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Kurdish Leader Urges Decentralized, Free Market Policy on Iraqi Oil:

Qubad Talabani - the main Kurdish Regional Government representative in th US and the son of Iraqi President Jalal Talabani - recently called for decentralized control of Iraq's oil resources, and for a more free market policy on oil:

We're trying to modernize Iraq, build a new Iraq, built on new foundations, new policies. The symbol of this new Iraq will be how it manages its oil infrastructure," Talabani said. "And if people want to revert back to Saddam-era policies of a state-controlled oil sector with no accountability, with no accountability to the Parliament or the people of the country, with no oversight except from by one or two, then I'm sorry, that is not the Iraq that the Kurds bought into. That is not the Iraq that the Kurds would want to be part of."

"If a centralized oil regime is imposed on us, we will not participate in the state of Iraq," Talabani said. "And we have to make it absolutely clear to our friends in Washington, to our brothers in Baghdad, this is a make-or-break deal for Iraq."

He said Iraq needs to embrace the free market and break free from the nationalized mindset. Numerous oil and Iraqi experts as well as key Iraq oil union leaders have told UPI that Iraqis see nationalized oil with pride.

Free market reforms of the state run oil industry can help increase production and attract foreign investment. They can also prevent the central government from using its control of oil to dominate the country and stifle political opposition - as has happened in many other oil-rich nations, such as Saudi Arabia and Venezuela. As Talabani explains, it is essential to avoid an oil law under which the central government has complete control over the industry and its revenues:

We want to create an automatic payment mechanism where it doesn't rely on the goodwill of the finance minister or the oil minister for the regions to get their fair share," he said.

"Trust is lacking in Iraq, and unfortunately it's been Iraq's miserable history that has created this system, this society that mistrusts each other, which is why something as critical as oil can be a trust-building measure," Talabani said. "By putting in place mechanisms and institutions that can ensure that I will not get robbed again, that my resources will not be used against me again, will eventually over time build my trust."

Obviously, the new Iraqi oil law will also have to ensure that regions without oil wells of their own get some share of the revenue, particularly the majority-Sunni regions in central Iraq, where most of the insurgency is based. I discuss various ways to achieve this goal in several previous posts on federalism and oil in Iraq. See here, here, here, and here.

Steve:
We want to create an automatic payment mechanism where it doesn't rely on the goodwill of the finance minister or the oil minister for the regions to get their fair share," he said.

Well, if you can't rely on the rule of law for protection, then it makes little difference whether you go with a free-market system. Those who end up as losers under the free-maket system will simply resort to extralegal means to claim their fair share.

If you feel you can rely on the rule of law, then ensuring an equitable distribution of oil revenues is simply a matter of writing it into the constitution. It's not that big a deal; Alaska is as free-market as the rest of the USA, and yet they legally mandate sharing of oil revenues across the population.

And there's no better way to ensure everyone has a stake in the future stability of Iraq than to give every Iraqi citizen a share of the oil revenues.
5.11.2007 6:25pm
Francis (mail):
Obviously, the new Iraqi oil law will also have to ensure that regions without oil wells of their own get some share of the revenue, particularly the majority-Sunni regions in central Iraq, where most of the insurgency is based.

There's nothing obvious about it, and it's high time that this group of purported libertarians recognized that our interference in critical matters of Iraqi governance is at best useless and at worse counterproductive.

Alternative Iraqi oil laws include giving nothing to the Sunnis and using the US training to drive them into Western Iraq by force of arms. Another alternative is for Kurdistan to declare independence following the referendum at the end of the year and shame the US into providing security against possible Turkish incursions (which is probably the one area where Democrats would still support the use of force). At that point we can expect the Chinese to start signing deals to purchase Kurdish oil and for the Russians to sign arms and oil technology transfer deals.

How would Kurdish oil get to market given an independent Kurdistan? Who knows. But considering the billions of petrodollars at stake I'm pretty sure a deal can be struck, even if it's one the US doesn't like.
5.11.2007 6:42pm
Jeff R.:
Obviously, the new Iraqi oil law will also have to ensure that regions without oil wells of their own get some share of the revenue

On the same principal, where do I go to get my share of the Alaska Oil Trust boodle? I don't live there, but apparently it's obvious that I have an undeniable claim on the cash, so...
5.11.2007 7:06pm
Ilya Somin:
On the same principal, where do I go to get my share of the Alaska Oil Trust boodle? I don't live there, but apparently it's obvious that I have an undeniable claim on the cash, so...

If Alaskan oil were the only significant source of wealth in the US (as Iraqi oil is in that country), then the situation here would be very different.
5.11.2007 7:28pm
Bruce Hayden (mail) (www):
I think that realistically the big reason that we are pushing for oil sharing is that we are trying to buy off the Sunni Arabs in the center of the country who don't have oil, but do have car, and now truck, bombs. Our question is what will get us out of Iraq the fastest without sacrificing a win there. But for the Kurds, it is how much can they grab without pissing us off too much. They do have some leverage, because theirs is the most secure part of Iraq, and we surely don't want to lose that. But we have some leverage over them with the Turks.
5.11.2007 7:31pm
Bruce Hayden (mail) (www):
If Alaskan oil were the only significant source of wealth in the US (as Iraqi oil is in that country), then the situation here would be very different.
Then again, study after study have shown that natural resourses wealth almost always prevents real development and change.
5.11.2007 7:33pm
RAH (mail):
Hong Kong has almost no natural resources but is very wealthy due to free enterprise and trading. Wealth is not based on oil alone. It happens with capitalism and trade. Not that I am owed part of the natural resourcs of Alaskan oil or gold mines in another state. Heck I do not even have any claim on resources of my own state. I am expected to pay the state tax money, not get wealth from the state.
5.11.2007 11:19pm
Eli Rabett (www):
Free market policy on oil = license to steal
5.12.2007 1:51am
M. Simon (mail) (www):
The question is: what do you do with a nationalized oil industry?

Give it back to the original owners? Politically dead.

Buy off citizens with a share per capita? Probably the best idea given the politics.

Sell it off and let the government pocket the money. Bad idea.
5.12.2007 3:14am
Michael B (mail):
Iraq the Model, It's a Rough Time But I Wouldn't Panic

Daniel Johnson, Contra Iran
5.12.2007 10:51am
David Maquera (mail) (www):
The question of how Iraq should manage/distribute its oil will be a moot point if the United States makes it a top priority to develop AND switch our economy over to alternative fuels away from oil/petroleum.
5.12.2007 12:00pm
TJIT (mail):
Eli Rabett, Your statement
Free market policy on oil = license to steal
Nicely illustrates your utter ignorance of the failure of most state owned enterprises to deliver the benefits from oil production to the citizens of the countries that produce oil.

If you weren't such a slogan chucking tool you would be aware of the situation in Nigeria and realize that is a situation the Kurds justifiably want to avoid.

In Nigeria the central government controls access to the oil resource and distribution of the revenues. This is the government controlled situation which you believe is superior to the free market. It has resulted in

1. Many fat swiss bank accounts owned by various corrupt government officials and bureaucrats

2. No benefits from oil production being given to the residents of the areas where nigeria's oil is actually produced.

The policy of government control you like has stolen more money from citizens of oil producing countries then free market policy ever has.
5.12.2007 9:27pm
Eli Rabett (www):
TJIT, unfortunately while not unsympatheic to the Kurds, I am quite aware of profitable Talibanism. BTW if you want to talk about how government control has stolen money from citizens of oil producing countries, perhaps you might want to comment on these goings on, and these goings on
5.12.2007 10:35pm
TJIT (mail):
Eli Rabett,

I looked at your links and it according to them there have been allegations of underpayment of royalties to the government. These cases are currently in court and if the oil companies lose the case they will pay a cash settlement to the US government.

The government, if the settlement happens to involve Indian trust funds lands, and if past behavior of the US government is any indication, will promptly lose track of the money, spend it for government purposes, thus stealing the Indians rightfully earned money.

Cobell v. Norton is a class-action lawsuit filed on June 10, 1996, in U.S. District Court in Washington, D.C. to force the federal government to account for billions of dollars belonging to approximately 500,000 American Indians and their heirs, and held in trust since the late 19th century.

Through document discovery and courtroom testimony, the case has revealed mismanagement, ineptness, dishonesty and delay by federal officials, leading U.S. District Judge Royce Lamberth to declare their conduct "fiscal and governmental irresponsibility in its purest form."

Then-Secretary of the Interior Bruce Babbitt, Assistant Secretary of the Interior Kevin Gover and Treasury Secretary Robert Rubin were held in contempt of court in February 1999 by Judge Lamberth for their departments' repeated delays in producing documents, destruction of relevant documents and misrepresentations to the court in sworn testimony. As the case proceeds, new revelations of false testimony, financial misconduct and bureaucratic retaliation have continued to surface.


The government behavior makes the private oil companies actions you pointed to seem positively pristine.

Perhaps ignorant tool would be a better description of your knowledge of what a wretched job many government managed programs do when given the responsibility of distributing the revenues from petroleum production to their citizens
5.13.2007 1:12am
TJIT (mail):
Eli Rabett you said
unfortunately while not unsympatheic to the Kurds, I am quite aware of profitable Talibanism.
What in the world do you mean when you say "I am quite aware of profitable Talibanism"? Are you accusing the Kurds of having Taliban like cultural tendencies?

Because according to this link

Kurds have always been among the more liberal Muslims and as a result Kurdish women have faced less restrictions in wearing hijab or holding jobs outside home than other Muslim women.

The kurds have a rather open minded attitude toward women.

And according to this link

Kurdistan has a history of religious diversity, with a fairly large Christian minority, but unlike Iran and Syria, which have gone to great lengths to purge their religious minorities, Kurds are embracing theirs. They even openly tolerate the Yezidis and Zoroastrians, who have been heavily persecuted elsewhere in the region.

The Kurds have a rather open minded view to other religions also.

Can you clarify what you were trying to say?
5.13.2007 1:25am
TJIT (mail):
Folks might want to take a look at this link which provides a timeline of the litigation on the Indian Trust Fund scandal in the United States.

It provides a rather compelling example of why the Kurds are entirely justified of being highly concerned about the potential for abuse and corruption in a highly centralized, government managed, petroleum revenue sharing arrangement.

Indian trust fund litigation chronolgy
5.13.2007 1:31am
Eli Rabett (www):
Talabani is a warlord. Think Chiang Kai Shek. That clear enough for you
5.13.2007 1:42pm
JoshL (mail):

Talabani is a warlord. Think Chiang Kai Shek. That clear enough for you


If you wish to refer to Jalal Talabani in an "ism" sense, then it should be "Talabaniism," not "Talabanism," which has a different meaning.

Comparison to Chiang Kai Shek probably isn't the best choice, seeing as Taiwan is currently a free and democratic territory, whereas the land that he lost, China, is neither free nor democratic. In that sense, one would have to ask why exactly Talabaniism would be such a bad thing (of course, Kurdish areas of Iraq are already comparatively free and democratic, so perhaps it is a good comparison...just not a negative one).
5.13.2007 3:26pm