[Editorial] Bearing Responsibility for Oil Field Project

The are growing allegations about the failure of Korea Rail Transportation Promotion Foundation, an organization under Korea National Railroad (KNR), in an oil field project. The foundation signed an oil field development contract on September 3 of last year with Russian company Alfa-Eko for US$62 million, and in October the company was paid US$6.2 million. The contract broke off a month later and officials have not been able to get the deposit back.

It is no small amount of money, but the motive behind the project is also suspicious. Uri Party member of the National Assembly Lee Kwang Jae is strongly suspected of involvement. Lee proposed to KNR that it get involved in the oil field and he is said to be personally close to the president and major shareholder of one of the companies that made a joint investment with the foundation in the company Korea Crude Oil. The suspicions are not dying down, either. It is strange that the foundation purchased the shares held by joint investors (60 percent) for 20 times face value, at W12 million.

In summary there are two main questions. The first is how a KNR organization was able to venture into oil field work when it has absolutely no experience. Oil field development is a "risky business," with only around 5 percent possibility for success even when world-class oil companies get involved. Furthermore, the Korea National Oil Corporation abandoned the very same project. The oil corporation heard the proposal in 2003 but was unable to review the legitimacy of the project because the state of the paperwork was so poor.

The second question is about Lee's involvement. It is not too much to suspect someone established the needed connections if the foundation suddenly decided to get involved for in oil field exploration. The same goes for the way shares held by the other companies that were investing were bought out. KNR denies the allegations and says the project was supposed about business diversification. Lee says he has evidence proving the allegations are not true. KNR's explanation is a lame one. If Lee really does have proof, the right thing to do would be to make it public.

The Board of Audit and Inspection (BAI) has commenced on an audit and that will be watched. There are two principles involved when it comes to dealing with cases like these; speed and thoroughness. There needs to be a thorough clarification about what happened, enough for the results to be convincing to the people, and the investigation must not take forever. Suspicions have a way of growing as time goes by. It looks like someone is going to have to bear responsibility. Business failures happen from time to time, but responsibility cannot be avoided when clear mistakes have led to losses.

The Hankyoreh, 1 April 2005.

[Translations by Seoul Selection (PMS)]