March 06, 2007
Iraq Oil Law Discussion
Somewhat tardily, but at reader request, a note on the new Iraqi oil law bill in cabinet, as reported in the FT.
My quick reaction: meaningless bollocks. My longer reaction, bloody idiotic meaningless bollocks just like the fucking schools painted and other such nonsense that only idiotic innocents with no fucking sense of fucking reality will get excited about. There are no economics to discuss. There is no way to model having your pipelines constantly cut and if you're in Kurd Land, the Kurds losing control of their production, a political threat of no small probability.
Reader reactions welcome.
[NB: corrected some idiotic early AM grammatical blunders, linking idiocies and the like-CL 7 march]
The law means fuck all at this point in time. It is not law that rules in Baghdad, it is men.
Pure relationships, and whose miltias may protect your assets.
Whle readers have noted - I have not bothered wasting my time with this - that the usual Left suspects have gotten their lovely Left Conspiracy oriented panties into a twist - and I am sure the usual Right Bolshevik drooling ideologue lapdogs (as any normal head-screwed on right person of the proper Right nows better) are shouting to the rooftops as to how this is a great sign of progress.... it means fuck all.
The only people who can use this law - once it passes - in the foreseeable future are investors who can operate outside the frameworks of Western governance. No OECD bribery acts or other namby pamby niceness.
In short, China, Iran, and others unconstrained by scruples or the like, and without the risk profile of a Western investor.
Let me bold, No Western Investor in his right motherfucking mind is going to put equity up for anything in Iraq in the next FIVE years. At best. The risk is way outside even the most aggressive zone. And anyone who does, that is Westerner, is going to lose their fucking shirt.
The whankery from the Left morons and the Right dupes is nothing but pure, illiterate idiocy.
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Go ahead L, don't be shy, tell us what you really think. ;)
Incidentally, us in Czechistan don't get 15 day FT trial subscriptions, evidently, and I'm not about to drop 120 quid on a year's subscription, so I have to take your word on it.
How desperate are they in Iraq to get foreign investment in their oil fields? Is this law part of that desperation? Also, what's the deal with the Kurdish regional government insisting on their right to conduct separate agreements with foreign companies, and that the agreements that they already have made must be upheld by Baghdad?
Posted by: Antiquated Tory at March 6, 2007 05:15 AM
Greedy. I would say.
Plus the Americans are deluded into thinking that somehow out of this mess of bloody crap, they're going to get a piece of the action (well, perhaps some small, frontierish Foreign Corrupt Practices Act be damned Texan firm might, until they got indicted).
The Kurds of course want to have an angle on the production sharing agreements and the like, that's a given.
In the long-run of course, a law that opens up production to investment by foreign firms is a bloody good thing, for the Iraqis and for the economy. Well, as good as anything gets in a Oil Curse situation - better to have private firms getting extorted than the corruption directly mainlining into the government via the Oil Ministry, at least there is the incentive for efficiency in actual production and exploration. Reduce some of the waste.
Of course, like Sudan, the people who are going to get into Iraq first and best are the NOCs from shady places, i.e. China, probably Iran, maybe even the Gulf. Them partnered up maybe with a Western JV (i.e. Western firm w an emerging markets one) providing engineering expertise, that probably can fly.
Any of the majors? Bah. The chances of expropriation remain high, and it's not even clear yet who you really have to bribe in order to get protection.
I tried to do a deal in Iraq in steel, bloody hell, 3-4 years ago already. Would have been providing support to this sector (i.e. the off-take to the hydrocarbons sector). We were looking at putting in real equity, and we fucking walked away because even then we realised there was no way in hell it was clear how not to get raped again and again.
So, an "economic analysis" of this law, in my opinion, at this stage, is an exercise in whanking. Like an economic analysis of Russian situs in 93. No way to value the idea of Putin saying, hmmm, well those are my assets now.
Posted by: The Lounsbury at March 6, 2007 05:42 AM
Juan Cole has an interesting aside on this, discussing possible upcoming legal action against Iraqi [opposition] parliamentarians for death squad-ties:
"Given that Sunni and Sadrist MPs have been loudest in denouncing the new oil law, if large numbers of them were incarcerated, it would also make it easier for al-Maliki to get the legislation enacted.
There are no mechanisms for by-elections to the Iraqi parliament to my knowledge, so that the parliamentarians that are arrested will likely not be replaced until late 2009. The arrests could dramatically alter the relative proportion of representatives of various communities. No Kurds will be arrested, since their Peshmerga militia has been legalized, so their bloc will be strengthened."
And from the article he links, comes another good point: since the law allows regional governments to sign contracts, it creates a powerful incentive & instant viability for a Shia subregion in the south. That will make SCIRI very happy. (Again, also the Kurds, but their self-rule and oil deals have never really been in doubt.)
Posted by: alle at March 6, 2007 01:23 PM
Juan is wrong. I wrote a comment on his blog - the 3rd in the comments section. If a parliamentary seat becomes vacant the party of the ex-MP gets to appoint the successor. (I am getting a bit frustrated with Juan, though, as he doesn't feel like he should update his posts in light of new information. Bah.)
I'll have to write a longer comment eventually, but no time now.
In short, I agree with L's general take on the situation.
Posted by: MSK at March 6, 2007 02:51 PM
PS: Here are the full texts (English & Arabic) of the Oil Law draft:
Most of the assertions in the news are simply wrong.
Posted by: MSK at March 6, 2007 02:57 PM
Cole can be amazingly thick and stubborn after he has arrived at an opinion, queerly he is most thick in stubborn in those areas where he is least expert, to whit, economics, business and financial issues where ideology rather than knowledge informs his opinions.
Actually, hardly queer at all, rather typical come to think of it.
Posted by: The Lounsbury at March 6, 2007 03:29 PM
MSK - Juan is wrong. I wrote a comment on his blog - the 3rd in the comments section. If a parliamentary seat becomes vacant the party of the ex-MP gets to appoint the successor.
Well, that pretty much kills the point. Thanks.
About Cole, I have no idea what his views are on economics and other things, but his blog would be so much better if he simply stopped commenting on (a) Bush and (b) Israel -- two areas where he always goes rah rah. (But who doesn't. I guess everybody should just stop commenting on Bush and Israel.)
Posted by: alle at March 6, 2007 08:24 PM
that's like asking people to stop thinking about sex.
Posted by: Tom Scudder at March 7, 2007 12:32 PM