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What Is The Cardin-Lugar Rule, And Why Is Congress Trying To Kill It?

What Is The Cardin-Lugar Rule, And Why Is Congress Trying To Kill It?

On January 30, a motion was introduced to the House of Representatives to rescind a measure included in 2010's Dodd-Frank financial reform applying to the disclosure of payments made by oil, gas and mineral companies to foreign governments. The motion was taken on by pro-business and regulation-averse congressional Republicans and approved two days later without challenge. It is now heading to the Senate, where the motion is expected to pass.

The measure under challenge was first proposed by the SEC and sponsored by Sens. Ben Cardin and Richard Lugar and was to take effect in 2018. The rule aims to curb bribery or otherwise illicit payments to nations with major energy resources from U.S. energy companies.

The Resource Curse

The concern over U.S. companies potentially contributing to foreign corruption or organizations that threaten international stability stems from the "resource curse," a pattern among resource-rich nations where profit from those natural assets does not result in governmental stability or prosperity to the country as a whole.

A 2016 investigation featured in the Journal of Peace Research surveyed 118 organizations in 13 countries in the Middle East and North Africa between 1980 and 2004. The survey found that nations where commodity exports compose 25 percent of their GDP are 27 percent more likely to experience violent conflicts from insurgency or terrorist groups.

Introduction And Elimination

The argument in favor of the Cardin-Lugar rule is that it will increase transparency in transactions made between foreign agencies and domestic energy extraction companies. The intent is to ensure that these payments do not go to supporting organizations that run contrary to U.S interests or threaten democratic rule in affected nations.

Challenges to the rule from the lobbying group the American Petroleum Institute as well as from Exxon Mobil Corporation (NYSE: XOM) contend that the rule would put American energy companies at a competitive disadvantage by requiring them to release information that could be exploited by foreign competitors.

A Pro Energy Administration

The motion has gained more attention due to the recent appointment of former Exxon Mobil CEO Rex Tillerson to Secretary of State for the Trump administration. While Tillerson has divested himself from the company, concerns still persist about whether the decade-long executive will avoid conflicts of interest in regard to the company's foreign business relationships.

Regardless of Tillerson's appointment, the Cardin-Lugar rule seems as though it is likely to be expunged by the Republican dominated congress.

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