Cookie Consent by Free Privacy Policy Generator
14.7 C
Sunday, May 26, 2024

Profits rule over risks and ethics

NEWS ANALYSIS: Major Norwegian companies seem more than willing to take risks and downplay ethical concerns to continue doing business in troubled areas abroad. Backed by supportive and often cooperative government officials, even Norway’s royal family at times, Norwegian executives are active in hot spots from Algeria and Azerbaijan to Yemen because of the potential for growth and profits, also when facing terrorist threats.

The In Amenas gas production plant, attacked by Islamic terrorists on Wednesday, is located in the Sahara Desert in southeastern Algeria. Production began in 2006 with the aim of supplying gas to Europe. PHOTO: Statoil/Kjetil Alsvik
Norwegian diplomats reportedly warned more than a year ago that the In Amenas gas production plant was under threat of a terrorist attack. The plant, where Statoil is an operator, was attacked by radical Islamists last week, with five Statoil employees still missing and feared dead. PHOTO: Statoil/Kjetil Alsvik

Newspaper Dagens Næringsliv (DN) reported Friday, for example, that Norwegian diplomats at Norway’s embassy in Algeria warned more than a year ago about the threats posed by armed Islamists in the country, specifically for the In Amenas gas plant attacked last week where Norwegian oil company Statoil was among the operators. Operations continued, though, part of the calculated risk Statoil has been willing to take in troubled or corrupt areas overseas.

Such risk has become a topic of rising debate in Norway and it’s unlikely to die down given DN’s disclosure of terrorism warnings long before last week’s attack. DN revealed contents of a partially classified report sent home to the foreign ministry in Oslo by Norway’s ambassador to Algeria, Arild Øyen, in the summer of 2011. It described frequent terrorist action and confrontations in Algeria at the time, often directed at foreign workers in the country. Border areas in Algeria’s southern desert had developed, according to the embassy’s report, into a region where terrorists and smugglers of weapons, drugs and people operated freely, and where kidnappings and murders of foreigners were occurring more often.

Foreign Minister Espen Barth Eide, who’s been attending the World Economic Forum in Davos this week, was reportedly unavailable for comment on the report, as was Øyen. Statoil spokesman Jannik Lindbæk wouldn’t say whether Statoil was made aware of the report, but DN noted that Norway’s establishment of its embassy in Algeria was a direct result of Statoil’s huge investments in oil and gas there. “Statoil is an important part of this,” top ministry official Sven Svedman told DN in 2007. “Assistance to (Norwegian companies) is important in our work.”

Latest example of risk-taking
DN’s report on Friday offers the latest example of how Norwegian companies, not just Statoil, have been willing to take the risks associated with doing business in countries that are both politically unstable, plagued by corruption or downright dangerous. Newspaper Aftenposten earlier this week charted the overseas operations of eight major companies – Statoil, Telenor, Hydro, Yara, Jotun, Aker Solutions, Det Norske Veritas and DNO – and asked them why they do business in high-risk areas, and how the attack on the Algerian gas plant (where five Statoil employees are missing and feared dead) might affect such business.

The answers to the first question were generally rooted in the companies’ perceived needs for growth and profits. “It’s here (in the high-risk areas) where you find the greatest possibilities for an oil and gas company,” DNO spokesman Tom Bratlie told Aftenposten. “It’s here where the reserves are.” Answers to the second question didn’t seem to indicate any looming withdrawals from risky areas.

Bratlie agreed with a professor at the University of Stavanger and specialist in risk management and security, Ole Andreas Engen, who bluntly stated that “oil companies are out after money. Therefore they’re willing to take high risks.” But Bratlie hastened to claim that DNO, active in Iraq, Yemen and Tunisia, has “lengthy experience and we have learned to operate in this region. We are familiar with the political systems and we know which conflicts we need to relate to.”

New markets needed, money to be made
Statoil, Telenor, Yara, Hydro and Aker Solutions collectively generated around NOK 100 billion of their revenues from their operations in high-risk areas in 2011, according to Aftenposten’s calculations based on the companies’ own annual reports. Their executives, according to researcher Indra Øverland at the Norwegian foreign policy institute NUPI, can feel compelled to expand operations overseas and to troubled, also corrupt, areas in order to maintain growth.

“Norway is a small country, we don’t have the same (large) domestic markets of countries like the US or China,” Øverland told Aftenposten. “We have to trade with other countries. Thoughts about an isolated Norwegian business world ignore the economic realities.”

Øverland also noted that “there’s more corruption in most parts of the world than in Norway and our neighbouring area.” He said it’s therefore “unavoidable” that Norway and other small countries are present in countries where there are high risks to security and stabiity, also for corruption.

Defying critics on a mission to Azerbaijan
Foreign Minister Eide, for example, was on an official trip in Azerbaijan, a country often associated with corruption and human rights violations, just days before Statoil’s gas plant was attacked in Algeria. Traveling with him, in fact, was Statoil Director Lars Christian Bacher, who immediately upon arrival back in Norway had to deal with the terrorist attack and hostage situation in Algeria. Statoil is the second-largest oil and gas investor in Azerbaijan and both men downplayed the ethical concerns around Norwegian operations in the country, preferring instead to engage in cordial relationship-building with their authoritarian hosts.

Norwegian Foreign Minister Espen Barth Eide paid his respects to late president of Azerbaijan and then secured a meeting with the late president's son who now rules the country where Norwegian firms have major business interests. PHOTO: Utenriksdepartementet
Norwegian Foreign Minister Espen Barth Eide paid his respects to the late president of Azerbaijan and then secured a meeting with the late president’s son who now rules the country where Norwegian firms have major business interests. PHOTO: Utenriksdepartementet

Norway’s involvement in Azerbaijan, where Statoil, Veritas, Jotun and Aker Solutions are among Norwegian companies doing business, has long sparked criticism in Norway precisely because of the country’s track record of oppression. DN, which covered Eide’s trip, reported that “corruption flourishes, human rights are violated … but Foreign Minister Espen Barth Eide wants to strengthen ties to the oil-rich nation.”

As part of doing so, Eide paid homage to the late president of Azerbaijan Hejdar Aliyev at his grave in Baku, reportedly a necessary ritual in order to secure a meeting with the current president, Ilham Aliyev, who inherited his job from his father. Eide, like government officials before him and even Crown Prince Haakon (who joined a disputed official visit by a Norwegian delegation two years ago) defends the visits and received a warm welcome in Azerbaijan. “This is about further strengthening ties to another important power within energy,” Eide told DN. He said Norway’s relationship to Azerbaijan had “gone up and down” over the years, “but now it’s good.”

Eide isn’t bowing to the claims of human rights organizations and others that the visits from Norwegian authorities, and the activities of Norwegian business, can be seen as Norwegian support for an authoritarian regime. Eide claimed after his meeting with Aliyev that Azerbaijan’s leader “has a long-term vision for the country” and called him “intelligent.” Eide didn’t take up any sensitive issues like human rights, or offer any “lectures” that have caused problems for some of his predecessors. Eide said Norway can communicate “the standards we have,” but noted that Norwegian officials wouldn’t like being told by other countries, for example, that they’re “doing everything wrong” any more than officials in Azerbaijan would. He seemed keen to continue Norway’s “energy and oil diplomacy” and to protect Norwegian business interests in Azerbaijan and elsewhere.

Foreign Minister Espen Barth Eide and his delegation, on the left side of the table, meeting the president of Azerbaijan in Baku just before the terrorist attack in Algeria. PHOTO: Utenriksdepartementet
Foreign Minister Espen Barth Eide and his delegation, on the left side of the table, meeting the president of Azerbaijan in Baku just before the terrorist attack in Algeria. PHOTO: Utenriksdepartementet

Armed with such government support for their international operations, Norwegian companies like Statoil seem inclined to continue to do business in troubled, high-risk areas, even after Bacher and his colleagues had to deal with 17 of Statoil’s own employees being held hostage. Both Statoil CEO Helge Lund, Eide and Prime Minister Jens Stoltenberg have claimed Norwegians can’t be scared off by terrorists, or authoritarian regimes apparently. They face renewed debate, however.

“The situation in Algeria demands such enormous security measures that we should rather go home,” oil research Helge Ryggvik at the University of Oslo told newspaper Dagsavisen. On Friday, newspaper Aftenposten also reported that Statoil’s key contact in Algeria when it set up operations in the country was fired on corruption charges. Statoil wouldn’t answer questions about corruption charges also involving its Algerian partner, Sonatrach, saying only that Statoil “has absolute zero tolerance for corruption.”

Ryggvik is critical of Norwegian companies operating in non-democratic countries and has some political support in parliament. Some labour organizations representing oil industry workers, meanwhile, fear companies will pressure employees to take risky jobs overseas.

“I think the situation in Algeria has sparked fear among many employees of large Norwegian companies,” Kirsten Rydne, a lawyer for engineers’ organization NITO, told Dagsavisen. “The question is what companies will do if they find it difficult to recruit workers to travel out.”

Views and News from Norway/Nina Berglund

Please support our news service. Readers in Norway can use our donor account. Our international readers can click on our “Donate” button:




For more news on Arctic developments.



If you like what we’re doing, please consider a donation. It’s easy using PayPal, or our Norway bank account. READ MORE