Norway, Nigeria and the Kurdistan Region’s Oil Policy

By Twana Ahmed Xeyat:

“Who became rich from oil in his country?”

“Nobody and everybody”.

The question was asked by John Campbell, a former United State Ambassador to Nigeria, and the answer was given by a Norwegian diplomat.

That Norway should be so wealthy is no surprise. It is the world’s fifth-largest oil exporter, with annual oil revenues of around $40 billion, plus a vibrant and diversified economy that spreads prosperity widely within the society.  When oil was discovered in the Norwegian continental shelf in 1969, Norway was very aware of the finite nature of petroleum, and it didn’t waste any time legislating policies to manage the new-found resource in a way that would give Norwegians long-term wealth, benefit their entire society and make them competitive beyond just being a commodities exporter.

Norway developed prudent strategies and institutions to avoid injecting oil revenue directly into its economy. This success has been underpinned by political will, the rule of law and developed democratic institutions. As a result, Norway has climbed to the top of the human-development indexes.

By contrast Nigeria suffers from what economists call the ‘resource curse’ — the paradox that developing countries with an abundance of natural reserves tend to enjoy worse economic growth than countries without minerals and fuels. The huge flows of oil wealth mean some of these governments do not rely on taxpayers for their income, and so they don’t have to answer to their people — a situation that fosters rampant corruption and economic sclerosis because there is no investment in infrastructure as the countries’ leaders cream off the wealth.

Who benefits?

Who benefits?

At the end of the 1967-70 civil war, Nigeria’s oil came on stream in a big way, generating state revenue of previously unimaginable proportions, but without the public and private institutions necessary to control it. Alas, coups and the war had militarized governance. Since oil belonged to the state, holding public office became the sure route to riches.

The Kurdistan Regional Government (KRG) has started to sign contracts with foreign companies and passed a law asserting that any oil and gas revenues from these new deals will stay in its own province rather than go to Iraq. The KRG oil law has paved the way for production-sharing agreements (PSA) with international oil companies. This has attracted many oil explorers like DNO, Addax, Genel and OMV who continue to invest in field development in Kurdistan.  Unfortunately the main problem of the oil industry in Iraqi Kurdistan is the lack of transparency. A lot of crises have arisen, especially since the KRG started to send its crude oil to the market independently, and its share of the Iraqi budget was cut by the Iraqi central government.  Due to this situation the KRG has not made paid regular payments to its employees for more than six months and most of the construction projects have been stopped because the contractors have gone unpaid.  In the political sphere, the parties do not have healthy relations because the former opposition parties are demanding clarification and transparency over the oil industry — and especially over its revenues and the contract terms between the KRG and the oil companies — claiming that the two major parties, the KDP led by Massud Barzani and PUK led by Jalal Talabani, control all sectors of power and energy in the Kurdistan Region and use the revenue for the benefit of their parties and their families but not the people. They are dancing on the brink of collapse and this situation will get worse if the leading parties continue to follow the model of Nigeria, relying just on oil and neglecting the potential of the rest of economy to generate revenue.

Unfortunately, due to the bad governance and lack of transparency. if you were to ask John Campbell’s  question of the peoples of Iraqi Kurdistan, without any doubt they would reply, “Nobody except the political leaders”.

Twana Ahmed Xeyat is a civil engineer, based on Sulaimani, with 15 years’ experience in the fields of management  and construction. He also writes articles, translates English articles into Kurdish and worked with several foreign journalists covering the 2003 war.

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