Market News

 January 10, 2018
In Colombia, a cease-fire saves lives---and oil

 From a distance, the muffled sounds of laughter could be heard along with the loud crackle of a microphone. Marxist guerrillas from the National Liberation Army were hosting an event for residents of Noanamá, a village in the rainforest in northwestern Colombia. After updating the audience on the latest developments in peace negotiations with the government, rebels took turns at the mic taunting each other with rhyming ditties that were met with raucous laughter and applause.

Among those trying out their wit that evening was an Afro-Colombian rebel whose nom de guerre is Negro Primero. He joined the group, which is best known by its Spanish initials, ELN, when he was 15 years old, he said, but would not share his current age or where he was from. He did concede that he'd previously been stationed in Arauca, an oil-rich province that's been the group's stronghold for the past 35 years. Asked what kept him and his comrades in the bush---more than a year after the Revolutionary Armed Forces of Colombia (FARC) had agreed to lay down its arms---he responded: "Let me ask you something, my little gringo. What would you do if you were born here, amid this misery and injustice?"

A three-month cease-fire---the first in three years of negotiations between the ELN and the government---expired on Jan. 9. While the group's leadership, which claims around 4,000 fighters, had pledged to carry on with talks, rebels resumed attacks on a vital oil pipeline that runs through Arauca just hours after the deadline expired.

Since it was inaugurated in 1986, the 485-mile conduit, which connects the Caño Limón oil field operated by Occidental Petroleum Corp. to the port of Coveñas on the Caribbean Sea, has been dynamited about a thousand times---or once a week, on average. There have been so many holes made in it some locals refer to it as la flauta (the flute).

The attacks have claimed 167 lives and put the pipeline out of commission for 3,800 days, or 10.4 years, according to the state oil company, Ecopetrol SA, depriving it and its private-sector partners of hundreds of millions of dollars in revenue. Some 1.5 million gallons of crude have been spilled since 2000 alone, which hasn't endeared the ELN to environmentalists.

The group was founded in 1964 by students inspired by the Cuban revolution and Catholic priests steeped in liberation theology. Unlike the FARC, which relied heavily on drug trafficking to fund itself, the ELN has supported itself through a combination of kidnapping, extortion, and voluntary contributions. Victor de Currea-Lugo, a professor at the National University of Colombia in Bogotá and a leading expert on the group, points out that Arauca is virtually the only place in the country with little to no coca crops, thanks to an eradication campaign carried out by the ELN.

The distinction never made much difference in Washington, which designated both the ELN and the FARC as terrorist organizations in 1997. Under President George W. Bush, Washington sharply ramped up military aid to Colombia, with just shy of $100 million earmarked for training and equipping a Colombian brigade dedicated to protecting the pipeline.

The resumption of attacks in Arauca complicates matters for President Juan Manuel Santos, who's been working to lure foreign companies to Colombia to explore for oil and minerals. The Colombian Petroleum Association, an industry group, expects investment by private oil companies to jump as much as 45 percent in 2018, to $4.9 billion, spurred by an improvement in security and the introduction last year of tax breaks for those investing in former conflict zones. Yet in a meeting with reporters in December, the association's president, Francisco José Lloreda, said that's still too little to replenish crude reserves, which have dipped to the equivalent of five years of production. Colombia's neighbors, Ecuador and Venezuela, have about 40 years and 340 years of reserves, respectively.

"We have used the pipeline as a strategy to influence government policy and to pressure multinationals," says Negro Primero. "But we are not using it as a tool to influence the negotiations." After more than 40 attacks in the first nine months of 2017, including one that shut down the pipeline for seven weeks---the longest it's been non-operational in 30 years---there were no incidents during the cease-fire. The show of goodwill didn't mollify Juan Carlos Echeverry, who stepped down as president of Ecopetrol in August. He calls the ELN "an anachronism" and says the group "needs to stop its irrational violence."

Bruce Bagley, a professor at the University of Miami who's an expert on the conflict, says he feels optimistic about negotiations. While the rebels are often portrayed as intransigent, Bagley says "the ELN is serious about peace." And so is the government: "Peace could attract lots of foreign investment, which Santos needs ASAP."

Negro Primero says a treaty like the one struck with the FARC in 2016 will amount to surrender or, even worse, could lead to the ELN's annihilation. Since laying down arms, 11 former FARC fighters have been assassinated, presumably by right-wing paramilitaries or paid hitmen working for landowners or politicians who would prefer to see the rebels behind bars or dead rather than reintegrated into society. The ELN rebels are demanding guarantees of their safety if they disarm.

Bagley acknowledges that Santos hasn't fulfilled many of the pledges made in the peace process with the FARC. In particular, the government has dragged its feet implementing land reform and ensuring security. The ELN argues its struggle is necessary to help bring about racial and environmental justice and fairer land distribution, and to resist exploitation by foreign corporations.

In an end-of-year address posted online, the ELN's jefe máximo, who goes by the alias Gabino, promised to continue negotiations even if hostilities resumed. Meanwhile, Colombia's defense minister, Luis Carlos Villegas, said in a speech in December that the army would "confront the ELN with full force" if the cease-fire isn't extended. For his part, Negro Primero seems less than eager to lay down the U.S.-made M16 rifle that lies by his side during our conversation. "We're proud to be the last armed insurgency on the continent," he says. "We'll fight to the end if we have to."

BOTTOM LINE - Colombia's National Liberation Army has spent more than three decades targeting oil companies. The government needs peace to lure investment to the country.