According to the BBC,  it was announced yesterday that Nigerian President Umaru Yar’Adua would soon write a letter handing over power to his vice president. Yar’Adua has been hospitalized in Saudi Arabia since November with heart and kidney ailments — there was even speculation he was dead. It was news many had been dreading even though it has looked to be inevitable for a long time. The current vice-president Goodluck Jonathan is from the south (Yar’Adua is from the north) and this may create further ethnic strains.

As President, Ya’Adua had been slow-moving but perceived as honest. He had also brokered a promising peace deal with the rebels in the violent, oil-rich Niger delta. Now, the rebels in the Niger River delta in Nigeria are have announced the end of the cease-fire.

Despite pledges of retraining for thousands of militants and development aid for the impoverished Niger Delta region, little has been done since the government announced an amnesty program for militants in August… The militant group, the Movement for the Emancipation of the Niger Delta, or MEND, warned that it would resume attacks on oil company pipelines and personnel, a threat analysts said was credible. (New York Times)

In late January, Royal Dutch Shell announced that a  pipeline in the delta had been sabotaged.

Nigeria is not the only place facing increasing violence in resource-rich areas. One always hopes for the best in a new year. And like most New Year’s resolutions, these hopes always crash into the never-ending constant of human nature.

The new decade seems to be getting off to a violent start. Here are a few more ominous events of the first month of 2010.

Pakistan is once again facing problems in Baluchistan.

A Pakistani provincial government plans to cancel a $3 billion joint venture copper and gold project owned by Canada’s Barrick Gold (ABX.TO) and Chilean copper miner Antofagasta (ANTO.L), a provincial mining official said …
The cancellation of the license — apparently meant to ease anger in Pakistan’s poorest province over outsider exploitation of its natural resources — would further damage Pakistan’s image as a destination for foreign investment and would throw a wrench into the plans of the mining companies. (Reuters 1/12/10)

And although Indonesia seems to be doing fairly well in gas-rich Aceh, its problems in Papua in the east are flaring up again.

At least seven persons were wounded in an attack on a convoy of Freeport-McMoRan Copper & Gold’s Grasberg mine, including Freeport employees American Howard James Lochart and South African Sandy Wilson, as well as Cindy Mokodampit, the 13-year old daughter of a Freeport employee.
A series of attacks on company employees last year between June and November killed three people, including an Australian engineer performing contract work at the Grasberg mine, the world’s largest gold mine and third-largest copper mine. Grasberg is also the focus of protests by locals who claim they are not benefitting from the extraction of Papua’s resources. (Mineweb 1/25/10)

The area near the Grasberg mine has experienced violence and environmental devastation for more than three decades. The same in Nigeria, Baluchistan also for decades. When it comes to dealing with the combination of long-standing bad relations with the central government, ethnic tensions and natural resources, it seems there are no easy answers, a lack of political will and focus, and a tone-deaf approach towards resolution. Yar’Adua will be missed.

If natural gas is so cheap right now, limping along between $2.50 and $5.50 per thousand cubic feet, why did Exxon pay the equivalent of $41 billion for natural gas giant XTO Energy? There is a global glut of natural gas, which won’t be disappearing any time soon.

I can think of a couple reasons. The obvious one is that the market is low right now and, as China has demonstrated for months, it’s the time to buy.

The second is that there are fewer and fewer major oil finds out there right now and it’s time to diversify. Natural gas is the logical step, since gas, upstream (drilling etc) and downstream (refining etc), is much more similar to oil than, say, mining or green energy — even shale gas, which is a large chunk of XTO’s business.

XTO also has proven reserves — always a comfort — here in the US, where the rules of the road are somewhat clearer, if often more expensive. It’s always better to buy a sure thing, if you don’t want too many ugly surprises. You don’t have to face the ground shifting under your feet as it so often does in Iraq or Nigeria or Russia or Central Asia.

Exxon may also be betting that the US will be moving away from coal and towards natural gas to power our electric supply. It would be a new opportunity.

The acquisition of XTO is not the only such investment Exxon has made this year: it is part of a consortium developing oil in Iraq, it is developing the offshore Ghanaian Jubilee oil field with the Chinese.

Energy companies around the world — multinational corporations, state-owned companies, smaller independents, little wildcatters — are in the proverbial scramble to sew up territories anywhere in the world. It almost doesn’t matter the challenges in getting the stuff out. There seems to be an industry-wide belief that it’s now or never. As bigger companies look to buy sure things,  exploration is left to the smaller independents companies (like Tullow Oil and Heritage in Uganda), and of course, China.

Increasingly this will matter, because the larger companies must, and mostly do, play by the rules of the road, no matter how close to the edge. Their leases today have far more environmental protections than in the past — they have to. The big companies are sometimes open to the idea of greater transparency. There is sometimes more involvement with local interests. The Western multinationals have inched towards being more willing to hire locals; many times, the Chinese use their own imported laborers and are openly not interested in transparency.

The problem with the smaller companies is that they often don’t or can’t offer the same levels of protection. Their margins are much smaller, their expertise less, their pockets shallower. They’re out there taking a chance. Environmental corners may be cut, local interests ignored, unsavory rulers supported. This means small poorer countries with little national expertise — the ones for whom an oil or gas strike would mean everything — are the most vulnerable.

(Of course, the big boys have done this too, but now less and less. It’s just not worth it. This week Shell began seeking buyers for 10 of its onshore oil assets in Nigeria, even with the possibility of more peace in the country. The Wall Street Journal quotes a Nigerian official saying they may be sold to the Chinese, but it is unclear if Shell is receiving Nigerian encouragement to divest.)

What began as a financial crisis in the energy sector this year has not been wasted: the seismic shifts in involvement by big companies and China have permanently altered the energy landscape forever.

Everyone seems shocked and discouraged by the outcome in Copenhagen. They shouldn’t be. We must control emissions. So why wasn’t there a deal that made everyone happy? Because that’s the nature of multilateral negotiations, with scores of parties with scores of interests. They are always, always like this, as anyone who has studied them knows: no one gets what they want, unless they can hold the final decision hostage. For an example of that strategy, look at the health care bill in Congress, tied up by the cynical calculations of Senators Ben Nelson and Joe Lieberman. Look back at the Kyoto Protocol.

Governor Arnold Schwarzenegger had it right when he told ABC News that the negotiations were a lot of “kabuki”. (Do you really think President Obama’s sudden appearance at a meeting the Chinese did not expect him at wasn’t theater, too? So was China’s Wen Jiabao’s decision to send lower-level officials to meet with President Obama.)

The negotiating process follows a very specific arc. The more parties, the more complex, fraught and risky it becomes. So with almost 200 countries present, the odds of a clean, pure agreement on a sweeping, binding law were always practically nil, even in the fairly weak field of international law.

Negotiations, like all games, are the process of the passage of time and its contained events. Early in any negotiation, most of the time is spent posturing, jockeying for position, and deciding angle. Testing the waters, testing the other side, making friends and allies, setting up competing early drafts of an agreement — particularly ones that suits your interests best, while giving the other side just enough to stay interested. These preemies never work — if they did, the other side would know for sure they are not getting all they could. But they do begin to give people a vague sense of what matters for a framework.

Most Americans find such behavior exasperating, infuriating. We think: just agree! Or come up with something better that we like too — right now! Then again, most Americans hate to haggle: it’s bad form. The rest of the world works differently.

Last minute negotiations — and they always come down to the last minute— are fuelled by some desperation to save face by getting something done, a sense that the other side is now (on some level) a partner in all this, and a certain amount of the game of chicken. Sometimes exhaustion allows for compromises that would never otherwise be considered.

Copenhagen achieved some things: focus on the problems of poor countries and climate change; money to prevent de-forestation. True, emissions were not cut; there is no enforcement. As with the mice trying to decide who bells the cat, no one was willing to risk their interests for a common good. So there is a lot of disgruntlement. Failure is like that.

But there is the future (by that I mean next year). Perhaps now that everyone has had their say in pure democratic form and seen what a mess that can make, coalitions will come together and each send a representative team to cut down on the number of parties at the bargaining table. Such a step would increase the odds of success next time. Apparently, Copenhagen itself was only a step towards dealing with climate change, as was Kyoto before it.  A big problem will get a mammoth negotiation. It will take years, but humanity will survive – it has through all the catastrophes of time. (The world has been about to end so often and for so many reasons, it can be hard to keep track.)

Compromise has its costs and is slow; that’s the downside to democracy. But would anyone like to change systems?

Overview

2009 was all about China. Early in the year, when energy prices crashed due to disappearing demand, oil sank to slightly more than $30 barrel from its mid-2008 high of $147 and natural gas from $14 to around $3 per thousand cubic feet. China, flush with cash, for all practical purposes stabilized the market by going on a spending/investment spree in Africa, South America, even Russia. By the end of the year, oil prices had climbed back to more than $70 a barrel, due to the plummeting value of the dollar. (Gas prices has only rebounded to around $5 per thousand cubic feet.)

2009 also saw several countries attempt to use their natural resources for political power — most notably Russia’s decision to freeze Europe last winter (literally) in its displeasure with Ukraine and its natural gas pipeline bottleneck. Result? Europe is desperately developing alternatives sources and pipelines for gas.

Mining prices also tanked early on, with the same response from China. In mid-summer, China ominously arrested employees of mining giant Rio Tinto of charges of spying.

A number of gigantic mergers took place in 2009; most recently oil mega-company Exxon, seeking to become a major player in natural gas, bought regular-size-giant company, XTO, in a deal worth $41 billion.

Finally, 2009 will probably be remembered for the rise of new energy sources — not only green energy, but a transition to unconventional sources of natural gas, including coalbed methane and shale gas. Billions of dollars are being invested, due to new technology.

Those Who Made It The Year It Was:

The Winner: China, for the reasons cited above.

Honorable mention: President Umaru Yar’Adua of Nigeria for taking the first concrete steps to ending the fighting in the Niger Delta, and
President Luiz Lula da Silva of Brazil (for using the energy market) and President Michelle Bachelet of Chile (for using Chile’s copper-based sovereign wealth) to limit the recession’s impact on their countries.

The Rogues’ Gallery: Vladimir Putin of Russia; Ali Ben Bongo (for growing up to be an oil autocrat just like his dad); Hugo Chavez (for the priceless rebuke to his countrymen on the energy shortage: “Some people sing in the bath for half an hour. What kind of communism is that? Three minutes is more than enough!”); Paul Kagame of Rwanda (a hero for ending the genocide there, but who has tacitly allowed the bloodbath in the DRC to continue); Alan Garcia of Peru (for deciding that the indigenous people of his country were too ignorant to understand his leasing of their land in the Amazonian basin); and Idriss Deby of Chad (for using oil to keep himself in power and exacerbate an already tense region).

What Was That Again? (Most Unexpected Event)
China’s announcement that it tends to monopolize its rare earth minerals required for emerging green technology.

Oh, Crystal Ball… What to look for in Energy and Natural Resources in 2010
Conflict
1) Fallout following the Iraqi elections. Big question what will the Kurds do? What about relations between Sunni and Shiite?
2) The strong possibility of war in Sudan, this time between the North and South again. The South, with the oil, votes on secession in 2011.
Power politics
1) More power politics from Iran and Russia.
2) More pipelines in development create  more opportunities for profit, energy and political obstruction.
3) The main US question: will the US Congress actually pass a meaningful energy legislation after the chaos of health care?
Money
1) The outcome of the push for global financial transparency in the extractive sector — will dozens of developing countries who have “committed” to making their dealings transparent actually make good?
2) How will China’s acquisitions affect global demand and long-term prices?
3) Can everyone working together keep oil prices stable to sustain the global equilibrium of today?
Green energy
1) Ethanol begins to wilt; farmers go back to growing food for the starving world.
2) Coal has the stake pulled out of its heart by friends in Congress and China, natural gas tries to stab it back in.
3) Water supply becomes a serious problem for green energy
4) We arrive at the gloomy realization that there are no easy answers when it comes to weaning ourselves off oil.

Last spring, I attended an event about the new positive resource contracts of Liberia, held at Revenue Watch, an international NGO which seeks transparency in the finances of governments with natural resources. During the Q & A, a man got up to congratulate a Liberian official there, and to pray that in his own country, Guinea, the new military government would have the wisdom to follow suit.

No such luck. Guinea, with its huge deposits of bauxite (aluminum), gold and iron, has always hit below its weight. After a hopeful but fitful start, the new President, Captain Moussa Dada Camara, sat by in September as troops went on a rampage slaughtering and raping civilians in the streets. Even the African Union condemned it. This week he seems to have barely survived an assassination attempt, and is currently in Morocco for medical treatment, they say. But according to Reuters, mining giants Anglo Gold Ashanti, Rio Tinto and others have not been affected by the violence. That would be politically stupid.

This parallels the ongoing conflict in the Democratic Republic of Congo, where chaos continues to flare and subside in the eastern part. The war there, a spillover from the Rwandan genocide more than 15 years ago, has cost five million lives and untold misery as the weak leader, Josef Kabila, son of the former (and also weak) Laurent Kabila, remains unable to bring an enduring stability to the region.

Much has been made of Congo’s free-for-all mining of gold, coltan and other minerals, which are exported through only-too-willing neighbors like Uganda and Rwanda. It’s the classic greed-versus grievance/chicken-and-egg story: do they mine to keep a war going that they believe and have a job fighting in? Or is the war is just an excuse to make money from illegal mining?

What is indisputably true is that parts of Africa (the despotic parts) are witnessing the law of genetics at work: the original hybrid tyrant may have been strong, but the descendants are much weaker and unpredictable. The Big Men of Africa (totally unmourned) are replaced by the Little Big Men: Camara, Bongo II (Gabon), Kabila, and someday, Teodoro Obiang (Equatorial Guinea). The original strong men who held their country together through terror, corruption and tyranny are followed by those who cannot even do that.

The age of the despot is over — those who can muster the violence to seize power rarely have the ability to run a viable economy. Historically those with resources relied on advanced industrial companies to translate it into cash. As the world moves into ever more technological economies, the miserable shrunken dictators (and they are not only in Africa) and their countries remain unhappily stuck in the past.

Can democracy survive 21st century capitalism?

In October, the courts of France dismissed a suit by Transparency International (and other plaintiffs) that sought to investigate how three African dictators in Francophone Africa came to possess hundreds of millions of dollars even though the people of  their countries were amongst the poorest in the world. The Africans were dictators, but France is a democracy.

In Namibia, an extremely poor but technically democratic African country, the Chinese government has offered scholarships to the children of the best connected families according to The New York Times. This is nothing new for China, of course, where kind touches and nice gifts — of roads and other infrastructure and no one knows what else — is part of the package to secure access to various natural resources. Undermining fairness may not bother the non-democratic Chinese, but it has infuriated many locals in the source countries. It ruins the equation that elections mean democracy means fairness.

The United States has the Foreign Corrupt Practices Act, which prohibits (in theory) bribery in order to secure foreign business. But early this year, Halliburton paid more than a half a billion fine for bribing Nigerian officials (to the tune of $180 million) for $6 billion worth of business. Officials and family members of officials, all with suspiciously large bank accounts and holdings, are regularly allowed into the US (especially, according to numerous reports, if their countries have oil).

Although corruption is so visible and so common in oil countries, it is scarcely limited to them. Afghanistan, which has limited natural resources, deals with corruption on all levels, a (probably) stolen election, a US-backed President who seems to uninterested in stopping it. A viable economy is thwarted by the current illegal one.

To me, Afghanistan shows most clearly the potential costs to democracy without equally enforceable laws. Defense Secretary Robert Gates has suggested tying aid to anti-corruption efforts, but that has rarely worked elsewhere. What will we do instead? Democracy relies on coalitions (although this is rarely emphasized in American politics these days either),but not necessarily a corrupt one. Building a working coalition in Afghanistan has meant deals with corrupt warlords, tribal leaders and drug lords. This behavior is the only thing that can validate the Taliban.

Historically, when we have promoted democracy around the world, we have linked the system with improved freedom and greater opportunity, especially economic opportunity. After all that is our legacy, if not exactly our own 19th century history. Now much of the rest of the world has elections: Nigeria has a civilian government — and is it beyond corruption? Kenya? Zimbabwe? Pakistan? Russia? Iran? People become disgusted with democracy when they connect it to democracy.

Democracy without honesty, without accountability, gives the best system in the world a bad name and bad image, with dangerous consequences. Unless America and the West can find a way to control the corruption that seems to follow the beginning of democracy, it will undermine the validity of the concept by association. Will people ultimately pull away, give up in the name of another organizing principle? Communism was once seen as a viable alternative to capitalist but democratic Western countries. Today, this is the attraction to other, antiquated, approaches, like sharia.

As we have seen in Guinea, Gabon and other places, the end of one dictator often means elections that are farces and a new old dictator comes to power. The “election” of Bongo’s son in Gabon this summer brought furious local protests blaming France. France, once an ocean-worthy power, now seeks to retain its glory in a duck pond, as protector of some of the worst dictators in its former colonies.

All countries endure some corruption — it becomes unendurable when wealth is limited to those in positions of power, however petty. Allowing corruption to become associated with democracy or the West (especially the US) will undermine the best hope for us all.

Last week, it was revealed that the supposed informant in the bribery case against the Ecuadorean officials deciding the $27 billion pollution case is a convicted felon. (Conspiring to traffic 275,000 pounds of marijuana, sic-ing his pit bull on a woman.)

It doesn’t necessarily mean that he’s lying about the bribery charge — just that he doesn’t seem to be the most ethical, upstanding person to begin with. How did he get involved in this lawsuit?

On the other hand, Ecuador, as an oil-producing country, does not seem to have learned anything substantial from the whole sorry episode, either. October saw increasing tensions between the indigenous Schuar people and government, which is now trying to develop new oil and mining sites on their land without their consent, and possibly privatize the water as well.

It’s hard to know what to feel about this saga. It’s tit-for-tat, like a ping-pong match with the people and land caught between Ecuador and Chevron. On the one hand, it is impossible to deny that there was major environmental damage and probably significant damage to the health of the local people because of Texaco’s sloppiness and malfeasance. It’s also true, it wasn’t by Chevron — they inherited it. It’s true that the operator was Texaco and they are usually legally responsible for such practices; it’s also true that Petroecuador was the majority stakeholder of the project(s), did know about the problems at the time, and did clear Texaco legally after a $40 million clean up job. And that the damage is visible today, oil is still being extracted, and Texaco and Chevron are long gone.

The real bone of contention in the Ecuador case is the price tag, $27 billion. It’s the equivalent to about ¼ of Ecuador’s entire GDP. If the number was just for environmental clean up, health care and compensation for those affected it would be much smaller. One thing that sticks in my mind is that the horrific spill of the Exxon Valdez resulted in a much smaller financial settlement — about 1/3 as much.

There seems to be this sentiment among the developing countries to, one way or the other, squeeze everything possible out of a multinational company, rather than just run the project right and responsibly as partners. Multinationals are seen as evil cash cows that it is okay to milk. It isn’t that they totally don’t deserve the image, it’s just that there is more to the equation, and those who milk are often not the most upright either — Ecuador also has serious corruption issues.

I am not a huge fan of oil (or other extraction) companies — I know they have done and will do a lot of extremely questionable things to preserve the bottom line. But I know everyone, when if comes to oil/gas/mining, goes totally crazy to get every last dime they can out of it, using contracts, legal action, enhanced security problems, criminality, anything possible. In this sad and bizarre case, perhaps it is in the best interest of those most affected — those sick and living on the land — to come up with a more balanced number without the padding and get them the money now.

In the past couple days, the New York Times has published two stories about new energy. In one about new controversial gas drilling in Colorado, The Times is pretty clearly against drilling. There is a risk of pollution (there always is an environmental cost in all energy, including green energy). But what upsets The Times is its aesthetic damage to the Roan Plateau.

“The rugged hills are dotted with sage and aspen groves. Some creeks are watering holes for cattle, but most appear untouched, rushing through the deep shale canyons that define the plateau’s topography. Vegetation hangs from some escarpments, and smooth shale slabs hold back pools of trout.”

The Roan has roads and development but its beauty holds a special meaning to many inhabitants who want to preserve it.

The following day, The Times condemned a similar aesthetic concern about Nantucket Sound where the Wampanoag tribes have objected to a wind farm.

“Tribal officials say their culture requires them to greet the sunrise each day and that this ritual requires unobstructed views. Their claim should be rejected by the responsible federal and state officials. Another round of bureaucratic reviews would drag out an approval process that has gone on much too long and give opponents time to find some other way to derail the effort… The alliance includes many local people but has been largely underwritten by wealthy homeowners from Nantucket, Martha’s Vineyard and Cape Cod who hate the idea of having 440-foot windmills on the horizon.”

I’ve never been to either place: I’m sure they’re both lovely. Of course, neither may be the Grand Canyon or other place of such wonder and beauty that they become an international treasure.

But I am not sure why one is aesthetically worth preserving and the other isn’t — except that The Times is pro-green energy, the same way the gas companies, which seem rather more immune to the delights of the Roan plateau, are pro-gas. It’s not the beauty of the landscape to The Times — it’s the beauty of the idea.

I’ve seen wind and shale gas projects — there are both near where I live, and I have to say, the huge turbines are strange and majestic but somehow not hideous (although they do apparently harm migratory bird populations and cause other problems). On the other hand, a shale gas well, after drilling, is roughly the size of a garden shed — not a terrible blight on the landscape and possibly easier to hide than a cell phone tower or a ranch. And I am not choosing with any side. There are significant problems with all the choices.

Giant oil rigs, coal strip mining, careless traditional well placements are ugly. They absolutely do ruin a beautiful landscape. In calculating wind or gas projects, the natural landscape must be considered – but fairly and equally.

Remember the fable of the grasshopper and the ant? The ant toils away storing grain for winter, while the grasshopper parties through the summer and dies of starvation in the winter.

Something like that is happening in Chile. Chile is the world’s largest copper producer. Like several resource-rich countries — especially those with oil like Saudi Arabia and Kuwait — Chile has a sovereign wealth fund, meant to increase the country’s wealth through external investments, independent of reserves.

(Actually, Chile set up two — one to be held against future federal pension shortfalls; the second, created in 2007 out of the old 1985 Copper Stabilization Fund, was to save when copper prices were high in order to smooth the economy when times were rough.) Dozens of oil countries have sovereign wealth funds but only a few are as transparent, well organized, or publicly accountable as Chile’s.

Most poor resource countries will say that Chile, a middle-income country, was better off to start than they were, and that they cannot have sovereign wealth funds: they need the money from the resources immediately, for urgently needed projects. Yet, with few exceptions (Botswana and Norway come to mind), their use of the money has rarely had the positive impact on their people or helped their economies as Chile’s approach.

Michelle Bachelet, the single mother who is Chile’s current president, is widely credited with the economic judgment that saved her country — and especially its most vulnerable citizens — from the worst of the global economic crash. She will leave office in a few months with the highest approval rating (76%) in history of any president of Chile. She had not been popular till the economic crisis.

The New York Times reports, like the ant of the fable,

“Ms. Bachelet resisted the cries of politicians to use revenues from copper sales to try to close Chile’s inequality gap, one of the world’s worst. Instead, during her first three years in office, her government set aside $35 billion in revenue from the boom. When the global financial crisis hit, the value of Chile’s exports sank by more than 30 percent. But by then Chile had nearly $20 billion invested in overseas sovereign wealth funds alone.
“We have the distinction of perhaps having the only sovereign funds that made money during the crisis,” said Andrés Velasco, Chile’s finance minister.
With billions of dollars saved, Ms. Bachelet’s government legalized alimony payments to divorced women and tripled the number of free early child care centers for low-income families. It added a minimum pension guarantee for the very poor and for low-income homemakers.”

And as importantly, in January, Chile announced a $4 billion economic stimulus including direct transfers to lower income families.  The IMF had recommended less.

Bachelet said in a speech to the OECD (Organisation for Economic Cooperation and Development) Council in May:

“… instead of reducing social spending in the face of the crisis, we are actually raising it. And we are doing so without increasing public debt.
A few months ago, we modified our unemployment insurance system so that Chilean workers are better protected if they lose their jobs. This year too, thanks to a pension reform approved last year, my government will increase the basic solidarity pension, received by the most vulnerable Chileans, by 25%.”

Other countries (like China) have used their savings to smooth their economy during this downturn. But few have been as wise and humane as Chile’s.

I hope the new Nigerian peace plan works. For years, Nigeria has been the poster child for everything that can go wrong when a country discovers oil. Instead of the prosperity, thousands have died violently, the country’s infrastructure has crumbled, the Niger River delta has been environmentally devastated, the army has run amok among the population, its politics have set an internationally recognized standard for corruption, leaders have been killed, oil companies sued, the general economy in a disaster with rampant poverty while hundreds of billions of dollars in oil revenue has disappeared.

Once Africa’s number one oil producer, Nigeria has now slipped behind Angola. For the past couple years, with the attacks on facilities and pipelines, Nigeria has been losing 1 million barrels or more of output a day. Its output, for much of the year, around 1.6 million barrels a day, has been far below its OPEC quota.

Violence against civilians, always bad, increased in the past few years in the Delta, Nigeria’s oil producing region, as rebel groups like MEND (The Movement for the Emancipation of the Niger Delta) and others attacked locals (for a variety of reasons), fought with Nigerian security forces (themselves guilty of innumerable human rights infractions), and engaged in kidnappings, mayhem, and money-making schemes like bunkering (stealing oil).

But in early October, many leaders of these groups and an unknown number of their fighters had accepted (at least for now) the amnesty offered by President Umaru Yar’Adua.

Why the sudden change? Amnesty is important but it comes down to one thing: money. Money in two ways. First, there is no doubt that the people and communities of the Delta have gotten the short end of the economic stick for decades. One report estimates just 13 percent of the oil revenues is earmarked for the delta states, made even scarcer by massive corruption of local government representatives. The national government is pushing a bill to give a higher percentage of the monies directly to the villages of the delta. After all this agony, shouldn’t any government looking at the case of Nigeria conclude it’s just easier and smarter to share the money with the local people from the get-go?

More ominously, the amnesty offers each former fighter approximately $13 a day to stop fighting. In a country where most people earn less than $2 a day, this is paying them very well, for —- not being a problem. Which is to say, they are cut in on the deal. They are not earning the money; they are being paid off. If you think about it, is a payoff really the best way to address corruption?

Yet such is often the stuff of peace plans. Will it work? It’s a huge step — acknowledging local rights to the money is huge. Yar’Adua will have to deliver on his end of the plan; such plans have failed before in Nigeria and things have gotten worse. No one actually is talking, either, about how many of the 8,000 rebels out there have signed on.

The one thing that will make the biggest difference in the lives of the locals is a real economy. The Economist reports

“the militants have also been promised retraining and education. Many … want to resume careers as welders, lorry-drivers and engineers… Some dropped out of the University of Port Harcourt to join the militants. One, who was studying gas engineering, says he would like to work for the oil companies he used to attack. All say that they expect the government to help them learn new skills or resume studies.

Reuters quotes a local fish-seller speaking the wisest words of all —not just for Nigeria but so much of Africa: “Give them jobs. If you do not give them jobs, they will go back to what they did before.”