EDITORIAL Ecuador, Nigeria, and people

When some governments act in the name of "the people," people should seek cover.

A populist president newly elected in Ecuador invoked "the people" when he had his energy minister last month threaten to throw Maxus Energy Corp. out of the country. Maxus, a subsidiary of Argentina's YPF SA, has been producing 30,000 b/d of oil in Ecuador's Oriente region under service and operating contracts.

The financially strapped government wasn't happy with the financial results. When Energy Minister Alfredo Adoum ordered Maxus to halt operations on its Amazon block near the Colombian border, he demanded that Maxus enter a joint venture with the state oil company and, like other expatriate companies working in Ecuador, share production.

Successful round

President Abdala Bucaram's July election and August bullying of Maxus follow a seventh licensing round that the prior administration called a major success-which is probably the new president's point. Handling of the round, made possible by reform of Ecuador's hydrocarbon law in 1993, and of bidding for expansion of the country's main crude oil pipeline generated bitter political controversy.

So now politics forces Maxus to choose between a new deal and departure. To the proverbial people, the new government presumably looks resolute. And to companies contemplating business in Ecuador, the new government looks like trouble.

Five years from now it will be worth asking how well this turn of events served the interests of Ecuador's people.

Also last month, Nigeria's oil minister invoked the interests of "the people" when he announced tougher enforcement of rules governing his country's expatriate operators and service companies. Joint venture partners of Nigerian National Petroleum Corp., he said, would have to set up escrow accounts to ensure the government collects its due from oil production. The government also wants approval authority for expatriate labor and the right to expropriate undeveloped marginal fields in existing license areas.

It is difficult to assess these demands without the context of Nigeria's widely held reputation for world-class corruption. Yet, even if it were not necessary in Nigeria to keep cash under heavy guard, the oil minister's demands would be ludicrous. He wants companies to entrust money and make contract concessions to a government whose ability to meet its own obligations under existing agreements is subject to perpetual question. It is a government that rules by force, a government that annuls elections that don't go its way, a government with no right to speak on behalf of "the people."

But it is Nigeria's only government at the moment. Companies deal with it or conduct business elsewhere. Some choose to deal with it because Nigeria's geology is very attractive and because most Nigerians are indeed not power mongers of the type now running things. Companies that do deal with the ruling elite to the extent necessary to invest in the economy or protect assets long in place-Royal Dutch/Shell Group in particular-suffer unjust criticism for the association.

Politics and commitments

Of course, no company expects to work abroad free of risk and tribulation. No company enters countries such as Ecuador and Nigeria thinking politics will play no role in their affairs.

What companies expect wherever they work is that governments will live by their commitments. Governments that do not do so eventually find themselves watching companies find and develop other countries' hydrocarbons, help build other countries' hospitals and schools, and train other countries' oil workers.

The governments of Ecuador and Nigeria last month demonstrated bad faith and lowered their countries' allure to international capital and technology. The countries will pay a price for their caprice, and neither of them can afford it. The people, by simple virtue of their humanity, deserve better.