FlashTraffic: Operation Iraqi Free Markets?

Senior Bush administration officials, including Defense Secretary Donald Rumsfeld and Secretary of State Colin Powell, are seriously mulling a plan to privatize Iraq's enormous oil resources and allow Iraqi citizens to share in the wealth generated from oil sales. Iraq has 112 billion barrels of proven oil reserves, second only to Saudi Arabia. Experts say the real total could be closer to 220 billion barrels. But the economy has been paralyzed for decades by Saddam's brutality, is saddled with $140 billion in foreign debt, and has been constrained by UN sanctions and its questionable oil-for-food program (see "The UN's oily dealings," p. 25). So Pentagon officials are quietly talking to members of the Iraqi National Congress and the Kurds about various privatization ideas. They hope that if oil revenues can jumpstart Iraq's economy and create jobs, and if oil profits can begin flowing into the hands of average workers and their families, Iraqis of all religious groups are more likely to agree that there are tangible benefits to working together for a democratic, post-Saddam government. Pentagon officials worry, though, that if Iraq's economy stagnates-or oil revenues are seen flowing into the hands of elites or foreign companies-the country could be vulnerable to anti-American insurgencies led by Ba'ath Party loyalists or Shiite clerics in the South. Such scenarios could create anarchy, and perhaps push the Kurds to attempt to secede. One privatization model under serious consideration by Iraqi National Congress leaders is distinctly American. In 1976, an amendment to Alaska's constitution allowed the state to lease land to petroleum companies, but required at least 25 percent of the companies' revenues to be deposited in a savings account called Alaska's "Permanent Fund" and divided among the people. Last year, the Fund was worth almost $25 billion and provided an annual dividend check of more than $1,500 to every official resident. Could something similar being done in Iraq? "It is under consideration, we're looking at that," Secretary Powell told a Senate Appropriations subcommittee late last month. "The ultimate judgment, of course, is up to the Iraqi people." Mr. Powell, now in the middle of a four-nation trip, heads on May 8 to Israel, the West Bank, Jordan, Saudi Arabia, and Egypt.

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