Oil Wars

Many like to say that the good things happening in Venezuela are nothing more than the result of high prices. Of course, one would have to be quite naïve not to realize that the surge in oil prices does have a lot to do with Venezuela’s recent successes.

But high oil prices in and of themselves guarantee you nothing. You still need a competent and efficient government that implements the right policies. If you don’t have that you are lost no matter how much money is coming into the country.

Witness the case of Iraq which exports almost as much oil as Venezuela, has received billions and billions of dollars in foreign aid, and has hundreds of thousands of foreigners there to presumably help the country. Although it has virtually the same population as Venezuela and should be booming it seems to be moving in the opposite direction as Venezuela as the New York Times pointed out on Saturday:

Weary Iraqis Face New Foe: Rising Prices

BAGHDAD, Iraq, Aug. 25 — For Mehdi Dawood, Iraq’s failures have leached into the cucumbers, a staple of every meal that now devours a fifth of his monthly pension.

And it is not just the vegetables. Fuel and electricity prices are up more than 270 percent from last year’s, according to Iraqi government figures. Tea in some markets has quadrupled, egg prices have doubled, and all over the country the daily routine now includes a new question: What can be done without?

“Meat, I just don’t buy it anymore,” said Mr. Dawood, 66, holding half-filled bags at a market in Baghdad. “It’s too expensive.”

“We are all suffering,” he said. “It’s the government’s fault. There is no security. There is no stability.”

As if Iraqis did not have enough to worry about. Going to the market already requires courage — after repeated bombings there — and now life’s most basic needs are becoming drastically more expensive.

Three months into the administration of Prime Minister Nuri Kamal al-Maliki, the inflation rate has reached 70 percent a year, up from 32 percent last year. Wages are flat, banks are barely functioning and the consensus among many American and Iraqi officials is that inflation is most likely to accelerate.

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Mr. Maliki’s office has responded with proposals to spur foreign investment and calls for public patience, even forgiveness. But billions in American aid has already been spent on Iraq with limited impact.

Compared with security problems, which can be addressed to some extent by deploying more troops to the streets, the economy is harder to control, especially since most Iraqi commerce occurs beyond the reach of government policy.

Fuel remains the country’s most visible example of economic dysfunction. A gallon of gasoline cost as little as 4 cents in November. Now, after the International Monetary Fund pushed the Oil Ministry to cut its subsidies, the official price is about 67 cents.

The spike has come as a shock to Iraqis, who make only about $150 a month on average — if they have jobs. Estimates of unemployment range from 40 to 60 percent. And with black-market sellers commanding $3.19 a gallon because of shortages, up from about $1.25 a few months ago, the actual price most Iraqis pay is far higher than what is officially sanctioned.

Filling up now requires several days’ pay, monastic patience or both.
Three years after fuel shortages led to riots in Basra, tension is often palpable at the pumps. Lines stretch as far as the eye can see, and at least two shootings have been reported in Baghdad this month alone. Near a station downtown this week, bribes and line cutting appeared to be the norm. At one point a Mercedes and several police vehicles cut ahead of at least 50 cars while a policeman watched.

“Why are you letting people come from outside?” shouted a man who was just a few cars from the station after seven hours of waiting.

The station’s manager said the drivers given special treatment must have had a note showing that they were doctors, or attending a funeral. A few hundred yards back, by a beat-up station wagon, Abdul Rehman Qasim had a different theory: the drivers avoiding the wait possessed either money or power. He had neither.

“I’m a poor guy,” he said. “So I leave some of my children here. They spend the night in the car.”

“Under the government of Maliki, things are getting worse and worse,” he added. “Only God can save us.”

In Iraq’s once-bustling markets, frustration is equally acute. Car bombers have regularly attacked commercial districts, and prices seem to be up at every stall. At markets in a middle-class Shiite area near downtown, chickpeas have doubled in price. Lamb now runs as high as $2.75 a pound, up from $1.50.

Cucumbers, tomatoes and eggplant have all jumped too, while the price of the propane gas cylinders most families use for cooking has quintupled to more than $15.

“We live hand to mouth,” said Mr. Dawood, a retired clerk for Pepsi.
Veiled women shopping nearby agreed. “We’re tired, and the situation is horrible,” said Zakiya Abid Salman, 55, a widow carrying eggplants. “There are no jobs, and the prices are always rising.”

Merchants said they had no choice but to increase prices because of the increased costs of doing business. And still, they said, their incomes have declined.

Ali Fouad, 27, pushing live fish around a shallow tub of water, said the price of transporting his product from farms south of Baghdad has nearly tripled since last year. A few months ago he sold about 110 pounds of fish a day, earning roughly $50 after expenses. Since he had to raise prices about 60 percent, he said, he sells less and earns only $20 a day.

“What’s our life today?” he asked. “We are working only for gas, ice and electricity. There is no savings.”

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Ali al-Dabagh, a spokesman for Prime Minister Maliki, said in an interview that “the government is working hard to find solutions.” He blamed terrorists for undermining Iraq’s elected leaders, but he acknowledged that the country “needs an administrative revolution.”

For the families trying to survive, time sometimes seems to be running out. Fathi Khalid, 43, a vegetable seller with a mostly empty stall, said obstacles seemed to multiply by the day. Sometimes roads are blocked so harvests never arrive. Sometimes he cannot afford to pay the right bribes. And week after week, his customers purchase less and less.

“Most people buy half what they used to,” he said. “The vegetables sit here and rot.”

It really is unreal that with skyrocketing oil revenues and foreign aid Iraq has inflation that is spiraling out of control. In Venezuela, by contrast, inflation has been more than cut in half. Too bad for Iraq Nelson Merentes, Venezuela’s Finance Minister, already has a full time job. But I hear former Finance Minister Tobias Nobrega may be available. God knows, the Iraqi’s need some good old fashioned Chavista competence.
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