–Cameroon Oil Pipeline project was planned as a model project, designed to prove that the resource curse and all its well-known negative effects could be avoided. The project, and particularly the revenue management component, was supposed to ensure poverty alleviation [6]. A major step towards this goal was the passing of the Law on Petroleum Revenue Management in 1999 (Law 001/PR/99). This law foresaw the following flow of oil revenues (see Figure 1):

“First they are stored in a transit account, from which the debt service to World Bank (in this case to the International Bank for Reconstruction and Development (IBRD) which is part of the World Bank Group) and EIB (European Investment Bank) is deducted. From the overall revenues, comprising royalties, taxes and dividends only the indirect revenues (i.e. taxes, duties) go directly to the Chadian treasury, for government expenditures. The direct revenues (royalties, dividends) are transferred into an escrow account at Citibank in London. From this money, 10 percent are set aside in a future generations fund, in a deposit account at Citibank and 90 percent pass through two commercial banks, Commercial Bank Tchad (CBT) and Société Générale Tchadienne de Banque (SGTB) before going into revenue allocation accounts at the Central Bank in Chad (BEAC). The remaining funds are distributed to seven priority sectors (80%), the producing region (5%) and to current government costs (15%). Law 001 defines the following priority sectors: Public Health, Social Affairs, Education, Infrastructure, Rural Development (agriculture and livestock), Environment and Water Resources” (Frank and Guesnet, 2009: 26–27).

Source: Frank and Guesnet, 2009: 27

This model project failed. The revenue management system was changed and all other provisions for good governance never implemented satisfactorily. As the World Bank’s own evaluation group states, the fundamental objective of reducing poverty has not been met[7].

Furthermore, it finds that “…the oil revenue windfall was associated with a resurgence of civil conflict and a worsening of governance” (IEG, 2009: 35).

How oil changes the political game

Prior to oil revenues, the annual Chadian state budget was around US $456 million (Oyamta, 2009). The net revenues from oil were expected to average US $80 million per year over a 25-year period. In fact, revenues had already reached US $131 million in 2004, the first year oil revenues accrued to the state [8]. With global oil prices on the rise, Chadian oil revenues soared and within “five years, Chad […] received more than 250 percent of the revenues expected over 25 years” (IAG, 2009: 20). By 2013, total oil revenues were over US $10 billion [9]. This income represents more than 70 percent of Chad’s fiscal revenues (IMF, 2013).

Political crisis and violent conflict have been dominant features of Chadian politics ever since independence.

Political crisis and violent conflict have been dominant features of Chadian politics ever since independence. This continued in parallel to the development of the oil sector. What changed was the attractiveness of state power, as controlling the state now meant holding the key to the oil rents (Marchal 2006, 475; Tubiana 2008, 12ff; Berg 2008, 33; Giroux et al. 2009, 7). Because the oil revenue is not widely distributed, but rather concentrated at the top of the state, reaching the top means gaining access to this money. For those already in power, this access is an additional motivation for retaining power (Gould and Winters 2012, 316; Maoundonodji 2009, 296). For those left without access to the oil rents, capturing control of the state seems to be the only way to profit from the oil wealth and the “resentments among losers may provide incentives for armed conflict” (Gould and Winters 2012, 316).

The connection between oil revenues and military expenditure

One important way in which President Déby has bolstered his power position is by reinforcing his military strength. This is visible in the stark increase in military expenditure. Between 2000 and 2009, military expenditure rose by 663 percent (Perlo-Freeman and Brauner, 2012: 15) [10].

The first oil-related income was a bonus of US $25 million paid by the oil consortium in 2000. Of this bonus, US $4.5 million were used by the government to buy military equipment in order to fight a rebellion. In 2004, the first oil revenues accrued to the state budget. It was also the year of a coup attempt. By 2005, the regime was increasingly fissured following defections within the presidential guard and renewed activity by armed groups (Maoundonodji, 2009: 357). Wezeman (2009) compared arms imports before (1999–2003) and after (2004–2008) oil revenues started flowing and found that five times more arms were imported after 2003 (Wezeman, 2009: 3). Between 2006 and 2010, Chad became the third largest importer of arms in sub-Saharan Africa (excluding South Africa), appearing among the top ten for the first time (Wezeman et al., 2011: 7).

With the money invested in the Chadian military, its capacity has significantly increased in the oil years.

With the money invested in the Chadian military, its capacity has significantly increased in the oil years. By 2009, ICG estimated the Chadian army to be “one of the best equipped in sub-Saharan Africa” (ICG, 2009: 13). Part of the arsenal (warplanes, helicopters, tanks and missiles) of the Chadian Army was exposed in August 2008 in a show of strength following a rebel attack which almost defeated the army in February 2008. With the involvement of the Chadian Army in the French Mali mission, this arsenal and the experience of Chadian soldiers gained international praise.

It is widely taken as a given that “increased oil revenues provided the means to sharply increase arms imports” (Wezeman et al., 2011: 29–30). Strengthening military capacity was an explicit aim of President Déby, particularly in response to the violent contestations to his rule since 2004 (Maoundonodji, 2009: 357). He acknowledged that he changed the Law on Petroleum Revenue Management (Law 001) in 2006 to be able to use more oil revenues for national defence (ICG, 2009). Having changed Law 001, including the abolishment of the Future Generations Fund, Déby declared: “I need [the money from] the Future Generations Fund to arm Chad, face rebel aggressions and reinforce the functioning of our administration. (...) I have bought weapons and I continue to do so with the money from oil” (Déby in an interview with Yérim Seck in 2009). With the modified Law on Petroleum Revenue Management (Law 002) in place since 2006, the revenues from oil can be used for security spending. Concurrently, military expenditure exploded (Maoundonodji, 2009: 357).
Investments in military hardware have included a dozen civilian helicopters [11] , (combat) MI-24, MI-171 and MI-35 helicopters, as well as three Soukhoi bombers and 82 tanks (type: Eland), equipped with 90mm canons [12] (Maoundonodji, 2009: 360). In 2007, a hundred Milan missiles were acquired from France, worth € 5 million. [13] Aside from arms purchases, salaries in the military, too, have constantly grown (see Maoundonodji, 2009: 359). This may be linked to the cooptation efforts involving the military: integrating former rebels and handing out higher positions to former enemies may be reflected as higher expenditure for military wages.

Table 1: Military expenditure, Graph: Jardena Kifle/BICC.

Overall military expenditure, as stated in the official budget and as estimated by SIPRI, rose sharply, especially in the most conflict-prone years 2006-2008. Table 1 shows the magnitude of these increases.

The president claimed to have acquired weapons with total transparency and respect for the checks in place, though this claim has been challenged by the ICG:

“[T]he exact figures for spending on the government military machine are in reality largely secret and outside the effective remit of any audit control. Such expenditure is covered by defence secrecy provisions, which formally ban the National Assembly and the Ministry of Finance from commenting on weapons procurements ordered by the Presidency” (ICG, 2009: 13; see also Frank and Guesnet, 2009: 50–51).

Moreover, budgeting procedures are often not respected and many forms of extra-budgetary spending take place. “These expenses mostly occur in the security sector” (Frank and Guesnet, 2009: 48).
Comparing military expenditure to expenditure on health, social action, education and higher education (other priority sectors as defined by Law 001 and Law 002) clearly highlights the regime’s priority on military strength: government spending on security was three times higher in 2004, 1.5 times higher in 2005, 2.5 times higher in 2006, and 4.7 times higher in 2007 than spending on those four priority sectors combined (see Table 2).

Table 2: Comparison of military expenditure and social spending

It can thus be observed that oil revenues and authoritarian rule are linked to ever more rebellions in Chad. These rebellions have provided justification for high military expenditure. The resulting military strength is one of the ways in which the regime is holding onto power.

 

Footnotes

[1] Speech by His Excellency Mister Idriss Déby, President of the Republic of Chad, Head of State, at the Official Doba Oil Valve Opening Ceremony - Komé, 10 October 2003. Available at <http://www.essochad.com/Chad-English/PA/Newsroom/TD_Speech_101003.aspx>. At the same ceremony, World Bank representative Nils O. Tcheyan announced: “Now the big challenge is to use the oil revenues efficiently in order to improve the living conditions of all Chadians. The oil revenues should enable Chad to accelerate the realization of the objectives of the millennium. To reach these objectives, good economic management will be needed in a framework of good governance.” (<http://www.essochad.com/Chad-English/PA/Newsroom/TD_Speech_101003_5.aspx>).

[2] See <http://hdrstats.undp.org/en/countries/profiles/TCD.html>.

[3] Soares de Oliveira defines elites in the Gulf of Guinea region as “those who, whether in government or not, can influence government policy orientation – though not necessarily particular decisions – and directly or indirectly benefit from them” (2007, 124-125). “The political power from the elite stems from the control of economic opportunities entailed by state control for, in the Gulf of Guinea, the possession of the means of administration is coterminous with the possession of the means of accumulation” (Soares de Oliveira, 2007: 125).

[4] Translation by the author.

[5] The license for oil exploration was given to American Conoco in 1969. Oil reserves were found in the Doba Basin in 1988 (SHT, 2008). The first consortium to be interested in exploiting the Doba Basin consisted of ExxonMobil (US), Shell (Netherlands), and Elf (France).

[6] In addition to supporting the development of oil infrastructure, the WB thus planned to “design() and implement() a sound petroleum revenue management program. (…) support() private investment and commercial financing. (…) implement() an environmental management plan” (WB, 2000: Abstract).

[7] In addition, “(p)overty developments were not adequately monitored, a serious shortcoming for a program whose main objective was poverty reduction through the use of oil revenue” (IEG, 2009: 23)

[8] See <http://go.worldbank.org/UHZL4T6B50>.

[9] The exact figure is US $10,231 million (ESSO, 2012: 83). Between 2003 and 2008 the government received US $4.3 billion (ICG, 2009: 9).

[10] This steep increase is based on a rather low level of annual military expenditure during the 1990s.

[11] They were bought from France and equipped in South Africa (Chad had done the same with helicopters from Switzerland) (Maoundonodji, 2009: 361).

[12] These were delivered by the French Sofema company under a contract with a South African company in September 2006. Maintenance is ensured by the Belgian Sabiex firm. Eland is the South African version of the French Panhard AML-60 and AML-90 (Maoundonodji, 2009: 361).

[13] Total arms purchases from France added up to € 5.4 million in 2007, compared to € 100,000 in 2006, according to a report on military exports in 2007 by the French Defense Ministry to Parliament (Maoundonodji, 2009: 362).

Bibliography

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IAG see International Advisory Group.
ICG see International Crisis Group.
IEG see Independent Evaluation Group.
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WB see World Bank.

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