Drilling into Debt: An Investigation into the Relationship between Debt and Oil

The following report was released at the G8 Summit in London, on June 29, 2005. The report includes case studies on the link between oil extraction and debt of countries such as Ecuador, Nigeria, and Congo-brazzaville. The study finds that oil production and export increases rather than relieves countries’ debt burdens, despite generating massive revenues.

The full report can be downloaded below.

For Immediate Release

G8 Oil Aid increases African Debt

Nigeria’s Increased Oil Production Projected to Generate
$21 Billion in New Debt by 2010

London – New research published today reveals that the energy strategy for the G8 is fundamentally at odds with its development strategy for Africa and the rest of the world. Drilling into Debt, co-published by Oil Change International, the Institute for Public Policy Research, and the Jubilee USA Network (with additional support from Milieu Defensie and Amazon Watch), finds that oil production and export increases rather than relieves countries’ debt burdens, despite generating massive revenues.

Doubling a country’s annual production of crude oil will increase the size of its total external debt by 43% as a share of its GDP, the report concludes, as well as increase debt service burden by 31%. For a country like Nigeria, which plans to increase production by 160%, this means a rise in external debt of US$21 billion by 2010. In addition, a World Bank program designed to increase private investment in the oil industry of developing countries, was found to lead to debt levels (debt-GDP ratios) in those countries that are 19% higher than those countries that did not undergo this form of structural adjustment.

Petroleum emissions are responsible for slightly more than a third of all global greenhouse gases, and Africa and other developing regions are highly vulnerable to the impacts of a changing climate.

The G8’s energy strategy, however, is to increase oil development in developing countries. Already, global annual subsidies to the fossil fuel industry are estimated at between US$20-235 billion. And the G8 Finance Ministers in their June 11 communiqué committed themselves to the “elimination of impediments to private investment” in Africa. Oil and minerals receive at least 60% of foreign direct investment in Africa – and much higher in oil exporting countries.

“If Tony Blair and other G8 leaders are serious about tackling global warming and debt in Africa, they need to be willing to end support for the common factor that causes both – oil.” said Steve Kretzmann, Director of Oil Change and co-author of the report. “While we welcome debt relief for Nigeria, we’re concerned that their 160% projected increases in oil production virtually guarantees that they’ll be out of the frying pan and right back into the debt fire”.

The report’s key recommendations include: Ending Oil Aid; Increasing support for renewable energy and efficiency; and that the G8 should immediately cancel 100% of the remaining multilateral and bilateral debt.


Drilling into Debt is the first study to rigorously examine the relationship in between oil and debt. The authors, Steve Kretzmann of Oil Change and Irfan Nooruddin of The Ohio State University, collected data on 161 countries for the period 1991-2002, and collected further data on 88 developing countries for the period 1970-2000 for use in a statistical model of debt burdens. The authors supplemented that analytical exercise with additional research, in order to shed light on the policies that led to the current situation.

For more information, visit www.priceofoil.org

CONTACTS: Steve Kretzmann, Oil Change, 001-202-497-1033 (US mobile, in London); Simon Retallack, IPPR, 07739 136 775 (UK); Neil Watkins, Jubilee USA Network, 001-202-421-1023 (US); Irfan Nooruddin, The Ohio State University, 001-614-330-8759 (technical inquiries)

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