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NewSecurityBeat

The blog of the Wilson Center's Environmental Change and Security Program
  • Landmark Law Takes Aim at the “Resource Curse”

    July 22, 2010 By Schuyler Null
    By signing the financial overhaul package on Wednesday, President Obama also enacted the first major U.S. government attempt to require transparency in the international oil, gas, and mineral trade, aimed at reducing the risk of “resource curse” scenarios that have plagued countries like Nigeria and the Democratic Republic of Congo.

    The amendment, sponsored by Senators Bill Cardin and Richard Lugar, requires extractive companies registered with the SEC to publicly disclose their tax and revenue payments to foreign governments. The amendment singles out the DRC for additional scrutiny: companies trading in tin, coltan, wolframite, and gold – minerals found commonly in eastern Congo – will need to report whether they are sourcing from the DRC or its neighbors and disclose what steps they have taken to ensure that their supplies are conflict-free.

    The international community will be eagerly watching the results of this effort. Can a U.S. law on conflict minerals reduce violence in the DRC’s complex civil war? I recently argued that while the legislation is a great initial effort, it will have little immediate impact on the violence and suffering in the country. In a recent interview with New Security Beat, EITI expert Jill Shankleman called the Cardin-Lugar bill “an important step” but pointed out that it only covers companies who are listed with the SEC and does not reduce the need for countries to enter into EITI.

    Will this new law help Afghanistan – with its allegedly vast stores of valuable minerals – avoid the fate of the DRC? While some fear that corruption and lack of transparency may lead to conflict around the new Chinese contract to operate Afghanistan’s Aynak copper field, a recent U.S. Army War College paper argues that contrary to prevailing opinion, the Chinese approach to large-scale extractive investments could complement Western-led military stabilization efforts.

    Photo Credit: “Wolframite” from the DRC, courtesy of flickr user Julien Harneis.
    Topics: Afghanistan, Africa, conflict, DRC, energy, foreign policy, minerals, natural resources
    • http://www.cnas.org/blogs/naturalsecurity Will Rogers

      Great post, Schuyler. I agree that the legislation is an important first step, and I think our colleagues with CAP's Enough Project really deserve a hat tip here for really being the champions of this cause and keeping it on Congress's radar.

      Beyond the limitations you identified, which is that the legislation only covers SEC-registered companies, how much do you think we're limited by our lack of either understanding or appreciation of just how complex mineral supply chains are? From my vantage point, I don't think policymakers understand just how complex mineral supply chains are – at least as well as they should. And that's not their fault. It's challenging. That's one of the challenges we've really run into time and time again here at the Natural Security program at CNAS.

      My colleague Christine Parthemore reviewed a great book on our blog last year, Uranium: War, Energy, and the Rock that Shaped the World, that really gets to the crux of how complex these supply chains are. In one excerpt from the book:
      "In October 2005, a customs official in Tanzania made a routine inspection of a long-haul truck carrying several barrels labeled columbite-tantalite, otherwise known as coltan…One of his bosses later recalled the scene to a reporter: “There were several containers due to be shipped, and they were all routinely scanned with a Geiger counter. This one was very radioactive. When we opened the container, it was full of drums of coltan…When the first and second rows were removed, the ones after that were found to be drums of uranium.” The truck had come into Tanzania from neighboring Zambia, but had started its journey in the Congo."

      It'd be curious to get your thoughts. Again, a great post.

    • http://www.blogger.com/profile/10648727700659999180 Schuyler Null

      Thanks for your comments Will and the work you guys are doing over at CNAS. I completely agree that the folks at the EnoughProject and also Senators Lugar and Cardin deserve tremendous credit for bringing to light some of the ugliness of the global supply chain and how the consumption choices we make can sometimes have terrible consequences. They've laid a crucial foundation. Now that the law has been passed, the work turns towards implementing it effectively.

      The central crux of my post was that we should be careful assuming that shutting down the illegal mineral trade in the DRC will end the conflict there. As you know, being too unicausal about how resource scarcity or exploitation can lead to conflict is an easy trap to fall into but rarely explains the whole issue. The revenue from illegal minerals in the DRC certainly helps support the different armed groups but it is not the sole impetus for violence, so shutting it down or suppressing it will not necessarily lead to the end of said violence.

      The real challenging question for the DRC, I believe, is what can we do (if anything) to help improve the human security situation? Is withdrawing the UN peacekeeping force next year the correct decision? If not what can be done to improve their mission and capabilities? How can we promote better governance and ensure that DRC government and army officials (and the UN for that matter) are not also compliant in human rights abuses and violence?

      You also did well in bringing up the second issue which is the difficulty in tracking the source of conflict minerals. Radioactive elements can be tracked using Geiger counters, (although Christine points out that they face their own set of issues) and diamonds can be traced because of their particular chemical makeup, but as the noted by the EnoughProject themselves, dealers in the DRC can rely only on differences in color and texture to determine the provenance of the three T’s and gold mined there – a decidedly much less scientific method. They also mention that even this crude method requires some government oversight and only one in ten transporters in Bukavu are officially registered with the government (and that figure does not account for minerals – perhaps the lions share – that bypass these trading houses and are smuggled straight out of the country).

      I admit I still have a great deal to learn on the tracking front however, as you say; it is an extremely complex issue!

    • http://www.blogger.com/profile/07430391562374233505 Meaghan Parker

      The effectiveness of the law also depends on the ability of the SEC to gather and assess this information. Unfortunately the financial crisis has revealed the SEC's weaknesses, as currently funded or staffed, in absorbing, analyzing, and acting upon complex economic and financial information in a timely fashion.

      Whether the complexity of the mineral supply chain rivals that of exotic derivatives, I don't know. But I bet the SEC knows a lot less about international mineral smuggling than credit default swaps.

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