'Hell, everyone knows you have to bribe somebody to do business in Turkey." This internal email, from an employee of Tyco, a fire safety and security company, reveals an attitude all too common in the oil industry.
Tyco admitted to corrupt practices in Turkey and in winning business with Saudi Arabia's state oil giant Aramco and with other petroleum companies in the Middle East. America's Securities and Exchange Commission (SEC) fined it more than US$26 million (Dh95.4m).
For its part, Aramco announced it had sacked the employee responsible in 2009 and put him and Tyco on a blacklist.
New regulations in the United States, the United Kingdom and the European Union intend to clamp down on corruption in overseas business deals. In the US, the move is part of the Dodd-Frank financial reform act. It would require companies to disclose payments they make to foreign governments. The European parliament is pushing for similar measures for natural resources.
Revenue Watch, which campaigns for natural resource sector transparency and is supported by the billionaire philanthropist George Soros, and the Extractive Industries Transparency Initiative, launched in 2002 by then UK prime minister Tony Blair, have long been campaigning for comprehensive disclosure.
Business lobbies have complained about the Dodd-Frank provisions, claiming they would put them at a competitive disadvantage, and framing it as a contest between US commerce and state-owned Chinese and Russian companies.
But this is not a contest between "western" and "Asian" practices, but between ethical and unethical business. Given the Tyco case, allegations of bribery by Noble Corporation involving oil rigs in Nigeria, and repeated allegations against French and Italian firms, western countries should not be so sanctimonious. "Tyco's subsidiaries operating in Asia and the Middle East saw illicit payment schemes as a typical way of doing business in some countries," the SEC found.
Tyco's attitude is still common, but mistaken. American companies are unlikely to be able to compete with Chinese companies on cost; they have to offer better technology. Falling into the trap of paying bribes nullifies the advantage of having superior products. It is in the interest of developed countries and leading corporations to promote a clean, transparent business culture that plays to their strengths, rather than running in a race to the bottom.
Equally, it is right for resource-rich countries everywhere to cooperate with these drives to improve transparency. It may sometimes be uncomfortable and offend powerful individuals. But rooting out corruption creates more attractive conditions for investment: compare Nigeria, ranked 143rd in the world on Transparency International's Corruption Perception Index for 2011 with the highest-placed African country, diamond-producing Botswana at 32, or new oil exporter Ghana at 69.
The presence of bribery prevents countries getting the best deal for their money. In Iraq, for example, suspicion of the pervasive corruption means that only the cheapest bid can be accepted - even if a more expensive deal offers superior technology. In the oil business, inferior equipment - whether valves, blowout preventers or cybersecurity - can be fatal.
In some places, such as Nigeria, Russia and Azerbaijan, corruption doesn't affect the system - it is the system. In the hope of preventing such a situation, emerging oil producers Afghanistan, Ghana and the Kurdistan region of Iraq have released the full text of their contracts with oil companies.
But such measures have to go further. The UK Bribery Act of 2010, described as the world's toughest anti-corruption legislation, criminalises the use of third parties to convey payments and disregards local customs that might condone bribery. Most dramatically, it becomes an offence for companies to have inadequate processes to prevent corruption - even if they did not intentionally break the law.
Both countries and ethical companies should welcome the tougher regulations that are inevitably on their way. The bottom line should be: if you can't do business without paying bribes, you shouldn't be in business.
Robin Mills is the head of consulting at Manaar Energy, and the author of The Myth of the Oil Crisis and Capturing Carbon
