The US House of Representatives missed an important opportunity to end oil aid in a bill [Acrobat pdf] that will “re-authorize” the Overseas Private Investment Corporation (OPIC) – one of two agencies in the US government that uses taxpayer dollars to provide financing, insurance and guarantees to US businesses wanting to expand their operations in foreign countries.The bill’s report language “discourages” OPIC from providing any assistance “for projects that involve the development, extraction, processing or transportation of crude oil.” It also states that “limited public resources for foreign assistance should focus on the many critical needs of development countries” and “extractive industries have significant access to private capital markets and increasingly do not need OPIC assistance.” While these are important and significant assertions, unfortunately, the report language is non-binding, acting as guidelines to OPIC rather than legal mandates.

This year, the House could have taken an important step to close loopholes in OPIC statute which, despite restrictions on directly financing the surveying and extraction of oil, allow indirect financing of these activities and the provision of any type of support for other oil-related operations. For example, in 2005 alone OPIC provided $580 million in support for oil and gas projects, including direct financing for pipelines. In the past several years, OPIC has used public funds to subsidize the overseas operations of many oil giants such as Exxon, BP and Unocal/Chevron.

The OPIC Reauthorization Bill (H.R. 2798) [Acrobat pdf], passed by the House on Monday and now being debated in the Senate, not only fails to rollback subsidies to the international oil industry, but falls short when it comes to clear directives in other areas:

• While the House bill mandates that OPIC “establish a goal of substantially increasing its support of projects that use, develop, or other-wise promote the use of clean energy technologies” [emphasis added] it fails to clearly define a portfolio target, giving large discretion to OPIC to determine what is meant by a “substantial increase.”

• While the House bill require that OPIC notify Congressional committees 30 days before providing support to a project in the extractive industries, this only applies to projects in which OPIC assistance is valued at $10,000,000 or more. This is a seemingly high threshold.

• While the House bill requires that OPIC “gives preference to” a project in which both the investor and host country implement the internationally recognized Extractive Industries Transparency Initiative (EITI) principles, it only requires that either the investor or country meet EITI principles “or substantially similar principles and criteria.” As written, such a provision will do little to change the way OPIC currently operates.

It is disappointing that the House OPIC Reauthorization Bill could not make clear commitments around such things as a defined target for lending to renewable energy projects and phasing out support to oil companies which have adequate access to private capital. We can’t fight climate change and invest our public resource in clean, renewable energy technologies while, as the same time, continuing to subsidize the oil industry. While the US must carry the responsibility for lowering its own emissions, our public foreign assistance should be geared towards helping impoverished countries establish renewable energy infrastructure rather than following the current policy and creating an oil-based infrastructure that will result in these developing countries producing harmful greenhouse gases.

• See the entire bill: H.R. 2798 Overseas Private Investment Corporation Reauthorization Act of 2007. [Acrobat pdf] (See the end of the summary of Section 8, on page 20, for the language that “discourages” OPIC investment in oil operations.)

• See an IPS article on the bill: OPIC Extension Tied to Terror and Environment.

Representatives Maxine Waters (Democrat from California) and Spencer Bachus (Republican from Alabama) have introduced the 2007 Jubilee Act for Responsible Lending and Expanded Debt Cancellation (HR 2634) in the United States House of Representatives.Oil Change International has been working with Jubilee USA on the connection between oil dependence and the debt trap, and the Jubilee Act expresses support for “the development of responsible financing standards where creditors and aid/loan recipients alike adhere to standards…, while encouraging the development of renewable energy and helping countries to transition away from dependence on oil.”

The Jubilee Act is the centerpiece of the Jubilee USA Network’s 2007 Sabbath year campaign. The Act:

1. Calls on the Bush Administration, the IMF, and the World Bank to ensure they keep their promises on debt cancellation and to challenge the activities of “vulture funds”;

2. Calls for expanded debt cancellation for all impoverished countries that will use the freed resources well and need debt cancellation to meet the Millennium Development Goals;

3. Creates new standards for responsible lending and creditor transparency by calling for measures to address the problem of vulture funds as well as debt audits of odious and illegal debts from the past.

After two years as President at the World Bank, Paul Wolfowitz, architect of the Iraq war, tendered his resignation on Thursday evening.“I have concluded that it is in the best interests of those whom this institution serves for that mission to be carried forward under new leadership,” writes Wolfowitz in a statement posted on the World Bank’s website.

His resignation follows weeks of public scrutiny and debate among the Bank’s Board of Directors regarding Wolfowitz’s involvement in a promotion for his girlfriend. However, this scandal triggered a much broader criticism of the Bank’s governance structures.

In a statement from the Board, Executive Directors of the Bank agree: “One conclusion we draw from this is the need to review the governance framework of the World Bank Group.” World Bank presidents may come and go but, unfortunately, the real scandal remains: that is a global public institution which continues to benefit the few rather than realizing the basic needs of the many.

Quick facts:

• Despite billions of dollars of aid, loans and other investments in the energy sectors in impoverished countries, World Bank data reports that 77 percent of people in Sub-Saharan Africa—526 million people—still don’t have access to electricity.
• In fiscal year (FY) 2006, the private sector lending arm of the World Bank, the International Finance Corporation, increased its lending for oil projects by 77%–from $150 million in FY05 to $264 million in FY06. (More on this…)
• The soaring costs of oil are undermining the benefits of debt cancellation by draining far more money out of impoverished countries than canceled debts are able to contribute. According to figures compiled by the Center for American Progress (CAP), the cost of Tanzania’s oil imports rose by about $290 million from 2002 to 2006. Conversely, debt cancellation is expected to free up roughly $140 million in Tanzania in 2006, less than half of the additional amount that the country is paying for oil imports. (More on this…)