Chad warns of oil cutoff unless funds freed

N’DJAMENA, Chad – Thousands rallied Saturday in Chad’s capital to support the president following a defeated rebel attack, while the oil minister threatened to shut down the country’s oil pipeline unless the government is compensated for frozen oil revenues.

President Idriss Deby’s government appears desperate to attract international attention to solve Chad’s political, economic and security problems.

Oil Minister Mahmat Hassan Nasser told the Associated Press in an interview Saturday that the pipeline would be shut down unless the international community ensured Chad received its oil royalties by midday Tuesday.

Chad’s oil exports – 160,000 barrels per day – are small by international standards and have a high sulfur content, reducing their value. But Deby appeared to be gambling that any threat to the world oil supply, no matter how small, will bring attention to his plight and free up needed funds to finance his government.

The warning came a day after Deby announced that he was severing relations with neighboring Sudan and threatened to expel 200,000 refugees from the Darfur region if the international community did not do more to stop what he claimed were Sudanese backed-rebels from destabilizing his government before the May 3 presidential election.

In January, the World Bank froze an escrow account with $125 million in oil royalties in London, Nasser said. It also cut $124 million in financial assistance after Chad changed an oil revenue law passed in 1999 as a condition for the World Bank’s support for the pipeline.

Nasser said the funds must either be released or the operators of the pipeline must compensate the Chadian government.

The law required two-thirds of oil revenues to go toward improving living standards in one of the world’s poorest countries. It also required 10 percent of proceeds to go into a savings fund to be used when Chad’s oil reserves are exhausted.

But the National Assembly amended the law in December. It doubled the money going to the government’s general budget, freed money in the savings fund and added security – buying arms and equipment for the military and other security forces – to the programs that received more than two-thirds of the royalties.

Nasser said Chadian officials met twice with World Bank representatives seeking to unfreeze the funds, but without success. He said that without payment, the government would have to shut down the pipeline, which flows through Cameroon to the Atlantic Ocean.

“The government has the right to act as it sees fit if obligations are not met,” Nasser said. He said such a move would not harm his government, but would hurt other businesses and Cameroon, which have been collecting revenues from the oil.

World Bank officials were not available for comment.

An Exxon Mobil-led consortium exported 133 million barrels of oil from Chad between October 2003 and December 2005, according to World Bank statistics. Chad, which receives a 12.5 percent royalty on each barrel exported, earned $307 million, the bank said.

The consortium invested $4.2 billion in the pipeline. Nasser said the pipeline would continue to operate if the consortium pays the royalties frozen in London and pays future revenues directly to Chad’s treasury.

Thursday’s rebel attack on the capital has shaken Deby’s government and, with the rebel United Front for Change regrouping in the countryside, the threat of a violent overthrow of the government has not diminished.