Time to stamp out corruption in commodity trading

This post was originally posted in the Huffington Post Contributors section here.

An explosive investigation by Swiss NGO Public Eye has revealed the complex tangle by which employees of Gunvor, one of the world’s biggest oil traders, offered secret payments to officials in the Republic of Congo for access to the country’s assets.

The case is a painful but vital reminder that the world’s efforts to stamp out corruption in the gas, oil and mining industries still carry crucial blind spots. The upcoming board meeting of the Extractive Industries Transparency Initiative (EITI) on 24-25 October, where leaders meet to increase transparency in these sectors, should renew efforts to reveal them.
As a priority, they should examine how the EITI’s work — which was designed to cover ‘traditional’ extractive companies — could demand more from commodity traders that do not dig or drill but rather trade, invest, transport or store these oil, gas and mineral assets along supply chains worth many trillions of dollars.
The Gunvor Congo case wasn’t new. In 2012 prosecutors raided their Swiss offices, and followed trails of money transfers linked to deals with the Republic of Congo’s national petroleum company. But after those initial revelations, Gunvor blamed a rogue employee.

Last month, Public Eye unearthed evidence that the secretive dealings continued years later, and that Gunvor employees attempted corruption in relation to Congo as recently as 2014.
Inspired by the EITI’s transparency standard, ‘mandatory disclosure’ legislation in over 30 countries (including the EU, Canada and oil-rich Norway) cover many of the world’s largest publicly listed extractive companies. This followed years of efforts from coalitions such as the one I lead, Publish What You Pay, together with committed leaders in government, business, communities and civil society from the global South and the global North. These standards are a huge step to help channel countries’ revenues into equitable and sustainable economic growth, instead of evaporating into a few individuals’ offshore trusts and bank accounts.

But companies like Gunvor, on the grounds that they operate higher up the supply chain as middlemen, not extractors, are not held to the same standards. In the meantime, of course, they can exploit the same harmful networks of patronage.

And Gunvor is not the only suspected offender. A separate exposé revealed the suspicious dealings of another leading commodity trader, Glencore, in Chad, where the country’s ruling elite pocket vast amounts from oil-backed loans.

By contrast, a commodity trading firm called Trafigura chose to proactively disclose its payments to national oil companies in half a dozen EITI member countries. When finally revealed, these payments amounted to $4.3 billion.

Trafigura’s previous ‘claim to fame’ was being outed by the international press for taking out a ‘super injunction’ in British courts – a judge-ordered ban on news reporting that went so far as to include any public mention of the court ruling itself. The story they tried to quash was about their role in a toxic dumping incident in Ivory Coast.
After that scandal, it was encouraging to see Trafigura take a different course, one towards responsibility and transparency in their industry. According to one report, company officials themselves have “spoken enthusiastically about the process and its impact on Trafigura’s reputation.”

While such displays of initiative from individual companies are welcome, the Gunvor scandal shows that EITI member countries should keep the momentum. Following Public Eye’s revelations, Publish What You Pay colleagues in the Republic of Congo have called on the authorities to launch their own investigations and a public audit of the national petroleum company.
There are precedents for this in other EITI member countries. In Indonesia, our PWYP colleagues have been closely involved in the government’s pledge to clean up the extractive sector, including commodity trading, following a push at the EITI level. As a result, the country’s state-owned oil and gas company, Pertamina, was the subject of an audit that revealed many problems. In Cameroon, Chad, Ghana, Mauritania and Nigeria, national oil companies have expressed interest in demonstrating commitment to transparency in oil sales (first trades) in the context of the EITI. More needs to be done however to ensure that the data that is becoming available is easily accessible by stakeholders.

The EITI board meeting is a vital moment to create momentum, and let the sunlight in. Board members should raise the Gunvor case at every turn, and governments should make another push towards strengthening their reporting requirements to deal with the likes of Gunvor and Glencore. Otherwise we will keep waiting for investigative journalists and experts to break scandal after scandal. And we will keep tallying the lost billions, months or years too late.

Following a response from Gunvor, this blog has been amended to reflect the fact that a Gunvor employee was filmed offering bribes, not making bribes, and that the raid of their offices was not focused on the deals in Congo in relation to which they are now being prosecuted by the Swiss Office of the Attorney General. You can read their response here.