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Did Cheney win? Or the Iraqis? How about both?

By AcademicElephant Posted in War — Comments (1) / Email this page » / Leave a comment »

A major (if largely ignored) story from Iraq this week is progress on resolving the distribution of the new nation's oil wealth. Many Americans are frustrated by the cost of the war--even with the depressing effects of the "Bush Recession" with its record highs for the Dow and record low unemployment and Defense spending being held (in my opinion wrongly) below 4% of our GDP, there is a collective sense that the Iraqis, who are sitting on one of the largest oil reserves in the world, should be footing the bill for their liberation. This is especially galling when we're paying $2.50 a gallon and up for our own gas. Fair play, after all, is a jewel.

So what have the Iraqis been playing at? Are they just feckless children we are encouraging to remain dependent on us? Are they too lazy to be bothered with pumping their oil? That appears to be the Nancy Pelosi/Hillary Clinton theory, and it plays well to a war-weary public, but there's an alternative explanation. You see, Saddam Hussein was not interested in growing his nation's energy business. He was interested in funnelling as much profit from that business into his own pockets, and so expenses for improving infrastructure and maintenance (what you might call investing in the future) were minimized if not abolished. Furthermore, terrorists know that a prosperous Iraq will tend to be a more peaceful Iraq, so they have targeted the ragged remains of Iraq's outdated production facilities. The end result is that getting the oil out of the ground is not as easy as some might think. And there's another issue: Once the oil is out of the ground, how will it be sold, and who will reap the profits? With Saddam, this was simple. Saddam sold the oil to complicit regimes, on the black market or through the oil-for-food program, and he got the profits. "Equitable distribution" was not an issue--the concept didn't even exist.

Read on...

But now it does. And here Ms. Pelosi and Ms. Clinton might want to follow closely--in the new Iraq, the democratic one, there isn't a dictator to force his terrified and abused subjects to extract the oil and hand him the revenue. There are different factions with their own agendae wrangling over the pie. There are expenses that have to be met. And settling these issues in a democracy will take time. And debate. And a little horsetrading. A few arms might get twisted. Of course this isn't the perfect system of civil and equitable debate in which Ms. Pelosi and Ms. Clinton operate, but even so, given time and increasing faith in the ability of Iraq's government to endure, compromises can be made. That's what the Iraqis have achieved this week with a draft law that regionalizes oil production. In a way, this arrangement echoes the "partition" plan in that it gives greater autonomy to the states to make deals with foreign oil corporations to assist in rebuilding facilities and selling the oil. The plan allows the Kurds, for example, to enter into different contracts than those negotiated in southern Iraq. This makes good sense in terms of efficiency. But the arrangement isn't as devisive as full political partitioning would be, and the deals have to be okayed by the federal government in Baghdad. In addition, oil revenue will be distributed by population, which will be a major step towards preventing the Sunnis, who have little oil, from becoming a sort of Iraqi equivalent to the Palestinians. This draft law has been approved by Prime Minister Nouri al Maliki's cabinet, and now goes to the Iraqi parliament for debate and hopefully for approval.

A big question in all of this is how the contracts with the foreign oil companies will be structured. Will there be "revenue sharing" to compensate for investment, or will investors have a clear equity stake in the industry? Given the distress of the left at the announcement of the draft law (my favorite is "CHENEY WINS!" and here's a little more from a brief visitor to our RedState community), I suspect the latter, which will have the added advantage of encouraging investment. And perhaps the left should cheer up. Economic imperialism isn't all bad. As nice as it would be for the Iraqis to harvest their oil with their own hands and not contribute a penny (or rather a dinar) to the corrupt and bloated coffers of Exxon and Halliburton, this is simply not a realistic option and Iraq desperately needs to start the flow of foreign capitol into the country. Investment will be focused on the oil industry, but that's not the end of the story as other businesses, notably in communications and technology, are already taking root without the benefit of substantial foreign involvement. The implementation of this draft law might well get Ms. Pelosi and Ms. Clinton what they want--an increasingly independent Iraq that can support itself.

Iraq faces serious challenges, but has some pretty substantial strengths. Against the odds--and contrary to conventional wisdom--Mr. al Maliki's government is enduring. Some might even say he's doing better than the Italians at this point. Faint praise, perhaps, but I think it isn't too shabby for a system of government this young. And I believe, as we've discussed before, that rebuilding Iraq has got to be an Iraqi project, and how better to begin than with the reinvigoration of the oil industry and the substantial profits that it promises? This law is not a perfect law. After all, there is no such thing. And I'm sure there will be spirited debate over it in the Iraqi legislature. But before we get to jaded about all this, we might do well to reflect on the words I was able to use in those sentences. "Law." "Spirited debate." "Iraqi legislature." Four years ago, such words were but a pipe dream. Now they're a reality we take for granted. No, the emergence of a free and independent Iraq might not be happening on our schedule or to our exact specifications, but the crafting of a viable and equitable oil law demonstrates that it is happening. For goodness' sakes, people, let's give it a chance and what the heck, we might even make a buck--not to mention foster a strong democratic ally in the heart of the middle east--in the process. Is it really just Mr. Cheney who has won here?