Iraq’s Last Window: Diffusing the Risks of a Petro-State

In this working paper from the Center for Global Development, Johnny West says Iraq’s oil industry has an opportunity to introduce an oil dividend based on expanding production. The predicted rise in revenues will allow the government to allocate a significant dividend that halves poverty, helps diversify the economy by creating demand at all income levels for goods and services, and stimulates capital formation—all without cutting into the government’s capital spending plans.

West describes how such a dividend program could be structured by, for example, taking advantage of Iraq’s existing rationing system, ubiquitous mobile phone networks, and new biometric ID cards. A dividend, starting at $220 per capita in October 2012 and rising with expanded production, could also cement the affiliation of all citizens to Iraqi territorial integrity, act as a powerful disincentive to secession in oil-producing regions, and create popular pressure among all sections of the population to discourage acts by the ongoing insurgency which disrupt economic reconstruction.