Ecuador signs $3.6bn deal not to exploit oil-rich Amazon reserve

Pioneering deal signed with UN sets up trust fund by wealthy countries worth half expected earnings from potential sale of oil
John Vidal in Bonn and Rory Carroll, Latin America correspondent
guardian.co.uk, Wednesday 4 August 2010

The climate of the Huaorani people, a native tribe in the Amazon rainforest in Ecuador, will benefit from the deal. Photograph: Guardian

How much would you pay for the most biologically rich patch of land on Earth – some 675 sq miles of pristine Amazon, home to several barely contacted indigenous tribes, thousands of species of trees and nearly 1bn barrels of crude oil?

Ecuador, home of the Galapagos Islands, the Andes mountain range and vast tracts of oil-rich rainforest, yesterday asked the world for $3.6bn not to exploit the Ishpingo-Tiputini-Tambococha oil block in the Yasuni national park. A knockdown price, it said, considering the oil alone is worth more than $7bn at today's prices. The 407m tonnes of CO2 that would be generated by burning it could sell for over $5bn in the global carbon markets.

But neither the oil block nor the park is for sale, and under the terms of a unique, legally binding trust fund set up yesterday by the government and the UN, the oil and the timber in Yasuni will never be exploited.

Instead, donor countries, philanthropists and individuals around the world are being invited to pay the money in return for a non-exploitation guarantee.

The idea of rich countries paying poor countries not to exploit their forests in return for financial compensation is being promoted at the global climate talks which reconvened this week in Bonn, Germany. But the idea of paying poor countries not to develop valuable oil reserves is believed to be the most radical and most forward-looking yet.

"The object is to preserve biodiversity and prevent climate change emissions. Ecuador is an oil-exporting country and the oil reserves in Yasuni have been shown to represent 20% of the oil in the whole country," said Helga Serrano, from the Ecuadorean foreign ministry yesterday in Bonn. "We will keep then oil underground indefinitely. We think $3.6bn is a fair contribution from developed countries," she said.

So far, only European countries have shown a firm interest. Germany has said it may pay $800m over 13 years, with Spain, France and Switzerland reportedly considering the offer. Guatemala and Nigeria have asked Ecuador for help with similar programmes.

The plan was first floated by the Ecuadorian government in 2007 when it asked for $350m (£174m) a year to leave Yusuni park oil in the ground, but commitment from the international community has been slow in coming.

Any money raised would be administered by the UN Development Programme (UNDP) and would go to protect 4.8m hectares of land in Ecuador's other national parks – including the Galapagos Islands – and to develop renewable energy sources and build schools and hospitals for indigenous groups.

Conservation groups have been staggered by the biological riches in the park, which is situated at the intersection of the Amazon, the Andes and the equator. It was recently found to have 650 species of tree and shrub within a single hectare – the highest number in the world and more than in the whole of north America. In addition, it has more than 20 threatened mammal species, including, jaguars, otters and monkeys, and several hundred bird species.

The rush for oil in the Amazon has long divided governments and people. Ecuador is fighting a massive battle to get US oil companies to clean up pollution, while indigenous groups have clashed with government forces and companies in neighbouring Peru and Colombia.

Yesterday human rights groups criticised the Ecuadorean government for using the conservation initiative to mask plans to open up other parts of the Amazon to oil development, and to re-open old oil blocks that had been closed because of resistance by indigenous people.

But conservation groups hailed the establishment of the UN trust fund for Yasuni as "historic".

"We welcome this long sought after final step to protect an important part of Yasuni national park," said Kevin Koenig, Ecuador coordinator with Amazon Watch. "This is a big win for Ecuador, and the world. Now we need more countries to contribute, and for [Ecuadorian] President Correa to keep his word."

"We are seeking nothing less than a new paradigm for development. This is what the majority of people in Ecuador want. Yasuni will remain protected through generations," said Daniel Ortega, an environment and climate change ministry spokesman.

But some environmental and indigenous groups cautioned that the deal covered only the eastern fringe of the Yasuni national park and left the rest open to oil and mining projects.

Repsol and the Chinese-owned Andes Petroleum extract oil in the west of the park and last month Ecuador's government said it would tender oil blocks in Pastaza province in the south.

The CONAIE umbrella indigenous organisation warned that the UN-brokered deal was not the end of the fight. "We don't want Correa to offset his lost income from leaving the ITT oil in the ground by opening up other areas of equally pristine indigenous lands," the group's leader, Marlon Santi, told reporters.

Sceptics questioned Ecuador's green credentials given it planned a major new oil refinery and spent billions every year importing and subsidising gasoline and diesel.