November 25, 2017
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Cleaning Up

Corruption Probe in China’s Oil Industry May Reach to Myanmar Gas Deal

Secret agreements reached between the former military regime of Than Shwe and China National Petroleum Corporation on Myanmar gas sales could be scrutinised by a top-level anti-corruption investigation under way in China.

The former boss of CNPC, Jiang Jiemin, is the most highranking of several top leaders of China’s giant state-owned oil and gas businesses now being investigated.

Jiang, who only recently moved into an even higher position as chairman of China’s State-owned Assets Supervision and Administration Commission, has not been seen in public since it was announced in the state media last week that he was being investigated for “suspected serious disciplinary violations” – code in China for corruption.

The sale to CNPC in 2008 of practically all 200 billion cubic metres of natural gas in two blocks of the Shwe field in Myanmar waters of the Bay of Bengal has always been surrounded in secrecy. No financial details of the deal have ever been made public.

Under the terms of the deal, CNPC can take gas from the offshore field for the next 30 years.

Similarly, the crude oil and gas pipelines just built through Myanmar by CNPC are also controversial because of allegations of land theft, forced removal of people on the pipeline routes and forced labor in their construction involving the Myanmar Army.

“Jiang’s case brought out concerns regarding corruption within SOEs [state-owned enterprises]. They control a huge amount of state assets without much competition from the market or strict supervision from the public, making corruption in SOEs even easier,” said Wang Wenzhang, a professor at the Institute of Social Development at Peking University, interviewed in Beijing’s Global Times.

“Corruption has become the top concern of today’s society as it aggravates people’s discontent over inequality in wealth,” Wang said.

This officially-sanctioned comment appearing in the Chinese press almost mirrors the views of campaign groups in Myanmar who have been arguing for years that the Shwe gas deal and the pipeline linked it were unfair.

“Natural resources should be used to benefit the country, not to enrich a select few at the expense of the environment and human rights of the affected communities,” the coordinator of the Shwe Gas Movement, Wong Aung, said recently.

“Our country has an opportunity to learn from past mistakes, but instead abuses are continuing in connection to the extractive industries.”

Some China watchers think the corruption investigation will lead to a restructuring of CNPC and other Chinese state oil and gas businesses, and might even open up what is at present a very tightly controlled market.

“One thing I can say with regard to the investigations is that it will affect the status of CNPC as the biggest NOC [national oil company] in China significantly,” senior research fellow Keun-Wook Paik at the Oxford Institute for Energy Studies told Mizzima Business Weekly.

“How far the restructuring will go depends on the decision on the investigation of the level of corruption. Many of CNPC’s subsidiaries will be affected by the level of investigation,” Paik said.

Jiang left CNPC only in March this year to become head of the State-owned Assets Supervision and Administration Commission (SASAC), a body directly linked to China’s supreme authority, the State Council.

The CNPC Shwe gas deal was negotiated through the Myanma Oil & Gas Enterprise (MOGE) which was closely controlled by the military.

An unreconstructed MOGE was a primary reason why an international bidding round for 30 new offshore oil and gas exploration blocks in Myanmar coastal waters was postponed for months last year. There had been objections from major Western oil firms – under pressure to engage only in clean business – about the state agency’s continued involvement.

MOGE has since supposedly been cleaned up to make it more transparent and accountable, but few details of any changes have been made public.

“The broadening crackdown on corruption may send a message that Chinese authorities will increase efforts to break the oil industry’s monopoly by stateowned giants,” commented ChinaScope Financial in Shanghai.

The opening up of Myanmar with the end of direct military rule has forced Chinese state companies operating in the country to become more conscious of issues such as human rights and public objections.

This was underlined by the decision of President Thein Sein to suspend the hugely unpopular giant river hydrodam project at Myitsone which was being built by the China Power Investment Corporation.

At least five other senior executives in CNPC are also now being investigated on corruption allegations.

They include Li Hualin, a vice president for oil and natural gas exploration and development.

The corruption allegations involving CNPC were sparked by a routine audit of Jiang Jiemin when he left the company this year, said the independent Beijing business magazine, Caixin.

“Ordinary Chinese people find it difficult to accept these are supposed to be civil servants and yet they make a tremendous amount of money in terms of salaries and bonuses. In the socialist economy, this is a bit unthinkable,” Joseph Cheng, professor of political science at Hong Kong’s City University, was quoted this week by the Interfax China news agency.

This article first appeared in the September 12 edition of M-ZINE+.


M-ZINE+ is a business weekly available in print in Yangon through Innwa Bookstore and through online subscription at www.mzineplus.com

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