December 23, 2006
Blood, oil, and ideology
Listening to the President's press conference just now, something caught my ear. In discussing the new "strategy forward," in Iraq, Bush mentioned that a key to unifying the country would be getting Iraq's new oil law passed. The idea is, I imagine, that once Iraq's new government has figured out how to equitably share oil revenues among various factions, everyone's going to get along just fine.
One doesn't need to "imagine" what the idea is, because it's been spelled out quite clearly right here at Econbrowser as well as by the Iraq Study Group. I can forgive Mr. Hayes for not reading Econbrowser (actually I can't, but that's my problem, not his), so let me again recommend the analysis contained in the ISG report. To quote from the ISG:
Oil production and sales account for nearly 70 percent of Iraq's GDP, and more than 95% of government revenues [page 22].
That to me means that any vision of how to get jobs for Iraqis or a government that can accomplish anything is absolutely and critically dependent on the health of Iraq's oil sector. Here's the ISG's summary of the problems:
Problems with oil production are caused by lack of security, lack of investment, and lack of technical capacity. Insurgents with a detailed knowledge of Iraq's infrastructure target pipelines and oil facilities. There is no metering system for the oil. There is poor maintenance at pumping stations, pipelines, and port facilities, as well as inadequate investment in modern technology.... Foreign companies have been reluctant to invest, and Iraq's Ministry of Oil has been unable to spend more than 15 percent of its capital budget [page 22].
Even if Iraq were at peace tomorrow, oil production would decline unless current problems in the oil sector were addressed [page 56].
But where is the necessary investment capital going to come from, when it's not even clear who has the authority to approve anything that's implemented? Hence the ISG's recommendation:
As soon as possible, the U.S. government should provide technical assistance to the Iraqi government to prepare a draft oil law that defines the rights of regional and local governments and creates a fiscal and legal framework for investment. Legal clarity is essential to attract investment [page 56].
What disturbed me most about Christopher Hayes' analysis was his suggestion that President Bush's urging of Iraq to develop a new oil law was inspired not by the above considerations, but instead had the goal of benefiting U.S. oil companies:
Of course, along with bringing Iraqis together, the new law might just also provide a boon to American energy companies A win-win!
...It's fairly clear that Bush is not going to withdraw from Iraq no matter what happens. Part of this is due to the fact that he has decided that as long as we stay in Iraq we can't lose the war, and he doesn't want to lose. But there's also the not-so-minor fact that if we withdraw from Iraq we'll have a hard time establishing permanent bases and may not have any secure access to the country's oil.
So why is it the word oil never crossed the lips of any of the reporters at today's press conference?
Now this is my position-- if Iraq is unable to pass an oil law, that will mean thousands of additional deaths of Iraqi civilians and U.S. soldiers. Analyses such as that from Mr. Hayes make it less likely that an oil law will be passed. And yet, although that is how I see the situation, I do not declare that Mr. Hayes' motive is to try to cause additional unnecessary bloodshed. Instead, I am inclined to assume that he simply sees the world differently than I do, and does not share my belief that an oil law would help solve any problems.
But why then does Mr. Hayes assume that Bush's motive for promoting an oil law is anything other than trying to solve the very huge problems there?
Although I do not believe that Mr. Hayes thinks of himself as doing his part to prolong and deepen the conflict, from my view of the situation, anything that undermines the prospects for successfully developing an Iraq oil law has exactly that effect. The thesis that he advocates-- the claim that America's motives in Iraq were to acquire oil rather than overthrow an evil regime-- is something that the Bush Administration must be prepared to fight just as energetically as it takes on insurgents and their IEDs. The ISG also recognized the vital need to combat such perceptions, but its recommended solution strikes me as pathetically lame:
The United States can begin to shape a positive climate for its diplomatic efforts, internationally and within Iraq, through public statements by President Bush that reject the notion that the United States seeks to control Iraq's oil [page 42].
I find this recommendation lame because those who are persuaded that the U.S. does seek to control Iraq's oil would put no credence at all on anything Bush says. And yet, their intellectual belief must be confronted and changed.
So here's another proposal to throw into the mix. What about China as one of the international players whose participation in Iraq's oil industry we try to encourage? True, their interests in the region are not always the same as ours, but that is precisely the factor that could give them some credibility as an independent third party. If Sinopec or China National Offshore Oil Corporation ends up helping the Iraqis reap the benefits of their rich geological heritage, that would be far more effective than any words from Bush in terms of silencing the "blood for oil" pundits.
And if so, also more effective in reducing the total blood that ends up flowing into the sands above these rich oil lands.
Posted by James Hamilton at December 23, 2006 10:45 AMdigg this | reddit
There are two issues here. You raised the issue of how important oil production is to the Iraqi economy - of which there is no doubt. The other one, which Christopher touches on, is the suggestion by certain people (I called them rightwingers but in no way necessarily meant the President) that invading Iraq gives the US more access to oil. One can always buy oil so the only possible logical explanation for gaining access seems to be a battle for property rights. Now if President Bush in no way is trying to extract the property rights to these oil fields away from the Iraqis, great as we should never use war to do that. We should note, however, that there is an element in the neocon philosophy that would encourage the use of military force to extract such property rights. Let's hope no American President is tempted to follow that philosophy.
Posted by: pgl at December 23, 2006 01:20 PM
Bringing in the Chinese is at least worth considering. Once oil reaches the market it is fungible. Hypothetically, the greater the supply the lower the price. Iraq has huge oil reserves and getting these to market efficiently - even if all the production goes to China - will relieve world oil prices. Unfortunately, the U.S. will still have to provide the security for any Chinese investment in Iraq.
Posted by: Tom Schofield at December 24, 2006 08:59 AM
Think of war as a preliminary investment for free enterprise, a la capitalism.
In 1998, the Iraq National Oil company was 9th in oil production, all of which raises an interesting fact: As of 1998, 7 out of the top 10 oil producers were nationally, not publically owned, oil companies.
What to make of these interesting statistics?
Free enterprise works?
Nationally owned companies are best?
War is one way of promoting free enterprise, i.e., privately owned companies?
Foreign investment in Iraq should be opened to nationally own oil companies?
The Iraq National Oil Co. should be reconstituted?
An interesting source for some company statistics is:
Posted by: Stormy at December 24, 2006 09:06 AM
Everything that Hamilton says is reasonable. But why not carry it a step further along the lines suggested by Stormy?
Nothing could be fairer or more likely to promote harmony AND higher productivity than to give each adult Iraqi a share of the National oil co. Privatize it. What other single move could have such a positive effect on the attitudes of everyone involved (asside from the bureaucrats currently making out like bandits)?
The lack of liberterian or democratic societies in the middle east is not unrelated to the fact that the governments own all the oil companies.
Posted by: algernon at December 24, 2006 02:43 PM
Hmmmmm all and the only original shareholders should be Iraqiis, every adult Iraqi.
And, as a down payment on war damages, the U.S. seeds the new company with real cash? (I would imagine that the Iraqiis can supply the expertise.)
Or, if "war damages" is a distasteful and poorly designed phrase, we could say that we are giving democracy "a financial boost."
Posted by: Stormy at December 24, 2006 05:42 PM
The company needs to pay dividends real fast so that common people don't just trade away their shares for little as what happened in Russia (hardly a model of giving commoners a stake in the system). And where do the dividends come from?
Share ownership is certainly a good way to build interest long term but it is unlikely a solution for a war ravaged country with little financial sophistication.
Maybe simply a promise of one day distributing the shares equitably among the populace is a lot better than actually doing it right now.
Posted by: HZ at December 24, 2006 09:07 PM
No pgl, it was not your beloved "rightwingers" who believed that invading Iraq would give us more access to oil. I suspect that more of those rightwingers know that you don't have to own oil to have access to it - you purchase it from the owners. If you recall, "No Blood for Oil" was one of key beliefs of the left wing. Now there's a group who have very sophisticated economic insights.
For those who think war is good for "capitalism", I recommend reading the chapter on war in Economics in One Lesson by Henry Hazlitt. After Hazlitt's debunking, there wasn't any good reason for intelligent people to believe that myth.
Posted by: Rich Berger at December 26, 2006 05:35 AM
US' motive was to "overthrow an evil regime"? Well, sure, if "evil" = "able to destabilize US regional interests" .... = the Iraq war is all about oil and not, say, cabbages, or democracy, or kindliness, or any of the lies your media spins. I mean, for what, if not oil, did the > half million Iraqi children die from the egregious sanctions your country applied before this latest war? For the good of Iraq? Is this latest war also for the good of Iraq? Like the first war?
Alice in Wonderland, holy cow.
Posted by: Thomas James at December 26, 2006 09:50 AM
One can always buy oil....
Steven Kyle writes, on the same blog:
Thirty some years ago we went through a crisis where oil was NOT allocated by the market but was distributed on an administrative basis for political reasons ? we were embargoed.
Which raises the question of which one is right? PGL or Steven Kyle. After all, if "we can always buy oil" on the world market, then an embargo wont really work.
Posted by: Steve Verdon at December 26, 2006 10:17 AM
I have agreed and disagreed with JDH on many issues but I find this particular posting one of the most disgusting I have ever seen. JDH has joined the recent trend in right-wing opinion makers who, having belatedly faced up to the disaster in Iraq, have taken to figuring some way to blame the fiasco on the people who warned about the war from the beginning. JDH makes a backhanded insinuation that the blood flowing in Iraq is somehow on the hands of those who opposed the war.
He belittles the scepticism regarding the motives of the Bush administration regarding the oil laws. There are two good reasons for this scepticism, 1) Bush has been proven many times to lie about his policies, and 2) the Bush administration has been proven many times to be incompetent. Only someone who has swallowed the kool-aid, is incredibly naive, or is fundamentally dishonest could deny that Bush has repeatedly failed in his policies.
Let's just list a few of Bush's lies.
In the 2000 campaign Bush said that he could simultaneously cut taxes, generate a budget surplus and also create new prescription program. Paul Krugman stated the obvious fact that this was mathematically impossible and was vilified as shrill and overwrought. Where were the honest economists willing to cover Krugman's back. They were silent.
When Krugman pointed out that 40% of the Bush tax cuts would go to the richest 1%, Bush denied it. When Bush tried to hoodwink the public by citing the average tax cut benefit, honest economists had a good opportunity to explain to the public the difference between mean and median in a skewed distribution. But again they were silent.
When Bush claimed that tax cuts pay for themselves, the economists were silent.
When Bush, a declared free-trader, placed tariffs on steel in a blatant pander to the electoral votes in Pennsylvania and Ohio, the economists were silent. And of course this policy worked. Bush won re-election due to only 100,000 votes in Ohio.
Another example of the Bush mendacity is Medicare Part D. One of your fellow economists, a career civil servant, was threatened by a Bush political appointee that he would be fired if he reported to Congress the real cost of the program, which was twice what the president was telling them. You failed to defend one of your fellows. You were silent when they slipped in a provision that forbid the SS administration from negotiating with drug companies over prices, knowing that the VA gets 40% discounts. You knew that this legislation was written by health industry lobbyists. The beauty for Bush is that he could buy some votes from seniors at the same time that he transferred billions from the treasury to his deep pocketed contributors in the health care industry. It was a simple two-fer for Bush. Yet again you were silent.
When Bush in speech after speech stated the obvious lies that Social Security would be in crisis in 2017 and totally bankrupt by 2045 you were silent. When he made the laughable declaration that U.S. Treasury Bonds are worthless pieces of paper you did not challenge him.
In every speech before the war in Iraq, Bush conflated al-Qaeda and Iraq in the same sentence as a deliberate attempt to confuse Americans. And it worked. Polls showed that 80% of Americans believed that Saddam Hussein was responsible for the 9/11 attacks. He said that WMDs were the reason for war, yet the inspectors were proving that false. The rush to war in the spring of 2003 was necessary because the inspectors were undermining his justification. Later, well into his war, Bush repeatedly stated that the invasion was necessary because Hussein kicked out the inspectors. This was a blatant lie. The inspectors were doing their job right up until eve of the invasion, when Bush himself ordered them out.
These are just a few examples of Bush's mendacity and why his motives must always be questioned. He has no governing principles except those that affect him politically.
And then there is the incompetence. Most people first noticed it when it was obviously displayed during his non-response to hurricane Katrina. Like Nero, he quite literally strummed a guitar at a fund raiser while on the news we watched dead bodies floating to the surface in New Orleans. He put a horse show manager in charge of FEMA, not because of his expertise or competence, but because he was a loyal party fund raiser.
Bush's puerile "opposite of Clinton" approach to diplomacy in North Korea led directly to the expulsion of inspectors and unsealing of the reactor fuel rods. This in turn led, for the first time, to the isolation of plutonium and the testing of nuclear bombs.
A more recent example of the Bush administration incompetence came to light when the New York Times published a redacted op-ed that exposed the fact that Iran in 2002 made several overtures for cooperation with the U.S. which Bush rejected because of his simple-mined and juvenile "good vs. evil" diplomacy. The CIA had cleared the piece but the White House censored it, not because it exposed secrets -- everything in it had already been publicly disclosed -- but because it exposed the incompetency of the Bush administration.
And then there is the war itself. In the lead up to the war, incredibly, they made no plans for the occupation. In fact, Rumsfeld forbid the discussion of the occupation phase. When Gen. Shinseki testified before Congress that several hundred thousand troops would be required to successfully secure the peace in Iraq, he was forced into early retirement.
When they set up the CPA, they hired 24-year-old interns from the American Enterprise Institute whose only qualifications were loyalty to Bush. One 24-year-old with no work experience was put in charge of establishing the new Iraqi banking system. His only accomplishment was the establishment of, get this, a flat income tax, a juvenile Randian wet dream.
Next was their placement of Paul Bremer in charge of the occupation, another incompetent with no management experience whose only qualification was his willingness to take direct orders from Dick Cheney. His first act on his first day was to disband the Iraqi army despite all the warnings he received from experts that putting half a million angry, unemployed, heavily armed men on the street was a bad idea. This is perhaps the single greatest policy failure responsible for the chaos in Iraq today.
So there are many reasons to be sceptical of both the honesty and competence of the Bush administration in the formation of this oil law in Iraq. Remember Cheney's energy task force that resulted in primarily more subsidies for big oil and big coal. And we should believe the same can't happen in Iraq? PGL noted the neocon philosophy that would encourage the use of military force to extract property rights yet fails to point out that one of the strongest proponents of this philosophy, one of the authors of the neocon screed "Project for a New American Century," is Dick Cheney.
No, Christopher Hayes was quite right to question the motives and competency of the Bush administration because we have so many previous examples. It is unconscionable that you would attempt to lay the blame for this fiasco at the feet of the people who were right from the beginning. This was a Republican war from beginning to end. The Republican majorities in Congress made sure that there would be no oversight.
You and your fellow economists had the opportunity to serve you country many times explaining the economic fallacies cited above yet you were silent, whether because of agreement, expediency or cowardice I don't know. Your failure to challenge the Bush administration, your failure to inform the public about the Bush lies before the elections, led directly to their failed policies.
No sir, James, the blood of the 3000 soldiers is on your hands. The tens of thousands of soldiers without arms, legs, and eyes are on your hands. The blood of the hundreds of thousands of innocent Iraqi civilians is on your hands.
Posted by: Joseph at December 26, 2006 03:45 PM
Good grief, Joseph. "Backhanded insinuation"? My words are perfectly clear, and need no twisting or reinterpretation. So let me just repeat them:
...if Iraq is unable to pass an oil law, that will mean thousands of additional deaths of Iraqi civilians and U.S. soldiers. Analyses such as that from Mr. Hayes make it less likely that an oil law will be passed.
In your comments you cover a great number of topics, telling us with great vigor and conviction which things are true and which are false. And yet I somehow missed your point: are these two sentences of mine true or false?
Posted by: JDH at December 26, 2006 04:24 PM
Well, the first sentence may have some truth to it, but to imply that the lack of an oil law is the most important cause of deaths in Iraq in spite of all the other disasters of Bush policy is overstating the case.
The second sentence is exactly why we are in the situation we are in now. You almost sound like Fox News talking heads when they say that criticism of the President in a time of war is treason. There is good reason to be skeptical of Bush's motives as I pointed out. Is a bad oil law better than no oil law? If Hayes' skepticism keeps a bad oil law from being enacted, he is doing a service.
It is the implication that Hayes, by speaking the truth, is somehow responsible for Iraqi deaths that I find most offensive. For too many years those who spoke out against the disastrous Bush policies have been ignored, but somehow now suddenly they are the ones responsible.
Posted by: Joseph at December 26, 2006 04:55 PM
By the way, I apologize for being overly harsh, but these hundreds of thousands of unnecessary deaths are very upsetting and isn't fair to blame the people who were right from the beginning.
Posted by: Joseph at December 26, 2006 05:04 PM
Joseph, you say that I "imply" and "almost sound" like I'm defending a position that you find very offensive.
I do not imply or insinuate, but instead declare just as clearly and openly as I am able, that Iraq most assuredly needs an oil law, and that those who would prevent that are doing damage. And, since you ask, in fact I do believe that a bad oil law would be better than no oil law. But I do not believe that Bush or the Iraq Study Group have proposed a bad oil law.
Posted by: JDH at December 26, 2006 05:16 PM
that those who would prevent that are doing damage.
That is a strawman. Who is preventing an oil law? We are only saying that is should be done honestly and openly. As Bush's history shows, there is good reason to doubt that. To say that well-deserved criticism of Bush policies is tantamount to obstruction is a dangerous position.
But I do not believe that Bush or the Iraq Study Group have proposed a bad oil law.
On what basis do you believe that? Just your undying faith in George Bush? I think your faith is unjustified. The administration has kept all of the details and negotiations secret, which has only fed the suspicion. The Cheney energy task force provides precedent for that suspicion.
Posted by: Joseph at December 26, 2006 07:00 PM
Strawman, Joseph? You are the one bringing up Fox News, New Orleans, Dick Cheney, and any of a number of your other favorite issues, whose relation to anything I said I still see as largely fanciful.
The issue I have been addressing has, from the beginning, been the need for Iraq to develop an oil law and the unhelpfulness of those who would derail that effort with mindless cynicism. You respond with an emotional tirade which, despite its length, fails to address any of the observations I make. And when I challenge you to address those specifics, you accuse me of being off-topic!
Posted by: JDH at December 27, 2006 06:42 AM
You have my sympathy. Joseph is rather typical of commenters that I hear on CSPAN, in the letters to the editor, and sometimes in person (ugh). Characteristics: broad generalizations, unrelenting hatred of Bush, conspiracy thinking, unverifiable "facts".
"Hundreds of thousands" of death, Joseph? You must believe that Lancet study. You know, the one with all the holes.
Posted by: Rich Berger at December 27, 2006 06:52 AM
Yes, the strawman is your statement that Hayes is opposed to an oil law. That is false. Hayes is saying that he is suspicious of the motives of the Bush administration and the details of the law. He is opposed to a bad oil law.
The entire point of my long post is not to just bring up a list of "fanciful" grievances but to point out the simple fact that the Bush administration has a long history of both being dishonest and incompetent. This is directly related to the issue. It is the reason to be wary of Bush's actions regarding oil law. It is not "mindless" cynicism. It directly addresses the your specific issue, which is that anyone who questions the Bush administration should shut up. Contrary to your assertion, I pointed out why it is absolutely necessary to be suspicious of Bush's oil law.
Posted by: Joseph at December 27, 2006 09:18 AM
Rich, feel free to point out error of my points about Bush's history of dishonesty and incompetence. Otherwise I will just assume that you are among those who ignore reality because of your loyalty to the dear leader.
Posted by: Joseph at December 27, 2006 09:22 AM
I would be happy to accept your challenge if you would give me specific instances of your claims. For example, give me one quote where Bush conflates Iraq and Al-Qaeda, and identify its context. Give me the quote where Bush said the tax cuts would pay for themselves, and identify its context. URLs are preferred. Give me two more of your choosing. I will give you honest answers.
Posted by: Rich Berger at December 27, 2006 11:47 AM
Tax cuts pay for themselves: link
As for Iraq and al-qaeda there are dozens of references but here is the first that came up in a quick Google search: link
Posted by: Joseph at December 27, 2006 02:03 PM
You tube is a wonderful thing.
Who are these people again..?
Posted by: Nin.. at December 27, 2006 09:09 PM
i've heard bush say that a royalty trust wold be a good idea. to avoid some of the problems that arose in russia they could make the shares non-tradable for say five years.
Posted by: adam at December 28, 2006 12:50 PM