Direct World Bank financing for oil companies is worth hundreds of millions of dollars a year, but the Bank’s behind the scenes work to make the world safe for Big Oil is priceless.While Bank support for mega-projects involving companies like Exxon and BP may get most of the attention, the Bank’s biggest impact on oil comes from its role in pressuring countries to reform their oil sectors in ways that suit the interests of international oil companies.

This is a complicated form of “oil aid” with a lot of layers to it, which is why it usually goes unreported, but today’s events in Ecuador are a useful reminder of how far the Bank is willing to go.

Ecuador’s new President, Rafael Correa, accused the World Bank today of “extortion”, saying that the Bank froze a $100 million credit to punish him for reforming the oil industry, and he has expelled the Bank employee that is accused of doing the arm twisting.

Correa previously served as Ecuador’s Minister of Finance, during which time he adopted reforms designed to create an oil fund to buy back Ecuador’s sovereign foreign debt. According to Correa: “When I became minister and turned out not to be a messenger boy for the World Bank, they held the check… They messed us around for three months, and when I went to Washington, they told me that they did it because we reformed our law. That is, they punished a sovereign country for rewriting its own law,” he said.

Only 10 days after Congressman Maurice Hinchey introduced the End Oil Aid Bill in the U.S. Congress, more than 150 organizations from 50 countries have written to House Speaker, Nancy Pelosi, recognizing her clean energy efforts and calling on her to lend support to eliminate international ‘oil aid’.

The letter (Acrobat pdf) cites over $20 billion in international subsidies to oil companies since the early 1990s and states that the projects supported by this aid “fuel global warming, encourage oil dependence, and increase conflict and poverty around the world.” The letter emphasizes that “ending oil aid and focusing on supporting truly sustainable energy alternatives would be an important step in addressing energy poverty and catalyzing new renewable energy.” “As Congress acts to repeal tax breaks and other handouts for oil companies,” signatories urge Speaker Pelosi that she “also work to end international assistance to Big Oil.”

• Read the End Oil Letter to Speaker Pelosi (Acrobat pdf) with list of signatories.
• Read and provide your comments in our blog on the End Oil Aid Bill.

The scandal at the World Bank is quickly spreading to Paul Wolfowitz’s handpicked deputy, Juan Jose Daboub. First he is accused of trying to remove references to “family planning” from World Bank documents, now the Bank’s Chief Scientist, Robert Watson, is accusing him of trying to erase references to climate change from the Bank’s Clean Energy and Investment Framework.The World Bank’s private sector lending arm increased its support to oil companies by more than 75 percent last year, so it is no surprise that the Bank doesn’t want to face up to the problem of climate change. But are these really the people that you want in charge of designing a Clean Energy Investment Framework for the developing world?