The Battle over Ecuador’s Oil Takes New Twist
October 4, 2013 | David Hill | Source: China Dialogue
The announcement by Ecuador's president, Rafael Correa, that he has abandoned a ground-breaking scheme stopping oil operations in the Amazon has led to a wave of protests across the country and speculation about why it failed.
The stated aim of the scheme, now widely known as the "Yasuni-ITT Initiative", was to permanently forgo exploiting 100s of millions of barrels of oil in the Ishpingo, Tambococha and Tiputini fields under the Yasuni National Park in return for compensation for at least half the unearned revenues, estimated at $3.6bn.
Yasuni is one of the most biodiverse places on earth and the region above the ITT fields – known as Block ITT or Block 43 – inhabited by two indigenous groups in 'voluntary isolation' who could be decimated by any contact.
The Yasuni-ITT initiative grew out of Ecuador's civil society and was publicly adopted by Correa in 2007, with a trust established in 2008 to collect contributions and another trust administered by the UNDP. The specifics changed over time, but it came to be seen as a revolutionary way to protect the rainforest and biodiversity, respect indigenous peoples' territories, and, by avoiding burning fossil fuels and emitting millions of tons of carbon dioxide, fight climate change.
However, it was brought to an abrupt end last month when Correa announced he had signed a decree liquidating both trusts and wanted to drill.
This has triggered protests involving thousands, severe criticism in social and non-state media, condemnation from indigenous organisations, and a petition to the Constitutional Court to force a referendum to reverse Correa's decision.
Before the announcement, over 80% of Ecuadorians supported the initiative, but an intense government media campaign has shifted opinion.
'Most recent polls show 50% of people in favour, 50% against,' says Eduardo Pichilingue Ramos, from the Centre for Economic and Social Rights (CDES). 'Obviously, there's some state media which is pro-extractive industry, pro-president, but practically all of the independent, private media have been critical. There's news about it every day.'
According to reports, the government has moved to expel students rallying for Yasuni, censor Yasuni media coverage, and erase the 'isolated' indigenous peoples from its Block ITT maps in an attempt to avoid violating Ecuador's Constitution protecting such people from 'ethnocide'.
Correa's announcement has also generated considerable international reaction, with demonstrations outside Ecuadorian embassies, a statement to Congress by more than 100 scientists concerned for Yasuni, and one to Correa by over 130 scholars urging him not to let Yasuni-ITT 'die'.
According to last month's decree, only $11.3m was received by the UN trust and $2m by the national trust. Correa was quick to apportion blame, saying, "The world has failed us.""
"It was unique and ingenious, but it was a lot of money to raise after an international financial crisis and the rest of the world basically ignored it," says Boston University's Kevin Gallagher. "People just weren't convinced."
Some blame Correa himself, citing confused objectives and strategies, frequent references to a "Plan B" to exploit ITT, and permitting operations in adjacent Block 31 where a road was built last year. The deposits are so small that, according to National Geographic, critics claim the real reason is to "lay the infrastructure for an eventual move into the ITT Block next door."
"Correa made a series of confusing declarations," says Alberto Acosta, ex-Energy Minister under Correa who played a fundamental role in the initiative. "One Saturday he'd be for it, the next against."
"Correa's discourse was: "We'll conserve the park if we get the money," says CDES's Paulina Garzon. "It was always conditional. It wasn't, 'We WILL conserve the park. Please help me.'"
"The industrialised world isn't blameless, but most blame goes to Correa," says Amazon Watch's Adam Zuckerman. "It was difficult to sell the initiative if you're drilling right up to ITT, and he's been talking about 'Plan B' pretty constantly over the last year. Then there's this road into Block 31 that tipped people off. Just because others didn't pay up doesn't mean he has the right to defy his own constitution or commit ethnocide."
China and Ecuador links
The interests of Chinese companies and Ecuador's general dependency on China for finance has also been acknowledged. Since its 2008 default on IMF loans, Ecuador has agreed to borrow more than $10 billion from China and 'pledged about half its monthly crude production to pay down its debt,' states Bloomberg.
"The way the international debt regime works is, if you default, the rest of the world won't finance you," says Gallagher. "China said, 'We're willing to.' It's a lifeline for Ecuador, but the Chinese will be paid in oil which further intensifies pressure to drill."
Indeed, Chinese interests have also been linked to ITT directly. Roque Sevilla, former president of the Yasuni-ITT negotiating team, told the Hoy newspaper that a refinery on the Pacific coast would involve Chinese financing and he had documents proving it is to be supplied with ITT oil.
Moreover, back in April 2007 the Energy Ministry issued a statement that although its "first option" was to leave the ITT oil in the ground, its second was to drill and therefore it was proposing a "Memo of Understanding" between state oil company PetroEcuador, Chinese state company SINOPEC and others. In July and August PetroEcuador negotiated agreements with SINOPEC et al, and that year SINOPEC presented a map to the Ministry titled "Comprehensive Development Plan for the Exploitation of Crude Oil in ITT" showing a projected pipeline connecting ITT to an existing pipeline.
Four years later, Block 14, operated by PetroOriental, part owned by SINOPEC and part by another Chinese state company, CNPC, was extended east to Block ITT.
"Who would benefit from the exploitation of Yasuni?" asked NGO Acción Ecológica, circulating a map of the new Block 14. "The oil companies – the favourite being PetroOriental, a Chinese firm, which is now just one step from Tiputini following its contract renegotiation".
"I suppose that was to facilitate the gift of ITT to the Chinese," says Acosta.
"That made a lot of people suspicious," says Pichilingue Ramos. "That was initially said to be the beginning of ITT's exploitation."
Suspicion also remains about how serious Correa's government ever was about not drilling. Ecuador is a poor country dependent on oil, and Blocks 14, 16, 17 and 31 already include parts of Yasuni.
"This isn't only about Correa," says Eduardo Gudynas, from the Latin American Centre for Social Ecology. "This is about the government's inability to present alternative strategies, and the many people within it pushing to drill. Many always had Plan B as their objective, and those for Plan A weren't strong enough."
According to Hoy in 2010, on 11 June 2007 – six days after Correa publicly adopted the Yasuni-ITT initiative – PetroEcuador's CEO requested the boundaries of the Yasuni National Park to be re-drawn to exclude Ishpingo wells, and Roque Sevilla was in possession of a document presented to the president three weeks earlier by PetroAmazonas, part of PetroEcuador, proposing exploiting both Tambococha and Tiputini.
"Correa thought the crude could be extracted from Tiputini," says Acosta. "There've been various attempts on that T and the other T too. I can't say he always wanted to drill, but he was never sure of the initiative and necessary strategy. There were always doubts."
For many, like Acosta and Acción Ecologica's Esperanza Martinez, the Yasuni-ITT initiative is far from dead. "On the contrary," she says. "It's being rejuvenated. It has been recovered by civil society and alternatives are being proposed showing that that oil doesn't need to be exploited. Now there's a Plan C, a Plan D, and we're calling for a referendum."
Rafael Correa and PetroOriental could not be reached for comment.