Constellation of Crises: Why Tackling Extractive-Sector Corruption Is Crucial in 2023

Corruption has plagued many resource-rich countries for decades, yet a constellation of crises requires renewed focus on the fight against corruption in 2023. A boom in demand for transition minerals that underpin renewable technologies poses major corruption risks, while actors with vested interests in fossil fuels stand in the way of a greener future. At the same time, kleptocrats in resource-rich countries continue to threaten democracy and security.

A boom in transition minerals poses major corruption risks

The International Energy Agency (IEA) projects that meeting Paris Agreement goals will require at least a quadrupling by 2040 of demand for minerals used in technologies like solar panels, wind turbines and electric vehicles. We know that past commodity booms have unleashed large waves of corruption. Fast-paced dealmaking and the promise of soaring profits serve to increase the risk tolerance of private and public sector actors alike—all while regulators struggle to keep up. The history of mining is already riddled with injustice, by which elites have grown richer at the expense of local communities and nature. And large amounts of key minerals are in countries that rank poorly on Transparency International’s Corruption Perceptions Index. Action is needed now to address these burgeoning corruption risks, which threaten to both disrupt transition mineral supply and hinder a just energy transition. USAID administrator Samantha Power, IEA, the OECD and others have recognized that these minerals may become an even more significant node of corruption in the future.

Actors with vested interests in fossil fuels may derail effective climate action

Global Witness found that fossil fuel lobbyists at COP27 outnumbered the representatives of the ten nations most impacted by the climate crisis. Research from Influence Map has shown that the five largest publicly traded oil and gas companies spent over USD 1 billion on misleading climate-related branding and lobbying in the three years following the 2015 Paris Agreement.

Actors with vested interests in fossil fuels may seek to manipulate or influence energy transition policies and practices

Yet undue influence risks extend beyond international oil companies; some national oil companies (NOCs) are susceptible to being used by corrupt ruling elites for their own personal or political benefits, creating particular risks that we have identified in targeted guidance. Actors with vested interests in fossil fuels may seek to manipulate or influence energy transition policies and practices (thanks to the opacity of government decision-making around energy transition policies and public subsidies) in ways that advance their own private interests but fail to protect the wellbeing of the country’s population or the global interest of avoiding climate disaster. NOCs produce half of the world’s oil and gas, and are responsible for 40 percent of capital investment in the global oil and gas industry. At NRGI we found that NOCs planned to invest more than $400 billion in costly oil and gas projects that will break even only if humanity exceeds its emissions targets and allows the global temperature to rise more than 2 degrees Celsius.

Resource-rich kleptocrats threaten democracy and security

Countries with authoritarian regimes produce much of the world’s oil, with these revenues propping up kleptocratic actors across the world. Russia’s war on Ukraine has shown the devastating impact of such regimes, and the ways in which natural resource wealth can often power conflict and aggression. Some of the best-known Russian oligarchs made their fortunes in the natural resource sectors, often enabled by European and U.S. energy companies and commodity traders that have turned a blind eye to Putin’s aggression. BP, Royal Dutch Shell, Wintershall Dea, ExxonMobil, TotalEnergies, Equinor, OMV and Trafigura have contributed over $95 billion to the Russian government via oil and gas projects since the invasion of Crimea in 2014. Combatting kleptocrats will be impossible without concerted action to address the source of their power: expropriated natural resource wealth. And this is not limited to the oil sector. Minerals have helped fuel conflict and authoritarianism in countries like the Democratic Republic of the Congo, Myanmar, Sierra Leone and Sudan, often aided by private military contractors such as the Wagner Group.

Call to action: Where next for anticorruption efforts in 2023?

Amid these challenges—as well as rising poverty and inequality—a concerted effort to tackle natural resource corruption is needed now more than ever. Transnational problems require transnational solutions, so cooperation will be key in the efforts to squeeze the space for corrupt actors to operate. There are important efforts to work together across civil society to tackle the many ways in which corruption can harm the planet, with a growing network of campaigners working to ensure integrity in climate governance and finance and taking on illegal logging and wildlife trafficking.
 
But unfortunately key decisionmakers are missing opportunities. They’re wavering on legislation to strengthen corporate due diligence, and backsliding on key anticorruption achievements such as public registers of beneficial ownership information.
 
To tackle extractive-sector corruption head-on, government officials, international organizations, aid donors, and activists from the anticorruption, extractives governance and climate communities should together push for stronger rules and enforcement, better community engagement, and crackdowns on actors with vested interests in fossil fuels and all those who enable them.
 
In 2023, NRGI will continue to work closely with our partners in the anticorruption space to support these efforts through:

• Advocating to governments, businesses, investors and international organizations on the need to tackle corruption in the transition mineral sector, using recommendations NRGI developed alongside experts from around the world and key opportunities like the EU Critical Raw Materials Act.  
• Supporting stakeholders in resource-rich countries (including Chile, DRC and Guinea) to tackle corruption with our Corruption Diagnostic Tool, highlighting lessons from pilot projects, and publishing new modules on topics such as artisanal and small-scale mining and actors with vested interested in fossil fuels.
• Identifying key studies to better understand how actors with vested interests in fossil fuel production within and around NOCs may unduly influence policies and practices around energy transition at the national level for their own benefits and at the expense of climate action for the public interest.

This post is adapted from opening remarks made by NRGI president and CEO Suneeta Kaimal during a plenary session at the International Anti-Corruption Conference (IACC) in Washington, D.C. in December 2022.