Unocal in Burma

Since 1990, Union Oil Company of California (Unocal), which was

founded in 1890, had operations in all aspects of the oil business.
Considering that it had expertise in all aspects, Unocal markets itself to
governments outside the United States for they like about Unocal’s one –
stop shopping that was from development to the marketing end.
In December 1992, Unocal paid US$ 8.6 million to Total S.A to
became 28,26% of the Yadana Field project, while the other investors are
Total S.A (31,24%), Thailand’s PTT Exploration & Production Public. Co
(25,5%) and the Burmese government (15%). The Yadana field project was
a gas mining project on the Yadana field that is located in the Andaman
Sea beneath 150 feet of water off Burma’s shore and belongs to Burma.
It was agreed that Total would be responsible for overall
coordination of the project, such as developed the wells and extract gas,
and Unocal would construct the 256 – mile pipeline to carry the gas from
Yadana to Thailand. While the Burmese government provided security to
ensure that land was cleared and rights of way secured for the passage of
the pipeline through Burma, including built roads and other facilities such
as base camps, buildings, barracks, river docs, helipads, etc. Most of the
pipe would lie under the ocean, but the final 40 miles would cross over
southern Burma through the region inhabited by the Karen, the minority
ethnic group most hostile to the Burmese government.
At the time of preparation and installation of the pipeline from The
Yadana field to Thailand, there are numerous reports from human rights
groups who claimed that there had been human rights
violations against the Karen people. To clear the way and build facilities
for the pipeline construction, the Burmese government that was notorious
for violating human rights in Burma, forced hundreds of Karen doing so
and provided slave labor for the project. Even, 15 members of the
Burmese Karen minority group stated that during the period of pipeline
construction many members of their family were forced relocated, forced
labor, tortured, murdered or raped by the Burmese army.
Since the members believed that Unocal was aware of the brutal
methods used by the Burmese army, and they should be held responsible
for the injuries of hundreds of Karen people by the Burmese army because
of the pipeline project, they filed class action suits in U.S courts against
Unocal. On June 29, 2004, U.S. Supreme Court inaugurated
the provision that foreigners can use American law in order
to seek compensation in U.S. courts for abuses overseas. On December
20, 2004, Unocal announced it would settle a federal lawsuit, provided
compensation and funding for social programs for people who are in the
pipeline region.
QUESTIONS
1. Answer whether from utilitarian, rights, justice and, caring
perspective, Unocal did the right thing in deciding to invest in the
pipeline and then in conducting the project as it did. In your view, and
using your utilitarian, rights, justice, and caring assessments, did
Unocal do the right thing? Assume there was no way to change the
outcome of this case and that the outcome was foreseen, was Unocal
then justified in deciding to invest in the pipeline ?
Ethics is a kind of investigation and includes both the activity of
investigating and the results of that investigation - whereas morality is
the subject matter that ethics investigates (Velasquez 2006, p.8).
Simply put - ethics deals with understanding and differentiating right
from wrong. The validity of Unocal activities in engaging in the Yadana
field project can be discussed from 4 (four) moral principles point of
view, which are : the utilitarian, rights, justice, and caring perspective.
a. Utilitarian Perspective :
Utilitarian is a moral principle that claims that something is right to
the extent that it diminishes social costs and increases social
benefits. In any situation, the “right” action or policy is the one that
will produce the greatest net benefit or the lowest net costs
(Velasquez 2006, p.59 & 61). The core concept of utilitarianism is
the focus of good consequences for all stakeholders and not just the
individual. To understand if Unocal decision to invest in the Yadana
project from a purely Utilitarian perspective, we can see the costs
and benefits of the project, such as : Unocal and other companies
built schools and roads along the pipeline, small businesses were
also growing, the project provided Burma citizens with employment,
infant mortality along the pipeline dropped, Thailand was able to
enjoy cleaner natural gas from the 500-600 million cubic feet of gas
that was piped in daily through the pipeline instead of using dirtier
fuel oil and Unocal was expected to earn $2.2 billion dollars
throughout the life of the contract. However, the projects also
causing the costs, as follows : hundreds of Karen were used as
forced labour and also forced to relocate to accommodate the
pipeline project, allegations of abuse and even murder by the
Burmese government for those who opposed the project.
Considering the above mentioned benefits and
costs, a pure Utilitarian perspective would say that it was right for
Unocal to investing in the Yadana pipeline. By conducting the
project, there were a far greater number of people got benefits
from the project, as opposed to the costs.
b. Rights Perspective :
In general, a right is an individual’s entitlement to something
(Velasquez 2006, p.72). When an entitlement is a result of a legal
system, then it is known as a legal right. However, there is a far
greater right that encompasses all human beings or better known
as moral rights. The most famous foundation for moral rights
requires that everyone be treated as a free and equal person
(Velasquez 2006, p.78), as it is stated at Imanuel Kant’s theory of
Principle of Ends, which is : never treat a person as a means to
advance one’s own interest but rather as an end in themselves.
Moreover, Manuel Velasquez in his Business Ethics Concept and
Case’s book also mentioned that :
- Humans have a clear interest in being provided with work, food,
clothing, housing and medical care when they cannot provide for
these themselves (Velasquez 2006, p.81);
- Humans have a clear interest in being free from injury or fraud
and in being free to think, associate, speak and live privately as
they choose (Velasquez 2006, p.81);
- Humans have a clear interest in preserving the institution of
contracts (Velasquez 2006, p.81);
From the case study, we find that references are made to the rights
perspective of ethics violation, including : the report that
throughout 1993 to 1996, the Human Rights Watch and Amnesty
International issued reports claiming that the Burmese army was
using forced labour and brutalising the Karen population to
provide security for Unocal workers and equipment. Subsequently,
a 1995 report commissioned by Unocal also stated that human
rights violations have occurred and continue to occur. All of
reports were proves of indirect conflict with the rights perspective
of ethics. It appeared that based on the rights perspective, Unocal
was not correct in investing in the Yadana project and conducting
in the ensuing project as there was information at hand prior to
Unocal entering the contract and again during the time of the
contract which showed that unethical violations against human
 rights existed in Burma both directly and indirectly related to the
project.

c. Justic e Perspective :
Justice is giving to each that which is his due. In essence, the justice
approach to ethics is ensuring that all are treated fairly, with equal
distribution of benefits and risks. Taking into consideration the
information gathered under the Utilitarian and Rights perspective, it
can be examined Unocal’s position from the three different
categories of justice, as follows :
- Distributive justice : distributive justice is concerned with the
fair distribution of society’s benefits and burden (Velasquez,
2006, p.88). From a distributive justice viewpoint, it did appear
that Unocal made the wrong decision to invest in the Yadana
project due to the fact the various reports from the US State
Department, non-profit organisations and even Unocal’s own
commissioned study shows that although the benefit of the
project could have in theory been distributed to all of Burma via
government development, it appears that the burden of the
project has been focused on those living within the pipeline
corridor;
- Retributive justice : proportionate punishment is morally
acceptable for breaking a rule or a law. From a retributive justice
viewpoint, it appears that Unocal was not correct in its decision
to invest in the Yadana project as it was sued in both the Federal
and State courts in the US and the ensuing bad publicity and
boycotts by consumers in the US eventually forced Unocal out of
business by way of a merger with Chevron.
- Compensatory justice : the just way to compensate people
for what they have lost when they were wronged by other.
(Velasquez, 2006, p.88). From a Compensatory Justice
viewpoint, Unocal was right in investing in the Yadana pipeline
as the Karen population who had suffered as a result of the
project were adequately compensated through the out of court
settlement.

d. Caring Perspective :
 Ethics from a caring perspective emphasises the importance of
relationships. Since caring about other persons is the heart of
the moral life and, thus ethics. It is suggested that by
demanding that we show care towards those who depend on us,
be it our family, community or even country, we as individuals
run the risk of burn out and self sacrifice. Again drawing on the
various reports from the US State Department, non-profit
organisations and even Unocal’s own studies, it appeared that
Unocal was not correct in investing in the Yadana project from
an ethics of care perspective. This is due to the nature of the
ethics of care which emphasises compassion, kindness and the
development of relationship. Since the Karen people was treated
badly or without compassion by the Burmese army, and with the
awareness of Unocal, it violated the ethics of caring
perspective .

2. In your view, is Unocal morally responsible for the injuries inflicted on

some of the Karen people ? Explain.
To analyze whether Unocal is morally responsible for the injuries
inflicted on some of the Karen people, it is necessary to review the
principles of ethical or moral that had been violated and how the four
main principles of ethical translated into standard moral of the Yadana
field project. In his Business Ethics Concepts and Cases’ book,
Velasquez showed that ethical principles (utilitarianism, rights, justice
and care), provide a systematic basis of moral standards that can be
used to determine and evaluate the moral value of a decision or
assessment. In the case of Unocal, before the investment was made,
Unocal had conducted socio-political analysis of the State of Burma. In
fact, Unocal contracted a consulting firm to review the 1991 Amnesty
International report, which documented abuses against the Burmese
by the army. Although it had received an explanation of human rights
violations in Burma, as well as the risks that might occur, Unocal
continued investing into the project. Subsequently, in 1995, Unocal
hired consultants to investigate conditions in the Yadana region and
again obtained a report on the existence of various human rights
abuses during the pipeline installation. The violation of ethics or morals
that obviously occurred related to the case of Unocal in Burma,
including:
- Violation of rights principle, given the reports that show the existence
of human rights had been widespread;
- Violation of justice principle, because the benefits and the costs were
not evenly and equally distributed;
- Violation of caring principle, because the loss of basic compassion for
the people of Karen by the Burmese army;
Since Unocal proceeded with the project based on the Utilitarian
principle of Ethics in which the consequence of continuing the project
outweighed the social costs involved, it was justifiable to continue. As
such, Unocal should be held morally responsible and accountable for

the injuries inflicted on the Karen people.

3. Do you agree or disagree with Unocal’s view that “engagement”

rather than “isolation” is the proper course to achieve social and
political change in developing countries with repressive governments?
Explain
The options between engagement and isolation became the questions
that the global community has put forth with regards to Burma.
However, Unocal had consistently chosen engagement since they
believed that they could affect better social and political change than
via isolation policies. I agree with the Unocal’s preference of
engagement rather than via isolation, to affect changes in a country.
Historically, isolation (isolation occurs when a country is isolated by
another country or group of countries in the form of sanctions usually
in the form of trade embargoes and/or travel & immigration bans) or
unilateral sanctions have proven to be ineffective. For example,
commercial and financial embargo imposed on Cuba by the US
Government for more than 40 years was the reason why Cuba became
one of the poorest countries in the world. Nevertheless, despite
continued pressure from the US, Cuban president Fidel Castro remains
in charge of the country.
Likewise, sanctions against Iraq after the Persian Gulf War suggests
that as many as 567,000 Iraqi children may have died since the end of
the first Persian Gulf War because of economic sanctions imposed by
 the UN Security Council (Thawnghmung & Sarno 2006, p.42). The
Myanmar Times & Business Weekly at its website suggests that the US
ban on textile imports from Myanmar in 2003 resulted in tens of
thousands of the estimated 350,000 workers employed in the garment
industry in losing their job. Whereas, the Clinton administration
switched from a policy of isolation to one of engagement (engagement
is where a country or a group of countries actively engage with a
specific country with hopes that dialogue and bi-lateral communication
would serve as a more effective platform to affect change for local,
regional or global interests) allowed Vietnam to grow towards
liberalisation and has become an active trading partner with the US.
The Unocal Yadana project can also be considered as an engagement
policy. Among the benefits derived were :
- reduced infant mortality rates from 87 per 1000 to just 13 per 1000;
- provided improving medical care, new and refurbished schools,
electrical power, and agricultural development in the pipeline region;
- created of employment along the pipeline region which was and
remains an extremely poor and underdeveloped region of Burma;
In summary, although occasionally isolation policies have produced
point specific result, it is however usually accompanied by greater
social, political and economic fallout typically suffered by the general
population. In contrast, a policy of engagement does provide better
overall outcomes socially, politically, and economically, although
sometimes it takes longer to provide visible results.