Ecuador’s Amazon oil referendum is a huge win for country laden in unjust fossil fuel debt

River in the Amazon rainforest.
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The citizens of Ecuador have made the historic decision to end oil and gas in a protected zone of the Amazon rainforest.

As the Canary previously reported, the people of Ecuador have voted to end a key oil and gas block in the biodiverse Yasuni National Park. On 20 August, 59% of voters chose to halt the exploitation of oil in ‘block 43’.

Yet even as they claimed one victory against fossil fuel interests, Global North oil majors and capitalists continue to hold the country over a barrel.

Resistance to end oil and gas in the Amazon

In part, resistance to the end of ‘block 43’ originated from concerns for the loss of the revenues that the sector brings into the country. For example, the US Energy Information Administration estimated that crude oil amounted to 27% of Ecuador’s total export value in 2022.

The government of outgoing president Guillermo Lasso estimated a loss of $16bn over the next 20 years if drilling were halted in the oil block. National oil company PetroEcuador and operators extract 57,000 barrels of oil a day from 230 wells across the block.

However, the estimate omitted the risks of tying Ecuador’s gross domestic product (GDP) to a volatile oil market. Notably, the amount of GDP Ecuador derived from oil has dropped from 16% in 2011 to just 6% in 2021. The US Energy Information Administration suggested that this was due to the 28% decrease in the value of crude oil prices.

Fossil fuel company arbitration against Ecuador

Moreover, it overlooked the dangers of pinning the fate of the country’s finances to exploitative, extractive foreign corporations. As the Canary has previously reported, French fossil fuel firm Perenco has extorted millions from the Ecuadorian people. It did so through an arbitration under the France-Ecuador Bilateral Investment Treaty (BIT). In 2011, the World Bank’s corporate-friendly court ruled against the government of Ecuador.

Read on...

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The crime? Damaging Perenco’s profits. In 2007, then left-wing president Correa railed against the enormous profits of oil and gas companies. Specifically, he highlighted that the firms were amassing these from the oil-rich reserves in the Amazon. Correa’s answer then was the same that social justice campaigners continue to advocate for now: tax them.

Correa raised the windfall tax on oil and gas from 50% to 99%. He argued that this was to account for the soaring oil prices. Correa pointed to the fact that the existing oil contracts had been agreed when oil prices averaged USD $24 a barrel. By 2007, these had risen to US $90. Crucially, Correa pledged to spend the increased revenue from its oil resources on public services for the people of Ecuador.

Instead, numerous Global North courts upheld the World Bank’s decision, saddling Ecuador with $351m in debt to Perenco. The country is due to pay up the damages by the end of 2023.

Fossil fuels to pay off international debt

On top of this, oppressive debts to the Global North have also hampered Ecuador’s efforts to stymie the flow of Amazon oil and gas.

As the Canary reported, a new report released on 21 August has highlighted the “fossil fuel debt trap”. Specifically, it illustrated how international debt is locking Global South countries into fossil fuel infrastructure. In Ecuador’s case, it noted that outgoing president Guillermo Lasso had:

based the country’s pandemic recovery plans on doubling its oil production by 2025, including to generate revenues to pay back its foreign creditors

Moreover, the International Monetary Fund (IMF) has long pushed for the development of Ecuador’s oil and gas sector. According to a 2005 article in the journal Multinational Monitor, the IMF viewed:

the huge oil reserves under Yasuni as Ecuador’s best chance to pay off its enormous foreign debt.

In other words, funds from fossil fuel extraction were facilitating financial resource drain through the servicing of the country’s debts. Crucially, the IMF and Global North creditors were absorbing oil and gas revenues. As a result:

if the IMF has its way, the vast majority of the oil revenue will not even be used for much needed social and environmental spending within the poverty-stricken country.

The Global North’s exploitation of Ecuador’s oil and gas reserves and revenue is another reason the referendum result is a resounding victory for its people. It shows that through the power of grassroots climate democracy, citizens can end oil and gas in the Amazon. Importantly, Ecuador has taken a vital first step to breaking out of the industry’s exploitative economic grasp.

Additional reporting via Agence France-Presse.

Feature image via Neil Palmer/CIAT/Wikimedia, cropped and resized to 1910 by 1000, licensed under CC BY-SA 2.0

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