Analysis of Proposed United States Military Aid to Protect the Caño Limón Pipeline in Colombia

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1. IN COLOMBIA THE OIL INDUSTRY IS A ROOT CAUSE OF CONFLICT

Proposed US funds for increased pipeline security will do nothing to weaken the underlying foundation of violence in the region - complicity between US oil companies and armed actors. In Colombia the oil industry is more than a just a target of violence - it is a root cause of the conflict. Armed groups are attracted to oil-rich areas by oil revenues, which they use to finance their armies. Occidental Petroleum, operator of the Caño Limón pipeline, contributes to the cycle of violence in the region by funding all sides of the conflict.



OXY founder Armand Hammer: “We are giving jobs to the guerrillas . . . we take care of the local population. It has worked out so far, and they in turn protect us from other guerrillas.”2
The Oil Industry Pays Colombia’s Armed Groups
The relationship between North American oil companies and conflict in Colombia is contradictory. Oil infrastructure is a magnet for violence – the Caño Limón pipeline was attacked 179 times by Colombian guerrillas in 2001. Yet ironically, oil companies also fund all of the armed actors. Occidental Petroleum (OXY) is the biggest US player in the region. OXY’s direct contribution to conflict comes through the payment of ‘war taxes’ to armed groups and through equipping and funding local military units. According to the Oil and Gas Journal, “Oil company operations and rebel activity have become inextricably linked.”

· Insurgent Groups. Since OXY first entered the region, it has made payments to guerrilla groups, the ELN and the FARC, which they use for operations throughout Colombia. In the mid 1980s, the ELN were a fledging army. But ‘taxes’ from OXY and other oil generated revenues provided key seed money for expansion of their armies. First year payments to insurgent groups alone are estimated at over $3 million.

· Private Security Companies. The role of OXY and their contracted private security firm AirScan in the 1998 Santo Domingo massacre raises concerns about the complicity of oil companies in human rights abuses in Colombia. OXY’s operational compound was used as the staging ground for the attack and AirScan provided the military with key strategic information gathered during aerial surveillance work for OXY and pinpointed targets on the ground. 18 unarmed civilians—9 of them children— were killed.

· The Colombian Military. Despite continuing links between the Colombian military and paramilitary groups, Occidental Petroleum paid $750,000 dollars last year in logistical support such as transportation and food, as well as approximately $150,000 in direct funding to the Colombian Military. The company has provided Arauca’s 18th Brigade with a fortified meeting room within OXY’s compound.

· Paramilitary Groups. Right-wing paramilitary groups are also funded by the oil industry. According to a Human Rights Watch report, paramilitary forces responsible for the majority of human rights abuses in the region earn an estimated $2 million per year from protecting oil operations in Colombia. An additional annual sum of approximately $5 million is earned from trade in oil stolen (illegally tapped) from the Caño Limón pipeline. This illicit income has funded recent paramilitary expansion resulting in a wave of massacres, disappearances, and forced displacements. There are clear links between many paramilitary abuses and oil interests, which are particularly evident in the assassinations of oil unionist and indigenous leaders. In January 2001 the state prosecutor’s office accused Durán Montaguth, a former Ecopetrol (Colombian state oil company and Oxy’s partner in the Caño Limon Pipeline) official of coordinating a paramilitary massacre in the villages of Tibú and la Gabaifa that left 42 people dead.

2. FURTHER MILITARIZATION WILL EXACERBATE CONFLICT

US-backed military solutions have strengthened Colombia’s deadly cycle of violence as evidenced by the recent intensification of conflict and increased human rights abuses. US military aid for additional pipeline security will only increase violence as armed groups will respond to militarization by stepping up conflict and human rights abuses against civilians. Spiraling violence in the region will place civilians and vulnerable indigenous communities along the pipeline route in the crossfire. Furthermore, US military aid for increased security for the Caño Limon pipeline will not effectively protect it because logistically, the 483-mile long pipeline is indefensible.



President Bush announced the $98 million pipeline protection plan, over 30,000 people took to the streets in the oil-producing town of Arauca to denounce the imminent violence that would result from increased militarization.

Communities in the Crossfire
The proposal to provide $98 million of US aid largely to the Colombian military’s 18th Brigade, which has a poor human rights record, could send a damaging message to all participants in the conflict and expose many innocent civilians to further risk of abuse. Civil society leaders working on oil industry-related issues and local mayors in towns along the pipeline route are already routinely murdered. The intensification of violence resulting from increased militarization of indigenous territories, rural villages and farmlands along the pipeline route, will result in vulnerable civilians being caught up in conflict.

Indigenous Communities Pushed to the Brink
A recent State department report concluded, “indigenous communities suffer disproportionately from the internal armed conflict”. The case of the U’wa indigenous people of Northeast Colombia is particularly worrying as the proposed military aid is intended to encourage further oil exploration in their area, particularly in the controversial Siriri (formally known as Samoré) block. The guerrilla group, the ELN, has declared war on the oil industry; therefore, oil operations in U’wa territories could come under intense attack, trapping U’wa communities.

Since the U’wa people first confronted oil development by Occidental Petroleum on their lands, armed actors have invaded their territories. Guerrilla groups were followed by the Colombian military who was called in by Oxy to protect its drilling equipment. Paramilitaries forces recently announced their arrival in the nearby Arauca province with plans to maintain a permanent presence in the region. Despite the U’wa’s neutral stance in the face of war, oil exploration has drawn in all of the armed groups to the area.

The Caño Limón Pipeline is ‘Indefensible’
Colombian military experts and Occidental Petroleum assert that the 483-mile Caño Limón pipeline that crosses remote farmlands and high Andean mountains is logistically indefensible. The presence of the Colombian state in the vast rural areas along the pipeline is weak and two thirds of local military resources are already dedicated to protecting the pipeline. OXY spokesman Larry Meriage testified before Congress: “the pipeline is 483 miles long, and so there aren’t enough troops in all of Colombia to protect that pipeline along its corridor.”

3. SUBSIDIZING OIL CORPORATIONS WITH PUBLIC FUNDS

The proposed Caño Limón military aid constitutes an imprudent investment of public funds. Much of the oil from the Caño Limón pipeline is not, and will not be exported to the United States. Hence, the use of $98 million to secure optimum pipeline production effectively constitutes a subsidy for US oil corporations operating in a conflict zone. It is not the responsibility of taxpayers to cover Occidental Petroleum’s operational risks, yet, the high ‘per barrel’ cost of Caño Limón oil imports to the US will be passed on to them.

An Irresponsible Investment of U.S. Public Funds
The financial viability of the proposed aid investment is questionable. According to the U.S. Ambassador to Colombia, Anne Patterson, $98 million in military aid to protect the Caño Limón pipeline is critical to securing US oil imports which provide “ a small margin [for the US] to work with and avoid price speculation.” Yet, only a portion of Caño Limón oil is exported, and not exclusively to the US, meaning the return on public funds invested is minimal when the high price of security per barrel delivered is considered:

· Even if Caño Limón export volume bounced back to their 5-year peak of 22 million barrels a year (60,000 barrels per day) and 100 percent of exports were shipped to the US, the security cost per barrel for US taxpayers would be $4.50.

· For the current Caño Limón export volume of just 4 million barrels a year (11,000 barrels per day), the proposed aid would result in a staggering US taxpayers’ subsidy of $24.38 a barrel, or more than a $1 per gallon of gasoline.

Figures confirm that $98 million of aid to protect oil imports from Colombia does not make financial sense. This aid is an irresponsible investment of public funds.

Taxpayers Underwrite Operational Risks of Oil Companies
Public funds should not be used to buffer financial risk for US oil corporations operating in war zones. It is not the responsibility of US taxpayers to cover overseas security costs or operational liabilities. Yet, given the small amount of oil currently or even potentially imported to the US from the Caño Limón oil fields and the high cost of proposed security increases, this aid proposal appears to be aimed primarily at ensuring profitable returns OXY and other US corporations.

Furthermore, Ambassador Patterson has made clear in her statements to the press that is the Administration’s hope to secure the larger oil production area—believed to have new oil potential – for US corporate investors. What this means is that US taxpayers will be paying overseas security costs for private businesses that knowingly enter into high-risk ventures in conflict areas.

170 bomb attacks disabled the Caño Limón pipeline for much of last year and resulted in shutdowns estimated to have cost Occidental Petroleum some $75 million in expected profits. However, Occidental invested in the Caño Limón field with full awareness of these risks. The proposed security aid more reflects the company’s ongoing investment in Washington. In the 2002 election cycle, Occidental has already contributed $276,900 with 78% going to the Republican Party. This follows on $550,700 contributed to political campaigns in 2000, with 59% invested in the Republican Party.

4. MILITARY AID WILL NOT BRING STABILITY

Military aid will not meet the needs of the impoverished Caño Limón pipeline region, blighted by unsound investment practices and corruption. This security-focused approach might increase oil returns but offers no solution to the extortion of oil takings by armed groups and the unwise investment of oil revenues by local authorities. A more comprehensive aid package is needed to confront the social and economic instability on which conflict thrives and the political weakness on which economic ties between armed actors and the oil industry depend.

Oil and Violence Undermine The Local Political System
In Colombia’s oil producing regions, economic dependency on an oil industry ensconced in conflict has bred a political climate mired in corruption and extortion. Oil plays a central role in Colombia’s economy. In oil regions, regional and local authorities’ budgets depend almost wholly on oil royalties because income from other federal sources is limited. However, the benefits of oil revenues have not touched the lives of the majority of the population in oil-rich areas because of insidious relationships between armed groups, oil companies and some local officials.

· In Arauca, home of the Caño Limón oil fields, an unknown amount of oil royalties are channeled to armed groups who extort payments from local officials. Oil revenues then finance armed campaigns throughout the country.

Oil Revenues - No Panacea For The Poor
The problem of unsound investment is compounded by the presence of large numbers of poor economic migrants attracted to the area by the illusion of oil industry employment who place additional strain on overstretched social services. Since oil development began 20 years ago, the population of Arauca city has increased from 17,000 to 78,000. The city has 14 extreme poverty areas and 30% of houses receive no basic services (nationally, this figure stands at 10%). Thousands of workers in Arauca city depend on employment with Occidental Petroleum, yet most contracts are limited to 3 months a year.

Endemic poverty along the Caño Limón pipeline route is partly explained by neglect in the spending of oil revenues on social services and economic infrastructure.

· Oil revenues have been invested in large-scale agro-industry (mainly cattle-ranching) and recreational facilities for more prosperous social sectors. For example, the Casanare regional authority spends roughly 1/4 of oil royalties on beauty pageants, floral arrangements, recreation projects, and foreign travel.

· There has been insufficient investment in other economic activities such as crop production. Depleted expenditure on the region’s irrigation systems has resulted in only 10% of Arauca ‘s 500,000 hectares of rich agricultural land being in use.

In the words of Major Edgar Delgado, military commander at Caño Limón oilfield: "We don't need more aircraft or more weapons," he says. "The [military] aid should come with progress - education, health clinics, and roads.”

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