RBS lead near billion pound deal for Uganda war zone oil company

4 Feb 2010

Bailed out Royal Bank of Scotland act as joint coordinators of a £925 million deal linked to a controversial project on the resource-war struck Uganda-Congo border - project alleged to have led to an escalation of violence, with oil companies accused of equipping troops, and allegations of corruption.

students holding up RBS banner and pretending to die with pools of oil instead of blood

Graduate recruitment stunt at Birmingham University

Bailed-out Royal Bank of Scotland have, along with financiers Merrill Lynch, led a deal worth nearly a billion pounds for controversial company Tullow Oil. The finance is closely linked to a project which is said to risk exacerbating violence on the border between The Democratic Republic of Congo and Uganda.

According to news agency Reuters, Tullow Chief Executive Aidan Heavey said the cash raised by RBS and Meryll Lynch would allow Tullow to bring their Ugandan fields to production.These oil fields on the country’s border with the Democratic Republic of Congo are a cause of substantial controversy because of their role in ongoing violence in the region, alleged suppression of those attempting to monitor the situation, and allegations that the Ugandan people will not see sufficient proceeds from the deal.

This is not the first time since the 2008 bail-out that RBS have assisted Tullow in finding credit during their involvement in Uganda. In March 2009, the bank provided roughly $100 million for the company. A few months later, Irish newspaper The Independent reported that: “a near riot broke out on June 17 after journalists and Civil Society Organisations were barred from entering the Tullow Oil drilling area.” They go on to say:

“Heavey (Tullow’s Chief Executive), for example, dismissed claims of a “political risk” looming over the oil sector in Uganda. But just a week before, on Friday June 12, the Wall Street Journal had run a headline: “Uganda-DRC: Tensions mount over Lake Albert resources, oil and gold deposits in a border town breed confusion”.

The story claimed tensions were mounting between Uganda and DRC because the DRC government had put up a checkpoint at Goli, a major commercial town in its territory of Mahagi, Ituri.

The story quoted Betty Adima, the Resident District Commissioner (RDC) of Nebbi district in Uganda (which is adjacent to Congo’s Ituri region) fuming: “I believe this is just aggression. It is provocation. That is the simplest way I can put it.”

The story re-awakened similar tension in August 2007 when a British engineer exploring for Heritage Oil on the Ugandan side of Lake Albert was killed in armed clashes between Uganda and DRC armies. The two countries almost went to war.”

Oil companies in the region seem to have done more than providing an incentive for violence. According to Uganda’s paper The Daily Monitor

“The United Nations Mission in Congo (Monuc) reported later that year (2007) that Tullow’s partner in the license, Heritage Oil, owned by former mercenary fighter Tony Buckingham, had donated speed boats to the FARDC (Congolese national army) in March and had also been responsible for the delivery of 30 Land Rover jeeps to Bunia, which were then distributed to local commanders across the region.”

The border area between Uganda and The Democratic Republic of Congo has long been struck by a war partly fueled by resources including oil. This war is estimated to have killed millions of people.

The deal has also led to considerable controversy in Uganda. Oil industry expert Mika Minio-Paluello from PLATFORM leaked the contents of the secret deal that had been done with the Ugandan government late last year. He argues that

“While the contracts will deliver vast profits to Tullow Oil and Heritage Oil, the contracts will prevent the Ugandan people from receiving their due benefits. The terms of the contracts and the lack of openness are placing Uganda on a track set for the “resource curse”.”

His colleague at PLATFORM, the Uganda based Taimour Lay goes further, arguing in The Guardian last month that:

“The ingredients for the so-called “resource curse” are all in place: contract secrecy, government corruption, commercial disinformation campaigns, with environmental protections ignored, and a simmering border dispute with the Democratic Republic of the Congo frozen rather than resolved.”

Ian Leggett, People & Planet director, said:

“Using taxpayers money to fund this this company’s involvement in Uganda is highly irresponsible. Resources, including oil, have long been a contributor to the violence in this region. drilling for oil on Lake Albert - right on the border between these countries - was always likely to cause substantial problems. RBS cannot be allowed to continue to misuse public money in this way.”

People & Planet - along with the World Development Movement and PLATFORM - yesterday launched a second judicial review over the Treasury’s failure to stop RBS using public money to fund projects which are exacerbating human rights abuses and damaging the environment.