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SPEAKING
FREELY
Tempting the Iraqi oil
curse
By Stanley A Weiss
Speaking Freely is an Asia Times
Online feature that allows guest writers to have
their say. Please click here
if you are interested in
contributing.
LONDON - Call it the
curse of Babylon. In antiquity, Mesopotamian King
Nebuchadnezzar ignores the warnings of the prophet
Daniel that his riches will be his ruin and
fulfills the biblical curse that his beloved
Babylon "shall become heaps".
Today, it is
not pride but petroleum that poses one of the
greatest challenges as Iraq tries to become the
first oil state in history to succeed as a
prosperous democracy. In fact, the warnings were
clear long before the US invasion - the oil that
many see as Iraq's greatest blessing may actually
be its greatest curse.
Two years later, is
Iraq breaking the oil curse that has turned so
many petro-states into corrupt, impoverished
heaps?
The danger of
dependence
Although Iraq's immediate
challenge is too little oil due to insurgent
sabotage that keeps production and exports below
pre-war levels, its long-term task will be to
avoid the perils of too much oil. History shows
that the more a country relies on a natural
resource like oil, the lower its growth rate as
investment and labor are sucked from other
sectors, such as manufacturing and agriculture.
But with oil accounting for 95% of
government revenues, Iraq will have no choice but
to rely on petrodollars for its long-term
recovery. As N K al-Bayati, director general of
Iraq's Oil Ministry, said of Iraq's goal to pump 6
million barrels per day by 2015: "We are very
optimistic. We have to be. We have no
alternative."
Keeping politicians
out
With plans to reconstitute an Iraq
National Oil Company by the end of this year,
Baghdad will need to protect oil operations from
political interference. The Oil Ministry's ongoing
talks with Norway's Statoil, Brazil's Petrobras
and Malaysia's Petronas give hope that Baghdad can
learn the secret of these successful national oil
companies - separation of power between a ministry
that limits itself to policy-making, and a
state-owned firm that controls production.
Iraq risks repeating the abuses of
Nigeria, Angola and Venezuela, where vast oil
wealth has done little for the impoverished
masses. A series of United Nations and American
audits has found that about $9 billion in oil
revenues that have poured into the Development
Fund for Iraq cannot be accounted for by either
the US-led Coalition Provisional Authority or the
successor interim Iraqi government. As the
watchdog group Transparency International has
reported, misuse of oil funds threatens to turn
Iraq into "the biggest corruption scandal in
history".
A more promising model - on the
minds of some Iraqi leaders, according to a source
familiar with their thinking - is Alaska's
Permanent Fund, which sets aside 25% of oil
revenues to pay yearly dividends to every Alaskan.
Distributing even a small fraction of Iraq's $20
billion in annual oil revenues directly to the
people would give Iraqis a desperately-needed
economic boost and a powerful incentive to hold
their leaders accountable for management of the
country's oil wealth. The government, in turn,
would gain a new source of taxation - and, with
it, reinforce the bonds of public representation.
To their credit, Iraqis have retained the
new anti-corruption structures put in place by the
US occupation, including inspector generals in
every ministry and commissions on fiscal and
public integrity that audit government contracts
and have investigated hundreds of government
employees, including two former ministers in the
interim government.
The oil sector,
notorious for secret contracts, poses a special
challenge. Recognizing that where there is no
transparency, there can be no democracy, Baghdad
should seize the chance to become an example of
open government, with oil companies publishing
what they pay for exploration and drilling rights.
Sharing the wealth
Iraq's
biggest challenge remains avoiding the fate of
Congo and Sudan, where competition for control of
oil fueled civil wars. Luay Towfik al-Swaidi, a
Sunni Arab whose father and namesake served as
prime minister under the Iraqi monarchy, tells
that, used wisely, oil could actually bring the
country's disparate groups together. "Oil can be a
source of national cooperation, not confrontation
- so long as all Iraqis benefit fairly from the
oil wealth of Iraq."
But what is "fair?"
The constitution that must be drafted by August 15
will surely include some clause that Iraq's oil
"belongs to all the people of all the regions".
But the constitution is unlikely to resolve either
a precise formula for sharing oil revenues between
the regions or the final status of the disputed
oil-rich city of Kirkuk.
Iraq's best hope
as a unified state, therefore, will hinge on a
precarious Lebanese-style power-sharing
arrangement where leadership positions and oil
revenues are allocated along sectarian lines.
Already, the oil minister has three deputies - a
Shi'ite, a Kurd and a Sunni, each looking out for
their brethren's oil interests.
Like so
much in Iraq, management of the country's oil
wealth so far gives cause for both hope and alarm.
The ancient warning holds true - what appears to
be riches can just as easily lead to ruin.
Oil remains a temptress that beckons
desperate nations with the illusion of easy money.
If Iraqis can resist its temptations, their oil
may yet be a blessing, not a curse.
Stanley A Weiss is founder and
chairman of Business Executives for National
Security, a nonpartisan organization based in
Washington. This is a personal comment.
(Copyright 2005 Stanley A Weiss)
Speaking Freely is an Asia Times
Online feature that allows guest writers to have
their say. Please click here
if you are interested in
contributing. |
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