Over 3 decades after Iraqi oil was nationalized, Royal Dutch Shell has become the first Western oil company to return to the troubled but resource-wealthy country. But are private companies right to profit from a country under occupation?
Last monday, four shell delegates arrived in Baghdad to sign a joint venture agreement with government controlled Iraqi South Oil Co. ISOC will control 51% of the $4bn venture with Shell retaining the rest. The deal is the second international oil development deal l for Iraq, earlier this month China signed a $3 billion deal to develop the Ahdab oil field in southern Iraq.
Shell hopes to start exploring and developing gas projects in the southern province of Basra starting from next month. While short term prospects involve revitalising existing infrastructure with fresh capital, the long term goal is to build liquified natural gas processing facilities.
Iraq loses roughly $40 million worth of natural gas each day due to a lack of infrastructure. The country sits on an estimated 115 billion barrels of oil and 112 trillion cubic feet of natural gas reserves, but analysts expect the real numbers could be much higher.
As Obama mentioned in last week’s presidential debates, Iraq is sitting on a $80bn budget surplus from 2005-2008. Considering that export of crude oil accounted for 94 percent of Iraq’s revenues from 2005 to 2007, it’s no surprise that Americans are annoyed to be paying $4 per gallon and paying taxes to build Iraq’s infrastructure.
According to this CNN article, the United States has invested $48bn in Iraqi reconstruction since 2003, $23bn of which was spent on the oil and electricity industries, water systems and security. Basra was a Taleban hotspot until the surge, and it is now one of the safest regions in the country. Considering that in 2007 Shell said it would not work in Iraq unless employee security could be guaranteed, last Monday’s deal must have been influenced by America’s continued improvements in Iraq.
So should American taxpayers receive dividends from Iraqi oil revenue? The suggestion has been proposed by some senators but the idea is shaky. Any profits made would enforce an image of America as a mercenary and incite dissent amongst Iraqi’s. In reality, the only tangible benefits America is likely to receive are taxes from American corporations operating in Iraq and a new supplier to lessen OPEC’s stronglehold of Middle Eastern oil.
That isn’t a very positive outlook, but it is realistic. Unlike Paul Wolfowitz in the lead up to the Iraqi invasion in 2003. The then-Deputy Secretary of Defense told the House Appropriations Committee “We’re dealing with a country that can really finance its own reconstruction, and relatively soon.”
It seems to me that the Iraqi oil revenue, just like Alaska’s oil revenue, should be used for two purposes:
1. It should be used to fund infrastructure and various government services: schools, streets, utilities, public transportation, police and courts, emergency services, etc.
2. The excess should be used to provide an annual dividend check to every man, woman and child who lives in Iraq. I don’t mean property owners. I don’t mean people who have fled the country. I don’t mean the religious groups, or the regions. I mean every man, woman and child who lives in Iraq.
America inserted itself into this situation, and now should uninsert itself. We spent a lot of money there, but we ought not to charge the locals for that. We did it on our own, not at their behest.
When there is full transparency, and every Iraqi citizen has a stake in Iraq’s natural resources, they will figure out how to govern themselves effectively. It won’t happen overnight; look at the American experiment with democracy — how long it took for women to get the vote, how long it took for all races to be acknowledged as fully human and equal.
Every bit of infrastructure we destroyed hurt the people of Iraq. Every bit of infrastructure we manage to leave rebuilt will help the people of Iraq. Can you imagine living with only a few hours of electricity per day? Think how individuals’ and business productivity will pick up when someone manages to bring online 24/7 electricity, and other amenities we associate with the 20th century.
Not only does Alaska fund much of its state spending from oil revenues, but a portion of Alaska’s oil revenues every year are turned over to the ALASKA PERMANENT FUND, which provides an annual income to every man, woman and child who is a permanent resident of Alaska. It doesn’t flow directly from the current year’s oil revenues; rather, it is invested into a broadly diversified portfolio whose returns are used to provide the income, based on the past 5 years of income. In recent years, the APF dividend has amounted to $920 (2004) to 2000′s 1,964; 2008′s $1,654 was supplemented by an additional $1,200.
But utilizing Iraq’s oil revenue to meet the needs of Iraq is not the only thing they need to do. The other thing — and it is something Alaska fails to do, as wise as their oil revenue policies are — is to collect a significant tax on the value of Iraq’s land. Every improvement in the reliability and constancy of Iraq’s electrical and sewer systems (to cite a few examples) will increase the value of Iraq’s urban land.
Who should harvest that value? Individual Iraqi landholders? Individual homeowners? Or the local community? I am persuaded that collecting that value for the local communities is vitally important to creating a good place in which all can prosper.
The American people certainly should receive dividends from oil revenue … the revenue on oil drilled within the US borders, and perhaps from within some distance beyond our borders. That oil revenue should not belong to the Jed Clampetts, or the Exxon Mobils … it should belong to all of us. Equally. It should not sit in American private pockets any more than Iraqi oil revenue should sit in private Iraqi oil portfolios.
By: LVTfan on September 30, 2008
at 12:53 am