Iraq Oil Licenses

Another Economist article (I really need to broaden my online news sources), this time dealing with Iraq and its unwillingness to offer foreign oil companies licenses to drill in their fields. Addressed in Stiglitz, the so-called resource curse has been a major issue in IPE and development in the post-WWII world.

The article outlines the Iraqi governments attempts to avoid the pitfalls associated with resource cursed countries, such as offering drilling contracts that do not adequately compensate the host country. The government will auction off several of its oil fields in December to foreign companies, a long-awaited event for these companies. However, the government only offered $2 a barrel in a June auction, compared to the $4 a barrel the oil companies sought.

The current structure of state-run oil production in Iraq reflects similar resource cursed countries- a lack of central direction and plentiful infighting between the separate subsidiaries of the government. The government hopes to consolidate all oil production under one national company, yet making this a reality is still a long way off.,

Most troubling to the foreign companies is the political wavering by Iraq's new parliament. Whenever an election looms, the MPs feel "obliged to beat a nationalist oil drum [and] are unable to tell voters that the country will earn more from its oil only if foreigners are drawn in." The government's wet feet are indeed costing them a lot of money, as the US Department of Energy estimates that there are 41 million barrels of oil in Iraq's 10 oil fields, worth roughly $3 trillion at today's price.