São Tomé Fears Striking Oil May Be a Curse

Sao Tome coup leader Maj. Fernando Pereira
Maj. Fernando Pereira, who led a successful coup against São Tomé's President Fradique de Menezes but returned power to the president in July 2003, cited mismanagement of São Tomé's oil wealth as a motivation for his actions (Photo: Desirey Minkoh/AFP-Getty Images).

It sounds like every poor country’s dream: strike oil, get rich, wave goodbye to poverty.

But on the West African São Tomé islands, where a big influx of cash from crude may be just months away, fears are growing that the money may cause more problems than it solves.

Jolted by a coup attempt linked to the promise of new-found wealth and surrounded by neighbors where oil has fueled chaos, many islanders wonder if their government is prepared for the shock.

“Unless we put things in some order now, this will be a total mess,” said Carlos Tiny, a one-time presidential candidate in the former Portuguese colony. “So far, things are not in order.”

Time is short. The U.S. oil major, ChevronTexaco says it is poised to win an offshore oil exploration block with a bid of $123 million, grabbing a chunk of one of Africa’s hottest prospecting zones.

For islands that typically export about $4 million worth of goods a year, much of it cocoa and bananas, the expected oil revenues represent vast amounts of money that could transform the economy.

The islands simmer with intrigue spurred by the increase in the financial stakes for those in office.

Foreign players from Nigeria to the United States are understandably interested in an estimated 6-11 billion barrels of crude. But this interest has further muddied the waters of the island’s volatile politics, putting a little-known backwater on the strategic map.

The government says it is in control and preparing to manage the influx of money, but the next few months may yield clues as to whether São Tomé is ready for a better life or whether it will succumb to the curse of so many oil-rich African states.

The continent is littered with examples of how not to do it—some just a few hundred miles from the volcanic peaks of São Tomé, where many of its 140,000 people live without running water or electricity.

Civil wars have wrought havoc in oil exporters like Angola and the Congo, while Nigerians—who hail from one of the countries jointly managing São Tomé’s exploration zone—blame oil as the source of much of the corruption blighting their country.

Anxious to learn from others’ mistakes, São Tomé is working with the World Bank to set up measures to deal with the cash, such as creating a fund to smooth revenue flows and save money for when the oil runs out.

Analysts say such funds are no panacea, potentially providing a tempting cash cow for greedy politicians or collateral for loans that can suck states deeper into debt.

Aiming to discourage any attempt to embezzle the new income, São Tomé’s parliament plans to pass laws before the first payments for exploration rights come. The payments will force the government to begin publishing figures for oil revenues.

Most islanders agree on the need for transparency, but several politicians worry that the plans may be undermined. So far, events on the islands suggest that dreams of oil wealth have aggravated tensions rather than soothed them.

Army officers attempted to overthrow the government in July, saying they wanted to create a new one to combat poverty.

No one was hurt, but the putsch revealed a streak of anger at the government for signing what the coup plotters regarded as flawed exploration contracts. “At the bottom of it was oil,” said Sabino Santos, the plotters’ spokesman, who remains in São Tomé under amnesty. “Those who signed them should be punished. They are mortgaging our future. They drive big cars, and a few kilometers away, people are drinking river water.”

President Fradique de Menezes weathered the coup attempt with mediation in which Nigeria played a key role, but some islanders say he has lost support through a perception that he is placing close allies in control of the oil.

Critics say he is trying to wrest management from a more established class of politicians. They cite his appointment of Tomé Vera Cruz as Minister of Natural Resources after the coup, and his choice of Prime Minister María das Neves, who has constitutional responsibility for oil contracts.

“Expectations fed the coup, but the main source of instability is the president himself, including his erratic allegiances and decisions in the oil sector,” said a senior oil official. “As a result, he is losing people. He is not as strong as before.”

With the president apparently weakened, some observers detect a greater Nigerian influence in the country’s politics, where the prospect of oil has inflamed rumors of foreign meddling.

As São Tomé’s partner in a Joint Development Authority for the oil exploration zone, Nigeria will take 60 percent of the revenue if and when crude does start pumping.