Pioneering Commodities Studies Bring Transparency to Oil Companies and Swiss Trading Hub

Zurich/New York, 23.04.2012 - National oil companies and their customers should publish the price, volume, and crude grade for every cargo of oil sold, thereby bringing greater transparency to a largely hidden part of the world’s oil market, Revenue Watch (RW) reports in pioneering research released today. The study is being published simultaneously with the English edition of “Commodities: Switzerland’s Most Dangerous Business,” a groundbreaking analysis of the industry by Berne Declaration (BD) that shows why and how resource-rich developing countries remain poor while Swiss trading companies make billions.

“Since oil marketed by state companies belongs to the citizens of those countries, national oil companies and buyers share responsibility for making public all sales information,” says Alexandra Gillies, head of governance at RWI and leader of its research project. “In some oil-producing countries, these sales generate more than two-thirds of all the government’s income.” Like all other kinds of oil revenues, the buying and selling of a state’s share of production should be reported as part of the Extractive Industries Transparency Initiative (EITI), the study “Selling the Citizens’ Oil” concludes. “The money from these oil sales is supposed to benefit the public, which needs access to far more information about every stage of these transactions,” Gillies adds.

The study includes background papers on how oil sales work, oil sale governance risks and how global oil prices are identified and change over time. Based on research into how 11 countries sell their share of oil production, RWI’s recommendations include the following:

  • Governments should require commodity traders and other buyers registered or listed in their country to report on payments made to producer country governments.
  • National oil companies should also disclose all financial transfers to and from the government.

RWI’s analysis of good sales practices shows that selling to independent commodity traders can pose governance risks for developing countries. This sector is heavily concentrated in Switzerland and is the topic of "Commodities". German and French editions of Berne Declaration’s reference book were widely reviewed and became bestsellers in Switzerland. This first ever survey of Swiss-based commodities trading industry includes portraits of the key firms, provides insight into the consequences for the producing countries, scrutinizes tax avoidance and speculation, and offers proposals for greater transparency and better deals for producing countries in this multi-billion-dollar business.

“Unnoticed by the public and politicians, Switzerland has become the world’s most important commodities hub,” the book argues. “Because of tax privileges, a strong financial industry and weak political regulation it continues to attract trading and mining corporations as a dunghill attracts flies. After the fall of Swiss bank secrecy, the commodities business is the country’s next exposed flank.” The release of the English–language edition and of RWI’s report coincide with the “Global Commodities Summit,” which opens today in Lausanne, Switzerland.