EXTRACT UN Report on Somalia and Eritrea

Extract from the UN Monitoring Group on Somalia and Eritrea Report 19 june 2013

II. Acts that threaten the peace, security and stability of Somalia

78. In addition, there is a potential conflict of interest between Norway’s oil concerns and its support for the establishment of an exclusive economic zone that would almost certainly lead to a modification in Somalia’s maritime boundary in favour of Kenya. Serious limitations in the management of the Somali Petroleum Company and the Somali Petroleum Authority require urgent capacity development in order to safeguard their integrity and transparency and to mitigate their possible capture by private interests.

Annex 5.2: Public financial mismanagement and corruption

41. The appointment on 13 January 2013 of Abdusalam Omer as the Governor of the CBS in the FGS (Federal Government of Somalia) coincided with the introduction of a new initiative from the Government of Norway. A Special Financing Facility (SFF) would be administered by Norway, which would contribute 30 million USD as the stated shortfall of the 2013 Somali budget. Donor funds would be pooled in an international account and lump sums would be transferred to a government account controlled by the Ministry of Finance to pay for recurrent and capital costs. In its conception, it was effectively the recreation of the PWC (PricewaterhouseCoopers Associates Africa Limite) mechanism, not as the FMA (Financial Management Agency) but again as a transfer agent.

43. According to SFF Action Plans of 13 February and 10 April 2013, transfers from the SFF international account to the Central Bank-controlled Government account would be made through the hawala money transfer system, as in the case of the PWC mechanism. In May 2013, with Norway’s support the Ministry of Finance issued a tendering process for the SFF banking services, and awarded the bid to Salaam Africa. The Monitoring Group understands that Salaam Africa bank is an enterprise of Ali Ahmed Nur Jim’ale, designated by the Security Council for targeted measures. By September 2012, Salaam bank had established investment branches in Mogadishu providing loans against collateral to the growing number of businesses in the city. It was subsequently licensed by Abdusalam Omer after he assumed the office of Governor of the CBS. However, the licensing of banks by the CBS can only be done by the Board of the CBS, which was not in place, and not by the Governor.

44. The modalities of the SFF have been developed on behalf of Norway’s Minister of Development, Heikki Holmås, by a private entity, Nordic International Support Foundation (NISF), formerly headed by the current Special Envoy of Norway to Somalia, Jens Mjaugedal, a candidate supported by The Somali President for the position of Special Representative of the Secretary-General of the new UN Mission for Somalia (UNSOM). The image of Norway’s efforts to support Somalia, however, have been affected by its oil interests in the area (see annex 5.5)

Annex 5.5: Somalia’s petroleum sector: threats to peace and security and corruption risks

Threats to Peace and Security

11. 3) Norwegian oil company DNO entered into a Production Sharing Contract with the authorities of Somaliland in April 2013.8 The area under contract clashes with a prior license held by ConocoPhillips.

26. Therefore, the Monitoring Group is deeply concerned by the fact that protection of oil exploration operations may lead to a new armed conflict for the control of the disputed areas between Somaliland, Puntland and Khatumo militias. Moreover, it is alarming that regional security forces and armed groups may clash to protect and further western-based oil companies interests. In this case, the involvement of a Norwegian company on one side, and of a Swedishowned/ Canadian-based company on the other, is even more disturbing, considering the longstanding implication of Norway and Sweden in promoting peace and dialogue in Somalia.

28. The FGS has thus refused to recognise oil licenses granted to multinational companies by Kenya and which protrude into waters defined as Somali according to that perpendicular demarcation line. Oil multinational companies affected by the FGS opposition have included French oil company Total (Kenyan license L22), Italian major ENI (Kenyan licenses L21, L23 and L24), US oil firm Anadarko (Kenyan license L5) and Norway’s majority state-funded Statoil (Kenyan license L26) (see again annex 5.5.k for a more detailed map of disputed oil licenses).

33. The Monitoring Group understands that Kenya suspended Norwegian oil company Statoil from block L26 in late 2012, as the company was unwilling to meet financial obligations of developing exploration activities in the block while legal uncertainty prevailed over the Kenyan-Somali maritime boundary. However, a Kenyan Government official has confirmed that Statoil has nevertheless expressed interest in returning to develop L26 should the maritime boundary dispute be resolved in favour of Kenya.

34. The Monitoring Group has obtained information of attempts by the Norwegian Government to influence Somali parliamentarians and other FGS officials to adopt the EEZ for Somalia, which, as explained above, would lead to a separate process of redrawing of the maritime boundary towards a line of latitude.

35. Norway has been involved in attempts to introduce the EEZ onto the parliamentary agenda since at least 2008, when former UN SRSG for Somalia Ahmedou Ould Abdallah initiated the preparation of preliminary information indicative of the outer limits of the continental shelf on Somalia. At the time this was conducted, Statoil had no commercial interest in Somalia. However, efforts by Norway to lobby Somali officials to adopt the EEZ now coincide with current Norwegian interest in the fate of L26 as well as with Norwegian involvement in the application of a Special Financing Facility (SFF) donor fund of $30 million which has been allocated under the management of FGS officials with a track record of corruption (see annex 5.2).

36. Indeed, between 6 and 13 April 2013, two non-governmental organisations, the Oslo Center and the National Democratic Institute, hosted several Somali MPs, including the FGS speaker of parliament and Norwegian national, Mohamed Osman Jawari, on a Study Tour for the Federal Parliament of Somalia, in Oslo. The week-long programme included a briefing on the SFF by Norway’s Special Envoy to Somalia, Jens Mjuagedal, and Senior Advisor, Rina Kristmoen, as well as a briefing on Norwegian legal assistance to Somalia for the establishment of an internationally-recognized EEZ. Former Norwegian oil minister Einar Steensnaes also briefed on the issue of management of natural resources (see annex 5.5.l. for programme).

37. In this way, Norway’s development assistance to Somalia may therefore be used as a cover for its commercial interests there. Norway’s Minister of International Development, Heikki Eidsvol Holmås has, however, publicly denied any link between Norway’s assistance to Somalia in establishing its continental shelf rights and any commercial oil interest.

Extract by Herman J Berge

In Exile

Tonga