Sectarian Rivalry Solved

Much of the Sunni insurgency in Iraq is fueled by the perception that the Shiites and the Kurds will conspire to keep oil revenue away from the Sunnis, who live predominantly in oil-less regions. If this Jazeera article is right (here's a better article from the Independent), the Bush administration has come up with a brilliant way of getting over this hurdle: screwing everyone over equally.

The idea is that Iraq would enter into "production sharing agreements" that would allow foreign oil companies to extract the oil and leave the Iraqi government with a share of the profits, but that the terms would be dictated by the Western oil companies and would by no means be beneficial to Iraqis. The issue is further complicated by the lack of private Iraqi oil companies that have the ability to extract oil. It would probably be a better model for Iraq to establish a national oil company like Saudi Arabia's with the understanding that privatization - preferably to domestic investors - will occur down the line once production has reached a reasonable level. This would give Iraq most of the proceeds from oil extraction while still allowing the West to give its expertise (as it does in Saudi).

Either way, allowing Western oil companies to run off with most of the oil revenue from Iraq is in no way beneficial to Iraqis, whether or not Western companies can extract oil more efficiently from Iraq.

Of course, the nutty articles I linked suggest that this is proof that we fought the war because of oil. I don't buy it. I still think we fought this war because of stupidity. (Note to al-Jazeera and the Independent: Banditos Theorem.) This oil law is simply a factor of our mistaken assumption that the Western economic model is the best for everyone under all circumstances. The Bush administration and those pushing this law need to realize that foreign investment and liberalization isn't always the key to development success.