Saturday, August 7, 2010

African Union & Robber Barons

American taxpayers will pay roughly $6 million for USAID's first long term assistance agreement with the African Union (AU), headed by Libya's Colonel Gadhafi. USAID's press release stated:

USAID and the AU are working together in several sectors, including democracy and governance
Angola's offshore drilling has the feel of American democracy in the late 1800's, the time of robber barons. Sonangol, Angola's state oil company, partnered with Cobalt International Energy (CIE). CIE's major shareholders include:

Carlyle Group/Riverstone Holdings- 75 million shares (21%)
Goldman Sachs- 75 million shares (21%)
First Reserve- 75 million shares (21%)
Leland Stanford Foundation- 32 million shares (9%)
George Soros- 5.96 million shares (1.7%)

Note the mix of modern day and historical robber barons on the list. The Mises Institute cited Leland Stanford in a piece. It stated:

In some cases, of course, the entrepreneurs commonly labeled "robber barons" did indeed profit by exploiting American customers, but these were not market entrepreneurs. For example, Leland Stanford, a former governor and US senator from California, used his political connections to have the state pass laws prohibiting competition for his Central Pacific railroad, and he and his business partners profited from this monopoly scheme.

Carlyle Group co-founder William Conway stated his preference for a playing field tilted in favor of his private equity underwriter (PEU).

How did Cobalt International Energy tilt the Angola deal? By bringing in two local firms, Alper Oil and Nazaki Oil & Gas. High ups in the Angolan government own part of Nazaki. Alper Oil was a surprise addition to the deal. No information is available on its owners. Does secrecy hide deeper government corruption? Many believe so.

George Soros pushes government transparency, yet he invested $80 million in an opaque firm. Cobalt refused to share information on Alper Oil's owners, citing a confidentiality agreement. Things look more suspicious when Cobalt paid Alper's portion of upfront costs.

Cobalt is the operator for two blocks. Per the agreement, ownership is divided:

Cobalt (40%),
Nazaki (30%)
Sonangol Pesquisa & Produção (20%)
Alper Oil (10%).

Will USAID teach African leaders how to tilt the playing field in favor of the politically powerful and wealthy? Will it encourage them to forget past transgressions?

Colonel Gadhafi's son bragged how negotiations with Western oil companies brought the release of the Lockerbie bomber. Congress and the White House ignore this very fact. Which Robber Barons encourage elected officials to look the other way? The Carlyle Group courted Gadhafi's son when he visited Washington, D.C. in 2008.

What democratic and governance practices does USAID plan to export? Let's hope it's not greed and influence peddling.

Update 1-20-13:  American authorities launched an investigation into Cobalt's shadowy Angolan ownership.

Update 3-29-15:  A U.S. newspaper columnist reported "Tom Burgis of The Financial Times has a powerful new book, “The Looting Machine,” asserting that firms, including Goldman Sachs and Carlyle Group, backed an oil company called Cobalt in investing in oil operations in which Angolan officials secretly held stakes worth staggering sums."  It's not an assertion.