03 December 2007

Black Gold: A Possible Solution to Iraq's Woes

There is no doubt that violence is down in Iraq due to a variety of factors, even Rep. Murtha said the violence is down. You can get a "boots on ground" perspective from Michael Totten here, or you can check out my two-bit analysis. But the purpose of the surge was to bring about political progress and clearly that hasn't been happening. Keith Olbermann and Jon Soltz talk about it here, and there's no doubt that the "political benchmarks" just aren't getting done, and the time is running out. One of the key benchmarks is to ensure the equitable distribution of Iraq's oil revenues amongst the provinces. Right now the legislation to do this is stalled with the government in Baghdad, and they're missing out on a whole lot of revenue since they can't get foreign investment in their oil sector. Recently the Minister of Oil cancelled a bunch of contracts that foreign companies had signed with the Kurdish region. Dr. Dabbagh, government of Iraq spokesman, talks about it with milbloggers here:

"The government of Iraq believes that all the agreements should be approved by the central, and by a federal government in Baghdad. Although that there is no oil law been approved, but it is not allowed to go on agreement unless it has been approved by the federal government. This would create a complication of all the agreements which has been signed by the Kurdish Regional Government. The minister of oil of Iraq had declared clearly that this is an illegal contract, and it should not be performed by any foreign companies because it got no legality, and it's -- they should not go further in any operation in the north of Iraq... But since there is no oil law been approved now, nobody should sign such agreement unless it get an approval."

So Iraq's sitting on a goldmine and no one can make a move. Right now they export about 3M barrels/day, which just ain't enough to adequately employ the population for security and reconstruction purposes. Employment and infrastructure improvement is key to any counter-insurgency, and if they can get more revenue, they can make this reconstruction happen without massive foreign aid and assistance. This requires foreign investment from oil-starved countries like India, China, Russia, and the US. Say what you want about the perils of oil and multi-national corporations, but the world's demand for energy and hydrocarbon products is not going away anytime soon. All Iraq has to do is pass this Hydrocarbon Law and they'll be a flood of foreign investment which can be used to fix their country. Look at who they'd be competing with from oil exports: Venezuela, Saudi Arabia, Iran (those regimes are run by a bunch of assholes!). I make it sound easier than it is, but this is the benchmark I'm looking for to indicate when they will no longer need coalition assistance. Watch for the progress on the Hydrocarbon Law. Dr. Dabbagh points out:

"Now Iraq's fully dependent on the revenue of the export of the oil. We are 94 percent dependent on the revenue of the oil."

They could take a lesson from Jed and get rich quick with black gold so they can make meaningful investments in their fragile country. I may be a bonehead when it comes to economics, but doesn't this sound reasonable?

Iraqis, be like Jed and strike it rich!