Charitable neutrality

When operating in countries not their own, oil and gas companies adhere to a rigid doctrine of cultural and political behavior. The posture might be called charitable neutrality.

Sept. 21, 1998

3 min read

When operating in countries not their own, oil and gas companies adhere to a rigid doctrine of cultural and political behavior. The posture might be called charitable neutrality.

Under the doctrine of charitable neutrality, companies build roads, hospitals, and schools; donate humanitarian goods and services; train and employ host-country residents; and, increasingly, clean up environmental messes created by others. The doctrine's charitable dimension-some of it contractual, some of it not-propels these good works. In return, companies receive access to opportunities, goodwill in the host country, and little notice anywhere else.

Aloof from politics

The doctrine of charitable neutrality's other dimension keeps expatriate oil companies aloof from host-country politics. It asserts that companies move onto foreign soil to work, not to intrude in local affairs. If the terms of operation are even-handed and the work successful, companies, governments, and recipients of associated charity share the reward. For visiting oil companies, though, local politics is off limits.

The doctrine has turned creaky. Neutrality can look negligent, even compliant, in association with rancid political systems. Oil companies thus have been blamed for human rights offenses of host-country officials. They have been shut out of disfavored countries by sanctions.

If charitable neutrality exists mainly to immunize oil companies against guilt by association with mischievous regimes, its utility thus seems limited. This might explain questions now appearing about company roles in international relations. Yet charitable neutrality may exist less to keep oil companies safely distant from political odium and more to sustain a broader expatriate detachment that is, in fact, proper.

Either way, the assault has intensified. The scope of conflict is no longer national but global. While oil companies will and should stay charitable in their relationships, they will find political neutrality abroad diminishingly tenable.

Liberalization, the broad movement toward personal freedom and capitalist economics, is in retreat. With it may go commitment to open trade and free movement of capital.

Some of the Asian countries now reeling from economic contraction have resorted to government intrusion. Malaysia has imposed capital controls and fixed interest rates. Hong Kong, Taiwan, and South Korea have intervened in markets to save local investors. Japan has sacrificed currency values to the preservation of mismanaged banks. In Russia, where the economy is collapsing along with the ruble, the Communist party has revived.

Governments in these places have toed the churning waters of modernization and decided not to take the plunge. They are reacting against reform without having fully or legitimately tried it. Now they resort to the failed manipulations of yesteryear, submitting to inevitable pressure to do something official-anything-in a crisis.

Especially if it curtails trade, the retrenchment might shove the world into recession. But it need not do so. A few countries recommitting themselves to reform, staying the course in adversity, can save the day.

Incentive to speak

Wavering governments need to be reminded about the promise of liberalization and trade. They need to be told that current troubles result not from reform but from failure to reform. Some of the persuasion now must come from companies unaccustomed to the chore.

Threats to liberalization and trade raise threats to markets for oil and gas. The incentive thus is large for reticent companies to speak out in host countries about local matters with global consequence. If they say the right things on the right issues and make their presence constructive for everyone involved, few will fault them for abandoning charitable neutrality. Some might welcome it as charitable concern.