Reclaiming Guyana’s Oil Wealth: Confronting Political Cowardice and the Surrender of Sovereignty Part 2
Introduction
Last week I called out the political leaders for their cowardice and dishonesty for hiding behind “sanctity of contract”. Someone pointed out that I seem to have spared Shuman’s Liberty and Justice Party and the United Force (if it exists). That was an oversight.
The response to last week’s column was silence from the political parties, no doubt hoping that this too will pass. I will not let up or let them off the hook. So, what I have done is compiled a Survey Questionnaire which I am sending not only to the political parties but to business organisations, including the PSC, to trade unions and to other CSO’s in the country.
Before going into the Survey, I want to address some of the simple options available to our political leaders in righting some of the wrongs. Here are a few.
Independent Petroleum Commission. The establishment of an Independent Petroleum Commission, free from political interference and empowered to stand up to multinational corporations, is not just desirable – it is absolutely necessary to reassure Guyanese that everything possible is being done, and is seen to be done, in protecting the country’s sovereignty over its natural resources. Such a Commission must be independent of the politicians rather than their conduits, as is the case of so many state entities, commissions and other bodies. A united national front is crucial, but it must be one that places Guyana’s interests first. Such a Commission should include economists, petroleum specialists, legal and financial experts who can match the expertise of the oil companies at the negotiating table.
OECD/G20 Tax Framework. Another important option available to the country is the ability to leverage international agreements, like the OECD/G 20 Framework for a 15% minimum global tax, to our advantage. Guyana is in the unfortunate and undesirable position in which it is among a minority of countries not to have ratified the Framework. This omission can be corrected in the shortest possible time, making the tax regime of the country compatible with international norms. Once done this is done, it would be hard to see Exxon crying foul and a breach of the 2016 Agreement. Instead of hiding behind the shield of “sanctity of contract,” this tool will provide Guyana the opportunity to collect billions in taxes for which it can issue legitimate receipts instead of what now takes place. Equally importantly, it does no harm to the country’s reputation for following international norms.
Ringfencing: This is probably the easiest of all. All the Minister of Petroleum has to do is set a simple condition in a Production Licence that exploration costs in looking for petroleum outside of the Production area are not recoverable expenses against revenue from production. It is the ultimate in dereliction that this condition has NEVER been applied.
The betrayed citizens
It is against this background that citizens must demand that all political parties publicly declare their positions and strategies on the 2016 Agreement and hold them accountable for any stance that compromises our national sovereignty. This should include a commitment to full transparency in all dealings with oil companies, regular public updates on the state of our oil resources and revenues, and a clear plan for how to increase our take and how oil revenue will be used to benefit all Guyanese.
As Guyanese look towards the 2025 elections, they deserve more than empty rhetoric and vague promises, or the repetition of broken promises. They also need leaders who understand that true sanctity lies in protecting the interests of the Guyanese people, not in defending a flawed contract and protecting the oil companies to the detriment of the country. We need comprehensive, expert-backed proposals for renegotiation that reassert our sovereign rights over our resources.
The upcoming elections are probably the last chance for the country to correct the misdeed of the APNU +AFC Coalition and the broken promises of the PPP/C. What is staggering is that the Agreement allows for its modification by mutual consent which both major parties use as a scare-mongering bogeyman, accusing critics of calling for an abrogation of the Agreement. To use Jagdeo’s words, “they have sold us out,” but the only thing is that he has now become part of the “they.” The tools are available, and the opportunities exist to level the playing field with oil companies.
What does not exist is the political will and courage to face up to the evil brought upon the country, led by politicians who cower in the face of this challenge and who willingly cede our sovereignty to foreign interests.
The Survey
Here is a brief overview of the survey questionnaire.
First and foremost, the Questionnaire seeks to understand awareness of Article 31.2 of the Petroleum Agreement, which allows for amendments with the contractor’s consent. The survey highlights several contentious issues within the agreement:
- The meagre 2% royalty rate
- Lack of ring-fencing provisions
- Guyana paying taxes on behalf of oil companies
- Oil companies receiving tax certificates for credits in their home countries for taxes which they have not paid.
- Guyana only being guaranteed 12.5% of gross revenue, in addition to the royalty.
Perhaps most alarming is the 40-year stabilization clause, which prevents new legislation that could affect oil companies’ interests. This clause effectively surrenders Guyana’s sovereignty and ability to adapt its laws to changing circumstances for decades to come.
Another critical issue is the Natural Resource Fund (NRF) and its withdrawal rules. The current arrangement, which allows the government to withdraw US$3,700 million of the first US$4,000 million the country earns per year, raises serious concerns about intergenerational equity and long-term resource management.
It’s worth noting that the petroleum world has numerous examples of countries successfully renegotiating oil contracts when circumstances change or when original terms are found to be against national interests. Our leaders’ failure to even consider this option is a dereliction of their duty to protect Guyana’s interests.
Respondents have been given fourteen days in which to respond and the results will be highlighted in future columns. It will be a good measure of who deserve the support of the Guyana electorate in 2025. The results will be published.
Please note that the questionnaire is available on chrisram.net and I invite everyone to participate.