Burmese generals pocket $5bn from Total oil deal

An impoverished nation is deprived as pipeline cash is deposited in foreign bank accounts, report claims

Andrew Buncombe,Asia Correspondent
Thursday 10 September 2009 00:00 BST

The Burmese military junta has earned almost $5bn from a controversial gas pipeline operated by the French oil giant Total and deprived the country of vital income by depositing almost all the money in bank accounts in Singapore, a new report claims.

Campaigners say Total has also profited handsomely from the arrangement, with an estimated income of $483m from the project since 2000. Campaigners say that the windfall from the Yadana pipeline, operated by Total and two other partners, has been so huge that it has done much to insulate the country's military rulers from the impact of international sanctions imposed over its human rights abuses. The report from EarthRights International (ERI), published today, argues that this makes Total and their partners a major factor in reinforcing the regime's intransigence. And it claims that while their people suffer some of the worst standards of living in Asia, with miserable state investment in health, education, infrastructure and everything else that affects the lives of ordinary people, the self-perpetuating military elite has grown obscenely wealthy.

The pipeline in eastern Burma, which carries gas from rich fields in the Andaman Sea through Burma and into Thailand, has long been controversial. Campaigners have regularly claimed that the authorities have used forced labour in the project, security for which is provided by the Burmese armed forces. Last month, Total rejected claims that forced labour was still being used.

Yet the information contained in the report from ERI, a respected Thailand-based group, provides the most detailed insight yet into the vast sums earned by the regime from the pipeline and what happens to that wealth.

In the report, Total Impact, which has taken two years to research, the group says the junta, headed by General Than Shwe, manages to avoid including almost all its dollar gas revenues in the national budget by using an artificially low exchange rate. This way it calculates its revenue as just 6 kyat to the dollar when the real rate is closer to 1,000. According to a confidential IMF report obtained by ERI, the natural gas revenue "contributed less than 1 per cent of total budget revenue in 2007/08, but would have contributed about 57 per cent if valued at the market exchange rate". The report says that at these rates, the regime has listed just $29m of its earnings while around $4.8bn is unaccounted for.

The report says that "reliable sources" have indicated that the Burmese military regime's portion of the Yadana earnings are located in two leading offshore banks in Singapore - the Overseas Chinese Banking Corporation (OCBC), which holds the majority of the revenue, and DBS Group. ERI says that OCBC is Singapore's longest established local bank.

"The military elite are hiding billions of dollars of the people's revenue in Singapore while the country needlessly suffers under the lowest social spending in Asia," said ERI's Matthew Smith, the report's main author. "The revenue from this pipeline is the regime's lifeline and a critical leverage point that the international community could use to support the people of Burma."

The apparent disregard for its people is a charge that has long been levelled at the Burmese junta, which calls itself the State Peace and Development Council. The group Burma Campaign UK has estimated the regime's spending on health services is the lowest in the world – just 50 pence per person a year – while it spends up to half its budget on the military.

Criticism of the regime increased last year in the aftermath of Cyclone Nargis when the authorities were accused of a fatally slow and inadequate response to the storm that left 140,000 people dead. Suspicious of the motives of outside organisations, the authorities resisted granting entry visas to scores of aid workers. US and other foreign vessels carrying badly needed emergency supplies were refused permission to dock.

Yet while the regime appears happy to let its people suffer – Burma today is the poorest country in the region – senior members of the junta enjoy lives of luxury and excess. In November 2006, a rare insight into the extravagance of the regime was provided by a video of the wedding party of Than Shwe's daughter to an army officer. In the video, posted on the internet, copious amounts of champagne was poured while gifts totalling an estimated $50m were handed to the couple. The wedding presents included cars jewellery and houses.

For a regime facing a series of sanctions and widespread pressure to release political prisoners, including the detained opposition leader, Aung San Suu Kyi, energy deals have become a key bargaining chip in its relations with regional powers such as China and India.

The junior international partners in the Yadana pipeline are Chevron, which is said too have earned $437m from the project, and PTTEP of Thailand, which has earned around $394m. Burma's state-controlled Myanmar Oil and Gas Enterprise is also involved in the operation. Last month The Independent revealed allegations that the Yadana pipeline was still being serviced by forced labour, claims that were denied by Total.

Last night the Burmese Embassy in London failed to respond to questions about the report's allegations. A spokeswoman for Total said it was unable to respond comprehensively to the claims made by ERI as it had not seen the document. Asked about its earning in Burma, the spokeswoman said: "We do not usually comment on our earnings per country. Nevertheless our amount in Myanmar represents 0.7 per cent of the group's results."

She said that in 2008, the group's income was €13.9bn (around $20bn), suggesting Total annually earns $140m from Burma and its controversial pipeline.

A brutal regime: Military rulers who profit

Burma has been under the thumb of the military since 1962, and the current junta has ruled since the late 1980s when it brutally crushed a democracy movement, killing up to 6,000 people.

At the head of the State Peace and Development Council (SPDC) sits senior leader Than Shwe, a former postal clerk now aged 76. Initially considered something of a moderate, the general has shown himself to be increasingly authoritarian and hostile to negotiations. Located in the remote jungle capital of Naypidaw since late 2005, the SPDC's other senior members include vice chairman Maung Aye, who has a reputation for ruthlessness and xenophobia. Some reports suggest that he and Than Shwe are involved in a power struggle.

Third-in-command in the military structure is Shwe Mann, Joint Chief of Staff and co-ordinator of the special forces. A father of three sons, Shwe Mann became a powerful figure in the regime when he was appointed head of all three services.

Then Sein holds the position of prime minister and is considered to be a strong supporter of Than Shwe. In May 2008, as head of the junta's disaster preparedness committee, he became the point man for relief efforts related to Cyclone Nargis. He was notoriously pictured on the front page of a state-run newspaper handing out television sets when people were desperate for food, water and electricity.

The oil giant: Total's global reach

Total's adventures with the Burmese generals have disturbing parallels with the involvement of another French oil giant, Elf – a company Total swallowed in 2000 – with corrupt military dictators in Africa. It's an inglorious story that ended with one of Europe's biggest corruption trials in 2003 and the conviction of three senior executives at Elf. Soon afterwards the company was absorbed into Total and Elf's African operations were rebranded.

A Paris courtroom heard how the oil riches of West and central Africa from Gabon to Cameroon and Congo to Angola had flowed back and forth between Elf and its client leaders – three of whom are still in power while the third, Omar Bongo, died earlier this year.

In that case, although not in this, the company's senior management were accused of personally profiting from the deals. Elf's former chairman, Loïk Le Floch-Prigent, received a five-year jail sentence in 2003, as did the former director Alfred Sirven, while the company's "Mr Africa", Andre Tarallo, was jailed for four years and fined €2m (£1.75m).

The court heard how huge sums were paid – more than €16m annually to President Bongo – to ensure these leaders stayed loyal to Elf. The defendants maintained that French leaders and parties received similar sums to ensure no one interfered with the arrangement.

In Gabon, that meant Elf could act as a "state within a state", while the sweeteners ensured that France's military and espionage operations operated with impunity.

Today, Total is investing nearly $5bn (£3bn) in its Africa operations and is doing business with the same stalwarts from the Elf years: Paul Biya in Cameroon, Denis Sassou Nguesso in Congo-Brazzaville, and José Eduardo dos Santos in Angola. What these countries have in common are sham elections, broken constitutions, rampant corruption and mass poverty.

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