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Chad's risky path

September 08, 2006

CHAD, THE MOST CORRUPT COUNTRY on Earth and one of the poorest, has long represented a serious challenge for those seeking to alleviate Africa's relentless poverty. What is the best way to provide aid to a place where the rule of law is nearly nonexistent and the government entirely untrustworthy? One promising attempt to provide an answer may now be cut short.

Some background. Chad has oil reserves, but oil companies long had little desire to do business in a country with a record of rebellion and corruption (according to a survey by the watchdog group Transparency International, Chad was perceived as the world's most corrupt country in 2005). But after the World Bank put up $200 million, in 2003 a coalition of three oil companies completed a 660-mile, $4-billion pipeline from landlocked Chad through neighboring Cameroon to the Gulf of Guinea.

As part of the investment deal, the government of Chad agreed to put 70% of its oil revenues in an independently monitored account to be used for development projects such as clinics and schools. That was OK with Chad President Idriss Deby three years ago. But with oil prices rising and his grip on power fading, Deby now wants more government control and a bigger piece of the pie.

Last month, two of the three companies that funded the pipeline, Chevron Corp. and Malaysia-based Petronas, were told to leave the country, on the almost certainly bogus allegation that they weren't paying their taxes. Not coincidentally, the order came soon after Chad formed a national oil company to boost government revenues. The third oil company, ExxonMobil Corp., was not asked to leave.

Deby has since toned down his demands, saying only that he wants to renegotiate the deal with the three companies under which Chad gets a meager 12.5% of its oil revenues. For now, the development deal with the World Bank is unaffected. But Deby's moves look very much like the opening steps of a plan to nationalize the country's energy industry. That would likely mean an end to foreign investment in Chad, and it displays a blithe disregard for the rule of law, reducing confidence that the government will live up to its development commitments.

Deby is reliant on political and military support from France, and he recently traveled to Paris to meet with President Jacques Chirac. The latter is much more focused on enlisting Deby's help in stabilizing neighboring Sudan than in addressing Chad's oil grab, and Chirac may very well be willing to overlook the matter since it has increased Deby's popular support and could help stabilize his regime. But Chad's president is walking a dangerous path. Chirac should tell him to turn back before it's too late.

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