This topic overview, library and guides are jointly developed and curated by GOXI (co-convened by UNDP and the World Bank) and Extractives Hub teams.
2. Disputes in Mining, Oil and Gas - Conflict Pathways and Drivers
2.1 Drivers of Social Conflict
(a) Reduced access of communities to resource and livelihoods
Limited access to resources and land are important drivers of conflict between communities, companies and governments. Communities in areas affected by extractive activities might oppose operations if their access to vital resources such as land and its produce is restricted or threatened. Especially in an environment of scarcity, access to key natural resources such as water, pastures, forests or cropland are vital to sustain livelihoods. If the access is not secured or losses are not compensated, and the community is not engaged in decision-making processes, conflict often emerges as a reaction. Moreover, conflict can arise when customary land tenure regimes are disconnected from statutory regimes. For example, in many mineral producing countries, government assumes ownership of the subsurface mineral rights in order to regulate mineral development for benefit of the country as a whole. If government does not carefully control the land tenure process, it can lead to conflict between companies and surface landowners and users.
(b) Inadequate benefit sharing
If actors are burdened with responsibilities but enjoy little or no benefits to balance this cost, opposition to activities may arise. Benefits can take different forms, such as employment, business opportunities, a share of royalties or revenues, or community infrastructure or investment projects. Furthermore, unevenly distributed benefits within the affected communities can lead to positions of competition and hostility, mobilising groups of those marginalised in the process to oppose extractive activities.
Unequal distribution of benefits within a region can lead to conflict between adjacent rural communities because of the rise of unequal incomes. Also, if access to public infrastructure like roads, waterways or electricity grids is restricted to a small group, tensions may arise due to the “enclavement” of a certain area and its services.
(c) Unmet expectations
Unmet expectations can be the result of a wrong projection by companies or of unfulfilled promises and agreements. Especially in areas where public services are scattered, fragile or non-existent, expectation towards companies rises. The building of infrastructure and the creation of income generating activities can cause conflict if the local population is not included. Expectations can also arise when communities compare the services companies provide elsewhere or have provided in the past. The company might have made commitments for the creation of benefits for the local communities (such as the building of hospitals, roads or schools), which are implemented only partially, or not at all. There are additional important patterns of unmet expectations that can equally create discontent, such as a lack of anticipated employment opportunities or the failure to improve the delivery of public services.
(d) Forced relocation
The dislocation of households or entire villages on exploration and active mining sites ranks amongst the major fears of communities. Both temporary and permanent resettlement can lead to conflicts, especially where no fair compensation is offered. In some cases, the affected parties will request an improvement to their situation, access to public services and business creation. Lack of communication with affected communities or the involvement of some parties in secretive negotiations also fuels mistrust and opposition.
(e) Unplanned migration and impact on local values
The influx of workers and people seeking new opportunities, the partial rise of income and the creation of industry-related infrastructure such as housing and leisure units creates a new environment with related social problems, including increased costs of living, new residents anticipating benefits as though they were long-term residents, and an increase in criminal activities. Conflicts can emerge out of a change of environment previously unknown in the area (such as changes in or disregard of customs), as well a decrease in security.
Conflict can also be created as a consequence of increased levels of crime around mining operations. At times, this can be closely linked to unplanned migration caused by new projects, but sometimes it can be the mining companies themselves that operate outside of the law, undermining public order and trust (for instance by supporting illegal mining outside of concession areas).
(g) Labour rights issues, gender-based impacts, and human rights
Disregard for or lack of labour rights has the potential to stir conflict. Exposure to toxins, unregulated working hours or low pay, amongst other factors, can lead to tensions between workers and their employers. Furthermore, banning or hindering labour self-organisation can fuel conflict. When companies negotiate and interact only with governments, disregarding organised labour, there is a danger of mass mobilisation and strikes. Further potential for conflict is stirred when security forces from either the government or companies forcibly suppress self-organised workers. Organised protest can also emerge in the informal mining sector. For example, in the ‘informal’ and Artisanal and Small Scale (ASM) mining sector, lower labour standards heighten the risk of conflict. The disregard of global and national labour standards contributes to the risk of conflict.
Women may bear the negative effects of the extractives sector disproportionately, both within the workforce as well as from the impact of extractive activities. Gender-based violence such as human trafficking, prostitution and domestic violence lead to a high health and security risk for women. Within the formal sector, women constitute only a small portion of the workforce, tend to have lower status jobs and earn less than men on average, while in the ASM sector, women represent between a third and a majority of the workforce, depending on the country. The lack of basic labour standards here poses additional security and health risks. Changes in land tenureship in women-led agricultural households can lead to a decrease of income and loss of access to resources and livelihood. The disregard of women in extractives development can become a driver of conflict, especially as they form an important part of household income planning (for more, see Gender and Extractives Topic Overview).
Extractive activities ignoring, tolerating or instigating various forms of human rights abuses such as child labour, discrimination, forced labour (especially in conflict areas) or forced displacement can trigger public outrage and conflict. In some cases, these violations can be carried out directly or indirectly by company-controlled, private or government-led security forces.
2.2 Environmental Drivers of Conflict
(a) Impacts of pollution
Pollution as consequence of extractive activity can cause damage and restrict community access to environmental services and create health risks. Air pollution can be caused by all forms of extractives sector operations, including oil, gas and mining. Air pollutants, such as mercury and particles of metal, can have serious health implications for affected communities. For certain types of mining, noise and dust pollution, for example from heavy vehicles passing close to local communities, can be particular grievances. Furthermore, air and water pollution can cause damage to flora and fauna, impacting agriculture, fishing and hunting. The resulting negative impacts on communities can lead to tensions and conflict. Pollution can also lead to the degradation of fragile ecosystems. If waste management is lacking, contamination of land can drive conflict for communities depending on, or promised a return to decommissioned, remediated land.
Ecosystems are complex and at times fragile; increased human activities may cause chain reactions and degrade the land and water on which communities rely. The shifting of territory through land acquisition, an increase in population on less land or the extractive activities themselves can deprive (parts of) the population of vital access to natural resources, which consequently can drive conflict.
Forests, as providers of various forms of natural wealth such as wild game and energy, form an important part of livelihood for some communities. At the same time, certain extractive activities cause deforestation, especially during production, to access resources and for transportation access such as new roads. Consequently, the environmental base for some livelihoods can fall away. Unless it is replaced, vulnerable communities might be left worse off.
(d) Water issues
When water is polluted, this can have serious consequences for farming, hunting, and fishing, leading to tensions. Because of the transboundary nature of water bodies, conflict may also emerge in regions further away from the extractives activity. Water scarcity and pollution caused by increased extractive activity can have serious social implications, creating an uneven competition between companies and communities. Tensions between communities needing water for agriculture and pasture and extractive companies can lead to conflict for access to water.
(e) Climate change
Climate change is increasingly becoming a factor in environment-related conflict. The global need for oil, gas and mineral goods contributes to carbon emissions both through production and consumption, in particular including demand for materials for solar cells and batteries. Consequently, changing climate patterns such as prolonged drought affect vulnerable communities, for instance through decreasing pasture lands, crop failures and conflicts over diminishing arable land. Climate change is thus not responsible for conflict alone, but may have a multiplying affect, exacerbating already existing environment-related tensions. Climate change can aggravate already fragile situations and may contribute to social upheaval and even violent conflict.
2.3 Governance Drivers of Conflict
(a) Lack of transparency
The extraction of natural resources can contribute to conflict when decisions are not taken in a transparent manner. This is the case along all stages of the extractives value chain, starting with the decision to extract, granting exploration permits and concessions, to mine closure. The rights of local communities to access information about projects and decision making is often supported by national laws, but governments and firms are not always willing to provide this information, which can drive conflict. In particular, a lack of open and transparent governance can create mistrust in the decision-making process, which – once escalated – can lead to tension and ultimately jeopardise the positive impact that the oil and gas or mining sectors can have on the broader economy.
(b) Deficient planning
A comprehensive, robust and regular assessment of the benefits and risks involved in the exploitation of resources is a crucial element of extractives governance. Creation and implementation of a clear mineral or oil and gas development strategy is also an important aspect of planning that does not always occur. Furthermore, adequate planning focussed on project type and site selection and long-term strategies on the producing region’s development across sectors does not always occur, and can drive conflict. Emerging producer governments are frequently tempted to attract Foreign Direct Investment speedily to generate quick revenues. This can lead to rushed decisions and more broadly to critical deficiencies in the planning process such as: disappointing public expectations, failing to ensure sufficient social and environmental safeguards, or a lack of planning. These can lead to tensions in a myriad of ways, including at the company-government or company-community interfaces.
(c) Lack of adequate consultation
A key area for tension arises when communities and stakeholders – those affected by mining activity – are poorly engaged or even excluded from decision-making processes. Inadequate consultation can lead to the perception by communities that they will face immediate environmental, social, health or other impacts of the operations, while not reaping any benefits – thus leading to tensions with central governments or operating companies. Under these circumstances, opposition can mount and, if not addressed, can radicalise communities into using violence. More recently, with exploration and exploitation activities advancing into more remote lands, the failure to consult meaningfully with indigenous communities has become a particularly challenging area of extractives-related conflict, even where rights are protected by law, they are not always implemented in extractive projects.
(d) Corruption and mismanagement of resource revenues
The surge of funds generated by oil and mining projects can cause two distinct sets of problems. The first is outright corruption: the concentrated nature of the industry means that large sums of money can be under the supervision of relatively few individuals, creating strong incentives for corruption. But there may also be “softer” misuses of funds, such as ‘white elephant’ or ‘vanity infrastructure’ projects, or the tendency of governments to use revenues to fund recurrent expenditure such as the salaries of thousands of civil servants living in large cities. From the perspective of communities, even if no illegality has occurred, this kind of rent seeking appears as the mismanagement of funds and can contribute to tensions.
(e) Lack of local content
Tensions can arise over a lack of participation by local workforce in the exploitation of natural resources. Against the background that extractives mostly require a high-skilled workforce, oil and mining companies often heavily rely on imported labour and thus fail to meet community expectations with regard to jobs and reduced unemployment. Whereas producing strong local content results can be very difficult because of the technical requirements of the industry, governments can encourage local content through requirements and targets written in national laws and individual contracts, as well as targeted public education initiatives or training requirements and incentives. Without adequate local content provisions, unmet community expectations can cause, or exacerbate, conflict (for more, see the the Extractives Hub Local Content topic overview).
(f) Inadequate institutional and legal frameworks
The potential for conflict is dramatically increased in contexts where a country lacks an adequate institutional and legal framework to manage its extractives industry in an effective, transparent and accountable manner. State laws and regulations can fall short in many ways, such as by being contradictory, non-standardised or even non-existent. Common issues include the failure to recognise and protect property rights, the lack of integration of customary and statutory land tenure systems, the lack of protection of the rights of minorities and women and ineffective or inaccessible dispute resolution. While no country is immune to disputes, they tend to unfold in diverging ways depending on the level of development of a host country’s institutional and legal framework. Laws and regulations are particularly contested in regard to equitable revenue-sharing on the company-government level, and around issues of land tenure, water rights or environmental protection at the community-level. Host governments also vary widely in their institutional capacity to address extractive conflicts at an early stage. Where there is little institutional capacity or avenues communities can use to address the disputes, conflicts may escalate quickly.
(g) Inadequate dispute resolution and grievance mechanisms
There is an increased likelihood for conflict when stakeholders lack access to dedicated dispute resolution or grievance mechanisms at all levels, including for example at site, through host governments or financial institutions engaged in funding the project. In such circumstances, disputes can escalate with the use of protests and violence mounting both as a measure against operating companies and to oppose government due to the lack of other avenues for addressing grievances.
2.4 Economic Drivers of Conflict
(a) Unjust revenue sharing
The politics of natural resource management often meant in the past that they were a sensitive area of economic sovereignty. As such, there was a presumption by decision makers that the state, as embodied by the central government in the capital, was the natural custodian of all revenues, which would then be fed into national level spending plans. At the same time, local actors are often more directly affected by mining-induced economic and environmental change, and hence challenge central governments in their role as custodians. On the local and regional level, unjust revenue sharing can however also lead to tensions within and between adjacent communities.
(b) Government not providing promised infrastructure or services
Failure to meet promised development goals in regard to infrastructure or other public services, such as health or education, represents another area for potential disputes. Against the background that new oil or mining projects often require major infrastructure development, there is a tendency for affected communities to expect to benefit from newly built roads, railways, ports or electric grids. If such expectations are unmet, however, tensions can mount. A particular scenario of such conflict can arise when companies use an “enclave approach”, isolating themselves from communities and failing to make infrastructure accessible to the wider region within which its operations are located.
2.5 Drivers of Violent Conflict Emergence
Of the many phases and forms of conflict, violent conflict ranks amongst the most harmful manifestation. In the extractives sector, any of the drivers mentioned above can escalate into violent conflict, resulting in the loss of life, downturn of economic growth and investment, loss of infrastructure and services. Certain factors increase the likelihood of violent conflict, such as high value resources, illegal extraction, extractives which fund armed conflict, and climate stress.
(a) High value resources and war funding
High value resources such as precious metals, oil or gas promise a high potential yield and are therefore strategically important to conflicting parties. Especially in countries with weak institutions, government authority and regulatory frameworks might be quickly challenged when it comes to lootable resources (high value resources that require little investment for extraction). However, other resources such as oil and gas that require major investment and skilled labour can likewise fuel conflict if the means of transportation such as ships and pipelines are conquered or controlled by warring factions. In both cases, the resource soon becomes a major source of income to finance the continuation of violent conflict.
(b) Border and boundary disputes
Violent conflict has been known to emerge out of rivalry between two countries wrangling over control of resources. Border disputes over historic boundaries (e.g. between Ecuador and Peru), the interpretation of maritime law (e.g. over the exclusive economic zone), and secessionist movements (South Sudan) do not always exist solely because of extractives. However, resources can fuel conflicts (as in Abyei in Kurdistan and Aceh in Indonesia) or re-ignite old ones (such as after the discovery of new reserves).
At the national level, extractives can become a major factor in territorial disputes. Fragile countries experience violent conflict over resource rich areas whenever relatively powerful actors emerge, for instance due to exclusive claims of certain communities based on historic or customary rights, or the land use type whenever extractive activities cross their designated concession area.
(c) Climate stress
Combined with poor governance, climate change represents the largest and most global environmental variable to peace and security. In some cases, the effects of climate change compound existing low-intensity conflicts. Moreover, when combined with governance problems (as outlined in 2.3), if climate stress exceeds the capacity of communities to adapt, prompting them towards striving for access or control of basic resources, violent conflict can emerge as a consequence.
(d) Illegal extraction
Illegal activities in the extractives sector, operating without permit in prohibited zones, often challenge the central state. In combination with organised crime, extractive activities can take on their own dynamic through shadow supply and value chains, generating substantial amounts of income. Like in other unregulated activities, a disregard of labour and human rights is likely. Furthermore, illegal activity connected with high value resources lowers the threshold in the use of violence through the systematic purchase of weaponry. These activities can be used to fuel and sustain wars or finance political or terrorist groups.