Control and power matter in many centralized, capital intensive industries. But few have a history that show this as clearly as oil.
1) The World Bank, et. al. do argue that you lease the oil in a PSA and make as much by getting a good lease and allegedly good international management. A win-win. The same argument can be used for full formal privatization (one uses taxes, fees, etc to get a good deal). But at critical moments (and there will be critical moments) the company controls the machinery, the know-how, the marketing arrangements, the production information, the geological information, etc. And they control the decision whether to pump more or less.
"Critical moments" can be historical (those major shifts in the nature of the oil market) or just year to year (whether to pump more or less, in concert with OPEC etc). They will also be "critical moments" for reasons unrelated to the oil market - e.g. when the future direction of the country requires money for a long period (a major new development project) or a short period (a currency crisis). Control of these "critical moments" will be in the hands of people who explicitly have no interest in the nation's future (and may even prefer weak governments).
2) Then there is the relationship between politics and economics which the "economistic" perspectives exclude. In theory, the U.S. could freely tax the windfalls the oil companies periodically receive from the leased offshore oil but... In theory, a developing country could get a good PSA but a PSA is a process not a one time contract -- the implementation and actual payments require sophisticated, determined and uncorruptable government review and regulation (for example all oil pumped before the accounting tranche that is determined to be "profit oil" will be the exclusive property of the oil company). In short, you are inviting into your often weak country, with governments that are easily brought down, extremely powerful oil companies who are backed by the most powerful states on earth, and you are creating for them a vested interest in undermining the independence and strength of your government.
In the last year alone, the outside forces generated by PSA arrangements crashed the coalition government of Ecuador, leading to a year of instability (and, ironically, a leftist government albeit weak); will the country be better for it in the long run? This year, the PSA arrangements in Bolivia (in gas, fortunately with companies that were not U.S. based) created enormous problems for Morales -- with the companies holding the trump card of control and knowledge.
In Venezuela, even the relatively smaller deviation from true national control that Carlos Andres Perez intitiated when he nationalized the oil companies in 1977 (PDVSA was given autonomy and set up as 4 competing companies) mushroomed into the core of the forces that initiated the recent Coup d'Etat.
For developing countries these are powerful political forces that politically need to be carefully harnessed.
Christian must know that a lot of serious criticism has been put forward of PSA's and particularly for Iraq. see for example http://www.globalpolicy.org/security/oil/2005/crudedesigns.htm
Paul
At 05:54 PM 12/19/2006 -0500, you wrote:
>[Christian writes...]
>
>Doug,
>
>Tell your list that:
>
>the wise Mage (as usual) is right. I over stated that.
>Iraq would need start up $ but would then be self
>financing. I plead guilty to cranking out that piece
>in one sitting.
>
>But as for "production sharing agreements" which is
>the form that "privatization" of oil usually takes --
>the real assets below ground are almost never sold off
>-- were already in the works under Saddam.
>I don't think there is any huge hurdle to involvement
>via PSAs by the majors, the independents, the chinese,
>et al.
>
>the question is not really privatization vs state
>ownership it is the cut, or split on future PSAs...
>will it be fair or totally unfair?
>
>As it stands now the Iraqi oil industry, which I have
>been looking into, is in near collapse and if the
>country goes to hell so goes the industry.
>
>My main point (or attempted) point was this: a
>rational section of the ruling class is now worried
>about something much more than Iraq's oil. It sees the
>real possibility of region-wide chaos: social
>breakdown spreading on a previously unseen scale. they
>have at the helm a man who seems to work only for
>himself and not for his class.
>
>CP
>
>
>--- Doug Henwood <dhenwood at panix.com> wrote:
>
>>Christian - fyi - Doug
>>
>>Begin forwarded message:
>>
>>>From: John Mage <jmage at panix.com>
>>>Date: December 19, 2006 4:26:37 PM EST
>>>To: lbo-talk at lbo-talk.org
>>>Subject: [lbo-talk] Re: Parenti on ISG: we lost,
>>time to leave
>>>Reply-To: lbo-talk at lbo-talk.org
>>>List-Archive:
>><http://mailman.lbo-talk.org/pipermail/lbo-talk>
>>>
>>>The excellent Christian Parenti writes:
>>>
>>>>Experts close to the industry say the country
>>needs $20 billion to
>>>>$60 billion in capital investment if it is to
>>recover its former
>>>>glory. That deficit alone practically insures
>>future privatization--
>>>> or at least liberalization of participation by
>>foreign firms and
>>>oil
>>>> majors.
>>>
>>>This is deeply deeply wrong - it is not "the
>>deficit alone" that
>>>"practically insures" anything. With Iraq sitting
>>on top of a lake of
>>>scarce oil, once there is a viable government and
>>peace there will be
>>>many many sources of capital investment on terms
>>not less favorable
>>>than
>>>those given to Iran, Libya, Venezuela, Indonesia
>>or other
>>>***independent*** countries. China alone would
>>pay the necessary on
>>>terms that do not involve privatization or
>>production sharing
>>>agreements
>>>- a kind of colonial subjugation that does not
>>exist in any other
>>>significant producing nation. Christian has
>>swallowed something
>>>vile at
>>>a gulp.
>>>
>>>john mage
>>>