Nigeria's Election Heightens Oil Worries

Apr 11, 2007 From the Wall Street Journal via Dow Jones Newswires

The balloting that kicks off in Nigeria Saturday could prove to be a historic event: If the election of a new government goes smoothly, the transition will mark the first time one civilian government in Africa's most-populous nation passes power to another.

But sporadic violence already has marred the campaign season. Unresolved legal controversies surrounding two candidates could spawn prolonged court battles and possibly postpone voting day.

Amid the chaos, some observers are predicting a messy outcome that could result in challenges to the vote or widespread disenchantment with its outcome. That could have broad repercussions well beyond Nigeria, which in recent years has emerged as one of the world's most important energy suppliers.

On a good day, Nigeria can pump some 2.5 million barrels of oil a day, or about 3% of global consumption. Most of its output is exported, making it the fifth-largest foreign supplier of crude to the U.S., behind Canada, Mexico, Saudi Arabia and Venezuela. Nigeria's blend of oil is especially prized by American refineries because of its low sulfur content and its closer proximity to U.S. shores than crude from the Middle East.

A tumultuous election threatens that supply at a time when production cuts by the Organization of Petroleum Exporting Countries -- to which Nigeria belongs -- and a showdown over Iran's nuclear ambitions have stoked world oil prices. Amid the past three years of tightly balanced supply and demand, small flare-ups of violence in Nigeria have triggered big jumps in the international price of crude.

In the oil-rich -- yet impoverished -- Niger Delta, many groups have used attacks or the threat of violence to win concessions, such as payouts, jobs programs or funding for other projects such as better schools, from the federal government in the capital Abuja and from the handful of Western oil companies that work the fields. But territorial disputes between rival gangs and access to crude-smuggling routes in the Delta also have triggered bloodshed.

World leaders are watching the elections nervously. In testimony before Congress in February, Mike McConnell, the highest-ranking U.S. intelligence official, listed a failed Nigerian election as one of the biggest threats this year to national security. "We've been focused on this for quite some time," said Gregory Manuel, the State Department's special adviser for energy.

This past weekend, Nigerian President Olusegun Obasanjo ordered his country's security services to a heightened state of readiness ahead of the polls, promising to "clamp down heavily" on anyone attempting to disrupt the elections. Polling for local legislators and local government offices is slated for Saturday, followed by voting for president and the national Legislature a week later.

Isolated cases of election-related violence have flared across the country in recent months. And many analysts blame political maneuvering for helping to stoke three years of heightened tensions in the Delta, where most of Nigeria's oil is produced. Antigovernment militants, thieves and heavily armed gangs -- backed, many analysts believe, by various political parties -- have battled it out with each other and with federal troops.

In the past year, scores of foreign oil workers have been kidnapped in the Delta for ransom. The violence has shuttered about a fifth of the country's daily output, by some estimates. Early last year, Royal Dutch Shell PLC, the largest foreign oil company in Nigeria, closed most of its western onshore and shallow-water operations in the Delta. The company has said several times in the past year that it would soon restart work in the region, but has so far been unable to get access to the facilities it left behind.

For Shell Chief Executive Jeroen van der Veer, the best-case scenario in Nigeria is that tensions drop off after the elections and the company is able to resume production in a matter of months. "The worst scenario is that you have to stop operations even longer," he said in a recent interview.

With just a few days to go before balloting, the situation looks troubling. Last year, lawmakers ruled out a third term for Mr. Obasanjo, a former military leader who has won a measure of international prestige for undertaking modest anticorruption efforts in a legendarily corrupt country. Since winning independence from Britain in 1960, Nigeria has been led by a long line of strongmen, who have been accused of siphoning off billions of dollars of oil revenue.

One of the handful of recent presidential candidates died late last month. Though Adebayo Adefarati was a dark horse, his small party has called for a postponement of the vote to let it prepare a new candidate -- a move seemingly in line with Nigerian election law. A court is expected to rule on the request this week. Meanwhile, Umaru Yar'Adua, the candidate of Mr. Obasanjo's ruling party, was whisked out of Nigeria last month to undergo unspecified medical treatment in Germany. Mr. Yar'Adua says he is fine now.

Another prominent candidate, Atiku Abubakar, served as vice president under Mr. Obasanjo, but the two have fallen out publicly and bitterly. Mr. Abubakar last month was disqualified from the ballot by Nigeria's election commission. But he has appealed the decision in court, and it isn't clear whether the issue will be resolved before the presidential poll April 21.

Mr. Abubakar's name has surfaced in a Justice Department investigation of U.S. Rep. William Jefferson in Washington. The Louisiana Democrat is being probed in a bribery case involving a Kentucky telecommunications company that sought business in Nigeria. Mr. Jefferson denies any wrongdoing. Mr. Abubakar has said his political enemies have used allegations of bribery to tar his campaign, and he has repeatedly warned that Mr. Obasanjo's supporters are plotting to hijack the elections with the idea of keeping either the president or his allies in power indefinitely.

"Concerted efforts have been under way for some time now to return the country to full-blown autocracy and dictatorship," he said recently in a speech in London.

Some international observers question whether Nigerian election officials will be ready for the vote and whether the court system is prepared for the likely legal challenges that could follow.

"There is a chance that polling will be delayed," said Thomas Cargill, an Africa specialist at Chatham House, a London think tank. That could significantly erode the public's confidence in the elections, he said. "If these polls don't go ahead . . . it's going to be very hard to convince many everyday Nigerians" the vote was fair.

Copyright (c) 2007 Dow Jones & Company, Inc.


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