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Leaders' Statement

Daniel Kaufmann

President and CEO

Natural Resource Governance Institute

UK / US (HQ), North America

Bio

Daniel Kaufmann is president/CEO of the Natural Resource Governance Institute. He is an economist and an expert in corruption. Kaufmann is a member of EITI’s board, a non-resident fellow at the Brookings Institution, and has held several senior positions at the World Bank.

Statement

Oil and mining transparency laws must include trading

Key commodity trading hubs including Switzerland, the United Kingdom and the United States should close a major transparency gap by extending their natural resource payment transparency regulations to include the trading of oil, gas and minerals in order to reduce corruption.

An open and accountable natural resource sector is essential to tacking corruption. Much has been done in recent years including the establishment of the Extractive Industries Transparency Initiative (EITI) and new regulations requiring payment transparency in the sector. But there is much more to do. The London Anti-Corruption Summit should promote the adoption of several specific measures to address corruption risks in the oil, gas and mining sectors. They include requiring beneficial ownership disclosure, full disclosure of assets by politicians and high ranking officials, and full open contracting and procurement in the sector.

When governments and state-owned enterprises sell natural resources, these revenues should benefit all citizens. In many oil producing countries, the national oil company sells oil to international commodity traders. Payments from these oil sales trading transactions can be the largest source of revenue for a country and yet are largely opaque. For instance, total sales by the national oil companies of Africa’s ten largest oil producing countries from 2011 to 2013, totalled $254 billion, amounting to over one-half their combined government revenues.

Corruption can occur in the selection of the buying companies, in setting terms of the sales, and when secrecy around commodity sales allows governments to misappropriate the proceeds. Transparency is particularly needed in today’s world of low commodity prices, as trading companies engage in highly profitable deals with cash-strapped producer countries.

International action by home country governments is urgently needed to make oil, gas and mineral trading more transparent and accountable. The EITI recently included trading into its standard, but EITI is voluntary and does not include key countries. The new mandatory payment disclosure laws in the EU, Canada and the US have so far neglected trading-related payments, despite their huge size.

Switzerland, the world’s largest trading hub, will introduce oil, gas and mining sector transparency legislation later this year. It has agreed to include trading-related payments in its law but only if there is international action. The London Anti-Corruption Summit can be the moment when this international action emerges, if major trading hubs including the United Kingdom, Switzerland, the United States and Singapore commit to including trading transparency in their laws.

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