This new DIIS report is now online available at www.diis.dk:
A Complex Reality: The Strategic Behaviour of Multinational Oil Corporations and the New Wars in Sudan
Luke A. Patey, DIIS Report 2006:2: www.diis.dk/sw21249.asp
DIIS Report 2006:2, March 2006, 60 p. ISBN: 87-7605-137-4
DKK 50 incl. VAT/moms, shortly after publication
Her bringes et kapitel fra baggrundspapiret:
FROM THE Ground on Down: Multinationals, Oil and Civil War
Multinational Corporations (MNCs) exploiting oil resources in Sudan have been seen as representing a further complication in an already long-standing, devastating North-South civil war in Sudan.
However, the apparent signifi cance of the influence of MNCs must be reflected against prominent explanations for civil war in the developing world to evaluate more objectively the impact of oil development in the country.
Assertions forwarded in the ongoing debate on the political economy of armed conflict that internal conflicts persist due to economic greed and socio-political grievance find ample support in the case of Sudan.
The influence of international oil corporations in Sudan is best illuminated in light of the countrys past. Sudan is Africas largest country holding an estimated population of over 38 million.
The country has both an Arab and African legacy, containing more than 300 hundred cultural tribes and over 100 languages. The North is inhabited largely by Arab-speaking Muslims while the population of the African South holds more indigenous and Christian beliefs.
Outside of its colourful religious and cultural past, Sudan also has a tragic history of civil war. A former Anglo-Egyptian colony, Sudan gained independence in 1956 and immediately fell into internal conflict.
The main protagonists of the first Sudanese civil war were the Arab-led government and the southern rebel group Anya-nya. The conflict was largely one of succession; a result of continual economic and political neglect of the South by the northern government both before and after Sudan had received independence.
Following an eleven year span of relative peace resulting from the Addis Ababa Agreement signed in 1972 regional exploitation still held meaning in the country when the second civil war broke out. This was a war of regional autonomy between an Arab-led government in the North and a collection of rebel groups in the South, which fought under the eventual banner of the SPLA.
The civil war further devastated the country, particularly the South, leaving an estimated two million Sudanese dead and double that amount displaced (ICG, 2002:3-4).
While civil war in Sudan has largely been portrayed as one fought between Muslims and Christians or Arabs and Africans, economic reasoning for violence has become increasingly apparent with more recent explanation revolving around the country’s oil reserves.
Sudan has long been one of the worlds poorest counties. It continuously has ranked near the bottom of the United Nations Development Programmes Human Development Index with an estimated 40 per cent of the population living under the poverty line (CIA, 2005).
There is however economic hope for the country, as GDP has risen substantially in the past few years due to oil production, helping the country produce one of the fastest growing economies in the world.
The significance of oil to the countrys economy is becoming far more evident as the oil industry expands. Oil is the most important element of government revenue in Sudan, keeping the economy afl oat despite large amounts of debt (Stiansen, 2002).
Petroleum sources in Sudan are located in the southern and central regions of the country, primarily within the Melut and Muglad basins. Unity State, Upper Nile, and Western Kordofan have been critical areas of oil extraction since production began in 1999.
As oil is located onshore, a pipeline was laid down across the country to transfer the crude from oil fi elds in the South to the harbour town of Port Sudan along the Red Sea in the North.
Altogether, while the discovery and production of oil in Sudan has created prospects for economic development, it represented another conflicting element in the countrys protracted civil war.
Similar to other incidences of intra-state war in the developing world, one particular cause for the enduring character of violence in Sudan stems from combatants not necessarily seeking the defeat of the opposing side, but rather holding vested economic interests in the continuation of violence (Keen, 1998).
While the principle antagonists of war certainly held political intentions in their actions, the interventions of the Government of Sudan (GoS) and the SPLA into local communities of the South transformed violence into a way of life for certain ethnic groups. In particular, the GoS encouraged ethnic tensions through the military sponsorship of nomadic Arab tribes living in areas around the historical North-South border.
The GoS wished to prevent the SPLA from uniting destitute groups in the South with those in the North, ensuring a power base in the South and later on, access to lucrative oil reserves (Keen, 1998:39). Since few other economic opportunities existed, deprived Arab nomads found a way of life in raiding local communities, regardless of their affi liation with the SPLA. As a consequence, grievances grew within settled populations and retribution was sought through further violence.
The pattern of war in Sudan indicates that resource depletion and economic subjugation were objectives of war, not just incidental consequences (Johnson, 2003:145). The economic resource of oil fed into this vicious cycle of violence, influencing the on-the-ground dynamics of the civil war. The impact of oil was further manifested in the political arena.
Oil in Sudan represented another dividing factor in national politics. Upon realization of the significance of oil findings in southern Sudan, the GoS altered laws covering ownership of the countrys oil reserves by creating new northern states in southern territory so that regional authorities would be excluded from future earnings (Keen, 2001:224).
This was yet another example of economic exploitation perpetrated by the Arab-led northern government against the impoverished African South, providing additional reasoning for both sides to utilize violence as a means to secure access to political and economic goods.
The distinct religions, languages, and beliefs that make up Sudanese society allowed visible divides to be established between people. The ethnic discords, widest between those in the North and South, presented the primary lines of opposition while economic and political inequalities motivated violence. The circumstances in Sudan reflect other civil wars in the developing world, where a mix of poverty, inequality and distinguishable cultural diff erences between groups have resulted in internal strife (Stewart, 2002).
From one side, the hardship of economic and political policies established by the government contributed to pre-existing grievances in the South, and on the other, certain sections of the Muslim and Arab-speaking population of the North had a stake in continued southern suppression (Johnson, 2003:5). Oil represented another, albeit significant item on a long, expanding list of governmental mistreatments.
Indeed, oil grievances were listed in the SPLA s Manifesto. Altogether, a lack of political participation granted to the South by the northern government, in order to capture wealth from oil development, provides further explanation for the civil war.
These functions and reasons for civil war in Sudan were interconnected with the global marketplace. External processes established in war-torn societies between domestic actors and international markets allow the realization of value from local assets (Duffield, 2000).
In Sudan, oil acts as a source of economic gain for the GoS, which only can be attained through the international marketplace. The SPLA directed its forces early on in the civil war to protect natural resources in its territory, particularly oil fields, in order to deny these resources to the government (Johnson, 2003:60-61).
MNCs enter the equation as providers of the means to extract, transport, and sell oil. The GoS would not have benefi ted from the existence of petroleum nor considered oil fields significant areas to control without the technical expertise and capital muscle of exploiting MNCs.
Furthermore, this dynamic is a product of the rights international law grants globally recognized states as commercial interlocutors (Reno, 2001:11) and not other forms of domestic political authority, such as the SPLA, despite the initial military strength in areas around oil fields. Thus, MNCs were crucial components in the realization of the financial value of oil in Sudan. The economic and political motivations for violence created from oil development would have been non-existent without their presence.
Oil development in Sudan was predominately seen as a further deterrent to peace in the civil war. Since the oil industry is almost entirely comprised of international oil companies, MNCs have been implicated in holding a considerable role in perpetuating the conflict (Field, 2000; Verney, 2000).
Not only did oil corporations provide further motivation for violence, but they also fuelled violence through their financial investments in Sudan. The GoS was reliant on funds acquired through the oil industry to finance the war due to a continuously down-trodden economy (Field, 2000:7). Revenues acquired through MNC activity enabled the GoS to improve its military positioning over the SPLA, leading to an intensification of violence in areas around oil fields.
The continued expansion of oil development in Sudan increased the commitment of combatants to wage war, complicating prospects of peace (ICG, 2002:100). Moreover, oil production destroyed traditional sources of livelihoods and produced negative ecological repercussions in oil-bearing regions (Switzer, 2002).
However, similar to other case studies on the influence of MNCs on civil war in the developing world, researchers have focused on the specific impact of MNCs in Sudan rather than examine the reasoning behind the strategic behaviour of MNCs in the country.
Studies have provided some explanation for the behaviour of oil corporations in Sudan (Field, 2000; ICG, 2002; Swanson, 2002), but have failed to utilize a broad set of evaluators and thus complete a comprehensive and comparative analysis of all prominent MNCs in the Sudanese oil industry.
Variables explaining MNC behaviour in Sudan have been inadequately analyzed and others have been neglected altogether, largely examined only to the extent that they provide incriminating evidence of the negative influence of MNCs on conflict or highlight reasons for the limitation of policy instruments to control corporate actions.
While previous findings do set the foundation for a more intensive examination of MNC behaviour in Sudan, new developments in the confl ict and changes in the composition of international oil companies in the country call for further analysis.
Although there has been a limited focus on the strategic behaviour of international oil companies in Sudan, several studies have been completed on the general factors dictating MNC actions in conflict-affected countries. This presents variables that routinely infl uence whether a MNC will operate in a country affected by conflict, broadening knowledge concerning the way corporate managers approach the issue of armed conflict in their operational decisions (Berman, 2000).
More factors that influence MNC behaviour are revealed in research that investigates why firms would become involved in conflict management and what in fact they could achieve through such engagement (Haufler, 2001). This helps to uncover the limits and lengths of MNC decision-making capacity while operating in civil war, which consequently suggests categories to analyze MNC behaviour.
However, this research falls short in providing a thorough examination of MNC behaviour in an isolated case, or for that matter, concerning individual companies. It may prove resourceful to examine the similarities and diff erences between all MNCs operating in a specific context.
The actions of firms may find explanation in those of others in both the domestic and international environment. There is a tendency among those researchers engaged in the political economy of armed conflict debate, with some limited exceptions, to group together extractive industry MNCs as one predictable actor.
This promotes the belief that the behaviour of MNCs in the same industry is influenced by exactly the same factors. Thus far, little work has been done to separate the trees from the forest.
The inadequacy of current research on the behaviour of MNCs in war-torn societies is highlighted further in consideration of popular notions concerning those firms operating in the extractive industry. These MNCs compared to those in manufacturing or services are argued to remain in conflict-affected countries due to the sizeable, fixed, and capital-intense nature of their investment.
This certainly holds significant value when examining the decision-making of extractive industry MNCs in Sudan and other war-torn societies, but continues to describe MNC behaviour in the context of a profitseeking rationale, whether earnings are realized in the long-run or not.
While the multiplicity of factors involved in MNC decision-making and differentiation between private sector actors operating in war zones has been provided further definition, many investigators, particularly those involved in human right advocacy, remain locked to simplistic notions of profit maximization.
In light of the events in Sudan, this leaves the casual observer somewhat demurred, inquisitive for further explanation. The actions of international oil corporations in Sudan suggest that more clarifi cation for MNC strategic behaviour is required, both within the constructs of the internal profit maximization logic and concerning external factors that push MNCs to and from their objectives.
While oil companies as a whole remained engaged throughout the civil war, with some indeed staying put in the war-torn country, others pulled out despite the existence of profi table, extractable petroleum resources, and new corporations entered the scene.
Thus, the decision-making calculus of international oil corporations in Sudan cannot be assumed to fall completely along popular conceptions of MNC behaviour in war-torn societies.
