It's about oil
It sounds impossible (or oxymoronic) but there's a very interesting piece by John Cassidy in the New Yorker on the Iraqi oil industry -- past, present and future. In the print edition only, unfortunately (what is it with these people?):Critics in Europe and the Arab world suspect that [the Bush Administration's] agenda includes encouraging Iraq to leave OPEC, thereby challenging the oil cartel's power to set prices. Attempting to undermine OPEC would be a big snub to Saudi Arabia, America's most important ally in the Arab world, which dominates the organization. But some people in the Administration seem willing to countenance such a move. One of them is Ahmed Chalabi, leader of the Iraqi National Congress, whom the Pentagon flew to Iraq during the war. "We have a new ally in the Middle East -- one that is secular, modern, and pro free market," Francis Brooke, an American political strategist who has been Chalabi's adviser for almost a decade, told me. "It's time to replace the Saudis with the Iraqis." Since the war ended, Iraq has missed two OPEC meetings, raising further questions about its relationship with the oil cartel...
The Iraqi Republic (founded in 1958) had only a few years of unalloyed prosperity (1972-80) before Saddam's ten-year war with Iran (and other ruinous arms races) drained profits. That war in turn severely damaged the Rumalia oil fields in southern Iraq, engendering the crisis that led to the invasion of Kuwait and the subsequent UN sanctions. So what are the odds of prosperity and peace under the new order?
Cassidy estimates that with a population estimated to be about 30 million in 2010, and $55bn/year in oil revenues, Iraqis would each earn around $5 per day. While this is above the current World Bank poverty line of $2 per day, Iraqis would still be much poorer than Kuwaitis or citizens of the Gulf Emirates. "If Iraq is to prosper during the decades ahead, it will have to diversify its economy and other sources of income, something that will only be possible only if Iraq is transformed into a peaceful, stable land with an effective and stable leadership."
The alternative is long-term civil war, as in Angola, Congo, Indonesia, Nigeria and Sierra Leone: "developing nations with valuable natural resources, [where] violent internal conflicts are the norm."
Columbia is a good candidate for that list. And their neighbors in Venezuela are at risk.
Lincolnplawg has done a number of posts investigating the economics of the Iraq oil industry. I found them very interesting. March 31, 2003, April 8, 2003, and May 18, 2003. From his numbers it doesn't seem like the oil is going to be worth that much (against the cost of reconstructing the industries infrastructure as well as the sizeable pre war national debt.)
But he doesn't mention the one theory that always resonated with me (not that this means much given my very small knowledge of such matters): the Euro vs. US dollar battle in terms of clearing oil transactions. Remeber Iraq was the only major oil producing state to clear transactions in Euros. Iran stated they are thinking about switching. And rumors abound about all of OPEC changing to the Euro at once. So if the Iraq invasion wasn't about the oil (in terms of bottom line dollars to be made) could it have been about protecting the US dollar through a pre emptive strike against an about to defect OPEC?
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It sounds impossible (or oxymoronic) but there's a very interesting piece by John Cassidy in the New Yorker on the Iraqi oil industry -- past, present and future. In the print edition only, unfortunately (what is it with these people?): The Iraqi Republic (founded in 1958) had only a few years of unalloyed prosperity (1972-80) before Saddam's ten-year war with Iran (and other ruinous arms races) drained profits. That war in turn severely damaged the Rumalia oil fields in southern Iraq, engendering the crisis that led to the invasion of Kuwait and the subsequent UN sanctions. So what are the odds of prosperity and peace under the new order?
Cassidy estimates that with a population estimated to be about 30 million in 2010, and $55bn/year in oil revenues, Iraqis would each earn around $5 per day. While this is above the current World Bank poverty line of $2 per day, Iraqis would still be much poorer than Kuwaitis or citizens of the Gulf Emirates. "If Iraq is to prosper during the decades ahead, it will have to diversify its economy and other sources of income, something that will only be possible only if Iraq is transformed into a peaceful, stable land with an effective and stable leadership."
The alternative is long-term civil war, as in Angola, Congo, Indonesia, Nigeria and Sierra Leone: "developing nations with valuable natural resources, [where] violent internal conflicts are the norm."
- bruno 7-11-2003 8:36 pm
Columbia is a good candidate for that list. And their neighbors in Venezuela are at risk.
- mark 7-12-2003 9:44 am
Lincolnplawg has done a number of posts investigating the economics of the Iraq oil industry. I found them very interesting. March 31, 2003, April 8, 2003, and May 18, 2003. From his numbers it doesn't seem like the oil is going to be worth that much (against the cost of reconstructing the industries infrastructure as well as the sizeable pre war national debt.)
But he doesn't mention the one theory that always resonated with me (not that this means much given my very small knowledge of such matters): the Euro vs. US dollar battle in terms of clearing oil transactions. Remeber Iraq was the only major oil producing state to clear transactions in Euros. Iran stated they are thinking about switching. And rumors abound about all of OPEC changing to the Euro at once. So if the Iraq invasion wasn't about the oil (in terms of bottom line dollars to be made) could it have been about protecting the US dollar through a pre emptive strike against an about to defect OPEC?
- jim 7-14-2003 11:11 pm