Impact of Internal Conflict on Extractives Industry in Colombia

=Overview=

A sub-argument of the Resource Curse debate concerns the nexus between natural resources and violent conflict. Research led by the World Bank suggests that developing countries face substantially higher risks of violent conflict and poor governance if they are highly dependent on primary commodities. Paul Collier attributes this to the scope these activities provide for extortion by rebel organisations.

Companies often have to operate against a background or a threat of conflict and the extractive industries are more exposed than other sectors, often necessitating operations in more remote areas and with large fixed assets that cannot be easily moved. Groups jostling for power in a conflict may also see control over natural resources as a strategic objective.

In Colombia in particular the high level of political risk created by the decades-long internal civil conflict has had a significant impact on the development of the extractives industry in the country. In his paper for York University, Scott Pearce asserts that in Colombia there appears to be a strong correlation between regions of mineral wealth and regions of political conflict.

=Impact of international private sector in Colombia=

According to the UN Global Compact, international oil companies (IOCs) investing in a developing country adopt a position of of political neutrality, at least formally. However in the context of a civil war, factions in the conflict depend upon oil to finance their war-fighting capacity. They ask in their report whether it is possible to avoid complicity in this context?

Armed groups in a conflict can seek revenues from oil companies in several ways. In the case of the Colombian conflict, protection money and ransoms for kidnapped employees has been a common transaction. The armed groups reinforced their threats by attacking oil transportation infrastructure.In Colombia in particular the high level of political risk created by the decades-long internal civil conflict has had a significant impact on the development of the extractives industry in the country. Scott Pearce suggests that the oil industry in Colombia may have enriched the guerrilla factions in the country, through oil-related extortion, pointing out that an executive from oil major Occidental testified that their contractors in Colombia paid the so-called 'war-tax' to rebels in order to guarantee their security. Political scientist Nazih Richani even asserts that the FARC decided at a 1982 conference to move operations closer to strategic resource-rich areas in order to create a strong economic infrastructure.

A 2001 report by Christian Aid also reveals that oil companies in Colombia are known to have become involved in the internal conflict dynamics by entering into arrangements which oblige them to furnish the Colombian military with goods and services, including security and communications equipment, information, engineering and health services, helicopter time and land transport. They are also said to have made direct cash payments.

=Developments 2011-2012=

Despite improvements in the security environment for the Colombian oil industry since 2003, in August 2011 the Los Angeles Times reported that attacks on infrastructure and kidnappings of oil company personnel had increased in recent months, jeapoardizing gains in security made over the previous decade. The reports claimed that a widespread perception of increased violence was backed up by opinion polls and that energy companies have expressed their concern. At 193, the number of kidnappings in Colombia over the period January-August 2011 were up 25% compared to the same period the previous year. Attacks on electrical towers more than doubled over the period and there had been 13 bombings of pipelines and other oil infrastructure, up from 11 the previous year. Amid this resurgence of violence, Colombian Defence Minister Rodrigo Rivera abruptly resigned.

There were also reports in late 2011 of death threats being issued to members of oil industry trade unions by paramilitary groups in the Llanos Orientales region. Furthermore, in January 2012 press reported that oil union leader Mauricio Arrendondo and his wife were assassinated at their home in the south-western province of Putumayo.

Attacks on pipelines and other infrastructure by armed groups also continued into 2012, such as the January attack on a pipeline operated by Petronorte in the El Tarra municipality, in the northern province of Norte de Santander.

=References=