Iraq must succeed

April 14, 2003
Can newly free Iraq become a successful oil state? History suggests not.

Can newly free Iraq become a successful oil state? History suggests not. Yet lives sacrificed to transcendent values insist otherwise.

A lavish endowment of petroleum can be a blessing or a curse. Iraq's lavish endowment so far has been a curse. The country has oil reserves exceeding 110 billion bbl, largely undeveloped. It has gas reserves estimated at 110 tcf. It has large areas of great geologic promise that never have been drilled. It has a long history of production and a highly regarded corps of petroleum professionals. Yet the bounty from this gift has for decades been shunted to the intrigues of a murderous autocracy.

That changes now. The regime of Saddam Hussein is vanquished. Iraq has a fresh start—and the sudden need to manage responsibly a mammoth potential.

Most fail

Most countries facing comparable challenge fail. Most governments claim ownership of oil and gas resources and dissipate the wealth. Whether by corruption or caprice or both, rulers divert oil riches disproportionately to a well-situated few and appease others with free public services and cheap vehicle fuel. Much of the national patrimony literally goes up in smoke over congested roads and highways. And as political claims to oil money multiply, the resource goes without needed investment.

Except where governments are smarter and more generous than most, oil states thus find themselves in growing tension between capital starvation and political revolution. And the happy exceptions, few as they are, depend either on survival of unusually enlightened or lucky rulers or on legal institutions now absent in Iraq.

The world thus presents postwar Iraq more bad examples than good as it confronts two historic challenges. The first is to rehabilitate an economy based almost solely on oil quickly enough to meet urgent needs. The second is to implement durable governance inescapably founded in the petroleum resource.

Iraq can meet neither challenge on its own. So who helps? The question, focusing on the United Nations, moved to the center of international politics even before coalition tanks rolled to the center of Baghdad.

Strong arguments have emerged on behalf of UN administration of Iraq while an Iraqi government forms. But that idea faces equally strong opposition.

The UN, in fact, must have a role in postwar Iraq. It does some things very well. It provides humanitarian assistance well, for example. And it has a system in place for channeling oil revenue to the purchase of goods, services, and equipment. As the organization best equipped to do so, the UN should lead the effort to help Iraq meet immediate economic needs.

The UN is less equipped to administer Iraq's transition of governance. Success of the transition would, to borrow a phrase, legitimize the war. Yet a permanent member of the UN Security Council, France, has gone so far as to resist humanitarian efforts in order not to do precisely that. Administration of postwar Iraq is too important and too challenging to leave to an entity subject to such manipulation. A temporary administration involving Iraqis and representatives of countries whose soldiers liberated the country should govern Iraq until Iraqis can do so themselves.

Whatever its form, the Iraqi government must assert and pursue an ideal. Seeking to turn the country into a successful oil state, the government should avoid traditional paths, which too frequently lead to despair. It should learn from the world's mistakes. It should concentrate on what works. History does offer lessons.

History's lessons

The best decisions about resource development, for example, come from owners of the resource. Similarly, the best decisions about government come from the governed. Furthermore, legal mechanisms are available to marry capital and expertise from abroad equitably with the rights of people to benefit from the land they inhabit. And any system for managing the creation and distribution of enormous wealth must incorporate strong protections against the economic poison of corruption.

The new Iraq starts with disadvantages, including war damage, economic deprivation, and the cultural legacies of socialism and oppression. But the new Iraq also starts with the special exuberance that comes with liberation. It can, with proper help, become a successful oil state. In fact, blood shed for freedom and international security makes anything less than success unimaginable.