Wall Street Journal
April 8, 2004

World Bank Faces Pressure to Limit Energy Projects

Michael M. Phillips

WASHINGTON -- The World Bank is under increasing pressure to limit its financing of oil, natural-gas and mining projects in developing countries

Antipoverty activists and environmentalists, along with dozens of European lawmakers, have stepped up their campaign to force the bank to adopt the sweeping recommendations of its own extractive-industries review panel. That panel's report urged, among other recommendations, a ban on all World Bank lending for oil production starting in 2008 and a continued moratorium on coal-mining projects.

The report, ordered in 2000 by World Bank President James D. Wolfensohn, concluded that big-money energy projects improve the lives of the poor only if the bank and the host governments also fight corruption, environmental degradation and human-rights abuses. Activists say the projects usually enrich foreign energy companies but not the locals.

"We've often seen the paradox -- countries with the most resources don't always end up lifting the poorest of the poor of their countries out of poverty," said Jody Williams, winner of the 1997 Nobel Peace Prize for her work to reduce the use of land mines. War-torn Angola and notoriously corrupt Nigeria are two countries often cited for their misuse of oil revenues.

Ms. Williams is one of six Nobel winners who signed a letter to Mr. Wolfensohn urging him to adopt the panel's recommendations. A group of 126 lawmakers, most of them Green Party members from Europe, sent Mr. Wolfensohn a similar letter this month.

In an average year, oil, gas and mining projects represent just $900 million of $25 billion in financing provided by the bank and its affiliates, which are owned by the U.S. and other shareholding governments. But those projects -- such as gold mines in Peru or a pipeline connecting oil fields in Chad with the Cameroon coast -- are often extremely controversial.

On the other side of the debate are the oil companies, which often rely on World Bank funding as core financing for big projects in risky countries. "There is no automatic relationship between oil activities and negative consequences on development," as activists claim, a group of executives from Royal Dutch/Shell Group and other oil companies wrote in a briefing paper.

World Bank member governments are likely to discuss the issue at their spring meetings in Washington this month, and Mr. Wolfensohn is expected to make his call on the review's recommendations soon afterward. The bank's board would make a final ruling in May or June.

Bank officials said they plan to endorse many of the review's recommendations. But they are already hinting that they won't agree to end oil projects, which they have long argued represent the only major source of cash for many poor nations. "We're continuing to listen regarding the controversial recommendations," said Joseph O'Keefe, a spokesman for the bank's business-finance arm, the International Finance Corp. However, "phase-outs are not something that has garnered much support among the developing nations or other constituencies."

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