Critical Resource shares a few words with the British politician and Iraq and Afghanistan expert on lessons for firms venturing into these complex countries
Rory Stewart has packed in a lot in his 38 years – army officer, diplomat, best-selling author, Harvard professor and since 2010, a UK Member of Parliament. Between 2000 and 2002, he travelled on foot across Pakistan, Iran, India, Nepal and Afghanistan – the latter was his home for two years and provided the setting for his first book.
In 2003, he was appointed Deputy Governor of two provinces in Southern Iraq shortly after the entry of coalition forces, where he was responsible for leading development projects, and establishing functional government. During a quick chat with the MP, Critical Resource asked for his advice for resource firms venturing in to Iraq and Afghanistan. (Please note that the opinions expressed below are Rory Stewart’s, and may not necessarily reflect those of Critical Resource.)
Critical Resource: 2011 sees renewed and vigorous interest in Iraq’s oil reserves by international oil majors such as Shell, BP, Exxon and ENI. What does their decision to enter (or re-enter) Iraq say about where the country has come since 2003?
Rory Stewart: Their decision reflects the fact that attitudes have changed and foreign companies are much more welcome. The Iraqi government in 2003 was under attack and paranoid about a US led invasion which they perceived to be “all about oil”. It has taken seven years for the Iraqi government to develop the confidence to structure partnerships with international companies.
Critical Resource: Basra, in southern Iraq, has been a key focus of oil company interest. During your time as Deputy Governor you had mixed experience in delivering community investment in southern Iraq. What lessons do you have for oil majors hoping to build local support amongst communities in the Basra area?
Rory Stewart: What’s distinctive about the Basra area, compared with the areas around Baghdad or Kirkuk where there have been conditions of near civil war, is that it is relatively ethnically and religiously homogenous – they’re almost all Shia Muslims. But that has meant that the violence in southern Iraq has often been directed less against other Iraqis and more against foreigners. Therefore, it is vital for international companies to build trust and confidence in local communities, and to do so by delegating serious responsibility to local Iraqis. But this is always tricky – doubly tricky if you’re a foreigner, and trebly tricky of you’re a foreign oil company. I cannot emphasise enough the importance of including Iraqis at the most senior level.
Critical Resource: Some international resource firms are now beginning to see Afghanistan, understood to be rich in minerals, as an investment risk worth taking. What do you see as the main challenges they will face doing business there?
Rory Stewart: Stability of government. It’s possible to overcome some of the security risks, it’s possible to overcome some of the uncertainty about the exact nature of the deposit, but the real question is the question of title. At the moment, until there’s a political settlement between the Afghan government and the Taliban, I think foreign companies will be anxious about political stability, and I think they should be.
Critical Resource: Where do you feel the balance should lie between the need to develop Afghanistan’s mineral wealth, and the desire to protect its rich cultural heritage? For example, one copper mine said to threaten an ancient Buddhist monastery has attracted particular scrutiny in this regard.
Rory Stewart: In that particular case, I believe it’s a tragedy. Afghanistan does of course need to generate income, but the international community is currently spending somewhere in the region of $135 billion a year in Afghanistan. The amount of revenue that could be generated from that particular copper mine – although significant in terms of Afghan revenue – is very small when compared to the overall level of expenditure. This is one of the most unique historical sites in the world.