Iran exports the resource curse

Posted By Elizabeth Dickinson Tuesday, June 23, 2009 - 3:49 PM Share

As the world watches Iran, one unexpected country is paying particularly acute attention: Uganda. That country's oil-exporting future lies -- for now at least -- in the hands of whoever sits in power in Tehran.

The country's President Yoweri Museveni recently concluded talks with Iran's President Mahmood Ahmadinejad for the  construction of an oil refinery in the East African country. At least some of the funding for the refinery will come from Iran (reports vary on how much -- for example here and here). Tehran also promised to instruct Ugandans at its University of Petroleum Studies and invest throughout the oil pumping chain.

Uganda is a newcomer to the world of oil export. Its resources, now estimated at 2 billion barrells (Iran, by comparison, has reserves of about 130 billion), are just now beginning to come online. The deal with Iran is aimed at making the country's oil industry self-sufficient and value added; unlike other exporters on the continent such as Nigeria, crude oil will be refined in country and sent as a finished product for export. In theory, that could save the country some money -- and the need to ironically re-import its own gasoline. But some wonder if the refinery, at an estimated cost of $1.3 billion, will really be cost effective for a country looking to pump out just 100,000 barrels per day.

Either way, it's somewhat disconcerting to imagine Uganda following in Iran's path as an energy giant. The behemoth of oil revenues failed to improve the country's lot last year; and instead, economic calamity set in. If Uganda looks to that example, Iran's election outcome isn't the only gamble in the country's future. 

EXPLORE:AFRICA, ENERGY, IRAN
 

EDREED

8:44 AM ET

June 24, 2009

really?

I'm not sure I really agree with your point. Iran's refinery offer for Uganda is interesting, but you seem to have made a few leaps that don't really follow through.

To start with, can you "export" the resource curse? And how would Iran building a refinery in Uganda do so?

I'm not a development economist but it would seem that building infrastructure in the country - in this case Uganda - would surely be one means of counteracting the resource curse? It would provide more jobs and benefits to the locals, rather than exporting raw materials.

When you say "some wonder" whether it's a good idea, the person quoted is a Heritage official. Clearly he knows what he's talking about but it might have been worth pointing out that a) he's got a vested interest and b) it's not entirely clear he's commenting on the planned Iranian refinery.

To say that Uganda's export plans rest on Iran seems a little curious as well. I'd have thought that Heritage's Brian Smith might disagree as would Tullow. As far as I'm aware they're planning an early production system and, ultimately, a pipeline to Kenya's coast.

Finally, the idea that Uganda is "following in Iran's path" is a weird leap and I don't really understand what you mean by it. Iran has trouble providing enough fuel for its people, certainly, so both countries rely on imports. But if Uganda built a refinery it would then be able to export fuel, which would suggest it's going in the opposite direction to Iran.

Perhaps another way of looking at it would be why Iran might want to build a refinery in Uganda. Also, talk is cheap, refineries aren't. It's all very well for the Iranians to say they want to build a refinery in a landlocked East African country but it would pose significant problems and take a very long time.

 

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