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Obama signs the US up for transparency

In a speech, President Obama noted the importance of energy companies disclosing the payments that foreign governments demand of them

Campaigners for financial transparency today welcomed the US decision to implement the Extractive Industries Transparency Initiative (EITI). It becomes the first G8 country to commit to the mechanism and only the second OECD country, after Norway, to join.

In a speech at the launch of the Open Government Partnership in New York, President Barack Obama said: "We are continuing our leadership of the global effort against corruption by building on legislation that now requires oil, gas and mining companies to disclose the payments that foreign governments demand of them.

“The US will join the global initiative in which these industries, governments and civil society all work together for greater transparency so that taxpayers receive every dollar they are due from the extraction of natural resources."

Obama added: “We pledge to be more transparent, at every level – because more information on government activities should be open, timely and freely available to our people.”

Follow the leader

Clare Short, the chair of the EITI, welcomed Obama’s pledge, saying: "This demonstrates that the US and other developed countries can benefit from following the EITI standard. Other developed countries should follow the example of the US."

Isabel Munilla, from civil-society group Publish What You Pay, said: “This strategic and timely commitment demonstrates that mandatory oil and mining reporting rules and EITI are a complementary package to ensure accountability in the oil, gas and mining sectors.

“Not only does this package cover listed and non-listed companies, but the EITI process will also ensure that data is communicated to the public on a regular basis. We salute the US’ leadership on openness in the energy and minerals sector, and call on other resource-rich developed countries, such as Australia and Canada, to make similar commitments.”

Munilla added that EITI implementation will deliver transparency on the estimated $10 billion in annual revenues collected by the US for oil, gas and mineral development on federal land and offshore.

Other non-governmental groups, including anti-corruption watchdog Global Witness and Oxfam, also lauded Obama’s decision.

A simple idea

The EITI is built on a simple idea: companies and governments disclose payments made and received from operations in a country’s natural-resources sector. These figures are made public and independently reconciled. Supporters of the mechanism argue that while making the details of financial transactions public will not, of itself, ensure sound, effective management of a country’s resource wealth, it does help foster good governance and can eliminate the misuse of that wealth.

The EITI, established in 2002, sets a global standard for improved transparency of revenues from natural resources. The EITI standard is implemented in 35 countries worldwide. Of these, 29 have published payments from companies to governments in EITI reports, making it clear to their citizens, often for the first time, how much their government is receiving from the extraction of their natural wealth.

Obama’s announcement follows the passage last year of the Dodd-Frank Wall Street reform and Consumer Protection Act. Section 1504 of the act mandated that extractive companies listed on US stock exchanges publish the payments they make to the US and foreign governments. The move met fierce resistance from the oil sector.

At an EITI conference earlier this year, Shell’s chief executive Peter Voser and Yves-Louis Darricarrere, the head of Total's exploration and production unit, both claimed Dodd-Frank would undermine, or even threaten, the EITI's approach to transparency and good governance.

The highest goal is transparency

Referring to Dodd-Frank, Voser claimed: "Transparency for the sake of transparency is not enough. It should be used to advance society. This is where the EITI succeeds and Dodd-Frank fails. For Dodd-Frank, the highest goal is transparency. There is nothing more."

Darricarrere added: “[The EITI] does not merely record the statements of amounts companies pay, it compares payments received and explains discrepancies. It is a strategy of good governance, better than any legislation that simply requires some privately owned companies to declare what they pay."

The US’ entry into the EITI will extend the reach of the financial-transparency provisions within Dodd-Frank. While Dodd-Frank applied only to listed firms, the EITI provisions will cover all companies operating in the US, listed or not. The EU is expected to propose similar financial transparency legislation for listed and non-listed companies in October.

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