Tuesday, November 6th 2007
With crude oil prices likely to rise above US$100 per barrel by the end of this year, there has never been a better time for petroleum-rich countries to buy their way out of chronic debt and underdevelopment. On paper, some have made startling progress in this direction. In the eight years since Vladimir Putin assumed control, Russia's gross domestic product (GDP) has increased sixfold, its average salary is now US$540 a month - up from $65 - and nearly two thirds of its overwhelming foreign debt (70% of GDP under Yeltsin) has been settled. In Venezuela, President Chavez has arguably used his country's oil revenues even more wisely. For the first time in living memory, many of Venezuela's working class have become an active part of the country's political process, largely due to the government's widespread subsidies of food, health care and education. This has earned Chavez the unassailable trust of Latin America's poor, even though his critics have referred to the erosion of normal democratic rights and the increasing attempt to take control of all aspects of the society. Elsewhere, however, the track record of newly rich oil economies has tended to be one of general failure, punctuated by occasional success.
Consider Sudan. Human rights activists all over the world have forced the media to pay attention to the ongoing genocide in Darfur. Yet the faltering of the peace agreement which halted the country's horrific civil war has gone largely unnoticed. Before the Comprehensive Peace Agreement (CPA) was signed in 2005, Sudan endured two decades of brutal civil conflict in which an 'Arab' north tried to subdue the country's 'Black' south. That war claimed two million lives; its sequel, if allowed to happen, would almost certainly eclipse the carnage in Darfur. The CPA stipulated that the country's oil revenues, mostly generated by the south, would be shared equitably, but far from being a source of development and income redistribution these have become a catalyst for both sides to reconsider their future. So, although Sudan's proven oil reserves are the fifth largest in Africa and even though the country's GDP has tripled in the last seven years, most of the benefits of the new wealth have gone to Khartoum while much of southern Sudan continues to languish in hunger, disease and grinding poverty.
A few months ago, the human rights activist David Morse accompanied three refugees from Sudan's civil war on a return visit to their villages in the south (his moving account of this journey can be read online at the weblog tomdispatch.com). All of them were from the country's Dinka population, part of the exodus of 'lost boys' - several thousand children who fled to Ethiopia after government forces had destroyed their villages. Their escape took several months during which they were often bombed and strafed by government aircraft. Morse writes, "[s]ome died in rivers; others were eaten by crocodiles and lions. Dying of thirst, they drank any water they could find; some drank urine. Starving, they chewed on inedible plants or ate dirt." Having survived this, the boys managed to make their way to America, and by any reasonable estimate they had done very well there: two had obtained higher education, the third was a professional nurse.
Their return visit was a painful reminder of how little has really changed in southern Sudan. Soldiers, teachers and doctors had often received no salary for months, roads were impassable in bad weather, children got sick and died, often in agony, for want of drugs that should be easily available. Meanwhile, Khartoum maintains a strong military presence near the oil-wells in the south and many openly refer to a plebiscite on secession scheduled for 2011 as the date on which civil war will begin again.
From an accountant's perspective, however, the south should be booming. Last year, Khartoum paid the government of Southern Sudan just over a billion dollars as its annual share of oil revenues - based on a production level of 300, 000 barrels a day. (Since then production has slumped to 254, 000 barrels per day and there are fears that Sudan's oil, already high in sulfur and therefore less valuable than was initially forecast, may be 'maturing'.) But despite the spectacular growth of places like the city of Juba whose population has increased from 100, 000 to a million during the last two years, the government in the south does not have enough money to pay its civil service, or to tackle many of the critical human development needs that it faces. In this context, control of the country's oil is soon likely to degenerate into a lethal confrontation. And, since 40% of the national budget is currently spent on defense, the next war will undoubtedly be much bloodier than the first.
When Morse interviewed Southern Sudan's minister for oil, Dr Benjamin put the problem succinctly: "We are not getting all our oil." The line demarcating claims from the North and South has still not been definitively agreed on and unless that dispute is properly settled, war seems almost inevitable. The minister pointed out that the CPA which brokered the current, fragile peace is an international agreement. It was signed not just by the North and South but also the UN, European Union, the Arab League, African Union and the United States. In a cri de coeur that should be branded on to the hands of everyone who signs these agreements, Benjamin says: "I should not have to shout this from the rooftops! You don't give birth [to a peace treaty] and then forget . . . You need to nurse it, see that it grows properly." It is highly probable that something similar is being muttered by Iraq's bureaucrats.
"Oil don't spoil" said the Trinidadians in their first boom years. But they were wrong. It often spoils, and in spectacular ways. Societies that cannot or will not address their known failings so that they use the money for serious development, soon relapse into all the old familiar quarrels.
That has been been the case all the way from the creation of Saudi Arabia to the impending dissolution of Iraq and Sudan. If Guyana becomes a significant oil producer in the next few years, are we likely to prove an exception?
Friday, November 09, 2007