Conflict and Extractives

This topic overview, library and guides are jointly developed and curated by GOXI (co-convened by UNDP and the World Bank) and Extractives Hub teams.

1. Introduction

In many cases, exploitation of natural resources has contributed to the emergence, funding or prolonging of conflict. While conflict does not always trigger violence, and in some cases, has led to important social change and development, conflict tends to escalate once societal mechanisms and institutions for managing and navigating conflict break down. In the extractive sector, conflict imposes additional costs on production processes, and in extreme cases can lead to the suspension or early closure of operations and the consequent failure to make use of these resources as vehicles for development and poverty alleviation.

Hence it is critical for national and local governments, public and private finance bodies, regulators, companies, societies, including communities where extraction occurs, as well as the international community, to understand the root causes of conflict linked to mining, oil and gas and foster the conditions and mechanisms required for its peaceful transformation. If conflicts are successfully prevented from escalating into violence, and transformed into opportunities for sustainable development, experience has shown that good management of natural resource wealth can support economic development and help raise emerging producer countries out of poverty.

In the following, the term “conflict” is understood as the interaction of two or more parties with perceived incompatible goals, who may engage each other through a range of practices including dialogue, persuasion, negotiation, arbitration and legal action, or in extreme cases, protest, intimidation, and physical violence. One of the challenges in the mining, oil and gas sectors is that conflict situations are not always recognized and acted upon at an early stage by the parties involved, before conflict escalates to entrenched protests or violence.

1.1 A History of Troubled Relations

Historically, the exploitation of minerals, oil and gas has been closely linked with experiences of colonisation and independence struggles, from the Spanish conquest of the “New World” in the 16th century, with its fixation on gold, to the “Scramble for Africa” in the 19th century. Specifically, in politically fragile environments, such as post-colonial states, the questions of who controls and who benefits from resource extraction has frequently laid the ground for, exacerbated or sustained conflict, in particular where governing institutions were not fully developed.

Across the 20th century, financial flows from extractives sector operations have also been shown to play a role in the funding of armed conflict. According to the Uppsala Conflict Data Program and Peace Research Institute Oslo Armed Conflict Dataset, more than 40% of civil wars over the past 60 years can be associated with natural resources, with at least 18 violent conflicts fuelled by the extraction of resources since 1990. International engagement through mechanisms such as the Kimberley Process have helped to increase transparency in relation to the origin and chain of custody of high-value minerals sourced from conflict or post-conflict zones. Providing assurance to the end consumers of such products that they are ‘conflict free’ has become an important marketing tool and is increasingly viewed as an essential aspect of responsible production.

In addition to stand-alone disputes regarding specific aspects of extractives production and its regulation, conflict between mining operations and affected communities has been an ongoing theme. Such conflict frequently arises as a result of a lack of meaningful consultation with communities, unmet community expectations, weak governance structures and the lack of attention to transparency and accountability.

Set against this backdrop some countries, such as Botswana and Chile have shown that mineral wealth and extraction does not necessarily lead to conflict. Instead, the way extractive industries in these countries are managed is credited with contributing to their national economies and providing opportunities for citizen wellbeing and sustainable development.

1.2 The Commodities Boom of the 2000s

Demand and investment in commodities has rocketed since the turn of the century. Even accounting for the 2014 slow down, resulting from a general price crash, levels of production are up 60% or more from levels in the year 2000 across many commodity markets. At the same time, commodity prices have not only increased, but also become considerably more volatile. These developments have had at least two major implications for the dynamics between the extractives and conflict.

First, the commodity boom has led to many new “greenfield ” mine sites and oil fields – exploration and development in new areas that were previously not accessible or not economically viable. In many cases these may be in the developing world and in remote regions, such as Rio Tinto’s Simandou project in Guinea, or Tullow’s oil field in the Turkana region of north-eastern Kenya. Issues such as indigenous rights, and environmental or social sensitivities can be heightened in these areas, and governance structures in general may be weaker, hence increasing the likelihood of company - community conflict.

Another implication is the return of so called “resource nationalism”. Faced with the increased profit-levels of extractives companies, many governments in resource-rich countries started to push for a greater share in the returns from their natural resource wealth. Increasingly, this included measures such as seizing assets or declaring contracts void, consequently raising the chances for conflict with operating companies.