Army Post Road

     Via The Drudge Report, I found an article in The Independent from Great Britain outlining an upcoming proposed measure in the Iraqi parliament modernizing their oil and gas industry.
     The measure, which the Independent reports will be introduced this week, would award several 30-year drilling contracts to Western energy companies to update, modernize, and, in essence, privatize the practices and infrastructure of the Iraqi oil industry. For the first few years of the contracts, the oil companies would reap a 75% portion of the profits and return the 25% remainder to the Iraqi government and people.
     This seemingly disproportionate share going towards the oil companies is being done because of the immense capital investment that will be required on the part of the Western companies to bring the infrastructure up to par. Once that investment has been recouped, the Western companies share will plummet to approximately 20% and then the true riches will be returned to the Iraqi people.
     A lot is made in the Independent article about this being the American companies robbing Iraq of their birth-right riches and that the Iraq War truly was only fought over oil. That is all rubbish; plain and simple. This is a HUGE win for global capitalism and a major victory for the Iraqi people. If the Iraqi Oil Ministry had been charged with all this modernization on it’s own the costs to the Iraqi people would be exponentially higher. Without this arrangement the Iraqi government would be forced to borrow the capital necessary to pay for the improvements, capital which they do not presently have in their own reserves, a process that would undoubtedly delay the process and in-turn delay profit-generation to the Iraqi people. Not only would the Iraqis be paying the material and construction costs of modernization, since they have, at best, only nascent native knowledge of modern drilling and transportation practices and systems, they would be paying enormous fees to outsiders as architects, consultants, planners, organizers, and the rest of the litany of people needed to complete their project. Under the proposed agreements with the Western oil companies, the oil companies will pay the upgrade costs, through investment funds they already have available, and will be able to immediately begin updating the Iraqi industry. All the expertise needed to begin upgrades they have immediately available either in-house or in pre-existing business arrangements. With that arrangement, almost as soon as oil begins to flow, the Iraqis will begin to see positive revenues without having any additional debt to service.
     All of that upside for the Iraqi government and people alone is enough to make this deal a wonderful thing. But not only that, the deal is, like I said before, a huge win for capitalism. Rather than leave the process in government hands and perpetuate more government-owned industries and the inefficiencies and corruption inherent in it, this deal makes global private industry the driving force in this instance. In the given situation, the global economies of scale available to companies like ExxonMobile, BP, and Royal Dutch-Shell make the deal so much cheaper and ready for profitability than the Iraqis could have possibly ever done on their own. Say what you want about the nefarious and greedy nature of Western oil companies, which I will say nothing of the like and agree with none of it, but the likelihood for corruption with their involvement in the deal is next to zero compared with if the whole thing had been left to the Iraqi government alone.
     This deal, and any others like it, are some of the few true examples of win-wins for the entire globe.