October 18, 2005 | Wall Street Journal (Opinion Journal and European Edition)

Dollars for Dictators

Following last month's United Nations world summit, the poverty professionals are hard at work, having just marked World Poverty Eradication Day with powwows at U.N. offices around the globe and calls for global taxation to fulfill the U.N.'s “millennium development goals,” which propose to halve poverty by the year 2015. Among the participants have been Venezuela's President Hugo Chavez and Zimbabwe's President Robert Mugabe, the despotic duo, who took time out from presiding over the regress of their respective nations to jet to Rome for the 60th anniversary of the U.N.'s World Food and Agriculture Organization, whence they lambasted the U.S. and Britain and called for more aid and debt relief for the developing world.

To see poor people get rich is a worthy goal, and the likes of Messrs. Chavez and Mugabe aside, there's no doubt that in many cases it is well meant. Poverty is brutal, and in our age of miracle technologies it is needless. But if the real hope is to end poverty, we are going to need a lot less palaver about aid and debt relief, and a lot more focus on how to end the real cause of poverty–which is not scarcity of local resources, or lack of official assistance, or a deficiency of harangues and high-level panels courtesy of assorted dictators and U.N.-o-crats, but simply bad government.

The problem with presenting the eradication of poverty as an end in itself is that this implies the solution is to pour more money into the aid pipelines. Unfortunately, official aid too often tends to have the perverse effect of lining the pockets of the same unlovely regimes that engender poverty in the first place. Rich donors feel virtuous, dictators feel more secure, and legions of aid bureaucrats travel the world in a whirl of per diems and poverty-eradication conferences. Meanwhile, behind the fancy talk and big donations are often realities that on the ground look very different.

For a peek behind the scenes, take the case of the Republic of Congo, often referred to as Congo-Brazzaville to set it apart from its larger neighbor with a similar name (the Democratic Republic of Congo, formerly Zaire). Congo is one of those West African nations lumped onto the usual lists of places where the people are miserably poor, and the wealthy nations of the world, with the World Bank and International Monetary Fund in the vanguard, are now in the process of providing debt relief. At last month's U.N. world summit, Congo's president, Denis Sassou-Nguesso, joined the appeal for global aid to Africa, calling for “action while there is still time.”

Time? Mr. Sassou-Nguesso has already had more than his share. He has ruled Congo for 21 out of the past 26 years. From 1979 through 1992, having seized power within a military dictatorship, he ruled Congo as a one-party Marxist state. With the 1991 crumbling of the Soviet Union, he was forced to accept open elections, which he lost, ceding power to an elected government. Then, in 1997 he forcibly retook power, and against a backdrop of armed strife has ruled ever since.

The product of this leadership is that Congo, while one of Africa's richest nations in oil, is home to some of the world's poorest people. By some estimates Congo exports about $4 billion a year in oil. Given that the country's population is a mere 3.8 million, that would amount to more than $1,000 a year for every man, woman and child in Congo. Yet even taking into account other industries, services and labor in Congo, World Bank statistics show annual per capita income in Congo totaling less than $700. Life expectancy is 48 years. Transparency International rates Congo as one of the world's most corrupt nations, worse than Albania or Sierra Leone. And, on a per capita basis, Congo is one of the most heavily indebted countries in the world.

The aid community's solution is to fork out big dollops of debt relief. Since 2004, the IMF has taken the lead in administering a package aimed at greatly easing Congo's debt burden–a move more likely to help Mr. Sassou-Nguesso's government than the people who live under it. Debt relief has a nice ring, plays well at charity rock concerts, and keeps the IMF busy.

The irony is that that for the people of Congo–as opposed to the regime– the most useful debate may be inspired not by the poverty professionals, but by the likes of private creditors, who far from offering official aid or debt forgiveness are seeking to collect on Congo's old debts.

This past May, one of these private creditors, Kensington International Ltd., filed a civil suit in federal court in New York, seeking damages under the Racketeer Influenced and Corrupt Organizations Act (known as RICO) against the national oil company of Congo; its former president, Bruno Jean-Richard Itoua, now Congo's Minister of Energy and Hydraulics; and a French bank involved in financing Congo's state-owned oil business, BNP Paribas. The complaint alleges that “starting with the creation of a new national oil company for Congo in 1998, Congolese officials, along with certain international financial institutions and oil traders, have conspired through schemes of increasing complexity to loot the Congolese national economy.”

The complaint further alleges that under Mr. Itoua's leadership, the Congo national oil company, Societe Nationales des Petroles du Congo, or SNPC, from 2001-04 used a dizzyingly complex series of sham transactions and front companies to plunder the national oil wealth. The alleged intermediaries include a corporation registered in the British Virgin Islands with “its only identifiable place of business in a private residence in Monaco.” The complaint further alleges that the result has been “the impoverishment of the people of Congo, a total and continuing default on all pre-existing unsecured Congo debt, the destruction of Congo's access to credit through legitimate sources” and “an increased burden upon the world community to aid Congo through debt forgiveness and the Heavily Indebted Poor Countries program, the enrichment of each of the defendants, the debasement of the nation's institutions and the entrenchment of a corrupt and predatory regime.”

These are allegations only. No guilt has been established. BNP, Mr. Itoua and SNPC have all filed motions to dismiss the lawsuit, arguing that the U.S. courts have no jurisdiction, that the plaintiffs have no cause of action, and that this case is “an abuse of the RICO statute.” Asked for details, a spokesman for BNP declined to comment.

However this case plays out, it is worth watching–not least because in the course of the 30-page complaint, Kensington's lawyers detail a series of alleged sleight-of-hand deals that sound remarkably similar to some of the schemes carried out by Saddam Hussein to exploit another program meant by the world community to provide relief: the Oil for Food program in Iraq. A lawyer for Kensington, Robert Cohen, comments that in Kensington's attempts to follow the money, “the striking aspect has been the extent to which we found the same names that are prominent in the Iraqi Oil for Food scandal directly involved in the flows.”

What jumps out here is that such policies as debt relief may sound good, but in practice they can prove far from simple. And our global aid institutions–the U.N., the IMF, the World Bank–however eager to celebrate Poverty Eradication Day, Week, Month or Decade, are in no way equipped to cope with, or even care about, some of the more complex realities and byways of modern global trade and finance. Somewhere between the heartfelt impulse to help the poor and the complexities of tracking the actual money, there has to be a better distinction made between dollars for dictators, and policies that actually help the poor.

Ms. Rosett is a journalist-in-residence with the Foundation for the Defense of Democracies. Her column appears here and in The Wall Street Journal Europe on alternate Wednesdays.



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