Iraq – The Model ….. for Democracy and Private Sector Development

By Gavin Jones, Director of Iraq Business News, and Partner at consultancy firm Upper Quartile.

Something we could not have predicted five months ago is that Iraq would emerge as the most advanced Arab democracy in the entire region. As messy as it is, when you think back to the months and months that it took to form a government, and the fact that the conflict was political, they weren’t in the streets shooting each other. The government wasn’t in the streets shooting its people.” Bob Gates, US Defense Secretary.

Well, well ……………. given all the soul searching and some of the appalling misjudgments by various Governments involved in the reconstruction of Iraq followed by some the comments then made by the press over the management of the country by the Iraqi Government maybe the cynicism in the West is becoming a bit more muted.

Looking back to all the press speculation at the various game changing decision-points in the country’s development over the last 5 years it is astonishing how wrong all the experts were and – in many cases – still are. We have hosted Iraqi delegations to the UK on a number of occasions – on the first one a delegation of international oil companies dedicated time to explaining to the Iraqi Government that Service Agreements would never work; explaining (carefully) that if the Iraqi Government were looking to much-needed investment, they needed to come into line with the rest of the world and award Production Sharing Agreements (PSA’s) – or the international oil industry would walk right on by and invest elsewhere.

The press presented the 1st license round as a failure by the Iraqi Government who only allocated one license out of the ten bid ………… and publically forced BP to reduce their bid from $3.99 per barrel to $2. BP was hammered in the press for agreeing to take such a cut and the press talked about the oil community by-passing Iraq.

Where are we now; all licenses are awarded; BP’s agreement looks pretty shrewd with other service agreements being awarded at $1.39 per barrel and $1.15 in much smaller fields. And they are all there – Americans, Korean’s, Russians, Malaysia – and all contracted as service companies to the Iraq Government.

We watch the International Oil Companies – so used to being top-dog – coming to terms with their role of a sub-contractor …………. and some are taking a long time to adjust to this position.

The next issue to unfold will be whether Iraq holding out is going to change the way oil-rich countries allow companies to operate in their country is going to become embedded ………… eyes on Libya!

What Mr. Gates was in effect saying is that Iraq as a democtatic model is a potential bulwark for American interests in the Gulf. The private sector is piling in with eye-watering levels of investment – the Press (still) won’t acknowledge that Iraq is looking pretty good but – generally: mission accomplished.

It leaves the question as to why the interventions in Libya are based on principles learnt in Afghanistan; it’s the wrong model stupid! Learn from Iraq ….. not Afghanistan.

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