As anxiety grows in the United States and across Europe related to conflicts of interest in government, rising authoritarian power structures, challenges to checks and balances, and concerns about corporate intrusion into policy decisions, we sometimes make note of a connection or a potential lever of influence and wonder if such a lever can be easily pulled, and by whom. Can a corporate CEO join an advisory commission and persuade policy makers to deregulate his or her own industry? Can a high- profile political leader maintain influence and ownership in a private business? Can CEOs alter their business strategy based on the political climate of the times?
Recent events suggest that all of these can and sometimes do happen. How the global community responds will depend on the specifics of the situation, but for now, we present the question of the moment: can state-owned private company channel revenue into a military organization or private militia? And what circumstances facilitate this kind of corruption?
On July 9th, 2011, South Sudan became the world’s newest nation after seceding from Sudan, and its leaders faced a series of immediate challenges, including development needs and a difficult recovery from 50 years of almost continuous conflict. At that point, South Sudan lacked formal institutions and a tested and proven policy-making structure, but it had (and still has) the benefit of significant oil wealth. Very soon after independence, as often happens in newly-established nations, South Sudan became mired in a civil conflict that has placed its development and economic future in peril.
As of this year, new reports suggest that a state-owned oil company is now being leveraged to fund this ongoing civil war. The company, called Nile Petroleum, appears to be handing over funds to politicians, military officials, and companies owned by these people and their family members. Approximately $80 million of these funds, specifically between 2014 and 2015, have been used to arm and finance a private militia that is not only perpetuating the nation’s civil war, but may be committing war crimes and atrocities as well.
According to The Sentry, the respected investigative group that produced the reports, the most expedient way to stop these atrocities is by convincing the United States and the European Union to cut off the fund recipients’ access to international banks and foreign currency. As long as government leaders can siphon oil company funds into offshore accounts, they can continue to use these funds for personal gain.
Contact us to learn more about the state of South Sudan and what may be gained and lost as this conflict plays out and more detail emerges regarding the relationship between the newly established government and the country’s oil sector.