KAI RYSSDAL: The Iraqi cabinet approved a draft oil law earlier this week. Nothing’s set in stone yet — the full parliament still has to vote. But the law is seen as a crucial first step in deciding how to divvy up Iraq’s most critical natural resource — and the billions of dollars the country stands to make from selling it. Economist and commentator Susan Lee offers this suggestion.
SUSAN LEE: Sharing oil revenue sounds like a great way to sow peace among Kurds, Sunnis and Shiias. But the devil is in the details.
Let’s not forget what happens when governments get their mitts on oil money. It’s called the curse of oil, and it produces a spectacular amount of corruption, graft and waste.
The new Iraqi plan is an oil curse just waiting to happen.
So now is the perfect moment for Iraq to create something just like the Alaska Permanent Fund.
Just listen: the state of Alaska takes a quarter of the money it makes on oil leases and royalties and puts it in an investment portfolio. This portfolio then pays a dividend, each year, to every Alaskan citizen.
Alaska set up this fund 30 years ago, and today it’s got $36 billion in assets. Last year, the dividend was over $1,100 for every adult and child.
Replicating this fund in Iraq would be very, very attractive for lots of reasons. Most of all, it’s a nifty way to contain the government’s opportunities to stick its hands in the cookie jar.
Also, since Iraqi citizens would profit directly, they would all have an incentive to make sure the oil industry runs efficiently and honestly — which is no small matter for Iraq.
The Iraq Study Group estimated that $11 billion a year was being stolen from the oil industry.
In Alaska, the fund runs a tip hotline to combat fraud. Last year it recovered almost $3 million from fraudulent dividend claims.
And here’s a big bonus: an oil fund for Iraq would produce a fabulous, across-the-board injection of consumer spending for the economy.
An Alaska-style fund for Iraq is an unequivocal winner. Hands down.
RYSSDAL: Economist Susan Lee lives in New York City.
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