The resource of greatest economic value in Iraq is clearly the oil. Of course, I’m sure there are many other things of economic value compose an Iraqi GDP, but oil is dominant. A dominant theme in the Iraqi anti-U.S. propaganda is “You want our oil, so get out!”. Well, we want to buy it, but we don’t intend on simply taking it. And we also don’t intend on simply handing it over to some unstable power structure where yet another dictator could eventually grab control. If you believe that “He who has the oil, makes the rules”, and that certainly appears true in all of the Middle East, then let’s focus on the oil and let the politics sort themself out.

If the oil is not to be controlled by the state, which I think is the worst possible outcome regardless of how the political boundaries are eventually drawn, then who is to control it? Foreign corporations claim to have titles to some of those resources, but all of those titles were rendered meaningless with the eviction of Saddam. Besides, the Iraqi people are unlikely to tolerate foreign ownership of their natural resources, regardless of whether the foreign owner is the U.S, Russia, or France. The Iraqis believe they have exclusive rights to the oil, yet a state run oil monopoly is just a recipe for further oppression. So why not have it run by an independent corporation?

Well, a single corporation won’t do. With no competition, it would likely become a puppet of the government. And it wouldn’t generate any market efficiencies. If one believes that the natural result of oil competition would be a “Standard Oil” type monopoly, that is not justification for starting with a monopoly.

So we need multiple independent corporations. I’d say more than two but less then ten. I like four, but for no particular reason over five or six. It’s just easier to conceptualize.

Once the four corporations are created, there becomes a matter of granting resource rights to each corporation. I’d say simply split it evenly. Let them all start from the same base point. Focus on splitting the known reserves and don’t worry about the small stuff like refineries. There is no need to worry because there is no need to be perfectly even. The purpose of an “even split” is to manufacture a marketplace with four (or whatever) equally balanced players. This gives each corporation a better chance of building a strong foundation and not simply being swept aside by a more dominant player, at least from day one. Note that the creation and allocation of resources to these corporations has absolutely nothing to do with current ethnic or political relationships. It is simply the creation of four independent economic units.

Now, it doesn’t matter that they are exactly even because each Iraqi citizen would get a single share of EACH corporation. No individual then gets any more than any other individual. The idea of continuing this grant to all newborn/naturalized Iraqis for 10 years following is simply to grant the newest generation a stake in the country. I’m not sure what the economic significance of this type of dilution would be, but I think it would be offset by the social significance.

A basic restriction would be that no one could sell during the initial 10 years. This would be primarily to allow the Iraqi population time to grasp the significance of what they own, and not simply cash out quickly. Once the share value is better established in the marketplace, and 10 years is allowed in order to build 4 corporations from nothing to something, it is much more likely that your average Iraqi would want to retain those assests. Although the shares could not be sold, they could certainly be left as inheritance.

And for the citizens to be able to truly understand the value of the shares, the corporations would HAVE to pay a dividend on the shares, of let’s say a minimum of 50% of the profits. Maybe even 100%, after “capital investments”. Whatever, as long as significant funds from oil operations are flowing directly into the pockets of Joe Iraqi.

Would this be complicated to setup? Probably, but a hell of a lot cheaper than the 100B we’ve pissed away already. Once the economy is put directly in the hands of the people, they would stop the terrorism on their own. And we could walk away.

Thanks for giving me a forum to air this out.

“Set up a legal system to enforce these property rights”. Well, there you go. Now you’ve put your finger on the problem.

Also, giving a new share to newborn Iraqis, while fair, is more of a problem than you think. Given Middle East demographics, this represents significant shareholder dilution for those Iraqis who are already born and alive. They sure as heck won’t retire on it.

Last but not least, how does this relate to this post or the current reality in Iraq ? Is the fighting in Fallujah, Najaf or Ramadi about oil ownership ? Is that the only problem the occupying power has to deal with ?

The Iraqis should make this decision. And right now, the conditions for them to make it without undue pressure and coercion, and with the right information, do not even exist.

Then walk away.

Finally, I’m not sure I get the whole bit about Iraqis fighting each other. And there is no thug minority located in one single part of the country. It was true for a while but it no longer is. If anything, they seem to be fighting each other less. They are fighting us a heck of a lot more than they are fighting one another. Had we separated Iraq – arbitrarily, without popular consent ? yeah right – who is to say we would not be fighting the Sunnis in their bit and the Shia in theirs ? And if they are fighting one another, who gets to police their borders ?

I guess I don’t get it. Although I do agree with the general principle, I can’t quite map it to this particular reality.

A proposed solution: “oil revenue be split proportionately among the various Iraqi ethnic groups.”

This is obviously a step in the right direction, but doesn’t go far enough. It just moves the battle for power to control oil revenues further down the food chain. Let’s go all the way and establish an Iraqi National Oil Trust with the oil revenues being paid into individual accounts for every Iraqi.

That way, every Iraqi has an interest in a peaceful and united Iraq in order to enjoy their payments from the oil fund. If the oil belongs to the people, let them have the profits.