Ecuador's Worn-Out War on Chevron

An employee of state-owned Petroecuador works on a cleaning operation of a 30-year old oil spill at the Rumipamba commune, 200 mt form the Auca Sur 1 oil well --operated by Chevron Texaco in the seventies-- in the province of Orellana, Amazonia, on Feb. 20, 2011. Photograph by Rodrigo Buendia/AFP via Getty Images

Ecuador’s long-running spat with U.S. oil company Chevron Corp. over a polluted swath of Amazon jungle is the type of David-and-Goliath story President Rafael Correa uses to define his mandate.

Correa has worked hard to convince the world that Chevron is bullying the Andean country in order to avoid paying a $19 billion pollution judgment that an Ecuadorian court imposed in 2011. In a letter to the Economist, Juan Falconi Puig, Ecuador's ambassador to the U.K., wrote that the contamination of 2 million acres of Ecuadorean Amazon caused "one of the largest environmental disasters in history."

Correa recently took journalists on a tour to visit untreated oil-filled ponds in the Lago Agrio region. “This is Chevron Texaco. This is what they say doesn’t exist,” Correa told a group Sept. 17 in taped remarks at a pond that he said the company contaminated sometime in 1986. “This is the dirty hand of Chevron,” he said as he held up his oil-soaked hand.

On Oct. 5, the president was more explicit during an appearance on his television program "Citizen Link": “If Chevron thought that it would trample on a small country with its millions, it chose the wrong country to mess with. Because here we have a small country, but great in dignity and sovereignty.”

Correa’s public-relations push occurred for a reason. On Oct. 15, Chevron’s racketeering case against the lawyers and consultants in Ecuador’s lawsuit -- notably including the plaintiffs' lead attorney, Steven Donzinger -- finally went to trial. The company hopes to prove in court what it has long claimed in public: that the $19 billion judgment in favor of Ecuador's indigenous communities was brought about through fraud.

David Russell, an environmental consultant who formerly served as a witness for Ecuador’s lawyers, testified that his original damage estimate of $6.114 billion stemmed in large part from assumptions that Donzinger instructed him to use. “I came to learn that my cost estimate was wildly inaccurate and had no scientific data to back it up,” Russell noted in written testimony.

Also on Oct. 15, Ecuador’s congress, dominated by Correa’s allies, voted to reject “the deliberate attacks of Chevron-Texaco” against Ecuador, according to a resolution.

Evidence of pollution in the rain forest is undeniable. At issue is whether Texaco (which was acquired by Chevron in 2001) -- a partner of state oil company Petroecuador during its years in Ecuador, 1964 to 1992 -- took the right steps to clean up its share of the mess. And whether it is still responsible for what is left.

It is hard for many to take Correa’s environmental protestations seriously. On Oct. 6, Ecuadorian journalist Emilio Palacio asked the obvious question: “After 30 years, how come no one has done anything to clean up that mess?” he said, referring to successive Ecuadorian governments. Ecuador’s “neoliberal governments, we know, didn’t care much about environmental rights. But we now have nearly seven years" of the Citizens' Revolution, citing Correa’s political coalition. "Why haven’t they done anything to remedy this?” Palacio’s report presented documents purporting to show that, as recently as 2011, years after Texaco had left, Petroecuador continued to dump crude, including into the pool in which Correa dramatically dipped his hand.

Correa’s story line is unraveling overseas as well. Chevron says there is damning evidence that shows Ecuador’s counsel used forged plaintiff signatures and falsified environmental reports, as well as that they attempted to bribe Ecuadorian judges to get their way. (Alberto Guerra, one of the judges in the case, has admitted that he and a second judge permitted the plaintiffs' lawyers to ghostwrite their legal decision on a promise of $500,000 in the future. The second judge, Nicolas Zambrano, has denied he was ever bribed.)

The case against Ecuador’s lawyers looks so bad, even Bianca Jagger, a die-hard environmentalist, human-rights figure and the ex-wife of musician Mick Jagger, has weighed in. “I am not writing as an apologist of the legal team, nor am I condoning their behavior –- but I feel the need to speak up on behalf of the Ecuadorian victims who may now never get the justice they deserve,” she wrote in a Huffington Post piece Oct. 14. Still, she insisted, “Ecuadorian communities were the victims of exploitation by a multinational corporation, Texaco.”

Racketeering aside, the case also looks rather weak on its own merits. For starters, Texaco operated as a minority partner under state-owned Petroecuador when the pollution occurred, so it is difficult to argue the damage is all its doing. Through agreements in 1995 and 1998, the Ecuadorian government also freed the company of further liability following a $40 million cleanup. An arbitration panel in The Hague cited the government’s sign-off when it ruled last month that Ecuador's lawsuit should have never proceeded in the first place. However, the deal may not have absolved Chevron from responding to third-party lawsuits from Amazonian communities, which is what Chevron is now fighting.

Correa’s government is not willing to budge. The Ecuadorian Institute of Intellectual Property, or IEPI, tweeted on Oct. 17 that it would seize Chevron brands, including the royalties paid to Chevron for their use: “#IEPI proceeded with the embargo order of 50 brands related to the #ChevronCase.” These include Havoline motor oil and Ursa Super LA engine oil, among others. Chevron has no physical assets in Ecuador that the government can seize, which is why the plaintiffs have sought to have the judgment enforced in Canada, Brazil and Argentina, but those efforts have failed so far.

This fight is also about timely political posturing. Correa alienated his environment-loving fans in August when he decided to develop the oil reserves trapped under Ecuador’s Yasuni National Park, a unique swath of Amazon jungle -- the same ecosystem he once vowed to protect if developed countries paid his country $3.6 billion not to drill for oil there. When he announced his about-face on Aug. 15, he told Ecuadorians: “The world has failed us.” And he vowed days later he would not “sacrifice my people to solve the lack of responsibility of the real polluters.”

The president’s antics are no surprise. Correa is part of Latin America's extreme left, which sees U.S.-baiting as political sport. The Ecuadorian president granted asylum to WikiLeaks founder Julian Assange to burnish his image as a free-speech supporter, even as he passed a media law that curtailed free expression. Earlier this month, Correa accused U.S. President Barack Obama of Nazi-like rhetoric for mentioning American exceptionalism in a speech. Meanwhile, Correa has relied on Chinese loans and oil-fueled government spending to become one of the most popular leaders in the region. (He has an 80 percent approval rating at home.)

Ecuadorians may be torn over whether to pump more oil or preserve Yasuni. They should be more worried about preserving their democracy under Correa’s leadership.

Bloomberg