Friends of the Earth

African Oil in the City: a New Kind of Colonialism

by Chloe Farand and Mat Hope

Back in May, parliament voted for an amendment requiring overseas territories to introduce public ownership registers by the end of 2020, or face having them imposed by the UK government.

The Sanctions and Anti-money Laundering Bill vote was another embarrassing defeat for the Conservative government, which continues to talk-the-talk on corporate accountability without actually laying down any constraints. The issue is an old one, but the vote has given it a new lease of life.

The publication of the Panama Papers in 2016, and the Paradise Papers a year later, laid bare how tax havens and offshore jurisdictions have been used by the world’s wealthy elite to launder money, evade tax and finance dirty ventures.

At the time of the release of the Panama Papers, then prime minister David Cameron said the UK needed to take “additional measures” to “make it harder for people to hide the proceeds of corruption offshore, to make sure that those who smooth the way can no longer get away with it and to investigate wrongdoing”. But the subsequent parliamentary enquiry failed to deliver any concrete changes.

Today, the government continues to drag its feet. But if it’s actually serious about rooting out corruption and fraud, it needs to take a closer look at the financial institutions at the heart of the City – starting with its junior stock exchange.

“Wild West” Stock Exchange.

Set up in 1995 to help growing companies raise funds, the Alternative Investment Market (AIM) is the little sister of the London Stock Exchange. Described as an investing “casino” and “wild west”, AIM’s 20-year history is riddled with a host of well-publicised cases of corruption and fraud. As of writing, around 190 of the companies listed on AIM work in the extractive industries. Only 12 work in “alternative energy”. 

A new investigation by DeSmog UK recently identified a dozen oil and gas companies who operate from the City but explore for oil and gas in Africa, diverting company ownership and sometimes profits via offshore tax havens. 

The Tory and coalition government’s introduction of tax breaks on inheritance tax and stamp duty were implemented to encourage individual investors to buy shares in AIM, with many finding it an attractive place for self-invested pension pots. The policies certainly worked to encourage investment – as of March this year, 950 companies were listed on AIM and the market is now worth more than £100bn. But, according to research by the Financial Times, AIM has seen more investors lose money on the market than make a profit. 

Dirty Brexit. 

With Brexit looming, the government is faced with a perception problem. Theresa May wants the UK to be seen as leader of the global environmental movement, but one of the UK’s main selling points – the City of London – is harbouring some of the world’s most polluting businesses.

Analysts are clear that the world needs to leave most of the known reserves of fossil fuels in the ground if countries are to limit warming to the globally agreed goal of two degrees. The UK has been at the vanguard of efforts to get countries to commit to this – parliament made the UK the first country in the world to have a legally binding emissions commitment when it passed the Climate Change Act in 2008; and it was at the forefront of the efforts to agree the Paris Agreement in 2012, which codified the two degrees goal.

The government is keen to perpetuate this eco warrior image. When launching its 25 year environment plan in January, Theresa May told the world she wanted “the Britain of the future to be a truly global Britain, which is a force for good in the world. Steadfast in upholding our values – not least our fierce commitment to protecting the natural environment.”

But as is so often the case, this commitment is being tested by Brexiteers’ obsession with trade deals at all costs. This blinkered focus means the UK is making friends with countries whose main export is natural resources and whose records on environmental regulations and human rights are questionable at best. 

Even Dirtier Britain.

Government ministers including foreign secretary Boris Johnson and international trade secretary Liam Fox have been reaching out to African ministers in the hope of building further trade links across the continent. Speaking to the Africa All Party Parliamentary Group last year, minister for Trade Policy Greg Hands talked about the government’s desire to establish a thriving relationship with Africa, saying, “As we leave the EU, we will build and strengthen ties between British and African businesses and help turn the UK into Africa’s trading partner of choice”. 

Free from scrutiny and regulation, AIM companies will be at the forefront of this thinly veiled exploitation of Africa’s resources and the deployment of an economic model that reeks of Empire. As the UK isolates itself from its European partners, it is instead seeks to exploit old colonial relationships.

With the UK government keen to retain London’s financial influence in a post-Brexit world and parliament gradually moving the Sanctions and Anti-Money Laundering Bill through the institutions grinding gears, the issue of stock market regulation and offshore transparency is at least back on the agenda.

But until the government takes stronger action to regulate the UK’s financial institutions, it is enabling an incredibly polluting form of economic neocolonialism.

Published 7th June 2018

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