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Mobil in Aceh: A bloody profit margin

In the late 90’s, the head of Mobil Oil Indonesia, Ron Wilson, was pondering his response to accusations that were leveled against his company that the company was privy to several serious violations of human rights in the Indonesian province of Aceh (Stanford Graduate School of Business, 2002). In 1968, Mobil Oil Indonesia was formed together with the national oil concern of the company, Pertamina (Stanford, 2002). The company, on the basis of a 30 to 55 percent venture, was tasked to formulate and manage the many contracts and business arrangements with the state oil company and the state of Indonesia (Stanford, 2002).

Also, the company was to be responsible for the exploration and activities part of the business in Indonesia (Stanford, 2002). The province of Aceh lies in the northwestern portion of the island of Sumatra (Stanford, 2002). The population of the island, roughly numbering 4 million, constituted just fewer than two percent of the whole Indonesian population (Stanford, 2002). Former Indonesian President Suharto in 1967 set out to establish mechanisms with the view of managing the assets of the country (Stanford, 2002).

The following year the Indonesian leader enacted Oil Law number 44 that founded the national oil industry (Stanford, 2002). In the statute, the Indonesian state was to have sole access and powers to harness the country’s extensive natural gas and oil assets (Stanford, 2002). In the next ten years after the law was signed, many of the foreign oil companies in Indonesia sold off their assets to the Indonesian government (Stanford, 2002).

But in the case of Mobil, the law also allowed companies to obtain concessions on the condition that the exploration and production of the natural resource was tied in with the government (Stanford, 2002). In 1968, the only remaining player in the oil industry to explore the oil and gas reserves of the company was the state owned Pertamina (Stanford, 2002). As earlier stated, the oil giant then formed Mobil Oil Indonesia under the 30 to 55 percent share scheme on the 6th of December 1968 (Stanford, 2002).

In the midst of the negotiations in the Mobil and central authorities in the exploration of the region, the Acehnese themselves were keen on the developments in the talks (Stanford, 2002). The national leaders even dared the Acehnese leaders to welcome a global leader and investor to their locale (Stanford, 2002). By the late 1970’s, the company had drilled 14 wells, all with negative results (Stanford, 2002). Then in one of the wells, they soon discovered what was to be the biggest fields’ producing natural gas in the world (Stanford, 2002).

The discovery of the field extremely elated the personnel on the ground (Stanford, 2002). Not only the men were ecstatic of the discovery, but Mobil and the central government and the state owned company was thrilled at the discovery (Stanford, 2002). In the Production Sharing Agreement entered into by the company with the government, a vast sum of the earnings from the field would be gained by the government (Stanford, 2002). With that development, then Director of Pertamina Dr. Ibnu, predicted that the government would be able to settle all its foreign obligations, then amounting to $6 billion (Stanford, 2002).

In the early 70’s, Mobil has proposed to the Indonesian government the construction of a gas liquefying facility (Stanford, 2002). The company has also entered into contracts with Indonesia for the development of another production sharing agreement with the government that spanned another five million acres in various areas in the archipelagic nation (Stanford, 2002). In 1977, the shipments from the fields were delivered to Washington in the United States and to Japan the following year (Stanford, 2002).

Indonesia had been pressing Mobil to get the projects online as soon as possible and many other parties had been jockeying to get favorable conditions for themselves as well (Stanford, 2002). The first signs that things were amiss in the operations of the United States oil giant in Aceh began to rise in the open (Stanford, 2002). Several insinuations were leveled against the company, claiming that the actions of the company had been deleterious to the environment in the area (Stanford, 2002).

The community had also voiced out that the continued operations of the company had given little or no beneficial remuneration to the community (Stanford, 2002). And the last and most grievous of the accusations, the company was conniving with the Indonesian authorities in the commission of human rights infractions in the area (Stanford, 2002). In the findings of the international non governmental organization Down to Earth, they opined that the continued operation of the facilities owned by Mobil and Pertamina was earning more for the company and the Indonesian government more than the local community (Stanford, 2002).

Many residents in the region recalled instances where housing facilities were removed of their residents to make way for the construction workers and the employees of the oil company (Stanford, 2002). In response to the accusations, the company asserted its claim to be a responsible citizen in the corporate community (Stanford, 2002). In their rebuttal, the company claimed that they have conducted medical missions in the Lhok Sukon area that serviced the needs of around 100,000 people from the outlying settlements (Stanford, 2002).

In the light of the disparity and the discrimination put on them by the authorities, the Free Aceh Movement (Gerakan Aceh Merdeka) was established in 1976 (Stanford, 2002). The response of the government to the formation of this group can be characterized as brutal and ruthless (Stanford, 2002). The government instituted a widespread crackdown of the members of the movement, so harsh that many of the movement’s members were forced to go into hiding for several years (Stanford, 2002). In the response, more than a thousand civilians were killed or had disappeared as the crackdown was conducted (Stanford, 2002).

After the downfall of Indonesian strongman Suharto that the human rights violations in the country were bought to light in the international arena (Down to Earth, 1998). President P. J. Habibie and Armed Forces Chief Wiranto had apologized for the human rights infractions and started to redeploy out of the area the 1,000 troops of the Armed Forces (Down to Earth, 1998). Mass burial sites, nine of them, have been unearthed, containing at least 5,000 bodies of the victims of the abuses (Down to Earth, 1998).

The development were not only restricted to the borders of the Acehnese province or to Indonesia itself. On the 3rd of March 2003, United States District Judge Louis Oberdofer ruled on the case (Michael Renner, 2006). In his precedent setting ruling, Oberdofer had allowed legal action to be taken against ExxonMobil (Renner, 2006). The case was leveled against the company by human rights organization International Labor Rights Fund (Renner, 2006). In the middle of 2001, the group filed its motion under the Alien Torts Claims Act for 11 villagers in Aceh (Renner, 2006).

In the case, the 11 accused the company of engaging in torture, murder and illegal detention, along with other human rights abuses (Cohen Milstein, 2009). The company ha had sought and succeeded in getting the White House to intervene in its case against the complainants (Renner, 2006). The United States Supreme Court had ruled to seek information from the Office of the Solicitor General to reply with a case brief in the case that alleged that Indonesian security guards that the company hired committed several acts of human rights abuses (Anderson and Indonesia Action Network).

The United States State Department had earlier commented that the action might harm the interests of the other multinational firms doing business elsewhere (Anderson). The United States High Court also had sought the opinion of then President Bush on the matter of the lawsuit bought against the company (Christopher Rugaber). The justices have not committed at this point to hear the case, but have sought the opinion of the Solicitor General on the matter (Rugaber). The Solicitor General can ask the court to either accept the complaint or reject the appeal laid by ExxonMobil (Rugaber).

For the protection of the 11 complainants from Aceh, they were all named as John and Jane Does for the purpose of the case (Rugaber). The company had denied responsibility for the actions of the Indonesian military they had hired as security forces, saying they should be liable under Indonesian courts and not in the United States legal system (Anderson). In 2005, the United States District Court had thrown out parts of the challenge dealing with claims under Federal statutes (Anderson). But the court allowed the case to be tried under the laws of the state (Anderson).

In the case, John Doe vs. Exxon Mobil (05-7162 (2007), the United States Supreme Court ruled against the petitioners, saying that a suit against a sovereign country guarantees that country cannot stand trial in court of law (Doe vs. Exxon Mobil, 2007). President Bush had lobbied against the conduct of the suit against the Indonesian government (New York Times, 2002). In a seeming contradiction, the President continued his tirades against elements of terrorism but was condoning the actions of an American company accused of human rights violations abroad (New York, 2002).

The actions of then President Bush might be construed as a toleration of the abuses of some as long as it is vital to the interests of the administration (New York, 2002). The courts also took into cognizance of an opinion rendered by the State Department that any negative ruling might come into conflict with peace initiatives in the country thus harming American foreign policy (New York, 2002). References Anderson, M. H. (n. d. ). US High Court seeks gov’t comment in ExxonMObil suit. Retrieved April 29, 2009, from http://www. etan.

org/et2007/november/17/13us-hi. htm Down to Earth. (1998, November). Mobil Oil and human rights abuse in Aceh. Number 39. http://dte. gn. apc. org/39mob. htm Milstein, C. (2009). ExxonMobil-Aceh, Indonesia. Retrieved April 29, 2009, from http://www. cmht. com/cases_exxonmobilaceh. php New York Times. (2002. August 19). Oily diplomacy. The New York Times. Editorial. http://www. nytimes. com/2002/08/19/opinion/oily-diplomacy. html? scp=18&sq=mobil%20in%20aceh&st=cse Renner, M. (2006). ExxonMobil in Aceh. Retrieved April 29, 2009, from http://www.

cmht. com/cases_exxonmobilaceh. php Rugaber, C. S. (n. d. ). Justices asks gov’t to weigh in on Exxon human rights case that may affect other multinationals. Retrieved April 29, 2009, from http://www. etan. org/et2007/november/17/13us-hi. htm Stanford Graduate Business School. (2002). Mobil in Aceh, Indonesia. File uploaded by Client. Supreme Court of the United States. (n. d. ). John Doe v. Exxon Mobil Corporation, et. al. (05-7162 (2007). Retrieved April 29, 2009, from http://www. scotusblog. com/movabletype/archives/07-81_ob. pdf

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