Chad: When a model is built on paper

This is article 2 of 3 in the Natural Resource Curse series. Here is article 1.

In the early 2000s, the World Bank embarked on what was arguably the most ambitious experiment in resource revenue management ever attempted. The Chad–Cameroon Petroleum Development and Pipeline Project was designed to prove that, with the right institutional framework, oil wealth could be channelled directly into poverty reduction even in one of the world's poorest and most institutionally fragile states. A dedicated Revenue Management Law earmarked oil income for priority sectors; an independent oversight committee was established; a "Future Generations Fund" was created. On paper, it was a model the Bank hoped could be replicated across resource-rich developing countries. In practice, it faced more challenges. Within years, the Chadian government renegotiated then dismantled the framework while the oversight mechanisms proved unenforceable. Eventually oil revenues were redirected toward military spending and regime consolidation. Compared to Venezuela, which illustrates what happens when governance collapses from within, Chad reveals a different pathology: the difficulty in designing institutions in fragmented and complex political environments. The resource is not the curse, but neither is it always the remedy.

A model built on paper

The pipeline project was shaped by a specific historical moment. Dr. Scott Pegg, Professor of Political Science at Indiana University, explains how two forces converged in the late 1990s. On one side, the reputational fallout from Shell's involvement in Nigeria and historically low oil prices made firms unwilling to invest without guarantees: "The oil companies were very explicit and publicly explicit that they would not make the investments without some form of World Bank involvement. They viewed the World Bank as a form of reputational risk insurance."

The World Bank's role, as Pegg argues, was not primarily financial: "The consortium, led by ExxonMobil, could have secured funding elsewhere. What they needed was legitimacy, a seal of approval that would insulate them from the political and reputational risks of operating in Chad." The revenue management framework that followed contained elements that, in isolation, were sound: earmarking revenues for poverty-reduction sectors, establishing escrow accounts, and creating oversight bodies. But one potential flaw was treating direct and indirect oil revenues differently; royalties, taxes, and signature bonuses were largely left outside the earmarking system. As oil prices rose far above the Bank's initial forecasts, these indirect revenues became the larger share of total income, leaving the most carefully designed mechanisms applicable to an ever-shrinking portion.

Dr. Korinna Horta, who also served as a senior scientist at the Environmental Defense Fund, argues, "the model was designed in abstraction, without adequately accounting for the conditions on the ground." The World Bank's own internal evaluation described the project as "textbook perfect until reality interfered", which highlights the challenges faced by institutions who must attempt to anticipate policy and political environments that are far from certain.

Institutional perspectives

The deeper challenge was not the World Bank's solution nor its design, but rather the need for an institutional capacity and good governance that, ultimately, Chad did not possess.

Pegg compares it to sports and how the Chadian officials had a home-court advantage and, "the ability of African politicians, who are playing a different game on their home court with their home rules, to show agency, creativity, and resilience." The Déby regime signed the agreements, accepted the conditions, and then systematically circumvented them: the Revenue Management Law was amended, the Future Generations Fund dissolved, and oil income redirected towards arms purchases and military consolidation — particularly during the armed rebellions of 2006–2008.

As Géraud Magrin, geographer at the Université Paris 1 Panthéon-Sorbonne, observes, the authoritarian regime was reinforced by the oil rent, not reformed by it. Chad is substantially landlocked, bordered by Sudan, Libya, the Central African Republic, and northeastern Nigeria, one of the most volatile subregions in Africa. With or without oil, the structural drivers of fragility were already entrenched. Delphine Djiraibe, Chadian human rights lawyer and civil society leader from the oil-producing region in southern Chad, describes the impact at ground level: "In the early 2000s, there were high expectations that the project would transform lives. Instead, communities in the production zone lost their means of production and were left with nothing. A law was in place to ensure oil revenues funded health and development, but the majority was diverted to military spending under the justification of 'security'." Infrastructure was built, including hospitals, buildings, and roads, but much of it stands empty, what Djiraibe calls "white elephants." In N'Djamena, buildings were set up while people lived without water or electricity; and, according to recent reports by the Borgen Project only about 10% of the population has access to electricity. Trust between the population and the government, she says, is "lost."

Two decades on, Chad ranks 188th out of 190 countries on the UNDP Human Development Index, virtually identical to where it stood before oil production began. The World Bank's Worldwide Governance Indicators show negligible improvement across all six dimensions. Chad still sits at the very bottom of the Economic Complexity Index, exporting almost exclusively crude oil, and the absolute number of people in extreme poverty is higher today than when the project began.

Debt, depletion, and what comes next

Not only has Chad struggled to achieve its development goals, but the financial aftermath has actively constrained Chad's future options. Tim Jones, Head of Policy at Debt Justice, argues that resource-backed lending created a second trap. Chad took large loans from Glencore, collateralised against future oil revenues. In theory, the collateral should have secured lower interest rates; in practice, rates remained high, contract terms were never published, and a "cash sweep" mechanism accelerated repayments when oil prices rose, stripping the government of revenues precisely when they were most abundant. When prices fell, the debt burden remained. As Jones told us, "the government clearly had a problem with the fiscal impact of these debts. In 2020, they asked for the payments to be suspended but Glencore refused."

Chad entered the G20's Common Framework for debt restructuring, but by the time the IMF concluded that Chad no longer needed relief, Glencore had already been paid off and the debt effectively transferred from private to multilateral creditors. The public sector absorbed the risk while the private lender collected the return. Operationally, the project followed a predictable arc. As Magrin documents, ExxonMobil sold its stake after roughly fifteen years; the project passed through Glencore to Savannah Energy, then was nationalised under a new Chadian state petroleum company. At each stage, capacity to maintain production and environmental standards diminished.

What lessons can be gleaned for Chad today, especially in light of the energy transition? Horta argues that decentralised renewable energy (particularly solar) could be transformative in a country where villages in the oil-producing region still lack electricity. But she argues the approach should be different: "if it's done from a grassroots level, working with the communities and giving them some control, then they have every incentive to care for the maintenance, to make it work, because their children can study at night because they have light at home." Jones adds a structural constraint: he argues that Chad's existing debt architecture locks the country into an export-revenue model. To service external debt, the government would need foreign currency, which means continued dependence on oil exports, trapping economic planning in a cycle that actively discourages diversification. Meanwhile, the geopolitical landscape has shifted and China's emergence as an alternative financing source could fundamentally change the bargaining dynamics. If the leverage of Western institutions hold through governance conditionality erodes and governments can now turn to lenders who impose no such conditions, this makes a repeat of the pipeline model unlikely, and forces a harder question: if external institutional design can fail, and conditionality has lost its teeth, what does work? Djiraibe, despite everything, sees reason for cautious hope: a growing movement of youth and women is pushing for change. But she is clear about the priority: "without democratic governance and respect for human rights, no external framework, even if well designed, will deliver for the population."

When a model does not fit the country

Chad's pipeline project was one of the most significant attempts made to prevent resource curse dynamics from taking hold in a fragile state. It did not work — not because the ideas were wrong, but because the institutional transformation was not compatible with the ultimate political reality. Pegg frames the unresolved question: "it is easy to identify where the model works (Norway, Canada, Botswana) and where it fails. The harder question is where the threshold lies. At what level of institutional capacity does the equation 'resource revenue plus good governance equals good outcomes' actually hold?"

The pipeline project did not answer that question. It only confirmed that there is a level below which no amount of external engineering can substitute for domestic political will. As Pegg emphasizes: "The World Bank has always said there is no such thing as a resource curse, there's only a governance curse." The harder challenge is when countries do not have the good governance and institutional capacity to carry out the necessary reforms. For investors and institutions, the lesson is sobering: the financial structures that surround resource extraction can entrench fragility as effectively as the political dynamics they are meant to mitigate.

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