Last month, I talked to a man who works indirectly with one of the Native Corporations of Alaska. “The North Slope is going to be running out of oil in the not too distant future,” I said. “What will you do then?” He paused both considering the question and yet not understanding why I asked. “What does any business do? We’ll find more oil.”
This, in a nutshell, is the problem. For places with natural resources, the future will never come. There will always be a new field to tap, a new workover for a slowing field.
In energy, there are the environmentalists, who are against fossil fuels, worried about climate change and pro future; those in the business, who are pro-drilling, concerned about the here and now, and the sustenance of the industry; and those in places with natural gas or oil (or minerals), who have a different view. For these last, there is no future without fossil fuels. It just doesn’t exist, because it can’t.
In Copenhagen, oil countries demanded to be paid if the world went to green energy. They say the future looks pretty bleak for them without a global need for oil and gas.
Many places that rely oil or gas (or certain mining) actually have nothing else, or at least not that much. They never did. This doesn’t threaten so much the more populated and sophisticated countries: if you pushed Iran and Iraq hard enough — or even for that matter Russia, Nigeria, or Indonesia — these countries could and would find something else to develop an economy from. For them, green becomes as matter of financial readjustment and inconvenience.
But what about the Greenlands, the Chads, the Alaskas, the Saudi Arabias, and the Turkmenistans — the ones without the population, the geography, or the momentum to get something else going?
Even Botswana, which is a healthy functioning democracy and has worked assiduously to diversify its economy with other industries like cattle, still depends on diamonds for up to 36% of its real GDP. Some places, like Alaska or Saudi Arabia, set up savings accounts or sovereign wealth funds, but this is not the same thing as developing a healthy diverse economy.
Now it’s Mongolia’s turn to figure out how to handle its mineral resources. Conveniently located between China and Russia, the country has gold, copper, uranium and lots of coal. Under-populated (2.6 million people), poor (high poverty and under-nutrition rate), Mongolia has to figure out the age-old resource question: use the money to feed the poor and build an infrastructure now or save it for the future?
Mineweb (2/5/2010) says the current government is more interested in developing the country’s resources than the previous one. It has agreements with the giant mining company Rio Tinto and a Canadian company to the Oyu Tolgoi copper and gold mine.
It is also determined to keep as much of the money for itself as possible. It recently decided not to auction the large Tavan Tolgoi coal field, opting to use outside contractors to develop the mine. (Usually developing countries with large deposits but little technical expertise offer lucrative concessions to external extraction companies to get them to develop the resource for them.)
The 100 percent stake (Mongolian) ownership option for Tavan Tolgoi is to ensure that we will benefit from value-added production,” (Mongolian Prime Minister) Batbold told the Mongolia Economic Forum. “The option has been suggested and recommended to the task force responsible. 2/8/2010 Reuters
Mongolian officials are also working with the World Bank to weigh a sovereign wealth fund or a variation on the Alaska Permanent Fund Dividend model, to distribute some monies to the poor.
“ ‘If you go to most developing countries, they’ll tell you, “We’re saved; we’ve found uranium,”’ said Hernando de Soto, a Peruvian free-market economist. Mongolia, he said, has “a president who says, ‘We are in grave danger because we have discovered we have a lot of natural resources.”’
The country is overhauling its social welfare system to direct aid only to the poor. It also plans to improve roads and railroads, creating access to new mines and helping herders bring cattle and sheep to market… They are also leveraging their democratic system to build support for policies including greater investment in transportation and a new budget law aimed at curbing the impact of volatile metals prices.
Mongolians freely criticize their government, as evidenced last week at a Mongolian Economic Forum. Activists, journalists and Parliament members complained that officials were not doing enough to alleviate poverty and unemployment.” Bloomberg News/NYT 2/16/2010
