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MONDAY, MAY 14, 2012
opinion
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Jonathan unlikely to risk oil graft crackdown By Joe Brock igerian President Goodluck Jonathan is coming under pressure to prosecute top officials implicated in a $6.8 billion fuel subsidy fraud, but many of the suspects are allies he is unlikely to go after if wants to keep his power base intact. It has been three weeks since parliament produced a report detailing massive corruption in a state subsidised petrol import scheme and Jonathan has yet to indicate how he intends to respond. Inaction on one of the biggest corruption scandals in Nigerian history will hurt Jonathan’s reformist credentials and further alienate his government from a disillusioned population. It could also prompt major public protests. But some of Jonathan’s closest allies manage the oil industry, which is based in his home region, and the tentacles of the subsidy fraud spread throughout the political elite, making it near impossible to untangle. “In the past pressure for change has usually prompted the casting aside of a scapegoat,” said Antony Goldman, Nigeria analyst and head of Africa-focused PM Consulting. “Too many people in the ruling elite do not want an end to corruption, they just want their turn. From an external perspective, failure to act may indeed look like weakness; the domestic environment is more complex.” Civil society groups have threatened protests if those they deem responsible for the mess, including Oil Minister Diezani Alison-Madueke, and heads of the state oil firm, aren’t sacked. In January, thousands bought the nation to standstill in protests against an attempted removal of the subsidy. “The president is hoping this will blow away and we believe his own vested interests are holding him back,” said Clement Nwankwo, a political activist with the Abuja-based Policy and Legal Advocacy Centre, one of many that led protests in January. Jonathan already has many opponents and is struggling to contain an Islamist insurgency in the north. In a country where patronage and largesse still determine political success, prosecuting power brokers is risk he is unlikely to take. The report said Nigeria paid 900 percent more in fuel subsidies last year than it budgeted for, handing out billions of dollars to briefcase companies that had no capacity to import fuel or to firms that sold the petrol to neighbouring countries. Criticism focused on fuel importers and government agencies but the report’s evidence pointed to several ministries and the central bank. If Jonathan implements its recommendations he will undermine a large section of the team he chose to run the country. “I don’t think we’re going to see high level officials in jail ... that would imply his regime had imploded,” said Patrick Smith, editor of Africa Confidential. “The government didn’t want this to come out. It isn’t hard to track back some of this to the top people in government.” Jonathan this week squashed speculation about a cabinet reshuffle, saying he had confidence in existing ministers, to the dismay of activists who wanted tough action. He has said subsidy fraudsters will be prosecuted, but called for patience. He built his career in the oilrich Niger Delta, where much of the fraud took place under the noses of security agents and politicians he has worked closely with for decades. Some of the fuel import firms criticised in the probe have politicians as stakeholders - aviation minister Stella Oduah runs one of them. Others are owned by oil industry oligarchs who have helped fund Jonathan’s election campaigns. Femi Otedola, the CEO of Forte Oil, one of Nigeria’s biggest fuel importers which testified at the hearing but was not named in the list of fraudsters, was made a member of Jonathan’s economic management team this year. “If he is going to act, he needs to be very careful ... the scam reaches into many powerful crannies,” said Kayode Akindele, partner at Lagos-based financial advisory firm 46 Parallels. Government sources and political analysts see dismissals of mid-level officials and the banning of some fraudulent fuel importers, rather than arrests of senior officials, as a likely compromise. Swiss-based oil firm Nimex Petroleum was suspended this month by Nigeria’s fuel regulator for failing to provide documents for fuel shipments, a sign authorities may target the importers rather than government regulators. It is unlikely to be enough to appease an angry public. Some government officials said January’s protests were aided and funded by political opponents and they believe Jonathan’s rivals may use the subsidy probe to build momentum against him.— Reuters
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Spain faces corrosion not collapse from euro crisis By Alan Wheatley tudents are protesting on Barcelona’s elegant boulevards, public-sector wages are being cut for the second time in three years and resentment is growing against the central government and beneficiaries of bank bailouts. Such is the daily fallout from the euro zone’s debt crisis. Like the rest of Spain, Barcelona is looking at several years of hard grind as the country adjusts to living within its means after the collapse of a debtfinanced housing bubble that has brought much of the banking sector to its knees. Yet unless the most pessimistic projections of the cost of rescuing the banks prove right, the signs are that Spain faces corrosion not collapse. Greece risks suddenly not being able to pay for vital imports if it cannot form a new government that sticks to the terms of an international bailout. But Spain is more representative of the generally insidious, demoralising nature of the crisis: austerity is sapping trust in politicians across the euro zone and fraying the social fabric as the bills for years of economic mismanagement are shared out. “The problem is social. What are we going to do when we have 25 percent unemployment? It’s dramatic,” said Joan Ramon Rovira, head of economic studies at the Barcelona chamber of commerce. Even though every fourth Spaniard is unemployed, job protection is being eroded. In Barcelona, capital of the northeastern region of Catalonia, hospital wards are being closed, class sizes are growing and university fees are rising. The result is a hardening of attitudes as various groups campaign to preserve their entitlements. The crisis has also ratcheted up political tensions with Madrid as supporters of Catalan independence increasingly begrudge helping to bankroll the central government, which they feel treats them with disdain. “Spain is a backpack that is too heavy for us to keep carrying. It’s costing us our development,” said the spokesman for Catalan President Artur Mas, Joan Maria Pique. Rovira is optimistic that Spain will pull
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through. He produces figures showing how smartly exports are rising from Catalonia, which makes up 20 percent of the national economy and generates about 30 percent of its exports. Spain’s exports rose 11 percent last year as it gradually restored the competitiveness lost when wages spurted after the launch of the euro in 1999. The government expects the current account deficit to shrink to under 1 percent of GDP this year from a peak of 10 percent in 2007. Joerg Kraemer, chief economist with Commerzbank in Frankfurt, estimated that Spain had recouped half of the pre-crisis deterioration in relative labour costs, a trend that should continue because of recent reforms making pay and contracts more flexible. The priority now, according to Catalonia’s economy minister Andreu Mas-Colell is for firms in the region to bulk up. “The bright spot in our economy is exports,” he said in an interview. “But our firms are too small. In an export-oriented economy size is important. We are too fragmented.” In contrast to progress on external economic rebalancing, Spain is dragging its feet on reducing its budget deficit and is being punished by investors. Ten-year government bonds yield around 6 percent, a level that is unsustainable in the long run, on concerns that Madrid will have to spend tens of billions of euros to stop the rot in its banking system. Spanish banks have more than Ä180 billion of sour property assets on their books, and analysts fear there is worse to come as recession triggers more corporate and mortgage defaults. The Spanish government sought to boost investor confidence on Friday by ordering banks to set aside a further Ä30 billion in loan-loss provisions, two days after taking effective control of Bankia SA, one of the leading banks. But the financial markets were unimpressed. The attempted clean-up is the fourth, and Edward Hugh, an independent economist near Barcelona who says the government has been too slow to get to grips with the meltdown, doubts it will be the last. “The key question is where the price of property is going to settle. Until we know that, it’s
all guesswork,” he said. House prices have fallen about 25 percent since 2007 and a Reuters poll published on Friday pointed to a further decline of more than 15 percent in 20122013. Morgan Stanley’s base case is that banks will need Ä25 billion in capital. Royal Bank of Scotland expects a 68 billion euro shortfall over the next three years. Roubini Global Economics sees losses ranging from Ä130 billion to Ä300 billion and attaches a 60 percent probability to the need for a sovereign bailout followed, in 2015, by a restructuring of Spain’s debt. But the chief economist of one local bank, who requested anonymity because the government was still finalising its latest clean-up, said the extra provisioning being demanded by the market made sense only if Spain were to be stuck in recession for several years. “If it’s needed to restore credibility and reduce the risk premium on our bonds, then maybe we have to do it. But I think the markets are overshooting,” he said. The urgency of stabilising Spain’s fastgrowing stock of debt is shining the spotlight on its 17 autonomous regions, which account for about half of general government spending and whose debt has almost doubled in the past three years. The regions accounted for 55 percent of last year’s general government deficit of 8.5 percent of GDP, according to JP Morgan, and Madrid has passed a law threatening to take direct control of their budgets unless they rein in spending. Seen from Barcelona, though, things are not so simple. Catalonia and other regions are responsible for managing public services, but Madrid retains most regulatory and tax-andspend powers. This is a recipe for friction when economic times are tough: the tax take plummets, but demand for health and education does not. As a result, Barcelona frequently finds itself going cap in hand to Madrid to plug its cash shortfall even though Catalonia, Spain’s richest region, transfers more than 8 percent of its GDP every year in net taxes to the central government. At the same time, Catalonia’s ruling centre-right Convergence and Union (CiU) nationalist party says Madrid has withheld
promised investment funds in pursuit of what it regards as a blatant agenda of centralising power and suffocating Catalonia. “We understand that Spain is going through a crisis and reforms are needed. We are all in the same boat.” Mas-Colell said. “What irritates us is that the crisis could be used as an opportunity to limit our self-government or to not honour commitments made in the past.” Catalonia wants to negotiate a new fiscal deal that gives it more autonomy. But, saddled with a debt approaching 22 percent of regional output, its political hand looks weak. In the meantime, it is making more cuts. Health spending will fall 4.8 percent this year after a 6.5 percent drop in 2011. Regional public-sector salaries are being reduced 5 percent on top of a similar nationwide cut in 2010. A school building program has been halted and Catalans will soon start contributing to the cost of prescriptions. “We’re going out on a limb, but we think our voters will understand the constraints in which we live,” Mas-Colell said. Conversations in Barcelona suggest that people do understand the need for belt-tightening. Importantly, strong family ties constitute a safety net of sorts for the unemployed. But there is a sense that the sacrifices are not being fairly shared. Felipe Aranguren, 59, who works when he can as a sociologist, rails against Spain’s “rotten” banks and wants higher taxes on the rich to pay for a “New Deal” public-works program. A black star, the symbol of anarchism, is pinned to his lapel, but Aranguren does not think that dumping the euro and going it alone would ease Spain’s plight. “Economically speaking, we can’t do anything in Spain because everything is decided in Brussels. But leaving Europe would be just one more problem,” he said. Joan Colom, an economist at the University of Barcelona, said his department had been forced to let go a lot of young lecturers and slash research. He was optimistic that Spain would overcome the crisis but was critical of the laser-like focus on austerity. “We will pay a cost, for sure, and it could be higher than necessary,” said Colom, a former head of the Catalan Court of Auditors. —Reuters
Around world, Obama a disappointment By Don Melvin n Europe, where more than 200,000 people thronged a Berlin rally in 2008 to hear Barack Obama speak, there’s disappointment that he hasn’t kept his promise to close the military prison at Guantanamo Bay, and perceptions that he’s shunting blame for the financial crisis across the Atlantic. In Mogadishu, a former teacher wishes he had sent more economic assistance and fewer armed drones to fix Somalia’s problems. And many in the Middle East wonder what became of Obama’s vow, in a landmark 2009 speech at the University of Cairo, to forge a closer relationship with the Muslim world. In a world weary of war and economic crises, and concerned about global climate change, the consensus is that Obama has not lived up to the lofty expectations that surrounded his 2008 election and Nobel Peace Prize a year later. Many in Asia, Africa, the Middle East and Latin America were also taken aback by his support for gay marriage, a taboo subject among religious conservatives. But the Democrat still enjoys broad international support. In large part, it’s because of unfavorable memories of his Republican predecessor, George W Bush, and many people would still prefer Obama over his presumptive Republican challenger Mitt Romney. “We all had high hopes for him,” said Filomena Cunha, an office worker in Lisbon, Portugal, who said she’s struggling to make ends meet. “But then things got bad and there’s not much he can do for us over here.” Obama’s rock-star-like reception at Berlin’s Victory Column in the summer of 2008 was a high point of a wildly successful European campaign tour. The thawing of a harsh antiAmericanism that had thrived in Europe was
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as much a reaction to the Bush years as it was an embrace of the presidential hopeful. Those high European expectations have turned into disappointment, largely because of the continued US military presence in Iraq and Afghanistan and Obama’s failure to close Guantanamo Bay in the face of vehement congressional opposition. Foreign policy expert Josef Braml, who analyzes the US for the German Council on Foreign Relations, said many Germans give Obama too much of the blame because they don’t understand the limits of his powers. “There’s a lack of understanding both of how the system of checks and balances works - or doesn’t work any longer - and a lack of understanding of how big the socio-economic problems in the United States are, which cause the gridlock,” Braml said in a telephone call from Greece, where he was on vacation. Obama’s views on Europe’s financial crisis also have rankled some on the continent. In September, he said the crisis was “scaring the world” and that steps taken by European nations to stem the eurozone debt problem “haven’t been as quick as they need to be”. The Obama administration describes the eurozone crisis as a European problem that needs a European solution. The U.S. and Canada last month refused to participate in boosting the International Monetary Fund’s financial resources to manage the crisis. “I think people see through his game to put the blame on Europeans - I think Germans and Europeans still know where the economic crisis had its beginning,” Braml said. “That’s just finger-pointing, not doing a fair analysis of the dire situation in the US, but I can understand Obama is doing that because he wants to get re-elected so they need to shift blame around on the Republicans or the
Europeans.” Mehmet Yegin, a specialist in Turkish-American relations at USAK, the Ankara-based International Strategic Research Organization, said Europe still sees Obama as superior to Romney, “because they primarily evaluate Romney as a Republican and their memories about George W Bush linger”. Many in the Mideast also would like to see Obama win a second term, though they feel he has not lived up to his Cairo speech, in which he extended a hand to the Islamic world by calling for an end to the cycle of suspicion and discord. Obama has been the US president “least involved in the Palestinian issue”, said Mohammed Ishtayeh, an aide to Palestinian President Mahmoud Abbas. “We were very optimistic when Obama was elected. He talked in his meeting with us without looking into his notes; that tells how much he knows about our issue,” he said. But since Obama made his Cairo speech, Ishtayeh added, “he found his hands tied and couldn’t make much progress.” The Palestinians have refused to conduct peace talks while Israel continues to expand its settlements in the West Bank and east Jerusalem - areas claimed by the Palestinians. Officials have quietly given up hope for any sort of breakthrough until after the presidential election. Obama also has a strained relationship with Israel, where Bush was popular. Obama and Israeli Prime Minister Benjamin Netanyahu have been cool to one another in their handful of meetings. Obama’s Mideast envoy, former US Sen George Mitchell, made no progress during two years of frequent meetings with both sides before quitting last year. Despite the chilly relations between Obama and Netanyahu, overall ties between
the allies remain strong. The US has backed Israel on several key occasions at the United Nations, for instance, helping block a Palestinian attempt to join the world body last year without a peace deal and fending off attempts by other countries to charge Israel with human rights abuses. “Concerning Israel, he has proved that he is not absolutely rigid but is willing to reconsider when confronted with facts that he would not have expected,” said Avraham Diskin, a political scientist at Jerusalem’s Hebrew University. “He began very inexperienced on all fronts, but he is a very intelligent person and Israelis see that,” Diskin added. In Iraq, site of the war that fed much of the international community’s dislike of Bush, Obama has received some credit for pulling out combat forces last year. “President Obama has removed so much of the cowboy image of America that has been imprinted in the mentality of Iraqis by Bush,” Baghdad lawyer Raad Mehsin said. But Carawan Ahmed, a high school teacher in Iraq’s northern Kurdish capital of Irbil, said Obama has ignored the Kurdish minority, which continues to struggle against the Shiite-dominated government. “When Democrats, including Obama, are in power, we lose the sympathy and support from America. To be frank, the Republicans protected the Kurdish people, while Obama’s administration is not,” Ahmed said. In Mogadishu, former schoolteacher Fadumo Hussein retains a shaken support for Obama, but disapproves of the mounting casualties from US drone attacks on Somalia’s Al-Qaeda-linked insurgency while the country’s humanitarian need is neglected. “He only sent drones, not enough assistance,” Hussein said. “We don’t need bombs, but other means of assistance.” — AP