ERI Speaks to Oil Industry: New Investment in Military-Ruled Burma Poses Huge Risks to Companies

Written by EarthRights International
Tuesday, 28 April 2009
New investment in military-ruled Burma’s oil and gas sector could actually cost a company more than to stay away from the country, and effective corporate social responsibility (CSR) programs in the sector are impossible under the current Burmese military regime: That was the evidence-based message ERI delivered to the oil industry at an industry conference in Jakarta, Indonesia on April 14-15, where ERI Project Coordinator Matthew Smith spoke by invitation.
Convened by the Singapore-based International Quality & Productivity Centre (IQPC), the conference, entitled “Local Content and Capability Development in the Extractive Industries 2009,” was attended by executive-level representatives of several major multinational oil and mining companies and consulting firms on the topic of building “local content” and CSR programs in connection to oil, gas, and mining projects. ERI was one of two non-governmental organizations (NGOs) represented at the meeting.
On behalf of ERI and the interests of directly-affected villagers in Burma, ERI’s Smith delivered a presentation about the human rights impacts of the Yadana Gas Project in Burma, which is operated by the French company Total and the US-based Chevron. Documented abuses connected to the Yadana project include land confiscation, forced labor, rape, torture, and killings. The presentation also included evidence and analysis of the fundamental problems with Total and Chevron’s attempts to implement and audit CSR projects in the country.
According to ERI, “Apart from the ongoing human rights impacts and flawed CSR programs connected to these projects, it will actually cost a company more to develop natural resources in Burma than to stay away from the country, due to unreasonably high reputation and material risks. It’s simply not good business to pursue these projects under the current military regime and in the current global economic climate, whether a company is western or Asia-based.”
ERI’s advice to the industry is based in part on over a decade of research indicating that oil and gas development in Burma leads directly to human rights abuses committed by the Burmese military.
The organization also noted an increasingly effective and sophisticated civil society in Burma that is intent on documenting adverse impacts and exposing the truth, increasing the reputation risks that companies face. As recent examples, ERI cited a 2008 report, Blocking Freedom, by Shwe Gas Movement (SGM)member organization Arakan Oil Watch (AOW), which details abuses connected to onshore oil development by China’s CNOOC in western Burma. Also cited were ERI’s 2008 report, The Human Cost of Energy, which exposes the ongoing human rights impacts of Total and Chevron’s Yadana Gas Project, as well as a 2008 complaint to the Korean National Contact Point (NCP) regarding Daewoo International and KOGAS’s violation of the OECD Guidelines for Multinational Enterprises through their involvement in the Shwe Gas Project in western Burma. All of these publications reached the general public, shareholders, governments, and policymakers.
According to ERI Program Coordinator Naing Htoo, “ERI isn’t committed to maximizing profit, but to maximizing truth, and we want to share that with the industry and other concerned parties. Until these abuses stop, we’ll continue to document and expose them in Burma and elsewhere.”
In addition, ERI explained how oil and gas projects finance repression in Burma through billions of dollars in non-transparent revenues to the Burmese regime, seriously threatening a company’s public image. In The Human Cost of Energy, ERI estimates that in 2007, the year the military violently suppressed the Burmese peoples’ nationwide peaceful Saffron Revolution, Total and Chevron’s Yadana project alone generated US$969 million dollars in revenue directly to the military regime, enough to fund the regime’s entire military expenditures that year. Likewise, the SGM estimates that the Daewoo-led Shwe Project will provide the Burmese regime with up to US$26 billion dollars in revenue over a twenty year period beginning in 2012.
“Financing the Burmese regime in this way can only reflect poorly on a company’s reputation,” according to ERI’s Smith, “and that will ultimately affect their bottom line and ability to capitalize on deals in the future. It’s simply bad business.”
Several other factors also threaten a company’s bottom line when it decides to do business in Burma. At the Jakarta conference, ERI elaborated on the fact that investments in Burma risk expropriation by the authorities or getting caught in the crossfire of the country’s ongoing civil war between armed ethnic nationality groups and the Burmese regime.
Moreover, companies doing business in Burma risk legal liability and lawsuits brought by affected villagers, such as that faced by the US-based Unocal Corporation in the landmark case Doe v. Unocal. The Unocal case was brought by ERI and others in US courts under the Alien Tort Claims Act (ATCA) on behalf Burmese villagers who suffered rape, killings, and forced labor in connection to the Yadana Project. Unocal (now Chevron) was embroiled in litigation on this case for nearly ten years and settled the case out-of-court for an undisclosed amount of compensation to the plaintiffs. This may have complicated Unocal’s sale of its assets to Chevron in 2005, ERI noted.
According to ERI Campaigns Coordinator Paul Donowitz, “The potential litigation costs a company faces by undertaking new projects in Burma are in the tens of millions of dollars, and a verdict or settlement in favor of plaintiffs could result in a judgment that would materially affect a company’s bottom-line.”
Shareholders are especially concerned with potential litigation risks. In advance of Chevron’s upcoming shareholder meeting next month in San Ramon, California, a shareholder resolution has just been filed at Chevron by a group of US investors in response to concerns about the company’s investment in the Yadana Project in Burma. “Shareholders in the company are legitimately concerned with how Chevron evaluates its human rights impact and under what criteria it starts and ends investments in high risk countries like Burma,” added ERI’s Donowitz. “We encourage all investors to vote in favor of the resolution.”

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