For A Few Dollars More…

The New York Times has a report on the proposed law regulating oil contracts. There’s no mention of production-sharing agreements there, but there is something a little fishy about the law, which centralizes the approval procedure for contracts for the oil under regional control. Here’s the relevant text from the NYT:

[The law allows] regions to initiate the process of tendering contracts before sending them to Baghdad for approval. To limit the powers of the committee, they also have drawn up an exacting set of criteria to govern the deliberations of the committee rather than simply relying on its independent discretion. And in a bow to the Kurds, who objected to the use of the word “approve” in describing the committee’s duties, the draft law says instead that the committee may review and reject contracts that do not meet the criteria.

In order to preserve a degree of regional autonomy, especially for the Kurds who obviously want nothing to do with the rest of the country, the districts of Iraq are being allowed to negotiate singly rather than taking advantage of collective bargaining. In fact, it seems clear that they’ve mostly already negotiated these contracts, since most of the relevant interests have been in Iraq, wooing their prospective clients for months:

“The international companies keep contacting me — every week, without exception,” Mr. Shahristani said. “They are all very, very keen.”

It seems like the regions will be competing with each other, which will depress prices, but then, so will the oil companies. All told, it looks like there will be a lot of people trying to take advantage of the system, which is sort of a promising context in which to form a market. On the one hand, every oil company executive in the world would sacrifice her grandmother’s eye teeth to get a hold of one of these contracts. On the other hand, the Iraqis are staring down the barrel of instability and poverty, while standing on the second largest accumulation of fossil fuel wealth in the world. That’s what brokers and arbitrageurs like to call a motivated seller. If they’re truly making thirty-year deals… well, I imagine that a number of oil companies are going to achieve some record profit margins over the next few years: “oil company rates of return from investing in Iraq would range from 42% to 162%, far in excess of usual industry minimum target of around 12% return on investment.” (via) Yet, as a deal-maker for a big oil company, how much of those absurd profits would you bargain away to keep the rest, especially knowing your competition is angling to do the same?

Even as I write this, I have to say I approve of the overall institutional design that the Iraqis are working up for federal oversight of oil contracts. This kind of loose federation of oil interests strikes me as pretty well managed; the opportunities for corruption are manifold, but there’s also great potential for oversight, if the federal government chooses to exercise it. It just might work! And once these deals are inked, there’s no reason for Americans to stick around getting blown up. Send in the blue hats, and let them keep the oil people safe….

Okay, maybe I’m still a little bitter. The situation is so explosive that it’s hard to say what kinds of policies will be best for the Iraqis. Maybe corrupt oil executives are actually good for regime stability. (Works for the US, right?) At least there’s someone there thinking about money instead of religion. That’s good politics, I suppose.

Re-liberation Theology: Imperialism, Insurrection, Insurgency

It’s old news that the US is scaling back in Afghanistan. With NATO in charge, there seems little chance that various national caveats to the standard rules of engagment will enable the military forces there to beat back the warlords. I doubt that anyone even thinks that’s a legitimate goal; most seem convinced that we need only wait until the world is distracted to pull out completely. Without security, the Afghans can never develop a functioning economy. Perhaps, though, they will be able to go back to their feudal system of mostly lowtech violence and homebred dictators. A small improvement, but an improvement nonetheless.

Speaking of old news: what happened to this story? US Plots ‘New Liberation’ of Baghdad was my pick for the August surprise. The notion was to work block by block, eliminating insurgents and installing or fixing infrastructure. This is basic politics, as well as good military strategy for a conquering nation. Frankly, a successful reliberation might win the Republicans the midterms. But the administration seems to have dropped this plan, or reference to it, completely. I suppose the vocabulary of ‘second liberation’ is all wrong. It makes it look like we didn’t do a good job the first time. (News flash: we didn’t.)

The core concept, however, wasn’t about liberation in any grandiose way. It was about SWET: “sewage, water, electric, and trash.” This is the Fox News bread and butter: the painted schoolhouses pale in comparison to large-scale improvements in the average Iraqi’s quality of life. I think of it as ‘extending the green zone,’ winning hears and minds in Iraq by giving them the things that all human beings want: a measure of comfort and security. This is liberation, or at least a prerequisite for it. So what happened? Since the April article, there have been no new mentions of a major military operation in Baghdad, and no new google hits on SWET or “sewage, water, electricity, and trash.” Either this is going to be a really big surprise, or the US was truly flummoxed by the Iraq VP’s request that we withdraw.

Of course, there could be a deeper game afoot. Perhaps the US military is still working the carrot approach with this amnesty deal for insurgents. Yet the amnesty excludes any insurgents who actually fought, which seems unworkable, and only separates the wheat from the chaff (or the sheep from the wolves.) I’m no fan of imperial incursions, but I am a fan of logic and good strategy. I like to think that imperialism is a bad strategy, but I’m willing to be proven wrong on that front. Nonetheless, at the level of imperial tactics, it’s a bad strategy to create a population of militants who can expect no reprieve. The US may not like admitting it, but most of those who attack and kill our soldiers in Iraq are defending their homeland from invasion. They’re not religious extremists so much as cornered lions. It’s convenient to think we’re facing the same terrorists who masterminded 9/11, but that’s simply not the makeup of the average footsoldier or suicide bomber. Why import zealots when you’ve got homegrown fanatics made desperate by the enemy’s excesses?

The whole foreign-fighter argument has always led the US astray; we made the same mistake in Vietnam when we assumed our enemies were foreign-born Chinese communists rather than local nationalists fighting for their own liberation. The refusal to recognize freedom fighters when we meet them is what makes imperial powers stupid. This refusal to offer a blanket amnesty will only harden the hearts of our opponents, who would rather risk death in battle than the ‘justice’ of an invading army. Before this thing is over, I expect to hear many more violent arguments from Baghdad over the meaning of freedom.