Henri Reynard Speaks Out

Projected Revenues From Oil In Iraq?

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According to an article in the New York Times the expected oil revenues on an annual basis in Iraq will be around $20,000,000,000 per year. The number seems a little large since Iraq is capable of producing around 2 million barrels a day when its production is restarted. Of course if oil is still at thirty dollars a barrel at that point then the number could be accurate. At a constant thirty dollars a barrel our economy will be slightly depressed but we will adjust. If OPEC is right the price will be coming down quickly and production cuts will be needed in order to reduce the possibility of a price collapse. Below $25 a barrel the OPEC nations suffer a loss in revenues that destabilizes their economies if it lasts very long. Twenty-dollar oil would be difficult for everyone on the supply side. Fifteen dollars per barrel would hurt them seriously, and ten dollars would be disastrous for OPEC nations. So in a sense the Bush Administration is right, this war is not about oil, it's about the way oil revenue impacts our economy, the world's economy and political stability, here and abroad.

Oil revenue spent on WMD (Weapons of Mass Destruction) will always be bad for stability in the world. I think we can all agree on that premise. A depressed world economy would be bad for everyone, wouldn't it? We can also agree on that conclusion. Instability in the oil-exporting nations is bad for every industrial economy in the world. So the objective would be to avoid all of those eventualities. Based on that premise, using war to eliminate WMD in Iraq, now and in the future, is reasonable if it doesn't cause too much disruption in the price of oil. It appears to me that the Bush Administration has won that gamble for now with a short victorious war over Saddam and his cohorts. Let us all hope that the peace is as swift to arrive and the interests of the Iraqi people are as victorious. If the $20,000,000,000 in oil revenue were to be divided among the 25,000,000 Iraqi people evenly it would give every person less than $1000 in new income. The pre-war productivity of Iraqi citizens was around $2500; this is the average input into Iraq's GNP (Gross National Product) by each Iraqi citizen. The Iraqi GNP is therefore around $62,000,000,000 per year if that number is accurate.

The twenty billion dollars in oil revenue is roughly one third of total domestic productivity. This kind of dependence on one commodity is serious in its impact on every oil-bearing nation's economy. It is particularly important in the case of Iraq, which has been seriously depressed economically by the avaricious rule of the Baath Party. If for example the average Iraqi were to increase their productivity by 10% annually for the next three years they would ordinarily get richer. In the case of Iraq if the price of oil drops to twenty dollars during that period they lose ground even in a time when they are making great strides in productivity. That is a basis for some of the feeling of futility that prevails in the populations of OPEC nations. Another basis for feelings of futility would be their lack of control over their own destiny based on corruption in government and elsewhere in their society. If the people in our nation who promoted this war think they will win the peace without addressing this level of corruption they are sadly doomed to fail. It seems to me these same patriots are not doing much of a job addressing corruption in the USA business community, which makes me doubt that they intend any such effort in Iraq.

It is apparent that a culture that is steeped in themes like, as a friend of mine says, "I won't touch your bribe, here, put it in my pocket" is unlikely to change easily. I can hardly blame our leadership for that cultural bent. But I can watch carefully for where and how their corporate friends are allowed to tap into those oil revenues. I think we all should watch for that part of the post-war action. It will tell us how likely we are to succeed at generating a healthy Iraq out of the chaos of war. If the way the spoils are divided ignores the needs of Iraq for significant investment in infrastructure we will lose the peace. If we so richly reward the companies that we use to build that infrastructure that the economy of Iraq is harmed we lose the peace. If we fail to provide jobs for Iraqi's while we are rebuilding Iraq we will lose the peace. If we kill Saddam and replace him with our new puppet there will be no peace.

If our behavior in the Middle East continues to reflect our cultural differences with the Arabic Islamic nations that dominate that part of the worlds population both sides will lose. We will not gain a long-lasting peace either there or at home by denying their differences and implying or demanding that they must choose our ways in any regard. There are nearly an infinite number of ways for us to lose the peace after winning the war. No one doubted the ability of the US military to beat the Iraqi army. However many of us have doubted our ability to turn such a victory into a meaningful period of engagement with Arabic Nations resulting in a lasting peace there and here at home.

How can we win the peace? Here's my list. Work really hard to teach the Iraqi people what they need to know in order to manage their own oil industry and it's revenues. That is a primary necessity for winning the peace. Number two on the list is to get the heck out of Iraq as soon as possible. Number three is never, never, never, expect to get a permanent military base in Iraq or elsewhere in the Gulf out of this war. The forth way of winning the peace is not to lie to the world as we have tried to in regard to Saddam's threat against the USA. We have seen what level of credibility that threat was really at in the last two weeks. WMD are not there in sufficient numbers to mount a credible threat against Syria, much less the USA. The final need for winning the peace is to stop talking about invading Iran and Syria and work on resolving the Israeli/Palestinian war. That is perhaps the most difficult thing for our hawks to grasp. If you want to win the peace then you must first want peace to prevail. Else you are just another bully on the world stage, and that image has served no nation well for long at any time in the history of the world. Not ever, and certainly not now!