Marco Mantovanelli, the World Bank's spokesman for the Africa
Department,  said on Thursday:  "I can confirm that it has been frozen after we notified Citibank of the default on the loan agreement by Chad."

The World Bank suspended all loans to Chad last week after its parliament approved legislation that altered a bank-supported oil revenue law to access more of the profits from the pipeline, rather than reserve them for development and poverty relief.

Idriss Deby, the president of Chad, gave final approval to the changes on Wednesday as political tensions increased with neighbouring Sudan, which he accuses of backing insurgents fighting to topple him.

Paul Wolfowitz, the president of the World Bank who ordered the suspension of aid to Chad, has said he still hopes to resolve the dispute through discussions.

Exxon Mobil, the operator of the pipeline, said it was "assessing the situation and will act in accordance with applicable laws and existing agreements with the government of Chad and others".

"We are supportive of efforts through dialogue between the World Bank and the government of Chad to address any financial difficulties the government of Chad may be facing," it said.

As of 31 Dececember 2005, Chad had earned a cumulative total of $399 million in gross direct revenues from the export of 134 million barrels of oil since production started.

Transport projects

Since the start of the project, $307 million has been transferred to the country of which $245 million has gone towards education, health, agriculture and transport projects. It is unclear how much is in the frozen escrow account, but an analyst said it "had to be in the millions".

The World Bank agreed in June 2000 to finance about four per cent of the $3.7 billion pipeline, which unlocked $3.5 billion in funding by private sector oil companies, commercial banks and export credit agencies for the project.

The freezing of the escrow account does not affect a separate Future Generations Fund for Chad, which had accumulated $36 million which the government can access.

Tragic mirage

Ian Gary, a policy adviser with Oxfam America, said: "This move puts Exxon Mobil in a difficult position, but Exxon Mobil has a responsibility to use its leverage as the only oil producer in Chad to help salvage the revenue management system.

"Exxon Mobil was justifiably proud of its participation in this system, and it is in its own business interest to help ensure that the promise of Chad's oil boom does not turn into a tragic mirage for the country's poor.

"If Exxon Mobil continues business as usual, it risks being seen as aiding a government that may be acting against the best interests of its people."