White Powder, Black Gold

JEFFREY KAYE:

If there's a front line in America's war on drugs, it's in the jungles of South America. In Colombia alone, the United States has committed nearly a billion dollars in military and economic assistance to smash the drug trade. Drugs are a source of profits and power, not only for narcotics traffickers, but increasingly for leftist rebels and right-wing militias.

But the same jungles where governments have gone to war against cocaine and heroin conceal another treasure: Some of the richest petroleum reserves in the western hemisphere. As the regional conflict widens, oil here is becoming a flash point for politicians, guerrillas, and transnational energy companies.

Increasingly, petroleum fields and other industrial facilities are targets in South America's political and drug violence. For South America's poorest countries like Ecuador, oil could mean the difference between prosperity and turmoil.

PABLO TERAN:

I think Ecuador's stability depends on oil.

JEFFREY KAYE:

Pablo Teran, Ecuador's Minister of Energy and Mining, says petroleum sustains his government, since half its budget comes from oil revenues.

PABLO TERAN:

It's the only area, economic area, which can bring Ecuador out of this crisis. And we need investment and we don't have investment. If we don't bring dollars into the country, the entire system could collapse.

JEFFREY KAYE:

Ecuador, a nation of 13 million people, is in a state of political and economic turmoil. It has high rates of unemployment and inflation. Over 50 percent of the population lives in poverty. Ecuador's large Indian population is at the bottom of the economic ladder. They are the ones who could benefit the most from Ecuador's greatest treasure: The two billion barrels of oil or more beneath the nation's surface.

Ecuador's petroleum heartland is on the fringes of the Amazon rain forest, only a half-hour's flight east from the capital, Quito. What was untouched wilderness only 30 years ago is now the epicenter of an oil boom as multinational energy companies build oil wells and pipelines. South America is a vast checkerboard of oil-rich tracts.

From Colombia's Caribbean Coast to the Andean foothills of Peru, Latin American governments have leased drilling rights to the world's major oil companies. The region supplies the United States with 20 percent of its oil. With so much at stake, energy companies argue that U.S. policy makers need to focus on South American oil as much as drugs.

LAWRENCE MERIAGE:

Most Americans, when they think of the issues surrounding Colombia, focus on the drug problem.

JEFFREY KAYE:

Lawrence Meriage is vice president of Los Angeles- based Occidental Petroleum, which has major oil exploration and drilling operations in Ecuador and Colombia.

LAWRENCE MERIAGE:

I don't think Americans are really focused in on the fact that there are hundreds of millions of dollars of U.S. investment in places like Ecuador, Venezuela, Peru, as well as Colombia. And the significance which this has in terms of the U.S. economy, particularly with respect to oil.

JEFFREY KAYE:

Getting that oil is an often dangerous business. Because of political and drug violence, petroleum companies operate under a state of siege.

LAWRENCE MERIAGE:

I think there's been an escalation from a security risk standpoint that the company is facing at this point of time.

JEFFREY KAYE:

In Colombia, rebels have seized hundreds of Occidental Petroleum workers in audacious mass kidnappings. The same groups have also staged hundreds of attacks on oil wells, pipelines, and other industrial facilities. The attacks and kidnappings are part of a campaign to destabilize the Colombian government and extort money from multinational companies operating in the country.

In recent months, guerrillas have moved south from Colombia into northern Ecuador. In response, Ecuador is deploying thousands of troops along its border. One important mission for the army is to protect petroleum facilities, like Occidental's operations center only 25 miles from the Colombian border.

More than 30,000 barrels of oil pass through here daily. A platoon of Ecuadorian troops is stationed right on the compound. The army presence is essential, says Paul MacInnes, Occidental's general manager in Ecuador.

PAUL MacINNES:

The state is assuming its role in protecting the facilities, and we are obviously in close relationship with the state.

JEFFREY KAYE:

Do you need increased security?

PAUL MacINNES:

Again, it depends on the level of work activity. And as I'm going into a major work program, my answer is yes, I must increase the number of people in security.

JEFFREY KAYE:

Throughout South America, when oil company executives travel to and from their facilities, they are accompanied by armed guards or soldiers. For Occidental, military security is a condition of continued operations.

SPOKESMAN:

We rely exclusively on the government to provide protection, and to the extent that we are prepared to make additional capital investments in this country and exposing dollars, we're expecting… I think we have the right to expect that those investments are going to be protected.

REPORTER:

In terms of priorities, it is a very important case.

JEFFREY KAYE:

In Ecuador, occidental underscores its need for security in its close contacts with government officials. In turn, Ecuadorian Energy Minister Teran says his government has appealed to the United States for increased aid because keeping oil facilities safe is a daunting task.

PABLO TERAN:

I am so glad that the U.S. Has gotten involved in trying to solve the drug problem in Colombia, and for that they have given a lot of aid to Colombia but very little to other countries. We got to protect the entire Amazon, and it's very difficult to protect every single well, every single camp, every single executive which is moving back and forth. And therefore, we are going to do it under our limited resources.

JEFFREY KAYE:

However, critics say South American governments often cater more to international oil companies than to the needs of their own citizens. The critics blame officials for allowing the firms to damage the environment and to drill in areas claimed by native populations.

In the Oriente Basin, the heart of Ecuador's oil region, there's little evidence that energy wealth is improving peoples' lives. Inhabitants often lack rudimentary services such as drinking water and electricity. At Ecuador's Center for Economic and Social Rights, director Paulina Garzon says oil money isn't going where it's needed.

PAULINA GARZON (Translated):

The role of petroleum in this issue is critical because it creates tremendous inequality. The oil companies and their allies represent the rich; the rest of us are the untouchables, the poor who don't benefit at all from the industry.

JEFFREY KAYE:

Energy Minister Teran acknowledges the problems.

PABLO TERAN:

People say we're poorer in 2000, in the third millennium, we're poorer than we were 30 years ago. Probably right. We're trying 10 solve that. We're building roads now and putting a lot of investments. And that's the only way to protect these people from not going into the drug industry.

JEFFREY KAYE:

In Washington, that same argument, that oil wealth is the antidote to South America's drug trade, is made by energy company lobbyists, lobbyists who have been ardent boosters of economic and military aid to South America. One chief lobbying group is the U.S.-Colombia Business Partnership.

Its 20 corporate members include several energy firms, among them Enron, Texaco, B.P.-AMOCO, and Occidental. Michael Skol, a former U.S. Ambassador to Venezuela, is co- founder of the five-year-old partnership. He says fighting drugs also makes good business sense.

MICHAEL SKOL:

We have a stake in not just in drugs. We have trade and investment. If Colombia is unable to rid itself of terrorism organized by these gangs, if the state itself is vulnerable, is diminished, this hurts broad U.S. interests throughout Latin America.

JEFFREY KAYE:

That view is shared by the U.S. State Department's top anti-drug official, Assistant Secretary of State Rand Beers. He says a goal of U.S.-Latin American policy is economic and political stability.

RAND BEERS:

If a U.S. business can't operate in the country, then, by and large, nobody else can operate successfully in the country except at the micro level. And if you don't have that opportunity for larger businesses to operate in the country, then the country doesn't have a chance in the global marketplace.

JEFFREY KAYE:

Beers is one of the architects of Plan Colombia, a billion-dollar anti-drug program passed during the Clinton administration. The program provides training and equipment to Colombian police and military battalions that seek out and destroy coca fields and drug labs. But drug trafficking and cultivation, as well as guerrilla activity, are spreading. And companies like Occidental are pressing for broader U.S. assistance.

LAWRENCE MERIAGE:

We've made presentations to house and senate staffers. We have met with people in the National Security Council. We have met with various Congressmen and Senators just to raise the awareness of what the risks are that are involved and how this is impacting U.S. investments.

JEFFREY KAYE:

Meriage says that since key bush administration officials, including the president and vice president, have energy company backgrounds, they are sympathetic to the oil industry's arguments.

LAWRENCE MERIAGE:

I think the general knowledge that both men have of the industry was certainly helpful in terms of the perspective of the problems that we're encountering in our operations in many places.

JEFFREY KAYE:

But critics of U.S. policy say that oil companies are as much the cause of violence in South America as they are its victims.

WINIFRED TATE:

There is clear evidence that oil development increases and draws in conflictive actors into new regions and escalates existing conflict.

JEFFREY KAYE:

Winifred Tate is with the Washington Office on Latin America, a left-of-center foreign policy think tank.

WINIFRED TATE:

Oil companies have paid hundreds of millions of dollars to illegal groups because of ransom of kidnapped executives, because of the threats of violence, the bombings of the pipelines. All of this has fed into the conflict and oil companies have hired security forces to protect their installations, all of which increases violence in the communities where this kind of development is taking place.

JEFFREY KAYE:

Despite criticisms, President Bush is expected to receive bipartisan support for his proposal to expand military and economic assistance to South America. The President proposes a regional aid package worth about a billion dollars for Colombia and six other neighboring countries, including Ecuador. The administration downplays oil interests as beneficiaries of expanding U.S. intervention in South America.

SPOKESMAN:

I think that the triumvirate of issues that we focus on is development, democracy, and drugs. That's how we see this policy evolving. And I think that that says basically, what are the principal strands of this policy? There is no question, however, that oil and energy are an element within it.

JEFFREY KAYE:

For a generation, America's demand for drugs has contributed to unrest and bloodshed in Latin America. The question now facing policy makers is whether oil will help bring peace and opportunity or merely add more fuel to the fire.