Afghanistan has been plagued with decades of war, the Taliban, poverty, the opium trade, warlords, rampant corruption, and a dubious election. Now we hear it may have up to $1 trillion in natural resources like gold, lithium and iron.

Will Afghanistan add the resource curse to its troubles? Some  pundits scoffed that the minerals had been known about for years. Some said it would be used as an excuse for the US to stay longer in the country. Many argue the war has already been lost so who cares about mining? Mining could be an incentive to the Taliban or worsen corruption.

But could mining actually save Afghanistan? If handled strategically, yes. Handled wrong, these resources can ruin the environment, further infuriate the population against the government, and increase corruption exponentially. But with a different approach, the government really can use mining to enhance the economy, weaken the Taliban, and lessen corruption.

How? Think locally. Most resource problems stem from the nearly universal exclusive ownership national governments (except America) have of all subsurface resources. Because the faraway government controls all the money and decisions, corruption, environmental and financial mismanagement, and the temptation to ignore local wishes are overwhelming.

Involving the local people changes this dynamic. The Afghan government must include local people as real partners who have a say in and profit from each mining project.  By doing this will do what no counterinsurgency effort can do alone: offer the people something worth fighting for and a way to regain control over their lives and country.

Recently, I tracked a particularly diligent group of US farmers as they struggled over leasing their land for natural gas development. Some might dismiss anything American out-of-hand. But the world over, information about extraction projects — the environmental risks, the resource’s value, the actual extraction process — is notoriously unavailable to the public, and it was in this situation. The group (several hundred) did research and spread the information they found by rural word-of-mouth networks and the internet. They themselves developed the terms for leasing their land, and, after two years, selected the petroleum company they felt best for them. Interestingly, they did not choose the company with the highest initial bonus payment (although they still received a good amount of money), but the one they felt best addressed their environmental concerns and seemed most open to a cooperative relationship. Informed, they made a better decision than any outsider could have made for them.

Although extraction companies promise huge numbers of new jobs during the bidding process, the real job gains for the local population are often more modest. The Afghan government needs to ensure not only jobs in mining and the supply end but also to guarantee a healthy percentage of the bonus and royalties goes in some mutually agreed-to form to the local population. Ultimately, this could offer the area available capital to develop new businesses or local infrastructure.

This is also why it could work long-term against the Taliban. Last year, after decades of fighting over oil income and environmental damage, the Nigerian government brokered a peace deal with the rebels in the oil-rich Niger River delta, offering job training and a $13 daily stipend in exchange for disarmament, along with the promise of $1.3 billion in new local infrastructure. It’s estimated more that 15,000 rebels turned in their guns.

But the opposite is also true. In 2008, Peru sought to open millions of undeveloped acres in the Amazon basin for exploration and investment. It ignored the environmental and cultural concerns of the indigenous people. After a year, the government had a full-blown violent uprising on its hands with 30 dead, and it repealed the offending laws.

Finally, transparency and local oversight lessens the opportunity for wholesale corruption. By making the local population real partners, you equip them with the right to check the books for their royalties. Earlier this year, amid allegations of corruption during the bidding for the giant Anyak copper mine, the Afghan government signed on to the World Bank-backed Extractive Industries’ Transparency Initiative to open their books. It’s only a first step, but it’s a good first step.

Each resource country has its own unique challenges, especially Afghanistan. The government and the companies involved will have to work hard to minimize ethnic and class tensions and rivalries, and to minimize the environmental impact of mining, especially land reclamation and water supply. Not all the minerals deposits will be large or profitable enough for international interest. The Taliban has already some control over smaller mines; a good deal of strategic thinking will have to go into security measures for new ones.

Fortunately, mining resources take time to develop. If it has the political will, the Afghan government can bring in local support and put in place sound environmental protections and financial structures. The outcome in Afghanistan is not inevitable, not the war and not the resource curse.

Accidents happen, but the BP mess in the Gulf was an accident waiting to happen, which is not the same thing — faulty blowout preventer, faulty shears, faulty cement job, lack of blowout plan, possible lack of required permits, definite lack of oversight by the US Mineral Management Service.

At the same time, quite below American radar, something almost as telling has been happening in Australia. That country, where the mineral sector has been going gangbusters, is in the middle of a huge political flap over Prime Minister Kevin Rudd’s move to institute a 40% “super tax” on mining profits. Needless to say, the huge mining conglomerates are up in arms over this, threatening to limit expansion, threatening even the very government in the upcoming elections. Okay, 40% is a lot, but many extraction companies are willing to pay a lot in other production situations in the developing world— if required. Why not Australia?

I don’t think it is only the oil/gas/mining companies that believe they have the whip hand over governments, people, and institutions; it’s the banks and their cousins, it seems anyone in the corporate world feels they can flog a government over taxes and royalties, and then demand bailouts or protections.  It’s the attitude that they are the engines that keep the economy going and without them the world will collapse. Which is like the designers of the Titanic throwing women and children out of the lifeboats so they themselves can be saved because in the future, the people on land will have a need for steamships only they can fill. Instead of welfare queens of the 1970s gaming the system, we have these monolithic corporations, filled with their own sense of entitlement and slyness. Companies must not be allowed to ignore or duck laws just because they are inconvenient or have a cost attached.

It cannot be coincidence that in the past couple days both the New York Times and the Economist have posted blogs much angrier and more populist than I have seen in more than a decade. The New York Times one ( http://economix.blogs.nytimes.com/2010/05/14/companies-what-are-they-good-for/?emc=eta1by Uwe Reinhardt) compares the “liberal” theory of business, where the business of business is all about shareholders (which one cannot even say is the modus operandi of Goldman Sachs), with the currently strengthening shareholder approach, which takes into account the social environment the business operates in. Businesses today may believe in the former, but find they must give at least lip-service to the latter. For example, every energy company — especially BP — showcases their corporate social responsibility and environmentalism on their website.

The Economist’s blog “Democracy in America”  (http://www.economist.com/blogs/democracyinamerica/2010/05/employment_and_jobs_bills) cites recent blogs by Brad DeLong (of Berkeley) and Kevin Drum (of Mother Jones). All three writers focus is on the jobs crisis and why unemployment seems so unimportant (unless you are in the ranks of the unemployed) to Washington in the middle of our Great Recession. The writers trace it back to Ronald Reagan’s Administration and its wholesale attacks on labor and the poor. (Really, I saw it when I was young. It wasn’t nearly as triumphalist as it became after 1991 and the end of Communism and after the Republican mythmakers had 20 years embroidering it. Whatever you think about Ronald Reagan, pretty soon, the mythmakers will have him chopping down a cherry tree.)

In the first of these columns, Delong wrote

I think most of the answer to the difference in tone this time around is the ideological shift produced by the Reagan Revolution, which has over the course of a generation led more people to view economic problems as forces of nature about which the government can’t do anything.

It’s more than that. We live in an age of economic solipsism, where we are told what is good for Goldman Sachs is good for Goldman Sachs — who cares about America? And we must needs believe it. We are terrified of what we will find if we unravel the whole mess at the banks, perhaps all our holdings are worthless. Perhaps the Emperor will have no clothes. But regarding energy and commodities, should we really be afraid that if we put down too many rules or royalties, Exxon or BP won’t want to drill in our waters? Really?  When they are willing to drill in Iraq for $2 a barrel or work in Nigeria? England has a better safety regulations than we do; Norway and Brazil have better environmental safeguards. The company threats on the US and Australia strike me as bloviation.

Still, as our work force (including the media and those with well-developed 401Ks) has become increasingly college educated, it believes more and more in the wholesale conservative economics taught in college, even though these doctrines have now been shown to have no more truth than their predecessors. (Being educated not being the same thing as being smart.)  Two years ago, it was apparent that the political Right had run out of ideas — even the most extreme Tea Partiers have no new ideas. But now it is apparent, neither does the Left. Fighting in Massachusetts over windmills for green energy versus the beautiful views of visible environmental protection does nothing to inspire faith. These are goals or issues, not vision.  At the end of the day, we need a new vision, a new national destination that encompasses our corporate, social, and economic policy — or just a new economic philosophy — and we do not have it.

The extraction companies have forgotten one thing, or think they can control it — China. China saved the entire extraction sector during the long cold winter and spring of 2009. Now it is a fallback for those countries not too chauvinistic to sell to them.  The example of Unocal (whose sale to the Chinese was prevented by the US in 2005) notwithstanding, why shouldn’t any country, not just developing ones, work with the commodity-hungry Chinese? Unlike most of the giant Western companies, China doesn’t seek to squeeze every penny from the countries where they work — they give full payments and sometimes nice freebies. For China, it is not about the shareholders and their own bonuses; for them, it’s national security, a much bigger rationale. The extraction companies seem not to realize the ground is beginning to shift under their feet. What can they offer that China cannot?

Oil and gas royalties have been all the news this week. First, the coveted Pulitzer Prize for public service went to a small Virginia paper, the Bristol Herald Courier. It’s the sort of story which reminds us why it is essential that small local newspapers not go the way of the dodo. Its eight-segment series dissected a rural Virginia nightmare, where farmers and landowners had their land leased out from under them by the state, and then did not even receive the royalties for the gas taken. Royalties stuck in escrow amount to more than $24 million (not counting the money that was wasted, lost during the crash, or mismanaged by the bank ostensibly overseeing it.)

Also this past weekend, the New York Times offered an editorial about how US taxpayers receive no royalties for some of the oil taken from (US waters) in the Gulf of Mexico. Rep. Ed Markey of Massachusetts has offered a bill that every taxpayer should support: to make oil companies profiting from leases signed during the 1990s oil bust now pay the royalties once waived to promote exploration and drilling.

Oil then was $28 a barrel; it’s now $80 a barrel. The need for incentives is long over. According to the Bureau of Land Management, which oversees oil and gas leasing on public lands, federally reported the sales value of the oil and gas (and many mining commodities which are included in the charts) extracted in 2009 was $18,506,539,592.42. The government collected only $2,689,982,674.48 in royalties. We need more.

Personally, I fully understand supporting free enterprise, but I don’t support free rides. Even internationally, in all but the worst leases signed by the most naïve governments, developing countries receive a much larger percentage of the take than the US does. (Don’t forget that recently in Iraq many of these same companies were willing to invest billions in a precarious security and legal situation for the right to earn $2 a barrel for oil.)

The US should not be intimidated by the oil and gas companies. If they will work in some of the roughest and least developed countries in the world, they will work in the safe and supportive USA.

To read the article on the Virginia landowners, how they were bilked, and their efforts to get the money coming to them, go to the Pulitzer articles at: http://www2.tricities.com/tri/special_sections/mineral_rights/ .

Monday, the four executives, three Chinese nationals and one Australian from Australian mining giant Rio Tinto (and so dubbed The Rio Four by Mineweb) , were convicted of bribery and stealing commercial secrets after a closed, two-day trial in Shanghai. Their sentences ranged from seven to fourteen years. One defendant has already said he will appeal. Rio Tinto announced they would all be fired immediately.They had been arrested last July 5th and initially charged with stealing state secrets.

The four had pled guilty to accepting bribes although they rejected the prosecution’s amount of $13 million. But the outcome was never in doubt.

(David Kelly, a professor of China studies at the University of Technology in Sydney said), “This is the way Chinese law has always operated. And they only take a case if they know they’re going to win it, so there’s no room for defense. New York Times 3/23/10

(Reuters also handicapped the outcome: a light sentence would have implied that China wanted to get over with it and on to business; a harsh sentence to prove they had a serious beef and would not bow to pressure; or an acquittal, which seemed least likely, since it would amount to an embarrassment of the police and government.) It turned out to be a pretty harsh sentence.

In August 2009,

China said that it had evidence showing that for at least six years, employees working for the British-Australian mining giant Rio Tinto had engaged in commercial espionage, costing the country about $100 billion. China said computer data revealed that Rio engaged in extensive spying on the industry, allowing Rio and other suppliers to vastly overcharge China for iron ore, a main ingredient in steel.  New York Times 8/9/10

Commercial bribery in any country is scarcely a novelty. Nor is it wrong for China to punish those who give or take bribes. However, it is suspicious that no Chinese businesses were accused, although China says it will be arresting some Chinese businessmen soon.

What makes the Rio Tinto case riveting is the timing and circumstances surrounding the arrests, fusing foreign policy with state commercial interests, muscle-flexing with economic national interests on both sides. To the West, this whole affair only furthers unspoken fears of China’s beanstalk-like growth spurt and its often different value system.

Still, it must be admitted there were some significant issues within the Chinese iron ore industry, beyond foreign policy.

First, in 2009, according to The Economist, Australian officials had said that the four were charged because, only a few weeks earlier, the China Rio-Tinto $19.5 billion iron-ore deal fell apart. The deal’s failure was at least in part due to Australian concerns of the size of the acquisition by a foreign country (as with the oil company UNOCAL, the US, and China a few years ago).

Second, a market (iron ore) that had usually seemed unexceptional went through wild price swings before, during and after the financial crash, which hugely affected China, one of the last buyers left standing.

 Each year the world’s big steelmakers and the big suppliers of iron ore get together to fix a benchmark price for the commodity. (But after the price skyrocketed in 2008) China  contended that the price was manipulated, costing the government-controlled steel industry an additional $100 billion. The Economist 8/1/9/09

Chinese steel mills had been seeking a 40 to 45 percent cut from a year earlier. But seeing an economic recovery in sight, producers offered China the same 33 percent cut given to Japan. China rejected it. Now, the price of iron ore is climbing, and China’s steel mills are being forced to pay a higher price. The arrests of the four employees came just weeks after China and the three big iron ore producers — Rio Tinto, BHP Billiton and Vale Do Rio Doce of Brazil — failed to reach an agreement on a price for long-term supplies. Stern Hu, the Australian executive detained by China, was one of Rio Tinto’s top price negotiators.  (italics mine) New York Times  7/9/09

Finally, the Chinese steel industry procurement practices had themselves become controversial.

Big government-owned steel makers used their import licenses to buy more iron ore than they needed. Then they profited by illegally selling excess ore to small producers that lacked licenses to import iron ore, a critical ingredient to make steel…The market was particularly chaotic in 2007 and early 2008, experts say, when many big steel makers began hoarding iron ore supplies because of soaring global demand and then selling it to smaller competitors. Traders say that last year, companies with long-term contracts to buy iron ore at $100 a ton often sold some of that ore on the black market for nearly $200 a ton, or slightly below the spot market price at the time.  New York Times 7/14/09

Still, the foreign policy aspect matters at least as much.

Australia has worked hard to maintain a successful working relationship with China, which, according to Reuters “is Australia’s biggest export market with two-way trade worth $53 billion in 2008.”

Australian officials expressed disappointment with the verdict, a sentiment which was immediately rebuffed by China’s Foreign Ministry, which was quoted as saying, “Australia should respect this outcome and stop making irresponsible comments.” (Reuters)

It’s this pushback, which is really unnecessary, which causes concern — why is China pushing so hard in this case? Why make such a fuss if it’s simple bribery? No one in their right mind would expect a major company like Rio Tinto to condone it if true.

Since the rise of China, the inextricable fusion of state and commerce (not just companies of a particular nationality), with huge sums of money and trade and enormous economic dependencies, will inevitably alter the parameters of foreign policy.

National Oil Companies, like Petronas, Statoil (sort of), and the Chinese companies, and other companies have gone more often and further afield in the Great Scramble for resources. Unlike days of yore, these companies have developed the expertise and huge bankrolls (not limited by corporate financial management) to be major players. It’s especially visible in the Chinese deals in so many African, Central Asian, Middle Eastern and Latin American countries. As components of the Chinese  government, and with some sectors of their economies dependent on the outcome, how will these state-owned companies and their interests and practices affect foreign policy?

Rio brings up the question, what happens when something bad occurs? Developing countries once viewed Chinese foreign direct investment with whole-hearted joy; in many cases, they still do, since China often pays better to get what it wants. But they too have begun to recognize that with China, there is less chance for positive engagement (like job creation and local outreach), and greater secrecy and so less leverage with the company.

Of course, it isn’t only China that is like this — it’s just that there has been so much Chinese activity internationally that it is hard not to point to it.

This sticking point will come perhaps when there’s  gross environmental damage on, say, the scale of the Exxon Valdez, or human rights violations as surrounds Freeport McMoran’s gold mine in Papua, Indonesia (where there has been a recent upsurge in violence). Usually multinational behemoths can held to account in courts of law, through corporate transparency and reporting rules. What happens when the company is a foreign country that disagrees?

Probably it would clean up an environmental mess post-haste. Human rights violations, I suspect, will be trickier. In the name of foreign policy, these will be dealt with as an internal matter by silencing the complainers. Many analysts have suggested one day it may be more productive to deal with the now-despised multinationals than to entangle foreign policy with foreign direct investment.

China has often simply seen some commercial dealings and values differently than is taken for granted in the West. With some justification, it feels as if it is treated differently, with more suspicion, hesitation and cynicism than more Western partners might.

The value of transparency seems to be a leap for many Chinese officials, but it is paramount to avoid such zero-sum communications and situations. In all deals, there should be only winners; good deals — like good negotiations — should be win-win. Rio was lose-lose.

As the move toward energy conservation takes hold, lithium for use in ion batteries is destined to play a significant role in the energy equation of the next generation. From 2003-2007, global demand for lithium carbonate doubled, and realizing current hybrid car technologies will require access to massive stocks of lithium, which is largely harvested from an oily brine that can seep out of barren, cracked desert lands.

Nissan’s plan to put 500,000 electric vehicles over the next several years, to cite just one example, will mean much more intensive use of lithium batteries than the current generation of hybrid cars.

And South America has the vast majority of the world’s lithium reserves. Almost half of the world’s known reserves are in Bolivia, making it “the Saudi Arabia of lithium”; when combined with Argentina, and Chile—the world’s largest exporter of lithium—the three nations enjoy over 80% of known reserves.

Bolivia’s abundance of lithium once beckoned foreign investment, as pharmaceutical, telecom, and later car firms sought to harness lithium for use in lithium ion batteries and mood-stabilizing drugs. Yet investment in lithium recovery is now bypassing Bolivia, and increasingly targeting Argentina and Chile.

This is because of the Bolivian government’s distaste for foreign investment, epitomized by President Evo Morales’ nationalization of the oil and gas industries in 2006. In 2008 Luis Echazu, Bolivia’s Mining Minister, said regarding lithium mining: “We want to send a message to the industrialized countries and their companies…We will not repeat the historical experience since the fifteenth century: raw materials exported for the industrialization of the West that has left us poor.” Support for Mr. Morales efforts to keep Bolivia’s lithium recovery under national control is broad, especially among the very poor in the country. His position is unlikely to change much.

Enter the runners-up of lithium reserves, Argentina and Chile. In January, Ford and Toyota announced they would initiate projects to recover lithium in Argentina. The separate investments will top $110 million. Chile has appealed to the lithium-minded (no pun intended) for much longer. It surpassed the US as the world’s largest exporter of lithium a decade ago, and its sophisticated firms, such as the Chemical & Mining Company of Chile, have developed strong supply networks in Asia and America.

There are several unknowns regarding lithium’s future: Estimates of total recoverable lithium ranges widely; it remains to be seen if recent green initiatives, by the Obama administration for instance, will fulfill their promise; and, existing lithium batteries may well be recyclable, dampening the demand for new stocks. Still, lithium can be a powerful source of growth for several nations in South America over the next decade or two, allowing a chance for a large swath of Latin America to upend the sad history of natural resources feeding corruption, oppression, and inequality.

Sound long-term planning by moderate governments, coupled with fresh access to a natural resource that is in high demand like lithium, may provide for a development purse, instead of a development curse.

Categorized in Argentina, Bolivia, Chile, Poverty and its Legacy, Trade and Economy

A CROSS POST By Sean Patrick Murphy

Last Sunday, the New York Times reported on the wind energy industry in Wyoming (the eighth windiest state) and how the governor is pushing for a tax on wind energy. The wind power lobby has, of course, expressed its horror that the state would consider such a thing, practically comparing it to killing a newborn.

On this one, I am with the governor’s chief of staff, Ryan Lance, who was quoted as saying, ‘We want to make sure that wind developers pay their way in Wyoming and that the tax burden isn’t shifted to the taxpayers.’ Most of the people of Wyoming agree apparently.

Wyoming is hardly the most tax-happy state. Whatever moral and environmental rationale a person might have, it’s hard to justify a profit-seeking business not having to pay taxes because it’s more cosmically virtuous. All for-profit companies — including green energy — should pay taxes.

The lobbyist has said the wind guys will take their business somewhere else(perhaps the ninth windiest state), but this “we’ll take our toys and go elsewhere” game is the oldest in the energy book, played for decades by the oil and gas companies (among other games). It should be pointed out these companies don’t like taxes, either. But they have to pay them everywhere.

I must admit I love the irony: supporters of green energy asking for the same perks they deride in fossil fuel companies. (I’m not on their side either — I just love irony for its own sake.)

The real problem is that wind energy is barely competitive at this point. It’s just very expensive. The federal government is investing billions of dollars in grants for clean energy, although it is being outdone by China in this. (Of course, China does not have the giant natural gas fields the US can fall back on —at least, not that we know of.)

The technology is in its infancy. But it will get better. It may seem hard to believe but the giant wind turbines we are erecting will someday soon seem quaint. (Gigantic, but quaint.) Just as petroleum was of little use till the combustion engine (especially the automobile), and just as, about a hundred years ago, the cracking process made gasoline infinitely more useable, so too will wind and other green energy evolve. But the need to cut costs will be what does it.

There is no reason not to tax, that the communities around them shouldn’t profit too. Not taxing green energy companies would set a terrible and hard-to-change example.

Today, March 9, is the day about twenty countries,  including Nigeria, Gabon, and Equatorial Guinea, who have signed on to the Extractive Industries’ Transparency Initiative (EITI) were supposed to finish and have filed their Validation forms. Validation is EITI’s “quality assurance mechanism,” a step toward achieving Compliance with the EITI standards.

The Initiative is designed as a process by which countries and extraction corporations open their books and make their financial dealings available to public oversight. The idea, which began in 2002 and was fostered by then-British Prime Minister Tony Blair, was intended to stem the overwhelming corruption of the oil, gas and mining sectors. The thinking was, if everyone knows how much money is being paid for the oil/gas/minerals, the corruption can be tracked and stopped. Ideally, the money could and should go toward sustainable development; the alternative is the resource curse.

Validation requires the country to bring together multiple stakeholders, including some from civil society, to develop a plan by which the financial numbers reported by the extraction company and those reported by the government can be reconciled and made public. (This is not as easy as it sounds, since the extraction revenue is not only one stream, like pure royalties, but can include other sources, like signing bonuses, fees, and taxes.)

Compliance requires an independent audit at international standards. Countries who sign on have two years to come up with an acceptable Validation plan. To date, only two countries — Liberia and Azerbaijan — are actually in Compliance. Multiple NGOs have dedicated themselves to transparency advocacy, such as Publish What You Pay, Global Witness, Revenue Watch, and others.

Will the countries make the deadline? There are reasons to hope and reasons to doubt. Many developing world countries may lack the capacity to meet the goals of EITI (the accounting, the legal stuff etc). Jonas Moberg, Head of the EITI Secretariat, says he does not expect all the countries that are supposed will meet it successfully.  (Gabon and Equatorial Guinea already have asked for extensions.) If a country shows serious progress, it can take a little longer. But not forever.

Will EITI end the resource curse and corruption? Transparency is necessary but not sufficient.  But just by itself, the Validation process has helped in two ways, Moberg said in an interview. “You will need other measures and it won’t solve everything, but you have to start somewhere… The (Validation process) has had a tremendous impact on building trust.”

All this is true: transparency will be quite an achievement and could deal a body blow to the endemic corruption. Still, even with transparency, corruption, waste and mismanagement can linger. “How the money will be spent is not our mandate.”

The problem is that EITI, like so many other worthy initiatives, depends on the political goodwill of the country and leaders involved — and of course that is not a sure thing. Like so many international norms, like human rights or democratic governance, signing on to the ideal does not mean an actual attempt at implementing the reality. It’s like that old joke in the movies, “You was serious about that?” Although it is easy to see why civil society wants transparency, it isn’t very clear how transparent we’re talking here — will it include leaders’ bank accounts and salaries?

It is hard to be totally convinced by so many countries so steeped in decades of corruption. What is the incentive for some of these leaders? It is also uncertain how some of the National Oil Companies, which consider their business dealings in these countries and industries to be private, will respond. Although China has shown some willingness toward disclosure when required, it has also a history of considering such information a state secret, including the Rio Tinto case. Its increasing power in extraction countries remains a wild card in the EITI equation.

Perhaps —no, undoubtedly — only the World Bank would host an event to discuss the fiscal systems different countries have to divide oil and gas revenue. The conference, held in Washington DC by the Bank’s Oil, Gas and Mining division, concludes today.

While some systems are unitary (like, on balance, Indonesia), many today are federal. Fiscal federalism refers to the policies and division of the money between national, state/province/etc, and local levels. Since in most countries the government owns all subsurface rights (the US is an exception), the revenue from oil and gas has to be divvied up somehow. Does it first go to the federal government who, hopefully, will send back an agreed-to percentage? Does it automatically get shared? How is apportioned out? Who sets the taxes? Who oversees projects?

This is the mid-level minutia of mid-level policy makers and bureaucrats, and yet it is the determinant of taxation, revenue apportionment, policy  implementation, expenditures, and how happy everyone will be.

Since this is the World Bank, the ten papers on various countries (Pakistan, Australia, India, Argentina, Brazil, Venezuela, Russia, Canada, Nigeria, and the US) are often impressive technically (sometimes too technically) without giving a lot of feeling for how well each approach actually works or if the system is actually works in a positive way on general development or impact on the population. The paper on Pakistan, for example, makes mention of the violence and tension felt in Baluchistan and Sindh in only the most general way. But if you are interested in how oil and gas revenue works in different countries, it is hard to see where else you could get this level of information.

The conference included speakers/papers on general issues, such as conflict and ownership of natural resources (very interesting), commodity dependence and pricing after the crash (very informational).

I refrain from the nitty gritty — I realize it can be a snooze for most —although I will say I learned much more from the paper about US leasing on public lands than I did from the Bureau of Land Management website. If you are so inclined, the conferences papers can be found at:
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTOGMC/0,,contentMDK:22452146~pagePK:210058~piPK:210062~theSitePK:336930~isCURL:Y,00.html

Democracy produces stability only when it actually responds to the needs of the people. So India is taking steps to neutralize a Maoist rebellion in eastern India by increasing payments to local people being displaced by mining development.

The government will introduce a new bill, probably in the current session of parliament, to raise the payout to affected people and direct large mining firms to link the payment to their profits, B.K. Handique told Reuters.

“It will not only be a one-time payment. We are thinking of giving them annuity throughout the year from their profit domain,” he said.

For years villagers and tribesmen have opposed several projects such as India-focused miner Vedanta Resources Plc’s bauxite mines and POSCO’s  proposed steel plant in the eastern state of Orissa.

The protests have been often violent, with Maoist rebels killing people, disrupting mining operations and damaging property in eastern and central India, saying companies were exploiting the region and its mineral wealth.”  Reuters, 22 Feb 2010

It will probably increase the costs but what happens when people are forcibly displaced? Remember Peru last year? Months before the violence turned extreme, even the Economist was saying

Peru’s president, Alan Garcia …has granted land concessions for oil and gas exploration, mining, biofuel crops and logging. The problem is that many of these are superimposed on towns, farms and natural parks. That is a recipe for conflict. March 19, 2009

As harsh as it is, relocation is not a sure thing either. Increasingly, though, mining companies are realizing that perhaps better dealings with the people will yield better results.

…a Chinese company, Chinalco, is proceeding with a plan to move Morococha, a town of 5,000 people, to develop a big copper deposit. This whole project will cost over $2.5 billion… The Economist 1/29/09