Chad May Alter Its Pledge on Oil Funds

Six months after assuming the presidency of the World Bank, Paul D. Wolfowitz is facing his first big test in his new job. An avowed hard-liner on corruption, he must decide whether the bank should wash its hands of one of its most controversial projects, in a country with a notoriously corrupt regime.

At issue is a 650-mile pipeline that the World Bank helped finance for Chad, a landlocked central African nation of about 10 million, to transport oil from the country’s interior to a coastal port. Despite objections by critics that oil money in such countries is almost invariably squandered or stolen, the bank backed the pipeline in the hope of showing that Africa could use its mineral riches to benefit the poor. It secured an agreement with Chadian leaders that most of the government’s oil proceeds would go into a closely supervised escrow fund in London, to be disbursed and invested on the nation’s behalf in areas such as education, health and rural development.
Now that the oil has been flowing for two years, the wisdom of the bank’s gamble is coming under renewed questioning because the government is threatening to unilaterally change the terms of the deal.

Out of cash for its regular budget amid mounting security problems involving army deserters and refugees on the border with Sudan, the government announced in October that it intends to amend the law governing the petrodollars so it can use a larger chunk of the money for any purpose it likes, including its security forces. Under the proposed new law, the government would double, to 30 percent, the amount of oil money that it can spend without oversight. The government would also halt the diversion of 10 percent of the oil money into a “future generations” fund that is to be spent only after Chad’s oil wells run dry.

A low point for the bank came several weeks ago after repeated phone calls from Wolfowitz to Chad’s president, Idriss Deby, went unreturned, according to bank officials, who said the episode aroused considerable consternation in their ranks. Deby has taken a defiant public stance in response to the bank’s protests against the proposed legal changes, declaring last month, “I will not allow anyone, even if they are a partner, to violate our national sovereignty.”

Washington Post