Resource diplomacy probe goes to prosecutors

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Resource diplomacy probe goes to prosecutors

The Board of Audit and Inspection asked the prosecution to launch an investigation into Kang Young-won, former chief of the Korea National Oil Corporation (KNOC), for botched investments that resulted in the loss of over 1 trillion won ($903 million) during the former Lee Myung-bak government.

The audit office’s referral of the case to the prosecution Friday was the first crackdown on what the opposition claims was a disastrous “resource diplomacy” initiative by former President Lee.

After concluding Kang’s 2009 decision to purchase the Canadian oil refinery North Atlantic Refining Limited (NARL) for 1.37 trillion won was made without proper due diligence, the audit office reported that his miscalculation caused the state-run oil developer 1.33 trillion won in losses.

The agency’s accusation against the former chief and its referral of the case to the prosecution office will embolden the opposition New Politics Alliance for Democracy (NPAD), which claims that the Lee’s “resource diplomacy” wasted more than 35 trillion won.

According to the audit office, Kang okayed the purchase NARL, an oil refinery subsidiary of the Canada-based Harvest Operations, for $10 per share in 2009, when the Lee administration was in its second year. The inspectors pointed out that NARL’s share value at the time was $7.30.

The investment quickly turned into a financial liability for the state-run oil searcher as its Canadian refinery unit allegedly sustained 100 billion won in losses annually.

Under pressure to cut back its losses by the Park Geun-hye government, the KNOC sold NARL to an American investment bank in August last year for 32.9 billion won, a fraction of what it paid four years earlier.

“The Lee administration’s resource diplomacy can be characterized as an utter failure,” said an audit inspection official, who spoke on condition of anonymity. On its request to prosecutors to bring legal charges against Kang, the official said the audit office deemed it necessary to give a warning to state-run companies against their reckless spending.

It remains to be seen whether the former oil company chief will be formally charged with breach of trust.

The NPAD wants to grill former officials from the Lee government for their alleged mishandling of public funds under the resource diplomacy slogan. The opposition has called on the former president to appear before lawmakers for a special parliamentary audit hearing, though it is unlikely that the 74-year-old Lee will do so. During a meeting with Saenuri leadership lawmakers on Thursday, Lee said it was too early to judge his overseas energy projects because it takes up to 10 years to see the yields of resources projects.

The board of audit did not blame Finance Minister Choi Kyung-hwan, who was in a position to oversee KNOC’s 2009 purchase. It said there was no evidence that he was involved in the deal. The NPAD claims the Lee government invested a total of 41 trillion won in overseas resource development ventures, which included 25 trillion won from state-run corporations. So far, the government has only recovered 5 trillion won from the investments.

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