Various factors including, but not limited to, the nature of the project, the project context and the vulnerability of the Affected Communities of Indigenous Peoples will determine how these communities should benefit from the project. Identified opportunities should aim to address the goals and preferences of the Indigenous Peoples including improving their standard of living and livelihoods in a culturally appropriate manner, and to foster the long-term sustainability of the natural resources on which they depend.

While these are positive developments in industry standards, they still tend to link benefit sharing with negative project impacts, rather than acknowledging Indigenous peoples' right to share in the benefits of resource extraction from their lands whether or not they also have to experience negative effects from these activities. Moreover, the challenge of defining whether or not a community can be considered 'Indigenous,' thus triggering the relevant performance standard, has still not been fully resolved by companies and international financial institutions (see Section 4).

The 94 financial institutions which have signed up to the Equator Principles are obliged to follow the IFC Performance Standards in the case of large-scale projects (more than 10 million USD) in countries where national legal and regulatory regimes are deemed to have insufficient safeguards (of the Arctic states this is only Russia). In projects that affect Indigenous peoples, clients of Equator Principles Financial Institutions are required to follow IFC Performance Standard 7. Other international financial institutions have adopted similar ethical frameworks to the IFC, according to which they make lending decisions, including the European Bank for Reconstruction and Development (EBRD), which focuses on Central and Eastern Europe, Russia and Central Asia. As of the date that this article was submitted, the EBRD's revised performance requirements were undergoing review and public consultation.

Of course, not all extractive industry projects use project finance from international financial institutions. Other standards have been developed for institutional investors (e.g., the Principles for Responsible Investment) and export-credit agencies (e.g., the OECD Common Approaches). Many companies are also involved in voluntary membership initiatives, such as the UN Global Compact, or various industry associations (see below). However, many companies are self-financing, including state-owned companies, and are not obliged to adhere to international standards, only to the legal framework of the countries in which they operate. In the case of joint ventures (e.g., between a multinational corporation and a state-owned company), the policies and standards applicable to the project in question (over and above national law) need to be negotiated and agreed between the partners.

Industry associations have made a significant contribution to standard-setting. The International Council on Mining and Metals (ICMM), for instance, has 27 member companies, who are obliged as a condition of membership to adhere to and report on ICMM's Principles and Position Statements, which themselves can be viewed as an agreed industry standard for good international practice. In line with the ICMM Position Statement on Indigenous Peoples and Mining (2013), ICMM members commit to '[e]ngage with potentially impacted Indigenous Peoples with the [objective of] ensuring sustainable benefits and opportunities for Indigenous Peoples through the development of mining and metals projects' (Commitment 1). ICMM's requirements for benefit sharing do not only relate to Indigenous communities, and it offers a range of guidance documents and tool kits that cover benefit sharing and measurement of socio-economic impacts of mining projects [67,80–82]. The oil and gas industry association IPIECA, which has 35 member companies, has produced (non-binding) guidance that represents industry consensus around good practice as it is developed by working groups of industry experts from IPIECA member companies. IPIECA has produced, inter alia, guidance on social investment [44] and Indigenous peoples [83]. Individual companies have also pushed the

boundaries of good practice, consolidating this in published reports, for instance Rio Tinto's report 'Why agreements matter' [84]; setting precedents for engagement and enterprise support, e.g., Suncor in Alberta [24]; or they have been forced to innovate by new government regulation in frontier resource development contexts, as was the case for Tullow in Greenland [69].

Further relevant guidance has been produced by practitioners, researchers and foundations, aimed at companies, governments, communities, consultants and negotiators [40,85,86]. Of particular interest to benefit-sharing debates is the guidance that helps to understand effectiveness factors and measure the socio-economic impacts of an extractive industry project [64,87]. The IFC guidance highlights the importance of defining up front 'what success will look like in the eyes of the community, the company, local government representatives and other relevant stakeholders' [44]. This is in line with good practice around FPIC, which entails agreement between the proponent and the community up front regarding what consent will look like, who is to take part in the negotiations, how they will take place and how they will be monitored [60,63]. In 2014, the indigenous rights NGO, First Peoples Worldwide developed their Indigenous Rights Risk Report, a risk assessment tool, in response to demand from investors for better ways to identify, manage, and mitigate Indigenous rights risks [76]. Under 'social investments' in Indigenous communities, the highest level of risk is posed when 'There is no evidence of social investments in Indigenous communities', while the lowest risk rating can be achieved where: 'There are social investments in Indigenous communities; there is full or nearly full local control over design and implementation; benefits accrue to a broad cross-section of community members, and will be sustained beyond the project's life cycle' [76] (p. 22).

#### *3.3. Indigenous Control: Exploring James Anaya's 'Preferred Model' of Resource Development*

In his former role as UN Special Rapporteur on the Rights of Indigenous Peoples, James Anaya wrote a UN-endorsed commentary on Indigenous rights and extractive industries in response to the launch of the UN Guiding Principles on Business and Human Rights (2011). According to Anaya, the standard scenario or 'prevailing' model of resource extraction is when states or third party business enterprises promote natural resource extraction in Indigenous territories, 'with the affected indigenous peoples at best being offered benefits in the form of jobs or community development projects that typically pale in economic value in comparison to profits gained by the corporation' [11] (p. 3). Anaya articulates a 'preferred' model involving resource extraction through Indigenous peoples' own initiatives and enterprises (as long as environmental risks are minimised). He outlines this model as follows, with reference to UNDRIP, Article 32(1) [11] (p. 5):

As part of their right to self-determination, 'indigenous peoples have the right to determine priorities and strategies for the development or use of their lands and territories'. This right necessarily implies a right of indigenous peoples to pursue their own initiatives for resource extraction within their territories if they so choose. In cases in which indigenous peoples retain ownership of all the resources, including mineral and other subsurface resources, within their lands, ownership of the resources naturally includes the right to extract and develop them. But even where the State claims ownership of subsurface or other resources under domestic law, indigenous peoples have the right to pursue their own initiatives for extraction and development of natural resources within their territories, at least under the terms generally permitted by the State for others.

Anaya also states clearly that Indigenous peoples have the right to decline to pursue such developments, and to decline to be consulted on such developments. He refers to the rights to freedom of expression and to participation, which are established in international human rights law, according to which Indigenous individuals and peoples have the right to oppose extractive projects. He asserts the right to freedom from reprisals and violence in response to such protests, with reference to the UN Guiding Principles on Business and Human Rights and the Voluntary Principles on Security and Human Rights. He also states that Indigenous peoples should be free from pressure and coercion to accept extractive projects or to engage in consultation; while affirming the principles of FPIC, which he terms the 'general rule' for decision-making relating to extractive projects within indigenous territories.

Anaya argues that the 'preferred' model is 'by its very nature more conducive to the exercise of indigenous peoples' rights to self-determination, lands and resources, culturally appropriate development and related rights' [11] (pp. 4–5). Anaya also states that, in the light of Indigenous peoples' claims to land and resources, and their stewardship role in safeguarding these for future generations, 'recognising a priority for indigenous peoples for the extraction of resources within their territories is a matter of equity if not of entitlement' [11] (p. 6). Further, he argues that it is also a matter of good practice, since resource extraction by Indigenous peoples themselves maximises the possibility that it will be undertaken with respect for their rights and interests. As such, this type of development will reduce the risk of instability in such development, while profits are also more likely to stay within the country, and capacity enhancement will benefit local people.

In practice, Anaya observes that Indigenous peoples are frequently marginalised in resource development. He identifies strategic planning as a critical area for participation, but observes that Indigenous peoples are very rarely involved at this stage of development planning in resource sectors, and rarely have the opportunity to determine the direction of extractive industry projects. He also observes that many Indigenous people currently lack the required business and technical skills, strategic partnerships and start-up investment, and advocates government assistance to those Indigenous people who may want to pursue such business opportunities 'in contrast to the alternative of seeing the natural resources within their territories being extracted under the control of others' [11] (p. 6). To this end, Anaya proposes that governments (and where appropriate international donor agencies) support programmes of grants, loans, tax breaks, advisory services, skills training and scholarships, as well as preferential licencing and permitting for Indigenous peoples.

#### *3.4. Implementing Norms in Practice*

In this section, benefit sharing practices in three Arctic countries are compared in the context of extractive industry development on Indigenous peoples' lands. In line with the analysis of the standards presented above, benefit sharing is seen within the wider context of the development model for resource extraction. A key question is whether or not this development model grants the space for Indigenous peoples to 'determine development priorities' through involvement in strategic planning, as an essential foundation for equitable benefit sharing.

Since the 1970s, Norway has become one of the leading countries for local content policy in its (offshore) oil and gas sector, which has stimulated the growth of a globally competitive industry; and it is also lauded for the success of its sovereign wealth fund [15,88]. There is a—sometimes powerful—role for local government in decision-making on mining projects, which has empowered one Sami municipality to reject a gold mining project (see below). However, the role of municipalities is seen by some as a source of weakness or confusion in decision-making—and certainly as an area ripe for policy review [10,89]. Norway has also been criticised in relation to its tax regime that limits the flow of project benefits to local communities; the politicization of environmental and mining issues; and the lack of success in translating public consultation into meaningful public involvement in resource-related decision-making [90–92]. Moreover, resource extraction is still practiced within an overall extractivist model of development in Norway (as elsewhere). In the case of the Nussir copper project in northern Norway, while the company was given credit for its inclusive approach and concern for the local population, some local stakeholders felt there was little space for debate about 'the multiple concerns about values other than those measurable through economic growth' [89].

Norway has also been criticised for its lack of attention to Indigenous rights, despite having legislation and institutions to support Sami rights [73,74]. This includes the ability of Sami institutions to influence strategic-level decisions about resource development. While Norway's Minerals Act (2009) has undergone consultation with the Sami Parliament, the lack of a specific clause on benefit sharing for the Sami is one of several reasons why the Sami Parliament has not approved it [72,93]. Mining

activities need to secure certain approvals from the local authorities and land-owners early in the project cycle [93]. However, in Norway's northern Finnmark county where many of the Sami live, the official landowner is the Finnmark Estate, which collects the 'landowner fee' on behalf of the people of Finnmark [94], while mining companies can still obtain exploration licences for lands used by Sami reindeer herders, without engaging in advance in a process of meaningful consultation or FPIC with the local herding communities [55].

In 2012, in Sami-dominated Guovdageainnu (or Kautokeino) municipality, a reindeer-herding region of Finnmark County, the elected municipal council voted (narrowly—reflecting the wider community split) in favour of protecting reindeer herding livelihoods rather than allowing an environmental impact assessment to go ahead that could potentially give the green light for the Biedjovaggi gold mine to be re-opened in the area [94]. It was not Norway's commitments under ILO 169, but its decentralized decision-making arrangements (under the Norwegian Planning and Building Act) which allowed this to happen [93]. The project proponent, Swedish company Arctic Gold, challenged the legality of the 2012 vote, offered a one-off payment of around 2 million GBP to the community, and drafted a form of benefit-sharing agreement (to implement if the project went ahead), but in 2013, the municipal council again voted (narrowly) against the project [93,94]. Following municipal elections in September 2015, the newly elected council immediately placed a four-year moratorium (until the next elections) on discussions about Biedjovaggi, in order to focus on other aspects of socio-economic development [55]. Magnussen and Dale suggest viewing this decision as the evaluation not only of the potential economic benefits of the mining project, but also aspects of the local way of life that are valued in non-monetary ways—such as 'being Sami', living within an undisturbed landscape, and resisting political influence from Oslo [93]. However, the municipality did not go so far as to exclude the possibility of mining from the local area plan, and with the next round of municipal elections the mining question could arise once more.

In Russia, there is no national regulation determining how companies ought to share benefits with local and Indigenous communities, although the rights of (most) northern Indigenous peoples are protected by relevant legislation, including the right to set up a tax-free *obschina* (or commune) to protect their legal rights to traditionally used lands, which can form the basis to claim compensation [95,96]. Greater centralisation under President Putin, along with revisions to the federal law 'On subsurface resources', have reduced the amount of control that Russia's resource-rich regions have over revenue distribution. The regions benefit from income taxes and some land taxes, but the federal mineral tax goes to Moscow. This arrangement means that compensation and companies' social investment projects take on greater significance for local people [49].

Nonetheless, regional governments in Russia's Arctic and Far Eastern regions with significant populations of Indigenous peoples, have developed their own regulations governing extractive industry activities, including benefit sharing [5]. Some require companies to negotiate an agreement with local Indigenous resource users prior to securing their licence to extract resources, with or without regional government participation [2,97]. In some cases, the lack of government involvement in some of these agreements has been seen as a weakness [5]. In other cases, as in Russia's Komi Republic, a shift away from centralized agreement-making towards greater control by local Indigenous communities has led to the strengthening of local institutions and greater economic independence for Indigenous resource-user groups [8,49].

The role of international companies and international financial institutions has also had an effect on the way that benefit sharing is practiced with Indigenous communities in the Russian extractive industry context. On Sakhalin Island, in the Russian Far East, for instance, the Sakhalin-2 offshore oil and gas project sought to secure project finance from the European Bank for Reconstruction and Development (EBRD) for Phase 2 of the project. In 2005, following protests by the local Indigenous resource-users, the EBRD asked the proponent company Sakhalin Energy to prepare and implement an Indigenous peoples' plan [98]. The Sakhalin Indigenous Minorities Development Plan (SIMDP) was launched in 2006, with Indigenous governance structures in place, and has been running since

then, with later involvement of the regional government and with plans employing an FPIC process to reach agreement [4,50,99]. The Yamal liquefied natural gas (LNG) project in northern Russia, carried out a 4-year FPIC process with local Indigenous communities, which ended in 2014 with the signing of FPIC declarations and agreement on an Indigenous Peoples' Development Plan that included support for local Indigenous populations [77,100,101]. This was largely in response to the requirements of the Equator Principles financial institutions lending to the project.

Canada has considerable experience of inclusive resource development models and benefit sharing with Indigenous communities, and is still viewed as a leader in this area, despite controversies surrounding the implementation of UNDRIP in the country [102]. In their study of Canada's difficult relationship with UNDRIP, Favel and Coates challenge the heavy emphasis on FPIC in public debates, which they feel obscures other UNDRIP imperatives such as ensuring that Aboriginal communities meet the living standards of the wider Canadian population, which, they argue, can sometimes be achieved through equitable and respectful partnerships with extractive companies [75].

Where land claims have been settled, First Nations may own surface and subsurface rights within the land claim settlement area, although some land claims negotiations have lasted many years and remain locked in disagreement over land and resource-based benefit sharing [16,103,104]. Canada has no federal legal requirement for benefit-sharing agreements, but the practice of signing such agreements is widespread [56,60]. As part of the Nunavut Land Claims Agreement, for instance, resource developers are obliged to negotiate Impact and Benefit Agreements (IBAs) with the regional Inuit associations, as a condition of the licence. A study of the use of IBAs in Nunavut concluded that they are an effective way to ensure that industrial developers commit to benefit sharing with local communities, but that IBAs would be more equitable and have a greater sustainability impact if decision-making were devolved more to the beneficiaries [105]. Another model is that of the Aboriginal development corporation: these are community-based, collectively owned enterprises, many of which have become significant economic players. Many have benefited from funds from modern treaties and legal settlements, revenue from resource activity and arrangements with oil-sands companies pledging benefits to Aboriginal enterprises, such as priority access on bids [24].

Yet, despite efforts to ensure greater Indigenous involvement in resource development, observers note that underlying issues of poverty and inequity persist. Irlbacher-Fox notes that land-claim negotiations in Canada cannot be separated from the colonial heritage of the government–Aboriginal relationship, observing that while communities may have access to the procedures of participation, the historical context and forms of communication within negotiation forums mean they frequently cannot influence the thinking of the people they are negotiating with [103]. Meanwhile, in 2016, the Mining Association of Canada (MAC) issued a Position Statement on Government Resource Revenue Sharing between the Crown and Aboriginal Communities [103]. It observes that despite the existence of 265 active agreements between mining companies and Aboriginal communities across Canada, as well as joint ventures, collaborative planning efforts, training and employment initiatives, there is still a need to address outstanding issues of poverty and ensure greater consistency in the flow of benefits. MAC suggests that government resource revenue sharing with Aboriginal communities—as distinct from bilateral arrangements between companies and communities—could provide these communities with 'greater opportunities to participate in the mineral exploration and mining industry and significantly contribute to the elimination of socio-economic disparities between Aboriginal and non-Aboriginal Canadians' [106] (p. 2).

#### **4. Discussion**

Different models of benefit sharing—and individual elements within those models—are distinguished largely by the degree to which the state, companies and local communities are involved in and control the distribution of benefits, while other drivers include the role of international finance and global civil society networks. Key types of benefit-sharing and related activities are summarized in Table 1, which offers a typology based on existing typologies and categorizations [8,11,44,45], drawing on the standards and practices analysed in Section 3.

**Table 1.** Elements of benefit-sharing models for local and Indigenous communities.

The coverage of benefit sharing in international instruments frequently lacks clarity; there is no standard format or quantitative guidance on how to structure the distribution of benefits from a project; and there is no identified optimal ratio of involvement of public and private sector, as much will depend on the specific local context [8]. On the other hand, many guidance documents have been produced by standard-setters, industry guidance bodies, consultants and NGOs, while scholars have covered the area of benefit-sharing in some depth (see Section 3). Good practice can be identified, but this is mostly presented in terms of processes and procedures to be carried out in the context of the prevailing 'extractivist' model of development [11,29]. A key finding from this research is that 'fair and equitable benefit sharing' needs to start by reassessing the wider development model and ensuring greater Indigenous peoples' involvement in strategic-level decision making and setting the rules of the game and related forms of communication and engagement.

This paper focuses primarily on Indigenous peoples and Indigenous rights. However, this discussion cannot ignore the fact that certain Indigenous peoples are arbitrarily excluded from rights because they are not officially recognized as being Indigenous, while other groups are not technically Indigenous but are nonetheless highly dependent on the land and resources of a particular place and therefore especially vulnerable to extractive industry activities. International financial institutions and companies struggle to accommodate those groups who may wish to claim Indigenous status in a project context, but who are not technically eligible to be considered 'Indigenous' and to trigger the relevant performance standard. This can be a genuine dilemma in a specific project context, but it can also be a distraction from the priority of protecting the rights and addressing the needs of vulnerable local communities. While equitable benefit sharing is considered to be good practice in both Indigenous and non-Indigenous communities, Indigenous peoples are entitled to greater participation in decision-making and to benefit sharing arrangements that are part of a wider process of FPIC. It seems inappropriate to deny this opportunity to certain vulnerable, resource-dependent communities simply due to a question of definition. More guidance is needed for practitioners to understand how to tackle this question more sensitively. 'Vulnerability' is one possible entry point, but the vulnerability of Indigenous communities is an additional consideration to their right to self-determination and the implications of that in a project context. Thus self-determination and vulnerability both need to be addressed appropriately.

The Biedjovaggi case would indicate that the Norwegian government is not fully meeting its obligations under ILO 169 or UNDRIP by not involving the Sami enough in decisions that directly relate to them at a strategically early point in the planning process. This approach not only threatens Indigenous livelihoods, it also puts companies at financial risk if they invest considerable amounts of money in exploration activities, only to discover that the local community is opposed to the activity and may have the power to halt it. In the Biedjovaggi case, this resulted in the Swedish proponent company making multiple forceful attempts to convince the municipality to agree to the project, even after it had refused on two occasions. Scholars have also drawn attention to the need to evaluate such cases not only in economic terms, but in terms of those non-economic aspects of life that are valued by local and Indigenous people.

In Russia, three key drivers have particularly influenced benefit sharing models in particular project contexts—regional government regulation, international scrutiny and local public protest. International governance and Indigenous rights principles have reached outlying regions of Russia via international projects, which have even incorporated FPIC into their procedures. Nonetheless, these projects are still implemented within the 'extractivist' model of resource development. By its very nature, the promotion of meaningful stakeholder engagement and FPIC by multinational corporations and international financial institutions comes too late to ensure adequate involvement of Indigenous peoples in early strategic-level decisions. The regional governments perhaps have the strongest opportunity to do so, by including Indigenous representatives in planning processes and development of legislation. This does take place in some cases and should be studied further [5].

In Canada, while the practice of proponent-Indigenous agreement making is widespread, and despite great progress in developing Indigenous-owned and run businesses for the extractive industries, there is still an important role for the government in benefit sharing in addition to the partnerships and agreements between companies and Aboriginal communities. This would reflect government obligations under UNDRIP to ensure continuing improvement of Indigenous peoples' economic and social conditions. Yet the government role is frequently set within an extractivist paradigm influenced by the colonial history, which undermines opportunities for equitable outcomes from negotiations. Where Aboriginal Canadians have secured greater control of local government, as in Nunavut, they still tend to promote an extractivist model of resource development and there is a risk that power becomes concentrated in the hands of the governing elite, while local resource users remain marginalized. This challenge of ensuring equity through devolved decision-making within an already devolved Indigenous governance structure is also present elsewhere, notably in Greenland [69,71]. Therefore the level and nature of Indigenous representation becomes a critical aspect of Indigenous rights implementation and equitable benefit sharing in practice.

#### **5. Conclusions**

This article has explored standards, principles and practice related to benefit sharing in the context of extractive industry development on Indigenous peoples' lands, with the aim of identifying what models or elements of particular models serve to ensure greater equity and respect for Indigenous rights. All the case studies discussed in Section 3.4 are embedded within an extractivist development model, which James Anaya identified as the 'prevailing model' of resource development, and this can be said of most experience of benefit sharing in the extractive industries, even the most progressive. From the outset of developments, the extractivist bias in priorities and mindsets tends to compromise the ability of Indigenous resource users to benefit in an equitable manner from extractive industry development on their lands. In particular, the lack of involvement of Indigenous peoples in making strategic decisions about extractive industry development on their lands—decisions including the allocation of land for extractive industry activities and the granting of exploration licences—undermines the possibilities for equitable development outcomes.

It is likely that the extractivist model of resource development will continue to prevail for some time to come, although increasing awareness of the potential for Anaya's 'preferred' model may lead to wider innovation in that direction. This would more closely reflect government obligations under ILO 169 and UNDRIP to ensure continuing improvement of Indigenous peoples' economic and social conditions and to ensure that Indigenous peoples are able to determine priorities and strategies for development that takes place on their lands; and to ensure 'fair and equitable sharing of benefits' arising from resource development, in line with the principles established by the CBD, the Nagoya Protocol and the Akwe:Kon Guidelines.

While it may be an unfamiliar development paradigm for many governments, the 'preferred' model is already being implemented, at least partially, in some Arctic and sub-Arctic contexts. This includes efforts by the public and private sectors, including policy incentives and support for Indigenous enterprise development, preferential contracting, and embedding the principle of FPIC in decision-making structures and processes. Corporate approaches, such as those implemented by multinational corporations in response to the requirements of international financial institutions, or by enterprises that are simply more in touch with the communities in which they operate, provide the opportunity to analyse the results and effectiveness of such approaches. This can lead to greater adoption by industry associations and individual companies, and within government regulation at the national and sub-national levels.

Greater participation of Indigenous peoples at the strategic level in extractive industry planning and programme development—to determine priorities for their own development—may also prove to be a more effective foundation for equitable benefit-sharing and a stronger social licence to operate for extractive projects, if they are to go ahead. This offers potential benefits to governments—through reduced risk of social unrest and opposition, and increased security and predictability for investors. This may require a longer time frame for developing the natural resources, and may also require some resource-rich lands to be set aside and not developed, as part of strategic zoning agreements with Indigenous representative institutions and local Indigenous landowners and land users. However, in the longer term it may prove to be a more effective, sustainable and stable development model.

**Funding:** This research was funded by the Norwegian Ministry of Foreign Affairs, grant number QZA-13/0528 ('the Árran project').

**Acknowledgments:** I am very grateful to three anonymous reviewers for their positive and constructive comments on the first submission of this paper. I would also like to express my thanks to Sven-Roald Nystø of the Árran Lule Sami Centre, Áluokta/Drag, Norway, who first suggested this as a topic for exploration as part of the Árran project, and who provided invaluable assistance during the field work; to Kirill Istomin and Natalya Novikova who made excellent field research associates, and all the many respondents we engaged with in the field in Russia and Norway. I would also like to thank Maria Tysiachniouk, with whom I have exchanged many ideas around the topic of benefit sharing and who encouraged me to submit this paper to this collection; and to Pierre Gratton of MAC and Nick Pelosi of First Peoples Worldwide who also provided valuable comments to an early draft.

**Conflicts of Interest:** The author declares no conflict of interest.

#### **References**

© 2019 by the author. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).

### *Article* **Pipeline Neighbors: How Can We Avoid Conflicts?**

#### **Natalya Novikova**

The Institute of Ethnology and Anthropology, Russian Academy of Sciences, Leninsky Pr., 32A, 119991 Moscow, Russia<EMAIL_ADDRESS>Tel.: +7-9161903860

Received: 17 December 2019; Accepted: 21 January 2020; Published: 24 January 2020

**Abstract:** In this article, I consider the various policies of oil and gas companies relating to Indigenous peoples of the Russian Federation. The analysis is based on field research in Northern Russian regions. Data for the analysis comprises: International standards, Russian laws, corporate codes, official regulations, and interviews with company employees and representatives of the Indigenous populations. The research methodology is based on the concept of legal pluralism as the coexistence of various legal regimes and the search for platforms of common interests. The goal of this article is to analyze policies on benefit sharing by assessing projects and programs adopted by various industrial companies according to the social and humanitarian prospects of their social acceptance. I consider the possibilities for Russian legislation to promote respecting Indigenous people's interests in the preparation of corporate sustainability reports.

**Keywords:** indigenous people; oil and gas companies; corporate social responsibility; Russian North; benefit sharing; legal regulation

#### **1. Introduction**

Achieving partnership between Indigenous peoples and industrial companies in the Russian North is important not only for the survival of such populations, but for operation of major economic sectors, and the social and economic development of the Arctic and regions of the Russian North. Today, awareness regarding mutual responsibility and mutual interest in the establishment of such new relations between companies and Indigenous communities is only beginning to arise. Of special importance to their relations with industrial companies are the consultations with Indigenous peoples, and their ability to say "no" to projects that violate their rights and legal interests. New international documents have been adopted that govern the processes I consider in this article; indeed in Russia the awareness of the need to address this problem is growing. Economic and sociological research focus much attention on the issues of compensation, and thus the distribution of company profits to society. In this article I focus on the non-material/non-financial aspects of mineral extractivism in areas inhabited by the Indigenous peoples of the Russian North, and on possible means of their regulation.

#### *1.1. Main Themes, Objectives, and Methodology*

The goal of this article is to analyze policies on benefit sharing. The major research questions are: How has the social climate in regions of industrial development changed over time? How has the experience of living next to each other—of living as neighbors—come to shape attitudes of both representatives of industrial companies and members of Indigenous communities towards monetary compensation?

The study is based on legal anthropology methods, which combine ethnographic field research with the analysis of national laws and internal corporate documents. The benchmark for comparison comprises international standards [1,2] and Russian standards for business and sustainable development [3,4]. As a framework I employ the concept of legal pluralism, which acknowledges the coexistence of various legal regimes [5,6]. It is this very coexistence that ensures a relatively peaceful cohabitation, while domination or coercion by one party provokes conflicts. These approaches allow a more comprehensive consideration of all the actors involved in environmental management and highlight the opportunities for diverse regulations of the relations between Indigenous peoples and industrial companies.

The methodological approach of comparing the ideal and experienced legal order is useful for my work [7]. Since I focus on normative culture, my method incorporates an anthropological critique of legislation and corporate documentation. I have first collected and studied the documents and regulations, which lay out the rules of behavior for workers, and then, during field research, considered the extent to which these are lived out with respect to Indigenous people; they are experienced by the latter in everyday life.

So far, no country has created an ideal model of benefit sharing with regard to oil and gas production and impacted Indigenous communities. Research of the interrelationships between Arctic communities and industrial companies demonstrates, "Indigenous people seek jobs and income while not undermining opportunities for using local resources and have enduring nutritional, cultural and economic benefits." This tension reflects the definition of sustainable development and also self-determination and self-reliance of Indigenous people [8] (p. 122).

The academic and public discourse is increasingly acknowledging the need to study all environmental stakeholders and manage cultural diversity, especially in large federal states. A comparative study of benefit sharing issues associated with industrial development stresses, "the importance of communication, cooperation and consultation [...] This is crucial not only for Indigenous peoples—who need to be active partners from the beginning of access and benefit sharing initiatives, and to receive clear and honest information about projected benefits and risks—but also for governments, which have a responsibility to establish simple and clear information channels, to cooperate among themselves where resources or knowledge crosses national borders, and to establish transparent and fair consultation processes for the development of access and benefit sharing policies" [9] (p. 349). The former UN Special Rapporteur on the Rights of Indigenous Peoples, James Anaya, has discussed the interactions between Indigenous peoples and industrial companies. One of his reports is dedicated to the status of Indigenous peoples in the Russian Federation in the context of industrial development. Anaya noted: "In many instances agreements have been concluded for the development of natural resources on or near Indigenous lands, bringing some benefits to the Indigenous peoples concerned. However, a broader understanding of cooperation is called for: Rather than limiting the interaction between extractive industries and Indigenous people to compensation agreements, administrators should encourage ownership interest and profit-sharing in extractive industries, when Indigenous communities are so inclined. The federal government should establish reliable methods of monitoring the development of industrial projects ... " [10]. So far, these recommendations have been mere suggestions for Russia.

The Indigenous peoples' level of involvement in resource co-management, decision making, obtaining compensations, and profit sharing is largely dependent on constitutional guarantees and land tenure security. In northern Canada, the interaction process is enshrined in the Constitution Act, 1982 and in the agreements with the federal government. Also, Indigenous peoples have had to advance their rights and interests through the Canadian courts. As a result, for example, a long-standing policy development process took place in the Northwest Territories of Canada regarding the construction of a pipeline in the Mackenzie valley. This led to the fact that "Indigenous peoples are major stakeholders in Mackenzie Gas Project. Aboriginal Pipeline Group expect to receive additional capacity, which will eventually increase its ownership percentage to 33.33%" [11] (pp. 108–109). One Indigenous leader said: "A pipeline down the Mackenzie Valley will ... not destroy the land, but without some form of economic base we will surely destroy our people" [11] (p. 111).

The example of Alaska demonstrates the joint-stock model of profit sharing and the difficulties it has created for the social and economic development of local communities [12]. Researchers note: "As the scale of industrial development increases, however, costs to landscape, wildlife, subsistence

and cultural values can also increase while benefits from jobs and immediate income remain modest or even decline" [8] (p. 134).

Indigenous peoples give preference to working with local sustainable resources, usually seeing industrial development as a risky business with high expectations that cannot always be fulfilled. Therefore, benefit sharing may only mitigate the negative consequences of industrial development. In Russia, these practices look even more precarious, especially since industrial companies and government authorities practice benefit sharing primarily in the form of financial compensation.

In the past few years quite a number of papers on corporate policy have been published, including one by this author [4,13–15]. I approach the problem by looking for effective corporate and social policies in the Russian North as well as opportunities for legal regulation of benefit sharing. I will reflect on the fact that many oil and gas workers, who were formerly fly-in/fly-out employees, became local residents, and I will examine how this fact impacts benefit sharing. I will also consider who implements the policies of industrial companies and how.

#### *1.2. Legal Regulation*

In Russia, relations between Indigenous peoples and industrial companies are primarily regulated by constitutional and legal provisions in the special laws on rights of Indigenous peoples [16]. The Federal Law 'On the Guarantees of Rights of Numerically Small Indigenous Peoples in the Russian Federation' defines the right to compensation (collective and individual) as reimbursement for damages [17]. Unfortunately, these provisions are not incorporated in the legislation on resources, thus limiting their capacity to a large extent. Article 42 on profit distribution, which was incorporated in the first version of the Federal Law (1995) 'Subsoil Law', was abolished in a later stage. Federal Law 'Subsoil Law' (1995 edition) Article 42, "During the development of underground resources in the areas inhabited by small Indigenous peoples and ethnic groups payments to the budgets of the subjects of the Russian Federation shall be partly used for the social and economic development of these peoples and groups." [18]. Indigenous organizations and experts have for many years tried unsuccessfully to promote the protection of the Indigenous people's rights and to introduce corresponding amendments to this law. The Federal Law 'On Production-Sharing Agreements' guarantees reimbursement for damages to Indigenous peoples [19]. Article 7 of this law stipulates the responsibilities of investors operating within areas of traditional residence and economic activity of numerically small Indigenous populations to take measures to protect the latter's ancestral lands and traditional way of life and to appropriately compensate them. In 1994, Sakhalin Energy signed such an agreement to implement the Sakhalin-2 project. The same principle applied to Sakhalin-1 project (1995), implemented by Exxon Neftegas.

To a large extent the process of lawmaking at a Federal level was based on the legislative potential of the regions. So, for many of these regions this process of lawmaking was even more constructive then for those at the center. Nevertheless, legislation is not itself enough to protect Indigenous peoples [20].

In the Russian Federation, there are also 'Methods for Calculating the Scale of Damages', approved by a 2009 decree of a no-longer existing ministry, which are, nevertheless, still in place. This document has been criticized often for a number of reasons including the following two: (1) The methods only apply to legal entities, (2) the amount thus calculated may be less than the compensations the companies already paid. For instance, such criticism was made at a conference in Khanty-Mansiysk in 2018 [21]. Today the Federal Agency on Nationality Affairs and the Committee on Issues of Nationalities of the State Duma are working out new methods for calculating losses.

Insufficient legal regulation of issues concerning relations between Indigenous peoples and industrial companies, especially in relation to compensations and reimbursements for damages, as well as to minimization of negative consequences, leads to the necessity of considering corporate social responsibility standards [1,4].

#### **2. Materials and Methods**

The article is based on published research, academic literature, analysis of Russian legislation, and the empirical material that I collected in various regions of the Russian Arctic and Russian North. The fieldwork included participant observation and interviews with Indigenous residents, representatives of oil and gas extraction companies, and government authorities. The interviews were conducted in line with a specially developed guide aimed at revealing each interviewee's attitude to benefit sharing of oil and gas production. My key Indigenous informants were men and women aged 40–60 as well as youth living in close proximity to industrial development areas.

The article also draws on my experience as an expert on Indigenous peoples in the legislative assembly of the Russian Federation (2011–present). Every interview used in the article was conducted with free, previously informed consent.

One of the field work periods underpinning the article was conducted yearly between 1995 and 2000 in the Khanty-Mansi Autonomous Okrug, specifically in the city of Khanty-Mansiisk and in the villages of Surgutsky and Nizhnevartovsky regions, in Khanty and the Nenets camps, as well as among engineers and workers of the oil companies Lukoil-West Siberia and Surgutneftegas. In 2014, field work was carried out in both companies' headquarters in the cities of Kogalym and Surgut. Another field study was conducted in 2008–2012 in Yamalo-Nenets Autonomous Okrug, specifically in Yamalsky and Tazovsky regions and in the city of Salekhard, among various Nenets groups, as well as Gazprom and Lukoil employees. The next field work period was carried out in 2006, 2011, 2014, and 2019 in Sakhalin Oblast, namely in the city of Yuzhno-Sakhalinsk as well as in Nogliksky and Okhinsky regions. The study involved Indigenous inhabitants and local residents as well as Sakhalin Energy and Exxon Neftegas employees.

The article also makes use of the empirical material I collected in 2006 in the Northwest Territories of Canada during the public hearing on the Mackenzie Gas Project in the village of Inuvik (Scientific Research Licence # 14079N, Fale #12410684 Aurora Research Institute—Eurora College). In addition, the study draws on field data collected in 2018 while organizing a seminar in Bulun region (ulus) of the Sakha Republic (Yakutia).

The research topic requires establishing a relationship of trust between the researcher and the informants, which was ensured by my long-standing contacts in the field and the numerous phone consultations with my informants that followed the field stage of the study.

#### **3. Results**

#### *3.1. How Oil Worker 'Migrants' became 'Neighbors' and What This Means for Indigenous Peoples*

My research on this topic started in Khanty-Mansi Autonomous Okrug (KhMAO) in the 1990s; later I continued it in Yamal-Nenets Autonomous Okrug (YaNAO) and Sakhalin Oblast, which allowed me to observe the dynamics of company–community relations. At the early stage of industrial development, according to the interviews, Indigenous peoples were confident that presence of the arrived geologists, and later oil workers, is temporary, that they would work for a while and then return home, and that afterwards local life will return to its former state. At the same time, locals perceived newcomers as carriers of new information. They (especially, young people) liked how the latter sang guitar-strumming songs, handled cars, and shared stories. This process of acquaintance proved to be mutual. Back in 1920s some researchers wrote that, "without the reindeer and dogs, without an experienced native guide, our investigation in the Russian North and discoveries of new mining wealth would have ceased" [22]. In practice, in the absence of legal regulation and corporate social policy, the companies and Indigenous people were wary of one another, and relations were revolving mostly around a 'local–migrant' dilemma. During interviews recorded in KhMAO, the Khanty and Nenets often said that oil workers will leave, but the harm they have caused to the environment, to nature, in fact to the 'home' of the Indigenous people, will remain.

On the other hand, oil workers emphasized that this land has come to be a home for them: Their children live and study there and they are staying permanently in the newly built cities. The line was drawn between 'town people' and 'forest people'. In the 1990s, the Khanty, Mansi and Nenets started returning to their camps, securing 'clan lands', as they considered them their own. Those, who have arrived to work for the oil industry by that time have already been settling in cities, such as Surgut, Kogalym, etc. They have also begun to consider the land they worked on as their own. An employee of LUKOIL-West Siberia told me: "We work here, we brought in the equipment, and then out of a sudden, from who knows where, these Nenets appear with their reindeer." From Yamal nomads, I frequently heard that oil-workers fly over the tundra when reindeer herders are pasturing their reindeer elsewhere and, seeing no structures on the ground, they assume that nobody lives there. Here I draw attention to this perception of land, historically used by Indigenous people, as terra nullius, because it initially hampered the process of dialogue and the understanding of a need to pay compensations.

Initially, oil companies showed little interest in the local population, and even less in the Indigenous peoples. They perceived themselves as champions of civilization, a blessing for the area, and thought very highly about their own social status. In recent years, changes in the mutual perception of both groups are taking place. Life in a common area next to the local population is becoming an important trait of the oil and gas community. The previously present mutual 'exoticization' is giving way to the perception of both oil-workers and the Indigenous peoples as being neighbors.

In recent years, many of the companies under consideration have developed special policies related to Indigenous peoples, which are reflected both by corporate websites and sustainability reports. The Russian Union of Industrialists and Entrepreneurs (RUIE) publishes corporate practice guidebooks. In 2017, a survey was carried out among RUEI members on sustainable development goals (SDGs). The main activity area of companies, which helps achieve the SDGs, according to two-thirds of those surveyed, was the introduction of innovations and new energy-and resource-saving technologies. The second most popular answer—'stable economic growth—63.3%, and growth in employment' was chosen by 56.7% of the respondents. Just a little less—53.3% chose the answer 'responsible use and production'. Supporting a dignified way of life for workers and members of their family was noted by 46.7% of those participating in the survey. About the same number chose the answer "contribution to sustainable development of the territory under development, the improvement of the social climate, the acceleration of economic growth." Decreasing negative ecological influences, and climate impacts as was noted by 33.3% [4] (p. 10). Sakhalin Energy, Gasprom Neft, LUKOIL and some of the other largest fuel and energy companies have been traditionally recognized as leaders here. Many of these companies are also leaders in terms of their policies regarding relations with Indigenous peoples in their areas of operation, as confirmed by annual awards. For instance, since 2000, LUKOIL–West Siberia has received diplomas for collaboration with Indigenous peoples.

At the same time, both at the early stage of industrial development and nowadays, Indigenous persons pursuing traditional activities experience stress from being neighbors with oil workers. Some Khanty and Mansi people actively protest; others remain apathetic, having no faith in possible changes. Linked to this is the suspicion of and disregard for ethnological assessments on the part of the Indigenous population. Even if they assist the researchers, they often think that companies will continue doing their business nevertheless, once having arrived. Field research shows that in the absence of an effective policy, industrial companies will never become 'good neighbors' to Indigenous peoples.

#### *3.2. Case Studies of Benefit Sharing Regimes: The Diversity of Oil and Gas Companies' Policies Regarding Indigenous Peoples in Russia*

Usually industrial companies' policies regarding Indigenous peoples are evaluated by the existence or absence of relevant agreements and compensation payments. It has become somewhat of an academic tradition in publications to compare corporate policies in the KhMAO, YaNAO and Sakhalin Oblast, so I will limit myself to a brief overview.

Khanty Mansi Autonomous Okrug-Yugra (KhMAO)

KhMAO's distinctive features are a well-developed legal system pertaining to the numerically small Indigenous peoples and their relations with industrial companies; the allocation of about 500 regional-level Territories of Traditional Nature Use (TTPs) to these peoples (families and clan communities (Clan community is an economic unit of individuals representing, mostly, Indigenous numerically small peoples of the North, Siberia, and Far East of Russia. In practice, since their establishment clan community have been playing the role of economic enterprises employing not only relatives and kinsmen, but also friends and acquaintances).

Since the 1990s, economic agreements have existed between industrial companies and Indigenous peoples (originally the heads of clan lands, later the subjects of rights to traditional use of natural resources). The regional law "On Territories of Traditional Nature Use of the Numerically Small Indigenous Peoples of the North in KhantyMansi Autonomous Okrug—Yugra" stipulates that industrial activity on such territories requires approval of natives to develop production sites. Should they disapprove, a special commission shall examine the production site documents, which will share its recommendations with the Okrug government. Basically, from the legal perspective the general pattern seems fair, but practice shows that the commission's decisions favor oil workers. Another model was developed in the 1990s, namely a special environmental management regime at certain extraction fields, in particular in the Surgut area. In practice, the territories inhabited by Indigenous people became reservations, with limited access for the population [10]; this practice of restricting the movement of Indigenous residents continues today, according to social media reports. In 2009, the Okrug adopted a Model Agreement by government decree, which defines the scope of agreements signed with Indigenous peoples. Every family and community dealing with oil workers are listed into the Register of Subjects of Traditional Nature Use, which is a guide for oil workers.

This current system features a number of obvious disadvantages: The relationships are individualized, and in the event of conflict, they take on a private nature of a bilateral agreement with a large industrial company. According to this scheme, government authorities are excluded from such relations. Besides, there are no powerful non-governmental organizations; today, they often agree to the industrial companies' policies. The current practice satisfies the parties until companies claim new lands, especially in the Surgut and Nizhnevartovsk regions. Then, many conflicts arise in relation to reindeer pastures or sacred sites.

The largest industrial companies operating in the area have adopted corporate documents specifying their policy on Indigenous peoples; they also have departments on Indigenous people's relations. Responsible representatives of companies sign agreements with Indigenous people, track their implementation, and provide funding for various activities and programs. Over decades of industrial development, the policy of oil companies has changed significantly, but even now it is carried out residually, and oil companies sometimes freely shift the terms of payment or services for the next year.

Consider the policies of two largest companies operating in the Okrug. In spite of the existing legislation and documents adopted by the regional government, for instance, the Model Agreement, companies behave differently. LUKOIL mainly adheres to international standards; this company joined the Global Agreement Network in Russia and often receives awards in competitions for working with Indigenous people's relations and for sustainable development, etc. The company's policy is aimed at maximizing conflict prevention and its staff often provide informal support to Indigenous people, providing them with fuel, food, transportation, and technical assistance.

Surgutneftegas is the only major oil company that has its headquarters in the Okrug. Both local authorities and people recognize its authority and role in the development of local territories. However, in these days the company's relations with Indigenous communities have been characterized by conflict. Surgutneftegas insists on a rigid adherence with legislation (as it interprets it) as the only blueprint for action. In particular, company lawyers insist they are entitled to decide who represents

Indigenous peoples and thus can qualify for the signing of economic agreements. Such harsh policy provokes dissatisfaction among the Indigenous peoples. This company is involved in many conflicts over the preservation of sacred sites of Indigenous peoples. It can be said that this is an outcome of Surgutneftegaz's disregard for international norms and standards, and generally for ethical standards of behavior.

A significant problem in relations between Indigenous peoples and industrial companies is the difference in their perceptions of justice. Among permanent residents of the area, brought together and employed by Surgutneftegas and LUKOIL–West Siberia, (a division of LUKOIL)—the engineers and workers—widespread is the opinion that payments to natives is a social injustice. They believe that companies pay enough taxes, and it is the job of the government to provide social support for Indigenous peoples. Exclusion of public authorities from the process of interaction between Indigenous peoples and industrial companies under a Model Agreement intensifies such conflicts. In short, the main disadvantage of the policies of companies in the KhMAO is their focus on conflict resolution and financial support, and not on the sustainable development of the Indigenous peoples of the North.

Yamalo-Nenets Autonomous Okrug (YaNAO)

The YaNAO occupies a special place among the regions of the North, since the nomadic population living there preserves a traditional way of life based on reindeer herding. The significant percentage of nomads (primarily in the Yamal and Taz districts) contributes to the adoption of important legal documents in the district. Plans to sedentariness and to resettle into villages the reindeer herders proved to be meaningless, as anthropologists had predicted, but there are constant proposals, in one form or another to reduce herds. The issue of how to combine traditional nature use and industrial development in the YaNAO has recently become particularly relevant: How it will be solved will affect both the lives of Indigenous peoples and the geopolitical interests of Russia, which is concerned not only in industrial development, but also in having a population in its arctic territories.

The general demand of Indigenous organizations in YaNAO is the transition from corporate charity to the establishment of partnerships and cooperation in matters of mutual interest. Industrial enterprises to some extent also seek ways to diminish the impact of industrial development on the Indigenous peoples, to avoid open confrontation. They sign agreements with the Okrug Government and local (rayon) administrations. Based on these agreements, companies transfer funds, but there is no effective control over their distribution and use. Disadvantages of this system are the lack of targeted funding, transparency, and public (Indigenous) participation. Field research shows that against the background of general environmental problems related to industrial development and climate change, companies often allow themselves non-compliance regarding current legislation and their own obligations. The current practice of setting penalties that are insignificant for the fuel and energy companies also contributes to such an approach.

When considering interaction with industrial companies, we must take into account the fact that industrial development gives different groups of the population unequal opportunities and leads to different consequences. Tundra people experience a reduction of pastures and environmental pollution. Villagers, both Nenets and other residents, await new jobs from the development of industry in the north. If companies develop infrastructure in the towns, the local population, including the Nenets, would support industrial projects enthusiastically.

To enjoy psychological well-being, nomadic reindeer herders need to be confident that they can continue their activities in the future. Many Nenets have already made their choice—reindeer herding is their occupation, work, and way of being. Today, when the process of approving industrial development is underway, Indigenous people often do not believe that their opinion will be taken into account, especially since the organizations of Indigenous peoples often receive documents for approval only after all others have signed them. This exposes the Nenets to psychological pressure.

Another negative aspect is that not every reindeer herder and fisherman knows about the construction details in advance, so they do not know what they are going to receive or lose. Insufficient information provokes rumors and conjectures that all Nenets people will be relocated to villages,

that they will not be allowed to nomadize with their reindeer, etc. People resent that the industrial development is permitted in the elevated tracts of land where the Nenets people locate their camps and have holy sites. Experts and municipal authorities believe the development of the natural resources of Yamal should follow a systematic approach, built on the basis of interaction of all stakeholders—local state institutions, industrial enterprises, and Indigenous peoples. Today, contractual and financial practice approach prevail, without taking into account alternative development paths. This has a negative impact on the situation of Indigenous peoples and has reduced the legal regulation of companies in the region. Legislation monitoring shows that in recent years, there has been a significant change in the legislation of YaNAO and most of the previously adopted documents have ceased to operate. Many regional documents merely duplicate federal ones, featuring no provisions on Indigenous people's rights. The exclusion of such provisions from new laws on local referenda and cultural heritage sites negatively impacts the Indigenous people's status. Unfortunately, instead of adopting a law on social impact assessment, as planned in 2008, a weak norm appeared in the law 'On the protection of the ancestral lands and traditional way of life of Indigenous Numerically Small Peoples of the North in the YaNAO' that stipulates "scientific and sociological research for impact assessment purposes." Awkward wording is not so important in this case, as to recognize that the Okrug legislation takes a step back in terms of protecting Indigenous people's rights. Current YaNAO legislation seems rather like governmental support measures targeting peoples who lead a traditional way of living, mostly in material and financial spheres. Thus, government bodies are moving further and further away from monitoring the activities of industrial companies and regulating their relations with Indigenous peoples. Under these conditions, restrictions on economic activity and compensation due to Indigenous peoples that are guaranteed by law hang in the air, without law enforcement mechanisms and with contributing to the sustainable development of the region.

#### Sakhalin Oblast

In Sakhalin Oblast, several variants of interactions between energy companies and Indigenous and local populations emerged historically, and the previous experience of corporations and their successors reflects in the present. The oldest among the existing companies is Sakhalinmorneftegas; Rosneft and Gasprom have started operating in this region relatively recently. International companies Sakhalin Energy and Exxon Neftegas Limited also operate here. The experience of Sakhalin Energy has become almost 'textbook' in the literature on corporate social responsibility and Indigenous peoples. The experience of the program Sakhalin Indigenous Minorities Development Plan, implemented since 2006, has been described in detail in the academic literature [3,23–26]. Perhaps the difficulty of evaluating a company's activity is connected precisely with the breakthrough nature of its policies. Its activities are far ahead of those of other companies, which today may even create difficulties, as it has no one to compete with. Another successful company in this area is Exxon Neftegaz Limited.

The corporate social responsibility of international companies on Sakhalin is directed not only at Indigenous peoples, but at the entire local population of the region, which in itself contributes to the creation of a favorable social climate. These companies have special tripartite agreements (with regional authorities and non-governmental organizations of Indigenous peoples), on which an extensive network of coordinators works. During the field study of these companies, I got the impression that a main difference is that Sakhalin Energy has a 'Sakhalin Indigenous Minorities Development Plan', which is a clear document with prescribed organization and control mechanisms. Moreover, it is important to emphasize that the distribution of funds is carried out exclusively by representatives of the Indigenous community. The main significance of the plan is that it is aimed at the sustainable development of the Indigenous peoples of Sakhalin and contributes to the formation of social capital.

The third stage of the implementation of the development plan is underway. In 2016–2020 its objectives were development of potential (improvement of leadership qualities and technical skills; support for the pursuit of the further development of ethnic identity); socio-economic and cultural development (cultural revival, economic sustainability of enterprises engaged in traditional management); and improvement of social conditions as targeted areas of support. Emphasis is placed on long-term strategic planning with the concept of sustainable development (as a guideline); preparations for the creation of an independent fund for the development of Indigenous peoples; and information disclosure about the environmental impact of the Sakhalin-2 project (ensuring timely, objective, and complete information about the existing and or potential impact and measures taken to prevent and or minimize any possible negative impact). Since 2006, representatives of Indigenous peoples and their organizations proposed more than 650 projects in support of traditional economic activities and implemented social development, for which the Indigenous people themselves approved the funding. The benefits of the plan include its duration and transparency.

In a comparative analysis of the policies of industrial companies with regard to Indigenous peoples in the Russian Federation, the plan stands out favorably for its focus on the development of these peoples. These are projects for the purchase of equipment and the equipping of their camps and hunting areas. Such development plan, as a policy of interaction between Indigenous peoples and an industrial company today needs not only to be encouraged, but also improved. O.A. Bazaleev, who worked for Sakhalin Energy for a long time, conducted an interesting analysis of social capital as a factor in the implementation of social and economic programs. The role of the concept of social capital is especially important for analyzing the effectiveness of development projects, as it actualizes such a resource as the interrelations between people and public structures and, "allows to avoid a one-sided perception of aboriginal communities through the prism of scarcity of resources." However, it is necessary to take into account that social capital can have an ambivalent effect: Costs such as ethnocentrism or 'clanhood' can become an obstacle to the development of Indigenous peoples [27]. The development plan covers all the Indigenous peoples of the island, regardless of where they live. The plan creates prerequisites for the increase in level and quality of life of Indigenous communities. In general, an important positive factor is the wide range of activities of international companies on Sakhalin, aimed at the entire local population of the region. But the special rapporteur emphasized that despite the apparent success of the Sakhalin agreement, there remain many problems in the relationship, including the oil producer's fulfilment of its obligations under the agreement [10]. Initially, one of the criteria for the plan's effectiveness was supposed to be, "the number of Indigenous representatives employed in the project as compared to the total workforce." Today, the company has desisted from the plan (First Sakhalin Indigenous Minorities Development Plan 2006, author archive).

#### *3.3. Who Enforces Company Policies and How?*

In relations with companies, it is necessary to take into account the state of psychological health of Indigenous peoples, who often experience stress from being close to oil and gas workers, etc. Hostile relationships are usually based on a lack of knowledge. Many oil workers, who have been working in the north for decades, say with an incomprehensible pride in their voices that they have never seen Natives and do not seek to learn about their life and culture. Oil and other industrial workers have formed groups which now exist as separate communities, not having and not seeking to have connections with the local population. In recent years, the policies of some companies are changing: They are starting to think more about corporate social responsibility and the adoption of special regulations for Indigenous peoples.

Company policies regarding Indigenous peoples are largely dependent on the general legal and political situation in the country. Today, the interests of Indigenous peoples and the local population are often secondary in making decisions about the priorities of territorial development; the social value of industrial development is not considered in the mixture of all the effects of resource development [28]. It is very important to have the free, prior informed consent (FPIC) of the Indigenous peoples to make decisions and the right, guaranteed by law, to say "no". At the same time, field research shows that, in practice, the work of companies and the situation of Indigenous peoples in industrial areas vary.

An important indicator is the education and professional competence of staff responsible for working with Indigenous peoples. When conducting field research on Russian and international companies and when these companies create departments to work with Indigenous peoples and local people, the differing approach to recruitment is striking. In the mid-1990s, when I began my work, such a department in Kogalym (LUKOIL—Western Siberia) named a committee 'On Corrosion of Pipes and Work with Indigenous Peoples'. In the 1990s, companies entrusted this work to engineers who had Indigenous assistants. Neither had any special education. Today, in Russian companies, people without special education continue to work in this area; they believe their activities are aimed at helping Indigenous people. In international companies, such departments pursue their activities in accordance with international principles aimed at the development of Indigenous peoples. They usually employ professionals with a humanitarian education.

If we compare the situation during the last 30 years, there is unconditional progress in relations between Indigenous peoples and industrial companies. As one indicator of this, we may consider the regulations imposed on company employees. Restrictions on hunting, fishing, gathering of wild-growing plants, keeping dogs, weapons, etc., have appeared. These rules are fairly simple to implement, and companies, using administrative resources and penalties, can easily regulate them. Such regulations usually address the accumulated, often negative experience and serve primarily to prevent conflicts. However, they contribute little to the development of partnerships.

Regulations can be the subject of wide discussion. For example, in the KhMAO, after a 2015 conference on 'Indigenous peoples. Oil. Law', ethics recommendations commenced in May 2016, for workers of industrial companies and Indigenous people when working in territories of traditional nature use. An important feature was the reciprocity of requirements. Based on such documents, companies develop policies, which they then consider when developing regulations for employees. Municipal authorities also try to take into account the specificities of companies in the Arctic in their documents on the organization of public hearings (YaNAO). Of course, all these documents, as well as laws protecting the rights of Indigenous peoples, appeared due to these efforts.

The situation is more difficult with daily work. A comparison of international and Russian companies shows that the special education of such workers, their training and retraining, and the continuous improvement of their qualifications are important, as we see, for example, in Exxon Neftegas. Another successful practice is the (ethno-sociological) monitoring, which Sakhalin Energy conducted. Russian companies, for example Lukoil-Western Siberia and Surgutneftegaz, are more likely to continue their old way, relying most often on engineers or Indigenous persons, with little thought about their qualifications.

The most important indicators of the success of the development and operation of such regulations are their legitimation, openness and provision of feedback mechanisms. In practice, we are faced with the fact that often not only the Indigenous persons and ordinary workers, but even those employees who are responsible for working with Indigenous people, do not know about these regulations. Obtaining such documents is also not without incidents: sometimes they are declared closed to the public. Only Sakhalin Energy has a clear complaint procedure, while other companies often provide general telephone numbers that Indigenous people are invited to call in case of problems. In addition, the text of the regulations is often limited to minimal restrictions and statements about respect for the culture of Indigenous peoples.

The effectiveness of company policies also depends on how its employees perceive corporate social responsibility. This is also manifested in their dissatisfaction with payments to the Indigenous people, and in their desire to not advertise some of their achievements in terms of signing and accepting documents, so that Indigenous people cannot refer to these and make new demands. A study of the opinions of managers of oil and gas companies enrolled in MBA programs collected interesting materials. These managers listed the top five areas of concern, which included policies aimed at developing the potential of companies, creating jobs, and developing sports. The interests of Indigenous and local populations as part of CSR scored substantially fewer points. The authors of this study conclude that the perception of CSR by Russian oil producers is, "a rather motley mix of Soviet heritage, memories of the turbulent 90s, today's realities and Western approaches that were relatively recently introduced into Russia" [29] (p. 28).

#### **4. Discussion and Conclusions**

#### *4.1. How do Indigenous People Perceive Corporate Compensations—As a Fair Reimbursement of Damages, a Partnership, or an Unemployment Allowance?*

Indigenous peoples have been entitled to compensation for damages that industrial companies caused since 1999, according to an article incorporated in the Federal Law 'On Guarantees of Rights of Numerically Small Indigenous Peoples of the Russian Federation'. Why is it so difficult to realize this right in practice? There are a number of factors limiting this right of Indigenous populations. Firstly, it does not correspond to company responsibilities, and is not covered in the law on sub-surface resources. Secondly, this right should be built upon the free prior and informed consent (FPIC) of Indigenous peoples regarding decisions relating to their interests, as declared in international documents. Companies need to realize that compensation is one condition for obtaining Indigenous people's consent. Field research shows that for the just realization of the right to FPIC representation of Indigenous peoples is required at consultations and public hearings. Moreover, persons having a dissenting opinion should be entitled to court appeal, supplementary expertise, etc.

Availability of financial means is a very important condition to allow Indigenous populations to make decisions—they should be entitled both to exercise control over resource use, and have the right to priority access to resources, firstly to fishing and hunting lands and reindeer pastures, as the basis of their livelihood. Indigenous economies consist of not only state support and compensation payments from industries, but also their guaranteed right to free use of natural resources. Only then, Indigenous people will feel free to resolve issues concerning the use of the territories which they inhabit.

Today, two lines of compensation for damages experienced by Indigenous populations exist in the Russian Federation. Naturally, compensations cannot be a panacea for all the inadequacies of industrial development, however they may alleviate and minimize the consequences of such damages. First are financial payments, based on agreements, or on the basis of various methods of calculation. The result is the receipt of money, or sometimes other things of material value. This practice is best exemplified by KhMAO (among regions under my research). At the beginning of the 1990s, it was pioneering, which was a breakthrough in Russia. Unfortunately, as it often happens, its positive value has diminished over time; agreements became increasingly bureaucratized towards more formal identification of conditions instead of improvement and enhanced opportunities. These agreements very quickly ceased to restrict the activities of the companies. The Indigenous people were in a difficult situation. They are financially dependent on these compensations, as their ability to practice their own economic activities diminished. In the areas designated for traditional nature use there are more and more new industrial facilities. Sometimes the Indigenous people have to become shift-workers, and sometimes this is in close proximity to their own ancestral land. Such neighbors certainly reduce the possibilities for traditional nature use. This system often does not suit either party. Much is contextual, depending on personal relationships, not on law and justice [14] (p. 72). There is a danger that the developed method of calculating losses will change little. Experts (economists) are primarily concerned with the accuracy of formulas. The Committee on Issues of Nationalities of The State Duma does not support the proposals to discuss the procedure for using the methodology in discussions.

What happens in the areas of industrial development as a result of financial injections from large businesses? How do Indigenous peoples' lives change? How satisfied are they with the changes? Indigenous experts suggest their own visions of compensation, which are not only material or financial. Here is a notable quote from an Aboriginal teacher and UN 'Unsung Hero of the 20th Century' on Presentation to a San-!Khoba project workshop (Kalk Bay, South Africa, June 2006), cited in the 2009 book *Indigenous Peoples, Consent and Benefit Sharing: Lessons from the San-Hoodia Case*: "My biggest advice would be, please, ... do ... not ... just focus on the economic gains, because for Indigenous people the most important thing is the relationship" [9] (p. 334). Many Indigenous residents of

the Russian North also speak in favor of safeguarding the environment and preserving accessible renewable resources (primarily land) as well as the opportunity to support their families.

Seminars revealed interesting results in Bulunsky Ulus of the Sakha Republic (Yakutia) in 2018, especially during the training seminar: 'What do Indigenous peoples expect from ethnological expertise and how can we achieve this?' The seminar made use of the method of 'wheel of balance'. While this is useful for personal improvement, in our case, the psychologist-coach T.F. Martynova applied it to work with groups. During a role-playing game, participants were divided into 'Indigenous people', 'industrialists', 'local population and NGOs', and 'government bodies and local governments', and we tried to ensure that participants of the seminar choose roles contrary to their life experiences. Compared with the usual 'wheel', which includes important segments for each person (e.g., family, health, finances), instructors described sections that characterize traditional culture, language, and ecology as the most relevant for Indigenous peoples. Participants had to present their satisfaction in points from 1 to 10. This technique has proven successful; people started thinking about how to build relations with companies and about what they expect from ethnological expertise. Participants made very important conclusions that employment is more important than compensation. It should be noted that participant point of view took shape during the course of the seminar; at the beginning, everybody had said that the company should build and do everything for them and provide money. The second important point of the seminar is related to acquiring the experience of communicating on an equal footing in partnership with companies and authorities. This is especially important in modern conditions for regions where industrialists and Indigenous peoples become neighbors, who not only work, but also live side by side.

The competent social and environmental policies of companies aimed at the sustainable development of Indigenous peoples determine the other line is determined. In Russia today, it is represented by the Sakhalin Indigenous Minorities Development Plan (not to say this cannot be improved). It also has a financial component, but there is also a mutual understanding that "a gift of a fishing rod is more important than a gift of a fish". It is also important to note the emerging new opportunities for the development of Indigenous business. The plan allocates grants and microcredits for the purchase of equipment, transportation, and arrangement of processing points for products. Recipients can spend funds on the purchase of autonomous power plants, information and communication technologies, and electrical appliances useful for commercial activities.

#### *4.2. Possibilities for Legal Regulation of Corporate Social Responsibility*

The experience of studying the legal regulation of the interaction of Indigenous peoples and industrial companies shows its inadequacy for establishing equitable partnerships and co-management. Today, a new platform is forming to solve this problem—a draft law on public non-financial reporting and a plan for its implementation. In May 2017, the Government approved the "concept of public non-financial reporting", prepared a corresponding draft law, and created an interdepartmental group to develop a list of key non-financial reporting indicators [30]. The Expert Council of the Committee on Issues of Nationalities of The State Duma began negotiations on the possibility of taking into account the interests of numerically small Indigenous peoples in this process.

Until recently, local communities perceived the reports on non-financial reporting and corporate social responsibility as showing voluntary activities of companies. However, research shows the shortcomings of these policies: They are opaque, they focus on a narrow group, and far from all companies operating in the North and the Arctic generate sustainability reports. Citizens' passivity is also an obstacle [31]. Among Indigenous populations, this may be attributed to their low level of education, especially in legal matters, their low living standards, lack of material resources, and the resulting high degree of dependence on financial support from industrial companies, especially in KhMAO.

In their social policies, international standards and Russian standards have adapted to these guide companies. It is not by chance that new opportunities for including the interests of Indigenous peoples on the agenda appeared precisely in the summer of 2018. On 1 July, the GRI 411—Indigenous Peoples (Global Reporting Initiative) entered into force [32]. The development of formal criteria for non-financial reporting in Russia today is of interest to all. Large companies are interested in increasing their investment attractiveness, Indigenous people want their voice to be heard. Companies are interested in receiving feedback from the regions of their activities, while Indigenous people want to know what awaits them during and after the implementation of industrial projects. Yet, with respect to Indigenous peoples, company policies lack transparency and partnership. Some of them invest heavily, but do not see returns in society.

According to the GRI 411 standard, non-financial reporting requires companies to identify cases of recorded violations of the rights of Indigenous peoples. Unfortunately, the clarifications of this document are not taken into account in Russia. In international practice, it is included in the system of protection of the rights of Indigenous peoples. Two non-financial reporting indicators are included in the Russian version—the number of formal cases concerning the numerically small Indigenous people's violation of rights and the number of internal corporate documents in the company on policies regarding these people. The Expert Council of the Committee on Issues of Nationalities of The State Duma included a more detailed description of non-financial indicators and offered to decipher the conflict resolution mechanism in the light of the complaint procedure. Experts also proposed to introduce additions to the index on 'characterization and training of personnel' for the employment of Indigenous people, including training and retraining programs.

The interaction between Indigenous peoples of the North and industrial companies is certainly a complex and intractable problem to solve. The sheer proximity of various actors adds to its severity. Climate change, reduction of renewable resources, the need to improve the level and quality of life of the population in areas of industrial development dictate a clearer position for the state and civil society. Corporate policies of companies are becoming a promising field for dialogue. Experts proposed various means of legal regulation of these relations including international law, Russian legislation, and standards of business communities. It is obvious that the Indigenous peoples themselves and their organizations play a significant role. Their participation can suggest best practices and the mechanism for their implementation in specific regions for specific companies. Indigenous involvement can also offer possible mechanisms for the prevention and resolution of conflicts.

Benefit sharing of oil and gas production is a long process. In order to be successful, it requires legal regulation, everyday work of the companies, supervision and involvement of Indigenous peoples, as well as stakeholders' observance of mutual agreements. Applied anthropological research has demonstrated that companies are to combine equitable compensations covering the actual damages done to Indigenous peoples with socially responsible policies and high international business and human rights standards.

**Funding:** This research was funded by Russian Foundation for Basic Research (RFBR, grant No. 18-05-60040) written in the framework of the project 'New technologies and social institutions among Indigenous peoples of the Russian Arctic: Opportunities and risks'.

**Acknowledgments:** I am very grateful to three anonymous reviewers for their positive and constructive comments on the first submission of this paper. I would also like to express my thanks to all the many respondents I engaged with in the field. I would also like to thank all my colleagues with whom I worked on projects on interaction between Indigenous peoples and industrial companies in Norway, Canada, and Russia. I would also like to thank Maria Tysiachniouk, with whom I have exchanged many ideas around the topic of benefit sharing and who encouraged me to submit this paper to this collection.

**Conflicts of Interest:** The author declares no conflict of interest.

#### **References**

1. Guiding Principles on Business and Human Rights: Implementing the United Nations Protect, Respect and Remedy Framework. Available online: https://www.ohchr.org/documents/publications/ guidingprinciplesbusinesshr\_en.pdf (accessed on 12 December 2019).

© 2020 by the author. Licensee MDPI, Basel, Switzerland. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution (CC BY) license (http://creativecommons.org/licenses/by/4.0/).

### *Article* **Resource Allocation in Oil-Dependent Communities: Oil Rent and Benefit Sharing Arrangements**

#### **Svetlana Tulaeva 1,\* and Soili Nysten-Haarala <sup>2</sup>**

Received: 2 March 2019; Accepted: 18 April 2019; Published: 3 May 2019

**Abstract:** This study is dedicated to the interaction between oil and gas companies and local communities that depend deeply on the production of oil. One of the key concerns of all oil-dependent communities is the distribution of oil rent: Who participates in decision making regarding the distribution of oil profits and who can claim the benefits and on what grounds?  Using Russian Arctic and subarctic areas as examples, we analyze the main rules and practices of the distribution of benefits from oil production at the local level. This study focuses on the coexistence of oil companies and indigenous people, many of whom practice a traditional way of life. We also pay attention to the institutionalization of the norms and rules of oil-dependent communities at the local level.

**Keywords:** indigenous people; oil-dependent communities; oil companies; Russian Arctic

#### **1. Introduction**

The introduction of new technologies in the 19th century suddenly boosted the value of oil, making it one of the symbols of economic progress and political power in the world. From a sticky substance used to light kerosene lamps, it became the key resource for industrial progress [1]. Technological progress and the creation of relevant infrastructure also made oil a supreme resource. By the end of the 20th century, the world had completely turned into a society symbolically referred to as the oil Leviathan [2]. This society has certain distinguishing features. First, there is a close dependence between economic prosperity and the production and export of oil. There is even a group of countries whose progress has depended on the price of oil for many decades [3]. Second, oil can be used as a political tool in the oil-dependent society. The third prominent feature of the oil-dependent society is the development of an oil ideology. A number of countries have started to embrace the idea of national supremacy, based on their control over energy resources. This is why researchers speak of resource nationalism and the use of natural resources as a tool to strengthen the idea of national exclusivity. Resource nationalism, in turn, leads to the development of a power ideology. On the one hand, this provides an oil producing nation with a chance to substantiate its political ambitions in the global arena and to legitimize its existing power or influence and, on the other hand, it justifies a lack of economic growth and material prosperity among the deprived population [3].

Just as any other society, oil-dependent societies have their own sets of rules and norms of behavior, their own beliefs and rituals, their own distribution of power and authority, and their own types of conflicts and the methods for their resolution. According to Douglas Rogers, the depth of the oil well is always directly proportional to the depth of institutional transformations [4]. Most existing research papers on the topic analyze the influence of the oil curse on political institutions at the national level [3,4]. In this study, we focus on the influence of the oil curse on the social institutions of the oil-dependent society. We also study agreements on the distribution of benefits between oil companies

and indigenous people. Indigenous peoples leading a traditional life are the most vulnerable group in terms of industrial development in their territories, and they are occasionally forced to fight for their rights in conflicts with oil companies. One of the key questions regarding such interaction relates to the rules of the distribution of oil rent among various groups of stakeholders.

We mainly pay attention to the rules of the distribution of resources among oil and gas companies, state authorities, and local residents in the oil-dependent communities of Russian regions. The development of the oil-dependent society in the indigenous regions of the Russian North dates back to the Soviet Union. Oil drilling started in the northern territories following the Second World War. Geological surveys were conducted in this area in the 1950s and 1960s, and a little later the identified sources of oil were subjected to drilling. Traditional communities were affected by the construction of industrial facilities, the shrinking native territories, the arrival of many nonlocals bringing along new lifestyles, the development of infrastructure, and the spread of technology [5,6]. Following the perestroika era, a crisis and a shift to a market economy, the oil and gas companies that maintained the infrastructure in these areas became the key economic players. The shift from a planned to a market economy required the development of new rules of engagement between oil companies and local communities. The process of enacting the new rules was accompanied by a rise in the number of conflicts [7–10].

We can identify some of the reasons behind these conflicts. First, the increase in oil production led to a decrease in agricultural land area used by the locals. This problem is very acute for indigenous people, who practice a traditional lifestyle. The shrinkage of land threatened the conservation of reindeer herding and other traditional lifestyles [5,8]. Land-related conflicts were persistent in Yamalo-Nenets Autonomous Okrug (YNAO) in the 1990s and in Nenets Autonomous Okrug (NAO) in the beginning of the 2000s. In Yamal, such conflicts grew into open protests, whereas in NAO they were latent by nature. Second, oil production affected the environment. Industrial activity deteriorated pastures and decimated fish populations in the rivers. Despite the related legal environmental norms, oil production brings along spills and other industrial accidents [9–12]. In fact, the deteriorating environment became one of the reasons why indigenous people protested against oil companies in Yamal in the mid-1990s and in the Republic of Komi in 2010–2016. Third, industrial activity desecrated indigenous people's holy places. Since many indigenous communities adhere to pagan beliefs, it was important for them to preserve their holy lakes and sockets, i.e., the places in which they could perform pagan rituals. Oil drilling close to the holy sites of indigenous people indeed became one of the causes of conflict between oil companies and indigenous people in Sakhalin in the mid-2000s. Exxon Oil and Gas Limited started using indigenous people's holy field to store their industrial stock, which aroused dislike among the local population and became the starting point of a wave of protests against oil and gas companies in Sakhalin [13–17]. A similar incident took place in Khanty-Mansi Autonomous Okrug (KMAO), where a conflict broke out in 2015–2017 because of oil drilling performed by "Surgutneftegaz" in the Numto and Ilmor lake area. Despite the fact that it was a holy territory, the oil company was not willing to give up on these lands, because they held vast reserves of oil [9,18,19]. Last, conflicts were caused by the amount of money paid by the oil companies to local people to compensate for damage. This issue was very acute in the 1990s, when there were no formalized rules for assessing compensation [18,19]. In this paper, we analyze the different ways to resolve such conflicts between companies and local communities in oil-dependent Russian regions. The article focuses on the rules of the distribution of oil rent in oil-dependent communities and the ways in which these rules affect social institutions.

The main questions of this research are the following: (1) How are the rules of oil rent distribution institutionalized at the local level in oil-dependent communities and (2) how does the order of the distribution of oil rent affect societal relations?

#### **2. Theoretical Framework: Oil, Institutions and Society**

The theoretical framework of this study is neo-institutionalism. According to this approach, institutions are understood as formal and informal rules of interaction between actors [20]. Institutions are created by people to reduce transactional costs and the related uncertainties. Institutions mean cognitive, normative and regulatory frameworks that make it possible to integrate collaborators' actions, to determine the hierarchy of positions and to identify the different stakeholders operating in the same space. They form and sanction a relatively uniform code of conduct for inter-personal relations and help in the mutual creation of a shared system of values [20].

The process of institutional formation is complicated and is influenced by many factors. Of these factors, we focus on the availability of significant natural resources such as oil. Many studies have been conducted on the interdependence between the resource curse and institutions [21–24]. Can the physical nature of a key natural resource determine the political and social fabric of society? The majority of researchers agree that there is a close bond between the abundance of resources, the level of state control, and the development of institutions in less-developed, resource-rich societies. Ch. Tilly and M. Olson have noted that the formation of states was due to the institutionalization of certain forms of management and protection in exchange for the provision of some resources to military commanders [21,22]. In given territories, rulers enabled the formation of political and economic institutions that stabilized local people's lives in exchange to acquiring the right to collect taxes. According to A. Etkind and M. Ross, the nature of the resources available to the state and the rulers determines the formation of appropriate political institutions. In other words, in exchange for resources, the state provides the people with various institutions. Differing resources have differing features that are connected not only with their physical characteristics but also with their institutional characteristics [23–25]. This means that while being one of the key resources in modern times, oil also has specific features that affect the development of political, economic and cultural institutions in oil-dependent communities.

Researchers focus on some of the institutionally significant features of oil that play an important role in less developed, undemocratic societies. One of the key features of oil is its capability to bring considerable profits for the state. M. Ross notes that in forming state institutions, the main source of state revenue plays an important role. To rephrase, a person is what he eats and state is what funds it collects [8]. If the state's main source of revenue is taxation, the state is more considerate toward society and dependent on it. However, if the state can collect revenues from other sources, such as the export of oil, it is less likely to be affected by the pressure exerted by the citizens. The economic non-interest of the oil Leviathan in its citizens is accentuated by the fact that the oil industry does not need much workforce. The production of oil requires a limited number of highly qualified workers. According to A. Etkind, this determines a government's attitude towards the people of the country: citizens turn from a resource and a source of prosperity into objects of philanthropy. The rulers do not consider the people as a valuable resource that needs to be developed as a good investment. Therefore, some of the oil and gas producing countries are super-extractive states, where the prosperity of the political and economic elite does not depend on the people, but is determined by other factors such as global oil prices [23]. In such societies, the main reason why the state subsidizes its citizens is to gain their political loyalty [24–26]. The state buys its citizens' loyalty by increasing social transfers of the oil revenue towards the people [25]. However, the spending of hyper-profits generated by oil sales leads to an increase in secretiveness and translucency. In many oil-producing countries, citizens do not have the capacity to control the amount of money that their government earns through oil sales. In fact, it is practically impossible to find authentic data about the countries' oil revenue. Combined with weak democratic structures, this reduces the social accountability of the government [23].

High-profit resources ferment conflicts over the right of ownership. According to research, these conflicts are more frequent in oil-dependent societies than elsewhere [23,27,28]. The distribution of oil rent in these societies is not equal, and the benefits and costs of oil production are always distributed hierarchically.

Conflicts can be latent or they may turn into armed struggles. Not all researchers agree that there is a clear connection between conflicts and oil. For example, M. Ross notes that oil can have two contradicting effects: it may restrain insurgencies, as it increases people's income, or it may cause revolts in a country's oil-rich regions. If oil restrains conflicts, it affects the whole country, but if it instigates them, only the oil-rich regions are affected [23]. G. Schlee is also doubtful about the influence of natural resources on the level of conflict in society. According to him, there is no such thing as a conflict over resources or a resource-instigated conflict. He maintains that any conflict that looks like a conflict over resources is in fact a conflict caused by ethnic, religious and/or linguistic differences. Oil is often merely a catalyst of conflict [28]. M. Ross supports this view by noting that oil-related conflicts are amplified in areas where oil is complemented by ethnic or religious dissatisfaction [23].

All over the world, the oil and gas industry mainly develops in vertically integrated holdings [4]. Such form of industrial organization enables the reduction of transaction costs and increases the stability of the companies. To guarantee the security of its investment, a business must integrate the source of oil and the refinery into a single industrial structure. Meanwhile, a vertically integrated business structure is based on a strictly hierarchical system of management, which is also applied to the business's social activities. An oil company's social and cultural projects are also executed within the framework of this vertically integrated structure of management [4]. These projects are supposed to legitimize the dominating stakeholders, as well as to create an aura of social prosperity and equal distribution of oil benefits. K. Humphrey equates oil companies with medieval overlords, who took control of large underdeveloped territories with minimum infrastructure and local populations, awaiting comprehensive support and large cash flows [29]. In such cases, social and cultural policies are also subjected to vertical integration and hence become dependent on the major players. The social and cultural projects executed by oil companies and the state in oil producing areas are selected from the perspective of the dominating players, and they do not necessarily conform to the needs of the majority of the people [4].

Hence, many researchers say that oil and gas as key natural resources determine the formation of relevant political institutions and stimulate the advancement of autocratic political systems. It has also been noted that an abundance of oil deteriorates effective institutions or leads to their replacement with less-effective ones [25]. Other researchers tend to support the idea that the oil curse is not a crucial factor of poverty. The slow economic growth in some oil-rich states is not due to the negative influence of excessive oil profits, but to the ineffective institutions that the states have inherited [23]. The oil curse will have negative consequences in a society with weak democratic institutions. In this case, the availability of oil revenues increases the possibility that the authorities ignore the participation of citizens in decision-making processes and use the practices of social patronage towards the citizens. The governments of oil-rich countries are not always ready to resolve problems associated with the distribution of oil rent, the lacking interest of the state and oil companies in the population, and the fluctuation of oil revenues. The authorities tend to mask or negate the existing problems through relevant cultural and social programs. Therefore, it is necessary to pay attention to institutions that regulate the distribution of oil revenues within oil-dependent communities. Examples of such institutions are benefit-sharing agreements between oil companies and local residents. In this paper, we address the institutionalization of these agreements in Russia.

#### **3. Research Materials, Methods and Research Questions**

This study focuses on the sharing of benefits in the regions of northern Russia where oil companies operate: Nenets Autonomous Okrug (NAO), Khanty-Mansi Autonomous Okrug (KMAO), Yamalo-Nenets Autonomous Okrug (YNAO), and Sakhalin Island. NAO and YANAO are located above the Arctic circle, while Khanty—Mansi Autonomus Okrug is situated in western Siberia and borders the Yamalo-Nenets Autonomous district. Sakhalin Island is located in northeastern Russia (See Figure 1). Oil and gas corporations are operating in all of these regions, where there is very little other industry that would not depend on the oil industry. On the one hand, oil companies build

and maintain most of the local social infrastructure, and on the other hand, they determine the social and political trends in these territories, thereby converting them into oil-dependent communities. Since tax revenues flow almost totally to the federation, the regional authorities are dependent on good relations with the companies. Based on soviet legacy, companies are expected to take care of the local infrastructure as negotiated with the regional authorities. Although this bond between the companies and the regional authorities resembles taxation, it leaves the companies a lot of power to decide the way in which they support the regions [5].

**Figure 1.** Administrative map of Russia. Source: Maps of Russian Federation. URL: http://www.mapsof-europe.net/maps/maps-of-russia/administrative-map-of-russia.jpg.

A distinctive feature of these regions is that they contain large groups of indigenous people, some of which follow traditional lifestyles. These indigenous groups are the Nenets (NAO, KHMAO, YANAO), the Khanty and the Mansi (KHMAO), and the Nivkhi and the Ulta (Sakhalin). Their livelihoods represent subsistence economy: fishing, hunting and reindeer herding. Although there are some markets for their products, their livelihoods cannot compete with the oil industry in economic productivity. People representing this lifestyle do not share the same ideal of economic prosperity with oil companies, regional authorities or other local populations. According to tradition, they are satisfied with living off the land, which they aim to pass to the next generations. The local residents view the arrival of oil companies in an ambivalent manner. On the one hand, oil extraction is regarded as a matter of national importance and an opportunity to receive significant economic support from the companies, which in fact finance the construction of schools, gymnasiums and residential buildings. The material aid that the local residents receive from the companies provides them greater comfort. On the other hand, the arrival of the oil companies is perceived as a threat to the traditional way of life in the tundra, which indigenous people consider their home. For this reason, indigenous people are concerned about the forced limitations on reindeer herding and environmental pollution caused by industrial development. These people have always been closely tied to land; that land is not only important for reindeer herding and fishing, but also the basis for their spiritual culture. The reduction of land area inhabited by indigenous people alters their social norms and deteriorates their ethnic identity. According to our research, all these processes stimulated social transformations in the studied local communities.

This study is based on grounded theory and qualitative methods [30,31]. The use of grounded theory included the following stages: collection of empirical data, their careful coding, selection and interpretation of analytical concepts, comparison of the analytical categories with new data, further elaboration of the analytical concepts, formation of theoretical conclusions, and validation of the results. At the same time, data collection and analysis were carried out in parallel. The main methods of data collection were semi-structured interviews, document analysis and participative observation. We interviewed representatives of the regional and local authorities, representatives of oil and gas companies, local residents of oil production areas, and experts from scientific and research institutes and social organizations. The interviews were conducted with representatives of the following companies: Lukoil, Surgutneftegas, Sakhalin Energy and Exxon Neftegas Limited. In addition, interviews were conducted with representatives of the state authorities and local residents in Salekhard, Seikha (YNAO), Yuzhno-Sakhalinsk, Nekrasovka, Okha, Nogliki (Sakhalin), Khanty-Mansiysk, Numto (KHMAO), Naryan-Mar, Nelmin-Nos Horei Ver, and Krasnoe (NAO). A special guide was appointed for each group of informants. The crucial issues were focused on the main forms of interaction between companies, local residents and authorities, as well as on the economic and social consequences of the existing forms of interaction for local communities. The respondents were asked the following questions: What forms of corporate and state assistance to local communities are the most widespread? What forms of assistance are the most effective from your point of view and why? What are the negative impacts of industrial activities on local communities? What are the causes of conflicts between companies and local residents? The informants were selected with the help of the snowball method. Altogether, 95 interviews were conducted, and they were all subsequently transcribed and analyzed.

The main types of data analysis were coding, highlighting the main analytical concepts and categories, and their further development and interpretation. The interviews were analyzed through thematic, axial and selective coding. In analyzing the data, we identified some of the most significant codes, which were then combined into larger analytical categories. The key category of analysis was the concept of oil-dependent community. We divided this concept into the following subcategories: norms and rules of oil-dependent communities, myths and rituals of oil-dependent communities, cultural fakes, conflicts and risks in oil-dependent communities, and tools for conflict resolution. For a more complete disclosure of categories, we used memos. During our research, we revisited the selected codes and categories and made new interpretations based on newly collected materials. In further data collection and analysis, we compared the new data and the existing analytical categories, refined them, and made a more complete description and interpretation of the categories. Disclosure of the key category through the constant comparison and the addition of related categories was used to specify the studied social processes conceptually. This allowed us to substantiate our conclusions about the influence of oil resources on societal relations.

Furthermore, we used participative observation as a research method in the following indigenous settlements located in oil-drilling areas: Krasnoe, Nelmin Nos, Horey Ver (NAO), Nekrasovka (Sakhalin), and Seiha (YNAO). The observation was conducted during a period lasting from two weeks to a month in each community. During the observation, we lived in the settlements and took part in the daily affairs of the communities together with the residents: we attended public events in cultural centers, museums and village councils; we went fishing and gathering; and we participated in informal meetings and holidays. While observing, the researchers kept diaries that were later analyzed. This llowed us to study the life of the communities from the inside and helped us to reveal practices of interaction between indigenous communities, oil companies and state authorities. Additionally, it allowed us to analyze the implementation of various rules concerning benefit-sharing arrangements.

We also analyzed the federal and regional laws that regulate the relationship between oil companies and local residents, and studied local press and corporate reports about sustainable development. The following federal and international documents were analyzed: the Land Code; the laws On Subsoil Resources, On the guarantees of the rights of indigenous small-numbered peoples of the Russian Federation and On the territories of traditional use of natural resources of the small-numbered indigenous peoples of the Russian Federation; the Convention on Biological Diversity; the ILO Convention on the Rights of Indigenous Peoples, etc. Furthermore, we analyzed corporate reports and regional media in order to identify the main trends of corporate social programs in the regions.

The data were collected between 2011 and 2017 as follows: NAO (June 2011), Sakhalin (August 2015), YANO (July 2017), KHMAO (January 2016, February 2017) and NAO (2016) (We are very grateful to Maria Tysiachniuk and Galina Grening for their contribution to the materials). The duration of the study over several years allowed us to analyze the changes that have taken place in the local communities.

We used triangulation to ensure the validity of the interviews, observations, publications and documents. The combination of materials helped us to analyze the practices of benefit-sharing arrangements from the perspective of various groups of actors.

We anonymized the data to protect the privacy of our informants. Each interviewee was informed about the nature of the research and publications, and their oral consent was received prior to participation. The article does not provide facts about the actors, but it does describe the main practices of interaction between indigenous communities and oil companies in Russian regions.

In this research, we focus on the influence of oil on institutions and identify the basic aspects of the changes caused by this influence. We also analyze the transformation of social institutions under the impact of oil revenues. Then we discuss the main stages of oil expansion, the specifics of the distribution of authority and resources in oil rich regions, and the conflicts associated with these processes. Further, we elaborate the main forms of agreement between oil companies, indigenous people and the authorities in the studied Russian regions. We also discuss the norms and understandings that are rooted in oil-dependent communities and are influential in terms of the execution of agreements. Finally, we present conclusions about the basic features of agreements related to the distribution of benefits in the regions.

#### **4. The Institute of Benefit-Sharing Agreements in Russian Oil-Dependent Communities**

The prosperity of oil-dependent societies is based on oil rent, but the rules of the distribution of oil benefits rouse many differences of opinion and discussions, particularly because the redistribution of oil revenues in oil-dependent societies often occurs on an informal basis. Concurrently, various instruments of governance, aimed at a just and equitable distribution of natural resource benefits among various groups of stakeholders, are actively being promoted [20,32]. That said, the concept of just and equitable distribution of benefits has gained wide acceptance around the world. It originated in international conventions aimed at protecting biological resources and is associated with the idea of social and environmental justice [32,33]. This concept has also been widely accepted in the field of oil extraction [34,35]. The just distribution of resources is implemented in the form of benefit-sharing agreements between oil companies and local residents. On the one hand, these agreements take into account interaction with indigenous peoples, since oil extraction influences their environment and traditional lifestyles. Intensive oil production leads to environmental contamination, reduced wildlife populations, altered migratory routes, and lost fish populations in rivers. This has a negative effect on hunting and fishing, which are traditional livelihoods of indigenous people. On the other hand, the expansion of oil extraction means occupying land areas that are used by indigenous people [36]. Based on all this, indigenous people are entitled to a share in the revenues of industrial production [32,33].

Normally, benefit-sharing agreements are considered in the literature as a positive innovation that promotes sustainable development in natural resource governance. These agreements enable local communities to share the benefits of natural resource extraction. In many cases, the compensation is calculated according to damage and lost profits. Other arrangements include partnership or sponsorship agreements. Such agreements are regarded as a means for indigenous people to protect their rights, to support and strengthen their own institutions and to preserve their traditional lifestyle [34,35]. However, there is no consensus on their effectiveness. From the point of view of corporate managers, the agreements help to establish positive and trustworthy relations between companies and local residents. From the point of view of local residents, companies primarily use these agreements to achieve pragmatic goals and to reduce social and economic risks—in other words, they have nothing to do with trust. A number of researchers are skeptical about these agreements, saying that they do not

allow locals to participate in decision making. If resources are not redistributed justly, the agreements do not prevent inequality [37,38].

Some of the main aspects of reaching such agreements are highlighted in the scientific literature [32–34]. First of all, there are benefits that communities can gain from companies. These benefits can be passed to a community in various forms: as taxes (formal benefits), as compensation (formal benefits), as private-public partnerships initiated by authorities, companies and indigenous people (semi-formal arrangements), as charity programs (charitable giving), and as side benefits of industrial activity, including the creation of jobs and infrastructure development (trickle-down benefits) [39].

The second important aspect of entering such agreements is transparency and the participation of local residents in the distribution of benefits. This involves the introduction of transparent and formalized rules that govern the redistribution of benefits [36,38,39].

Finally, these agreements serve to address companies' degree of influence over local communities. This includes the regular evaluation of environmental contamination, changes in the lifestyle, the degree of loss of traditional culture, and the deterioration of the social fabric caused by industrial activity. It has been posited that the level of compensation to a community from a company is proportional to the effects of the industrial activity on the community [30,38,39]. In this study, we address agreements between oil and gas companies and indigenous peoples in Russia.

Russian practice regarding these agreements differs from international practice. In Russia, the agreements are concluded not only between indigenous peoples and corporations, but also between companies and authorities. It means that the funds received from companies are used both for indigenous people and for the rest of the population living near industrial enterprises. The idea of such agreements is rooted in the Soviet era, when state-owned enterprises were responsible for the social sphere of the settlements in which they operated [5,39].

Nowadays oil companies, locals and authorities use various types of agreements to resolve conflicts. These applied agreements enable compensating the locals for damage and supporting the local communities. They function as benefit-sharing agreements in the Russian context. The main types of benefit-sharing agreements used in the Russian regions are as follows [5,18,19,39] (See Table 1):

**Table 1.** Types of benefit-sharing arrangements in the Russian regions.

*Semi-formal agreements between oil companies and indigenous people on compensating for damage caused by the oil industry.* These agreements were typically concluded by and between companies and indigenous communities without the participation of the state. According to these agreements, the companies would pay reindeer herders compensation for land annexed for oil production. The money was used for vehicles, petrol, processing equipment, food, and transportation. Most of these agreements had been made on a short-term basis. The contents of the agreements were confidential, and only community leaders usually knew the amount of the money paid. Agreements were also often made with municipalities. In Russia, they are legal persons and their populations often consist of both indigenous and non-indigenous people. Sometimes oil companies also made agreements with the leaders of indigenous farms.