TI: I can see a moral argument, but how does this make business sense? How can a company increase its revenues through such an initiative?

GB: Of course there is a moral argument, but I wouldn't want it to be seen as such. Anyone operating a for-profit business must be able to see the hard edge of improved profitability. Although it overlaps with the moral case, it is actually driven by the philosophy of mutual advantage - where it is good for the country and good for us.

The business case is terribly important. It comes down to a simple matter of efficiency. It is very costly to operate in a corrupt regime, because everything takes longer. More so, in that BP has a very firm policy of not making any form of facilitation payments. That can sometimes mean a drag on the efficiency of moving goods and services, or of just doing business. A country that is spiralling downwards in terms of development could often be involved in conflict, and is therefore a much more challenging place to operate. Simply in terms of cost of operations, a country that is thriving is going to be a more efficient, safer place to operate. All of that equals greater profits – in the long term.

TI: Has BP seen an increase in its revenues in any country in which it operates?

It is still too early to give an example. The initiative was only launched at the end of 2002 and so far the only countries that are truly implementing it are Nigeria and Azerbaijan. In the case of Nigeria, those reports are only coming out now. In Azerbaijan, we have just produced our first oil through the pipeline, but it will continue flowing for 20 or 30 years. At that time we will be able to judge the effect of this transparency initiative. It is difficult to track its success as the traditional business world would like, quarter by quarter. Something like this takes much longer. I think we could argue that we can see the green shoots of spring. We can see that the discussion about revenues and accountability is starting. We need to give it time.

TI: How long must EITI be in operation before one could accurately judge success?

GB: No one could tell you. And it would be foolish to try to predict. But it is a great first step in the journey toward greater transparency and reduction in corruption to produce a more stable and prosperous macroeconomic environment. It is one of the things you need to have in place, but if it is all you have in place, it won’t make much difference. Because it affects our revenues, it is a step we can take together with our hosts. But we can only take that step if our hosts agree to take it. We cannot compel, we cannot force, and we cannot push. At the end of the day, we are just a contractor like anyone else.

TI: Does BP make EITI a prerequisite in all countries where it operates?

GB: EITI can only be implemented in countries that are committed to do it. We have found from our own experience that to unilaterally publish the flows of revenues from ourselves to a national entity without the permission of that government may be explicitly in breach of agreements with the government or our business partners, which obviously may put us in a very bad position with our hosts. We could face legal proceedings. The fact is, EITI can only be implemented by a government and not by a company unilaterally. Thus, for us it is very clear that in countries that are committed to EITI, we will fully participate in that process; we will promote the process and encourage others, but it is for governments to lead.

TI: According to the EITI website, 20 countries are participating in the initiative. In how many of these EITI oil-producing countries does BP operate?

GB: For us there are four countries, three of which are officially on the EITI website: Azerbaijan, which is clearly fully implementing EITI; Angola, which has made public commitments in the past; likewise with Trinidad and Tobago. The fourth is Indonesia, where there was a recent, highly successful visit of the EITI Secretariat and positive signs that they will go this way as well.

TI: You mentioned that it is not useful for a company to unilaterally publish revenues. Could you describe BP’s experience in Angola?

GB: Some time ago in Angola, we published a signature bonus – this is a payment that can be made up front in a licensing bid in a number of countries as part of a way to acquire access to oil and gas reserves. We did this without the necessary consent of the Government of Angola. They objected, in accordance with the confidentiality of our agreement, which resulted in a difficult period in our relationship.

This experience taught us a very important lesson with regard to legitimacy and sovereignty of contracts with these countries. As owners of the oil and gas resources, countries rightly agree the legal framework, and we must honour those contracts. In some implementations, the host country will explicitly override confidentiality provisions. This is the case in Nigeria, where there is now a law that makes it a requirement for companies to submit their revenues in the EITI process. This makes it very clear; everyone knows where they stand, and there is no argument. In many ways that is a preferable place for any company because there is no ambiguity. In Azerbaijan, this was achieved through a memorandum of understanding of all companies operating in that country.

TI: What challenges lie ahead on the road to revenue transparency?

GB: I think there are still considerable challenges ahead. The first is what it means to be “doing” EITI: is it simply a public statement by a prominent politician or leader of the country, or is it producing reports that are fully validated by an independent auditor and engaging civil society in that process? When is a country fully compliant with EITI principles, versus expressing the intention to do something but not having got round to it? There is a whole issue around validation – what does it mean to be “in” EITI, both for countries and companies?

A second challenge will be the issue of who continues to run with the EITI. The UK government has taken a very prominent lead in putting this all together and has done a wonderful job. But it is rather unreasonable to expect the UK government to keep on doing that forever. Who is going to look after EITI going forward? What is the governance structure and how is it all going to be put together?

The third challenge is one of incentives. How do you encourage host governments to get involved in this process? What is in it for them? Why should they do it? I think this is a very difficult question to answer when the revenues are flowing in at the rate they are at the moment, in a regime of high oil prices. The primary challenge will be getting more countries to implement the process, and then EITI will acquire momentum. At the moment, the number of countries on the list is about 20, but the ones actually doing something are quite small.

It is not about talk, it is about action.

Dr. Graham Baxter has worked at the BP Group headquarters in London since 2003, and is accountable for corporate social responsibility, working with civil society and shaping community engagement and investment globally. He sits on the International Advisory Group of EITI.