From here: http://news.independent.co.uk/business/news/story.jsp?story=447630
Dude!
I think he wants an explanation of what it means to mortgage furture oil revenues and exactly what is implied by that. Maybe?
It’s an interesting development. Usually, when rich countries (actually, those countries’ banks) lend money to poor countries, the loans are unsecured. Even a loan backed by future oil seems risky, considering the shaky politics of Iraq.
Having a defeated country pay for its own invasion is an interesting twist, though.
I guess a question would have been nice…
I thought the US was screaming loud and hard that this war was not about the oil? Now, before you jump all over me, I don’t believe the war was about oil either. So… why are we taking proceeds from… Iraq’s oil?
Is it just to pay for the war? And was it known that this would happen before the war?
The idea that the war was over oil, supposed that the U.S. meant to control the oil of Iraq and use it to its own advantage. It is different if the proceeds from the oil are going to rebuild the infrastructure in Iraq. Why should we have to pay for that, if they have the means to pay for it?
How about because we broke it? Or do you think that if someone smashes you car you should pay for the repair just because you can?
I think the question here is why isn’t this in GD?
Sailor, that country`s infrastructor was in shambles before we invaded. True, we made it worse, but the overall costs could not be accurately determined until we figured out how much we wrecked and how much would have been needed to get the country up to par regardless of invasion.
And the car analogy; if the police have to run you off the road because youre evading, do they pay the damage to your car or do you? You may even be forced to pay for damage to the squad that ran you off the road. I guess it depends on what side of the war issue youre on…
The Dept of State made a number of studies that provided results that turned out to be reasonably accurate. The Pentagon decided not to use these numbers before the war. Now, post-war, they’re commissioning new studies that reveal remarkably similar numbers.
But, the real question is how practical is it to mortage the oil revenue of Iraq. It has over $100bil in external debt already. The revenue for the next year is only projected to cover the operating costs of Iraq, (when combined with expected tax revenues). Even when things are up and running, the expected gov budget revenue will be only in the neighborhood of the $20bil that’s been proposed.
Iraq’s external debt is already 1000% of expected budget revenue. It’s about 200%+ of GDP. (The IMF has cautioned the US for approaching 6%.)
If the revenues were mortaged the payments would end up being so small and spread out over so many years as to not be much of a repayment for any fiscal year.
I’d have to guess that the whole mortage thing is mere political noise.
Relevant quotes and cites to follow
Look here:
http://boards.straightdope.com/sdmb/showthread.php?s=&threadid=212556&highlight=revenue
I agree that it depends on what side of the issue your on. I think the police analogy is sort of a good one, but in my opinion the scenario is a little different.
Its more like a police officer, or group of officers gunning for a known criminal on their own initiative. While going after the criminal, they do serious damage to some of that criminal’s stuff. Furthermore, they didn’t really get approval and some of the charges they used to justify their arrest seem to be bogus. It also appears that the police involved with the arrest have commited a few crimes themselves.
It seems to me that you could argue with my analogy above, but most of the arguments against it that I see are with using the police analogy for America. I don’t think the US is really analogous to the police, in this situation or ever. I also don’t want to make anyone angry with my analogy, this is just my humple take on the matter and I can see that other’s have a different point of view.
Leaving aside the GD aspects of who should pay for what and the GQ as to whether Bremer ever said what the Independent said he did in so many words, what we’re talking about here is just a method of financing.
If you’ve got short-term needs and long-lived assets, it may in some cases make sense to use the assets to lower the cost of financing the needs, even if the asset is not directly related to the need. U.S. states have been doing that with the stream of payments due from tobacco companies’ settlements.
An unsecured loan to a newly formed government in an unstable part of the world could be pretty expensive. With oil prices fairly high and interest rates fairly low a properly structured oil finance conduit could lower the overall costs of whatever it is one wishes to do – in this case rebuild Iraq, including tripling its export capacity and increasing in-country refining assets.
Much like the tobacco market, structure and timing are important here. If oil prices were to come down the financing cost rises. The parallel, again, with the tobacco settlement bonds is that now that the tobacco companies’ creditworthiness is under pressure from additional civil verdicts the states are finding they must also give a full faith and credit guarantee to newly-issued bonds.
Does that answer the question?
Moved to Great Debates.
-xash
General Questions Moderator
Current Iraqi external debt: $120bil
Projected Iraqi budget revenue, ( CPA est oil and taxes): $12bn-$13bn $14bil
Pre-war GDP: $58bil
Estimated costs for rebuilding Iraq: (McKinsey)$90bil
(white house est)[url=]$75bil
Amount currently proposed by WH: $20.5bil
Amount requested from other nations: $55bil
So even if oil revenues were mortaged, the pay off time would be considerable.