tv Key Capitol Hill Hearings CSPAN May 8, 2016 3:31am-5:32am EDT
james? >> how much time do we have? -- thing to be mindful of is this is something that comes out -- in mergers through an analysis of the documents of the past 70 years. the relationship between china and north korea, despite what we think in washington, by the propaganda, that they are as close as lips and teeth. there really is a profound sense of mistrust going both ways. but especially in pyongyang toward beijing. there is a sense that china has overly interventionist over the years, meddling in north korea affairs in more than one occasion. there is also the sense that china is less than respectful of north korean 17 -- north korean sovereignty.
north koreans pick up on this middle finger mentality. they feel that china's trying to koreart its hegemony over . of course, it leads to meddling. so it doesn't surprise me when relations sour. thei'm shocked more by people same -- by the fact that people seem perplexed by the souring of relations between china.orea and as recently as the mid-2000, china's aid to north korea was was up and down. it hasn't been consistent. there have been periods of andnse, you know, mistrust
souring of relations. this is something to -- again, something else to keep in the back of your mind as you are reading reports in the newspaper about the relationship with china and north korea. decades,e past seven their relationship has -- i would say, you know, at one point i went through and tallied up. out of the past 70 years, this is when relations were pretty okd versus, you know, just versus really bad. and it was, in fact -- i would say that the majority of the years -- unfortunately, i don't remember them off the top of my head right now -- the relationship was not so good. -- it tookoreans them a long time to get over perceived offenses or meddling in their internal affairs. >> thatcherite.
-- that's right. does not seem prepared to kiss and make up -- thee chinese, even if chinese had wanted to come i think, most of last year before the test. it was the north koreans who are holding back, nothing chinese. thele tend to think that dynamic is that in the north koreans are begging to be let back in the house. it is really the other way around. and the chinese were pushing to get back in and the north koreans were not having any of it. said,cause of what james they have been through this so many times. they live next to each other. geography is a pretty powerful predictor of the future. so they always make up because they have to.
they absolutely have to. and every time things go bad, people in washington say, oh, this is it. the chinese are just through with the north koreans. so far, the cycle has always come back to a more balanced approach and then it gets a little bit better and then it gets worse again. so we are in the middle of a cycle right now. and the north koreans are not crazy enough to completely sever chineselations, and the would not, for example, the surprise that the north koreans were angry at them for voting for sanctions and shrugged it off. they will live through this period, presumably, and five years from now, we will be back to normal. >> if i could get anyone to read these two documents, it would make things so much clearer. october 1973 conversation andeen kim il-sung
bulgaria. 1977 report a relations between the chinese and north korea. between kimersation jong-il and a mongolian official. seven-day one was 19 -- 1977. it was an east german report. in these where the north koreans are very consistent about their message. went bettership this time because of this. and they keep adding onto it and the message is pretty clear. we don't trust china. we probably never will. but we deal with them because we have to. and if people were to just look at these three documents, i think it would save us a lot of
also, i think,ld lead to some rethinking of our policies toward north korea and outsourcing our policy toward north area. there is even a section in the on sino dchives here .rk relations it is a curated collection of documents. right here. hundrede several documents on their relationship over the decades. and you can see here these three conversations. look at them all. they are great. but those three records of particular i think you should look at. >> and remind us, this is digitalarchive.org? >> yes.
>> the context for this congress, i wonder if you could guide us a little bit on the purges and north korea and's kim jong-un came to par of -- since kim jong-un came to power. given.sons how should we view of the purges as opposed to what happened in the past? -- i'venk some of it only seen what is available through the public. i haven't seen anything classified. that, in some of these cases, including the case was a uncle, it difference of opinions again. here was a guy who was promoting something that for many north korean officials is
unconscionable. opening up and reforming the economy, like china, getting closer to china and perhaps even following the china model, which would lease -- lead to a loss of freedom of action, would put the system at great risk. how do you convince them when you're so vulnerable? you could open and reform and let bigger powers come in and tell you what to do and what not to do. when they did not even join the council for economic assistance in the 1950's and 1960's, kim il-sung was suspicious of soviets and chinese, its allies, and they were afraid that they would come in and dictate to them good and you see him sing in conversations, for example, the pre-period of korean dialogue -- yeah, we said we would not join the council for mutual economic assistance
because we don't want to be a small country with larger holes in the ground. he said when we are no longer chinese and the soviets, we will be a small country with larger holes in the ground. it is the same thing here. you had a different opinion and a north korean solution to this is to simply purge these people. perceivedsense he was to be that much of a threat, even in exile, but they felt the throughget rid of him the execution. but i would say, in many of these cases, it is, again, purges, because of differences of opinions. we have a very good
understanding of the internal dynamics that didst to this question, not simply on who is being purged and why, but more generally? can you tell us? you've been out of government for a long time now. can you tell us? do we have a clue? or are we all guessing? bob: on this, i think we are guessing. but the part that you don't have a guess about is that it is totalitarian system with a single individual at the top who has the full range of human emotions and nothing to hold him back. you know, lyndon johnson had a temper, but he wasn't allowed to execute people. so he didn't. executed a few people, but it wasn't a big public thing. so we didn't get the feeling
that, oh, god, this guys out of control. the johnson took thing was so unusual, so dramatic. and then you had these silly stories about the dogs. crystallized in people's minds that this is a monster. we don't actually know. i know south korean intelligence says that it is 37 people. it isn't really much. peoplet know how many have been executed. people disappear. on a few occasions, they have shown up later wearing the uniforms and still having stars on their shoulders, but they have of the responsibility. that out. to sort we need a better sense of who is actually never coming back and who is still around.
and whether or not can jump on -- kim jong-un has changed the of sendingedure people to the underside -- the countryside for three mines or a year or two years. and then, when they are reformed, they come back to pyongyang. and, boy, will they behave themselves. we haven't seen that yet. we have seen it once. we do not know if he is going to fall into that pattern of dealing with his people as well. >> but i think, with the election of a new party congress -- i'm sorry, not the congress, the central committee. with the election of a new central committee, we will have who is in the of upper echelons of power in north korea. although, as bob pointed out,
things sometimes change and you can't look at that and interpreted as, well, this guy was purged because -- >> we throw around the word purge, when a we are talking about in some cases is replacement or headroom or what >> that is a good note on which to conclude. i'm sorry, there are a couple of hands here that i haven't gotten to. you and we look forward to seeing you back your real quickly. we are adjourned. thanks. >> james, good idea. we will do it again. i think we are to do it in two weeks. >> maybe. maybe.
announcer: this we, the c-span to santour takes you bernardino, california, to explore the history and literary culture of the city located east of los angeles. on december 2, 2015, 14 people were killed and 22 were seriously injured in a terrorist attack in the inland regional center in sambar and id no.
we talked with commerce meant pnu are about the attack. his district includes the inland regional center. >> when we talk about terrorism, about the fight against terror, it isn't something that is in the abstract anymore. it is something that come across this country, means something because this isn't a big city here in san bernardino. this could happen anywhere. announcer: we will also speak with the city councilmember about a permanent memorial for the victims of the attack. >> it provides a sense of remembrance and highlights their lives and what they contributed to our local community. and always, it will be a near and dear place for us to provide a place of consolation and serenity. so we are thinking a serenity garden, a prayer chapel of some sort in and around this area. announcer: an american history
tv, we will visit the salmon adeno history and railroad museum and talk about the importance of the railroad to san bernadino. the 1918 santa fe depot, the museum contains many objects related to the city's railroad history. -- >>nstruction construction was completed in 1918. it was a wooden structure approximately a hundred years -- a hundred yards from your that burned down in 1960. house theed to division headquarters at this location at that time. c-spaner: watch the cities tour today at 2:00 p.m. eastern on american history tv on c-span 3. the c-span cities took him ok with our cable affiliates and visiting cities across the country. now a look at the impact of low oil and gas prices on countries that export those resources. on how somescuss
places are making up for lost revenue and what to expect when prices begin to rise again. the center for strategic and international studies hosted this event. it is an hour and 40 minutes. >> okay. good morning. i direct the energy and national security program here and i'm pleased to have you here with us. for today's event, risk and reform and outlook for oil and gas exporting countries. this is actually the second in a set of events that we are doing looking at countries around the world that produce the revenue from oil and gas. and how they're faring with low oil prices over a sustained period otime. a couple wks ago my colleague and senior vice president here
discussed brazil and venezuela. it was a content rich discussion but what we thought we would do -- today to talk about the menu of -- today, we wanted to continue ont conversation, focusing iraq and nigeria. i know it is a loughery sought -- a short session. we thought we would bring in some experts who are not focusing on the energy sectors, but also on the political dynamics as well. we have been having great discussions with dr. benedict clemens of the imf. benedict is the division chief for expenditure policy division and fiscal affairs department at the imf gave and we're pleased to have him here today to talk about the menu of reform options that the imf thinks about when sort of considering revenue dependent oil producing
economies, and the ways in which they can adjust and respond to a low oil price environment. both in the near term and over time. he's going to set the stage by providing a little bit of the way that they're thinking about the current environment and the options before different countries. and we've got an excellent panel. we'll start with a he's an renowned ex then we're going to go to aaron zane, he's been here before. he's the financial crimes lawyer and investigator working as a senior senior senior senior governance center. he was working with the africa program to talk about nigeria. we're pleased to have him here today.
we'll end with jared levy. he's the director of the custom research division. we'v h essential vehicles out there for tracking what's going on in iraq. we'll try and get through a fairly robust agenda in a short period of time. keep everybody to about 15 minutes each and open it up for discussion. i would ask you to please turn off your phones. we are not only being web cast but televised as well. when you're asking questions please wait for the mike so everybody can hear. and before i stop talki so we can get to the people who have all othe expertise on the panel, i want to say a big thanks to my colleague, here for putting together this excellent event. it's well-timed and i'm looking
forward to learning a lot. without further ado, dr. clemens? dr. clemens: thanks, sarah. what i'm going to be talking about is -- i guess i need to -- just the down arrow. from the fiscal policy standpoint, a framework for fiscal policy for oil exportin g report. it will give us a overall fiscal picture for not only the world as a whole and here what we're going to focus on is the oil producers. what kind of fiscal situation do they face. let's say for the next five years or so.
so in terms of the structure of the presentation, i'll first talk prescriptive. about these macro fiscal developments, what we see in the data in then talk about even looking backwards a bit, the volatility and uncertainty facing oil producers. and then more prescriptive. what do you think needs to be done for a sound and sustainable growth and lt'll wra ip on -- and then just a wrap up on the conclusions. i want to get a sense of how are the oil producers doing versus everyone else. here on the left-hand side, this is looking at the overall fiscal balances for countries. you can see the red line here, the expert -- the oil exporters are on the top. you can see how their fortunes have changed. on average, surplus positions. then there is a sharp decline in
2015102016. generally, the oil exporters on average, they had revenues of six cent of gdp. that is a very big amount. you can see they are doing a lot worse than other emerging and developing countries. so that is a bit of the story. not expected to get much better. if we say current fiscal plans countries have in's -- in terms of spending and revenue and what people expect from oil prices, it doesn't look like it is going to get any better. oilof the things that the producers are facing, just like everyone else, is a reduction in economic growth, even going forward. if you look at the right hand side of the charts, those are the emerging and developing countries. if you look at the red bar in the red versus blue, you can see there is a reduction
in potential growth. this is making it difficult for everyone to say grow themselves out of fiscal problems. because the growth outlook is not as favorable going forward. it is not expected to pick up either. closer at a little the middle east and north africa, that gives us a sense of how revenues are evolving and what we can expect for the next few years. you conceal most across the board, you have most countries expecting much lower revenue than they had, in some cases toer revenues than 1990 2008. so much reduced revenues going forward, which is consistent with that same picture we had then, showing the overall fiscal balance.
the other thing that has happened is that spending has gone up a bit. 2020, the far right hand, the green bar, you can see spending, even if you take into account the budget cuts the countries have planned, still, they are spending to gdp ratio. it is much higher than it was periods.ive historic some countries have taken measures to contain spending. but if we look at the average for those years, spending still remains quite elevated. when you put that together, spending revenue and not going down that much to me youbigger deficits in when have a budget deficit, you can see here that we are expecting big deficits going forward. and before the crisis, we think that is a lot of countries
have a balance position or even surpluses. this is the overall -- to give you a hint of almost what we think countries should do, you can look at this char on theeft -- this chart on the left. these countries needed balanced budget. if oil, being in the $40 something range, the countries will have a deficit. why and what is the big issue for these countries? the message is here on the right-hand side of the chart. these countries generate very little in non-oil revenue if you look at the top chart looking at emerging countries as a whole, you see good progress and raising revenue. menna, progress has not been that great and it's stuck at low levels. now, these countries have big
budget deficits. but one advantage many of them have accumulated foreign assets. many of them have assets. which then allows them to have a gradual pace of adjustment. to dore going to have some fiscal adjustment. how fast you have to do it depends on how much buffers you have accumulated. some countries have buffers to take a more gradual approach. some have no choice but to do big adjustment now. just segue here about latin america. latin america, say commodity producers and oil producers, ecuador has suffered. a lot of commodity producers, columbia's and chilies of the how been affected by the decline. but not much.
times are not as good as they used to be. theseneral exporters, decline started in 2012. so this is kind of a long-term thing that's been happening. look at what we can predict about market prices. this picture on the left is you a good idea of how quickly prices have come down in terms of their historic average. ups andee periods of downs, fairly rapid declines from quite a peek. and then on the right-hand side, you can see some of the figures that we don't expects really to rise anytime soon. ok, kind of taking a step backwards, looking at what it's been like in the past, volatility is not anything new for the oil prices in this region.
one of the things that has been difficult is that oil prices are that hard to predict. we don't even try to do macro models on this. none of them work. you have to look at futures prices. then you can see there is a huge range of uncertainty. knowmebody claims they what is going to happen, it doesn't seem like many people have been able to do that. you can see how things have changed relative to our expectation on the right-hand chart. wouldid we think things do in 2014? oh, prices would moderate. inevitably, prices come back down. once you are in the middle of a bum, you say, oh, this is the
new normal and it will be high prices going forward. and then it comes back down. because of that high volatility and you rely on commodity revenues for your fiscal spending, you have an awful lot of volatility in your total revenue. even looking at menna, in advanced countries, like non-commodity advanced countries, revenue doesn't very that much. you do have that in a lot of the commodity producers. and what this has tended to do historically is lead to boom bust cycles. when the money is pouring in, huge increases in is how the -- in spending.
insufficientways savings was the collapse comes. have cuts in budgetary spending. norway is the country that has managed resources well. income for person desperate person has gone up over time. inmodity exporters are stuck gpd per capita of the 1970's. this is kind of the story we get. this in effect leads them to we grow growth. this summarizes the rest of the have steady growth. commodity gross -- commodity producers have done worse.
so what should fiscapolicy due tohelp break this curse and really put together a better future and, at the same time am a deal with the current challenges? six months ago in october, we had an entire chapter on what are the pillars of a good fiscal strategy. first, you have to improve the resilience of your revenues. you have to develop some not commodity revenues. there's no way around it. less volatilear if you have some income base taxes. you will have less volatility in your revenues. so you need to diversify and develop these. secondly, you have to improve the efficiency of spending. a lot of the metrics we do in terms of looking at how much
bang for the buck you get in spending for oil producers is quite low. there is a lot of inefficiency, including in the public investment. but also energy subsidies. many oil-producing countries provide gasoline at a price below the market. that is an implicit subsidy. ,nd if you just get rid of that charge at least the global marketplace -- market price, offsetgher price to negative costs, that would be better used for things, such as education spending. is what is that leads to better bang for your
buck. in the last is developing adequate buffers. savings. you need to have a framework that ties your hand in good times that forces you to save during good times and you don't have to cut spending in bad times. that's at the present juncture that's a lot of countries may say how is that relevant now we're in the bad times? point is now you want to lay the framework for setting up some rules, some guidance for your fiscal policy to make sure the next time there is a boom, that you save more of it than you did. okay. a few more details on this. we've talked a bit about it, increasing the resilience of budget. this is -- i'm repeating, but i think it's worth it. on the right hand side the non-oil revenue it's much lower than the emerging economy average. countries that also have the typical administrative challenges of administering taxes, emerging economies, they're doing better than the
mena region. there's room to do more non-tax revenue -- not commodity revenue. here's an idea looking at certain components. on the left side, personal income taxes, these are even lower than the non-say resource rich mena countries. goods and services taxes, such as value added tax, general sales tax, these are the two areas in terms of where there's a big scope for raising revenue. and the right hand side is saying even revenue mobilization in terms of the quality of revenue administration, how much revenue you get for percentage of tax rate. that's not very high. that's part of the institutional improvements that are needed. improving the efficiency of spending. the problem has been the boom bust cycle. if you look at the rates of spending on the right hand side chart, you can see in terms of
what happens during the cycle when your commodity prices are down you cut prices when prices go up, then spending all of a sudden zooms upward and then afterwards, spending growth goes down. it's kind of this yo-yo cycle of this -- which i think it m it o itwhich i think makes difficult in all public investment projects are properly vetted. i would focus on the right-hand side chart. we have also done some studies looking at how much would your real public capital stock the in services. there is really high public investment in a letter resource-rich countries. but that hasn't translated to from thervices
infrastructure. view can imagine, if you are spending money and it doesn't lead to producing really a good road, that's not very efficient. this is the gap between what is actually spent and what you see on the ground. so there is a large efficiency thein public investment in mena region. in terms of strengthening institutions. this is not just political -- if youns, but also here,t the inner circle generally, what it is saying, almost every metric you look at, commodity producers have worst -- worse institutions. you consume see what happens. that leads to lower economic growth.
fiscal framework, you have to think about scheduled spending and your budget envelope. the second key component is a commitment to transparency that can help make sure that the public understands what government policies are. so these are a couple of things int are important institution building. build adequate buffers. during good times, you need to save. many countries did do some saving. but about 30% of the extra revenues saved. 70% or spent. ideally, spending should grow at a constant rate your fear year. then you don't have to cut
spending so much during bad times. in many countries, we are the phase where we will not be a cumulative buffers. we will have to draw down our buffers. and at the same time, readjust spendin to a level of revenues that's not going to be as high as in the past. okay, one of the challenges countries face is that, at the exact time when you need to what you see is kind consumption byorrowing times. commodity prices go down, borrowing costs for commodity producers go up. so these allow -- countries may still need buffers and an intermediate framework to give
markets and assurance that they have a solid fiscal position and this is a spending path. this is the defit path. plan,s my medium-term rather than an approach where you don't know from one year to a next -- to the next. see in conclusion, you can we are one of the biggest boom-best cycles we have seen in commodity prices. this is not new. you can see this as quite a big fluctuation. it reminds us it is important to take into account uncertainty when we are doing fiscal .rojections and being cautious you're a commodity producer there's an awful lot of volatility. oil producers all are going to , even those who have big buffers, the question is how
fast. we also have to think about the next cycle that's put in place a fiscal framework that is actually there. that can allow us to accumulate those buffers in good times. i mean, when you also think of, okay, what are these countries need to do to grow? and if we're not going to have this commodity price as a source of growth. i mean, in revenues. in some ways oil producers are in the same boat that everyone else is. there's no way around enhancing structural reforms. that is, you can't expect to get a big push from, say, public investment. you don't have the fiscal resources to do it. the world economy is growing at a slower pace, so external demand is not going to be the engine of growth. a lot of countries are stuck in this that they have to do more of the fundamental structural reforms through the labor markets, product markets, to get
things going because there are no easy solutions. view have many countries with low interest rates. you cannot expect monetary stimulus to help. world, we have to tackle the structural reforms to get growth going. sara: thank yuo, that nicely outlined improving reliensi of . those are hard things to do in the best of times. but each of those reform efforts is happening in a difficult political and economic contexts. i'd like to talk a little bit about what is the context in which the kind of effort is taking place in nigeria.
>> i don't think we talk about algeria enough in this town. algeria is an important country in the region. what happens in algeria in a political and security sense affects all of its neighbors in north africa and in southern africa. it plays an important diplomatic role. algeria is an important country. it is one of the largest natural gas producers in africa. it is the second largest supplier of gas to europe. and it's one of the top oil-producing countries in africa. so algeria is a pivotal state. yet there's a lot we don't know about algeria. and in talking to people, observers, analysts, there is always a lot of frustration when it comes to analyzing algeria.
describe theays country is resistant to change. now, with the fiscal isis and the drop in oil prices, there are high expectations among many international observers that the economic crisis will lead to a toies of reforms in algeria diversify the economy, to attract foreign investment, to change the taxation system and the high burden of subsidies. but i think a lot of these assessments in many ways disqualify or disregard the importance of algerian history and its experiences in shaping debate and,tical most importantly, debates about reform. algeria's at experiences over the last several decades, reforms in financial crisis triggered by
lower oil prices have led to extreme violence and instability, which have threatened the entire state system of algeria. result of those experiences, the government's approach has been very cautious. and moving forward, will likely be in her mental in moving forward with different fiscal economic reforms. but the important point to take away here is that there is positive forward movement despite a wide array of challenges. briefly in my do 15 minutes is to briefly sketch out past reform efforts in these historical experience is, look at how the current economic climate affects debates over reform and foreign investment. and then assess the current reform effort. so to really understand algeria, we have to go back even before the french conquest of 1830. but in the interest of time, i'm going to start in july 1986.
but before i get there, i want to just first recognize that hydrocarbons and hydrocarbon revenue is the life blood of algeria. it accounts for 60% of government spending and 90% of export revenue. so after independence, the government made a conscious decision to prioritize hydrocarbon development and production at the expense of other sectors. and the revenue from energy was used to prioritize social spending and subsidies and a social welfare system to help maintain stability. so in many ways, distributing oil wealth throughout the economynd s aiety i a way to -- and society is a way to create a system or a sense of fairness in algerian society. and people have come to expect
government jobs, subsidies, food subsidies, fuel subsidies, free healthcare, free education. and so fundamentally energy and energy revenue are linked to stability in algeria. so in mid1986 the price of oil dropped from $30 a barrel at the beginning of the year to about $10 a barrel in july of mid 1986. this led to a drop in about half of the country's revenue from $14 billion in the early part of the decade to about $7 billion in 1986. an immediate drop by half of government revenue. and the declining revenue forced the government to start cutting spending on social welfare. they cut food subsidies, prices soared. the black market thrived. there was high unemployment and a very long population. and this financial crisis that algeria found itself in the mid
80s caused a lot of resentment and unrest. it triggered protests and demonstrations in 1988 where hundreds of people were killed. as a result of this social and economic crisis, the government decided to open up and liberalize not only the economy, but the political system as well. and in opening the economy, many of these socio economic were exacerbated by higher prices, more unemployment. it was the political opening that changed algeria fundamentally. 1989 constitutional reform and political liberalization allowed for the creation of political parties, free elections, and in 1989 and then in 1990, excuse me. in 1991. a consortium or coalition of political islamic in and these
-- islamic groups won local elections and then first round of parliamentary elections in a stunning defeat for the regime. and these are islamic groups some of called for imposing sharia or islamic law in algerian society which had been created or as the state8c cated -- as the state created after independence, a more secular society. so what happened next really scarred algeria for decades. , nullifiedy moved in the election results, swept they politicians out of power, banned the islamic salvation find the, which was the political islamist party that had won the elections. founddecade, algeria itself fighting a war against terrorism. many of us here know this history.
but it is important to remind ourselves of the impact this has had ria ge we have to understand this experience to understand the current debates over reform in algeria. there are two things that brought that nightmare to an end in algeria. the first was the president who came to pee 9 started pross of -- came to power in the late 90's, started the process of national reconciliation and created a new consensus within society within theolical -- the political system. the second development was the increase in oil production and oil prices, which allowed the government to continue -- or to revive this heavy state spending on social welfare and subsidies, which helped stabilize society. so in 2011, after the outbreak of upriseings in neighboring tunisia, libya, egypt and else where. alger fuia found itself in an position to increase spending.
so in 2011, they launched a $286 billion spending program on infrastructure, housing, subsidies, raising public sector wages across the board, including for the security .ervices and military and they increased military spending dramatically to face a range of threats on their borders. but now, with the massive drop in oil prices, algeria is back to this point where it has to make choices about spending with less revenue in a climate of political uncertainty. these are all countries that border on algeria. as algeria makes its choices and
more difficult fiscal, political, security environment, i just wanted to lay out some of the economic factors that it is facing. facing theia is lowest economic growth in two decades. 1.4%. this is the lowest since 1997. government revenue has dropped in half in the last year. as a result of not only declining oil prices but also declining output from maturing elds. and a growing domestic consumption of energy, which is taking away some of those potential exports. so according to the imf, algeria's breakeven point is $39 a barrel. budget deficit is almost doubled in the last year.
and this is troubling because energy is connected to political stability, social stability. it is at the heart of algeria's stabilization policy. so it can't maintain the same levels of spending. in 2016, the government has started to adjust its spending. they cut overall spending by about 9% in the new budget. most of this is for infrastructure projects. they raised gasoline prices as of january. they've increased value added taxes on some products. they're raising import duties on some products. and they've scaled back plans for investment in other energy sectors such as refining capacity as well. they've been drawing down foreign reserves. algeria built up a massive stock of foreign reserves over the last decade. has it also paid off almost all
of its foreign debt. and in , had reserves. it spent those down to $120 billion according to the algerian government. it also has an oil stabilization asideere it puts money from high oil prices to also help with social spending. that fund has dropped -- the reserves in that fund has dropped in half over the last couple of years as well to about $32 billion in so now what? the consensus among international analysts and observers is that come in order to about economic growth and promote diversification, algeria needs to take a long list of economic or firms -- economic reforms, to encourage investment and foreign investment in particular. many algerians have actually reached the same conclusion. are difficult debates in algeria over the nature of that reform.
some people are arguing that it is better to open up to foreign investment at all costs rather than take on foreign debt. some are arguing that algeria should take on debt, but only from certain lenders. some argue that the jury should continue to drive down its foreign currency reserves to maintain social spending and subsidies. there are a lot of questions. but i think the important point is that there is a debate and there is a will for change. in 1986, we saw hydrocarbon law that started to make the investment climate a little bit better. in the 1990's, cooperation with foreign oil companies expanded. in 2013, there was a revised hydrocarbon law. and now there are extra debates involved in the investment climate. so there is a new draft investment law being debated
that would give tax exemptions of property for a certain amount of time, other tax benefits. is a broad recognition in algeria that change is necessary, that diversification and foreign investment is an imperative to improve energy output. but it is important to manage expectations. reform will be incremental and modest. overall, the government will be andious because the country the region are in such a .recarious situation the economic reforms we are going to see may not be conclusive. satisfyingthe certain constituencies within algeria and not others. might improve in the investment climate for certain sectors and not others.
be as complete or as whole or as conclusive to many international observers who want or think algeria should move forward with. but there is a broad recognition that change is necessary. the question is the extent and the speed of that change. and the challenge ahead for algeria's to ensure that the incremental changes we are seeing add up fast enough to create a set of conditions that can manage short-term risks and instability while encouraging investment and laying the foundation for future growth. thank you. [applause] of awonderful sort historical reality of the role that energy plays in politics and governance and algeria. is your call. a little bit of a view on nigeria, which i think is different in some ways.
>> thank you for allowing me to sit down. sis for havinge for having mecsis back. has been doing a lot with this question about low energy prices. my specific feet is with nigeria. so nigeria is now in the middle oilts fourth or fifth major price shock, depending on how you define nature -- major. so has a going? not all the news is bad. if you look across the
continent, nigeria is better placed in some ways than some other african producers, particularly some of the newer what. isthe oil fiscal regime generous enough and the cost on those fields are low enough to projects of stream taking a long, near-term production is not certain to decline rapidly at current investment levels, which are not optimal. but anyway. like some other, especially the newer producers like tanzania itsgeria has not gained hopes and dreams on the success of a lot of big new expensive exploration projects. it also didn't have any plans for a big licensing round that turned out ho-hum, like what , where it wasanda
mostly nigerian companies that won. nigeria has ally, very large, for the content, nonoil private sector. oil and gas, total government revenues -- i'm sorry, total government spending and oil revenues each makeup less than 10% of gdp every year. so the face of the nonoil sector in nigeria isn't tied inextricably as to what goes on in oil as it is in some other countries. and fiscally so far, we don't see any definite no turning back , like nigeria isn't going to be able to meet its obligations without some outside program of support, like is
happening in ghana or angola, say. at the same time, the low oil prices are facing a lot of pressure on nigeria's external , as we haveccounts heard already for some of these other countries. regularlys accounts for around 90% of the country's export revenues and foreign exchange revenues. alone gaveells government 60% to 70% of total revenue during the boom years. total revenues for 2015 were about half of 2014. savings led to declining and a backlog of debt at the national oil company.
this is dead mainly to ending oil company partners. say thatto be able to the low oil prices are the only cause of these problems. maybe particularly unenviable about nigeria's position on the continent is that this is not the case, that there are some other less savory factors in play here. that the same time at -- the oil price fell, nigeria was also waking up to deal with they morning after headaches of a pretty serious rampage of oil-sector corruption and mismanagement under the last government, which has now been gone for a little under a year.
he nigeria's case, the history thead governance as well as low oil price could lead to the financial hell that it now fits in. foreign reserves are low because the central bank is spending billions of dollars a year to protect the local currency, the naira, against the high demand for dollars in the country. are insured supply and have been, partly because of the decline in the foreign exchange earnings from oil. but then there are some other things. particularly under the last government. for example, large amounts of illicit financial flows. wires out of harvard accounts in the country to offshore locations of a billion dollars
or more a month. and 2015,f to any 14 unchecked illegal, often time fraudulent speculation in the local currency market. pretty remarkable amount of cash-based money laundering and both smuggling and hoarding of dollars, particularly ahead of the election where it was not uncommon to have the central bank allow several hundred million dollars at a time to go out the back door in the evening on trucks and such. woops. cloudleave behind this cuckoo land of the capital where
conditions on the ground aren't necessarily any more reliable a gauge of what is going on in the whole country as they are in this town, then what is all this doing to ordinary nigerians? nothing catastrophic so far. particularly when viewed from 30,000 feet but we are here. but it is certainly the case that there are plenty of companies and individuals who are suffering now. civil servants are not being paid salaries on time. parts or not all of the oil sectors are shedding jobs and protect -- and productivity. consumer inflation is up about 4% in six months. yes a lean and jet fuel shortages are becoming pretty routine. there are concerns about food shortages in parts of the country. and gdp for this year's forecast at 2% compared to 6% or 7%
during the oil boom. the official response to all this is a little bit difficult to talk about. the new government hasn't announced any sort of comprehensive survival or recovery plan. and in general, lack of clear direction or articulation of economic policy for the country has been one of the things that the new government has had .eople concerned by so far, the main sort of legs of a recovery plan, if i can call them that, are pretty heavy on spending. so a boost in capital expenditure in the federal budget, mainly for things like transportation and power, and that is a record $30 billion budget for this year. it doubles the deficit, like in algeria.
the government has said he wants to continue protecting the naira through a combination of an artificially high foreign-exchange rate for the controls on foreign currency sales in the country. and it is also said it wants to roll out a bunch of palliative social where fair programs. i am not an economist. so there is no way that i am going to opine about the adequacy or the wisdom of any of this as a solution to nigeria's problems. but from a resource governance perspective, i will say a couple of things. far, governments biggest focus in the year or so that it
has been in office here, that it replaced of the last bunch, has been on finding money for its spending priorities and figuring out how to deal with its debt. and it has done this in particular by sort of encouraging probity in public and plugging or trying to plug some of the worst leakages in public revenues. there is a whole bunch of things that it has done. i think i will skip the laundry list in the interest of time and well, it'so me, perfectly understandable, particularly when the everyday pressures on government to find money to pay people, to pay contractors, to make sure there is enough gasoline in the country is totally understandable that all of that
would take up most official .ttention we also have to keep in mind that nigeria is dealing with a lot of couple kidded security challenges, not least boko haram , but also direct a bunch of eyeballs away from some of the other problems. but to me, the biggest open how far isght now is this government using the drop in prices as an opportunity to address some of the deeper government problems that led to where they are now in the first place? area, i think it is actually more pressing and more relevant to talk about a couple of things that aren't happening. one, leading back to a
point that benedict made, nigeria is not really doing a lot at this point, it seems, to mobilize non-oil tax revenue, particularly company income tax and vat. there has been a corporate tax registration drive. recent yearsn in has accounted for about 3% to 4% of gdp. , 15%, 20%.cers theead, in order to finance budget this year, there is more talk of our owing. and that's borrowing up to $5 through euro bonds, maybe through the world bank, maybe through the chinese. we are not sure about the terms or counterparties yet.
rational as aly .hort-term solution you can't build a high-performing tax administration system overnight when you are facing a public revenue crisis. and nigeria's total public debt 50% or so.s a out,if you look further there is some concern to be had about whether government can continue to spend at the levels and in the priorities that it wants to without taking on unsustainable debt. the finance ministry are he said this year that the federal government is going to spend 35% of its own revenues to service debt. is relativelyat
expensive domestic bank debt that comes do relatively soon. boost a lot going on to tax revenue. the other thing that i think is very much an open question is how far is the government going to try and control questionable public spending through depo institutional reform? so far, the new administration seems to have a sort of command and control idea of improving public institutional performing. you put the right people in the right positions and you get them to clean up some of the biggest messes. country like nigeria, particularly coming out of the , you know,stration putting in place a little more organizational discipline is not
a bad thing. however, not clearly -- really clear if that is a sufficient response in and of itself. a good case of this, we can take the national oil company itself and then pc. so when the new government came income of the top leadership was replaced. some of the nastiest, costliest contracts were canceled. some audits were ordered. all perfectly reasonable things. the broadera lot of former look -- forward-looking reform proposals haven't said much about how government is going to address some of the bigger unanswered questions mpc's role in the sector. what parts of the sector, what
parts of the business should it be active in? how should it fund its operation and share revenue with government? lots of open questions there. what else is needed to control operational costs. and what assets should it keep and what should it sell off? heatedlyas written .unted on these questions largely for political reasons. again could be costly, particularly when the oil price goes back of again or government changes hands. i think it is also worth pointing out that most reform ideas for the sector so far have mpc coming from inside an
itself. a lot of them have good stuff in them and they seem broadly sensible for the moment. it is also hard to imagine any successful oil sector reform campaign that didn't have some from an mpc.in i would suggest that it won't be long before we see clear limits on how far an mpc can be expected to reform itself. now, just to wrap up, i know that it is very easy for summary like me to come and pacific it from a safe distance about what other governments should be doing. toertainly haven't come here some doom for nigeria. to be somes seems
kind of crisis. this is just the latest one. want to feed some of the undue cynicism about nigeria that tends to make the rounds in d.c. sometimes. we need to keep in mind that the government has been met at the be the biggestst sudden and sustained public revenue crisis in nigeria's history, certainly if you measure in absolute terms. also, revelations from the ongoing anticorruption drive in the country just that mismanagement of public revenues and public institutions under the last government had gotten so bad that, when this
government took office, it basically had to jump behind the wheel of a runaway car and the wheels were about to come off. that they have succeeded in putting on the brakes on some of the worst abuses is already a significant success. userians and outsiders like are looking forward to seeing some more definite signs of the longer-term direction of travel. thank you for listening. [applause] sara: thank you. that was wonderful. are loudnow that there google lands other where -- other than d.c. as well.
ford: thank you very much having me here today. i am from iraq oil report and we iraq-centric news reporting division. certainly very interested in the issues we're talking about here today and a lot of my work has shifted to really focus on that and away from some of the other things that we were focusing on wasiously, such as what then viewed as the oil boom in kurdistan and the opportunities in basra. crunch andof fiscal reform and how to move forward. so by means of a brief outline emma i will sort of be talking about two different entities, iraq and the kurdistan region.
they are at present bifurcated enough in terms of governance, energy sector reform efforts that i couldn't really glom them together. i guess to just throw water at me if i go on too long. at the outset, by means of said in the context, iraq is in the headlines right now, particularly in d.c., because of the isis crisis and the ongoing fighting in the western and north of the country and also the chaos in baghdad. if people are following the news affiliated with the old american friend recently stormed into the green zone and occupied parliament. so i'm not going to get into the weeds on that exciting stuff. i'll sort of only touch on that as it relates to some of this reform effort stuff.
so certainly as the other folks on the stage here have said iraq is struggling with a lot of the same problems that sounds like algeria and nigeria and other oil producers are. namely in the time of high oil prices, they didn't do a lot to inoculate themselves against a potential crash. in fact, certainly in baghdad and kurdistan, i have personally heard from people back when oil was over $100 a barrel, this message that this is going to continue because it's happened for the last couple years. therefore it will happen going forward. and i think government behavior reflected to that belief so you had some sort of rainy day funds for iraq in the form of the development fund for iraq that was actually drawn down during high oil prices and isn't as available as it would be if that hadn't happened.
you have also got a bloated public sector based on political parties in the government. lots of subsidies and inefficiencies in both writing tariff laws and collecting those tariffs. so i guess look inging i'll go through the political oil sector environment and reforms that are underway. i'll try to do the same for the kurdistan region if i have time. but politically despite this chaos in baghdad that's seen the cabinet more or less di the -- dissolved. prime minister put forward successive slates of new cabinet members who have either been wholly or partially rejected by iraq's sort of fractured political elite. thestries, including
ministry of oil, have continued to function. minister hashe oil stepped away from sort of his day-to-day duties, he is the only guy that can stand. so despite to the cabinet being kate -- and in chaos, the ministries are still functioning. this week will be very decisive in terms of establishing whether a is able to hobble together cabinet -- a new cabinet. despite the chaos and dysfunction, the apparatus of government are still working. so where the political element also comes into play is how the government is able to address reforms to i will get into more that later.
are trying what they to do to bridge this crisis is taught to institutions like the imf and some other international development wings of different governments and the folks that are talkingutions to are now not necessarily -- their jobs are in question. so that has all been delayed at a time when they need pretty urgent assistance. economy, production continues to increase and exports continue to increase. ons is even with some cuts oilfield development spending. but revenues have plummeted shared the production increases are nowhere near enough to make up that gap. i won't just spit a bunch of numbers at you, but in the first three months of this year, revenues were about for the central government were averaged about $2.5 billion a month.
those figures in the first three months of 2014 were in access of $7 billion despite production being about 20%, 30% lower. in the best of times, iraq's budget process did not work particularly smoothly, often what was on paper in law on the books was more emotional than actually action. this was exacerbated a lot by the fall in oil ices and the fact that the oil price has been below what they accounted for when they drew the budget up. so this has led to squeakiest wheel allocation of money where rather than ministries anticipate what they will have for an operational budget and a neediest basis. working as much as possible are
at the forefront. obviously, defense spending because there's an ongoing war on multiple fronts with isis. the oil sector has also been seen as a place where they need to continue having high levels of investment spending, but a product of that is prioritizing those things. pensions, salaries, defense and oil sector investment means that investment in nonoil sector has fallen by the wayside. so when isio they need todivey,y don't he money to invest in doing at an for all those above reasons, it's also not a particularly entice ing enticing time for foreign companies outside the oil sector to invest money.
in terms of the oil sector, they are continuing to invest in development but about half the , levels that they had awn out in their integrated national energy strategy. so even though it's prioritized, it has taken a significant hit. so this means that operating in southern iraq have been told to invest less money because most of the investments are cost recoverable and ultimately paid for by the government so the directives are do what you need to do to sustain production, but we no longer view these s as realn increase estate. also, delay in funding projects critical to addressing current
and future bottlenecks, it will be critical to reach plateaus and bars rock. ,here is pumping and storage both of which need to be done, both of which it is not clear where the financing will come from right now area there's also concerns about aging export infrastructure, which can be a shock to iraq's ability to export. and that is probably night getting the attention it would shifting then to sort of theeform, four things that dr. clemens laid out earlier, iraq i would say is doing one of those fairly effectively and that is cutting expenditure. that's largely out of necessity and the fact that the money is simple uly not there.
they have been able to trim away operational budgets and figure out place where is they can cut. they have also lost control of the significant swath of their territory so are no lger -- no longer fielding the expenses associated with that. there's been sort of a built in place to cut expenditure. this also comes at the expense of diversification. so iraq was getting a lot of advice from development organizations on building industrial cities and figuring out ways to develop manufacturing in there's also -- and that has slowed down a lot. as one aspect of reforms, they are not able to do. there has also been an effort to improve tariffs on things like electricity and they have done a good job of drawing up tarif but
-- tariff systems where they are able to protect the poorest and wealthier folks, and industry, but actually implementing those has been challenging. and despite the obvious financial crunch iraq is under, the ministry of electricity has gotten pushback from other quarters of government of that thinks these will look bad if these are implemented. so in addition to this, they are looking at things to help bridge their budget deficit. like an imf package, although that will cover a minority of their deficit and is not a silver bullet by any means. there are also a lot of other oil producers dipping into foreign currency reserves so were in excess of $50 billion by the end of last year and have had to use those and i'm not an economist, but i believe the mechanism is the central bank
essentially provides money to the private banks in iraq to buy ministry of finance issue bonds so this is a way to address the deficit, but is not a long-term solution and runs the risk of destabilizing the currency if they do it too long. they are also getting soft loans agency. japanese the u.s. government is obviously providing a lot of military aid, which is having them probably billions of dollars in defense expenditures. they are making steps towards having foreign companies invest in areas that were previously perview of the government.
the best example of that recently is a swiss-chinese consortium building a finery that will be owned by that government rather than given over at the end. there's been talk about revising the service contracts between the government of iraq and international oil companies in southern iraq and also about that proves a bridge too far at least drawing up different contract templates for future licensing rounds that will help the guard government when oil prices to drop. institutional things such as cutting public sector employment, streamlining ministries, but that has also particularly given the current political environment proved so challenging as to not be a near term solution. so, the upshot is they are
finding a way to cut spending to a degree that they can go part of the way towards addressing the budget deficit. but the more institutional changes and things like revising oil contracts have proven a lot and are really vulnerable to political chaos who there is unclear minister of oil or financial the a week or a month from now. it is hard to make any real progress in that kind of change. how my doing timewise? i will very briefly address the , and hopelesson him and asks me a question about it and i can get to that in more detail. politically, the garda region kurdistan
continues to be between the two dominant parties. they are looking at the same financial constraints and need for reform that the central government is, but the fact that you're looking at two entities within kurdistan has been an impediment. they have been very good at the -- bad if you're a resident dollop they found ways to cut spending which often is reduced salaries or delayed salary s toent issuing iou' contractors instead of cash. that willreforms reshape the economy have been very elusive in part because of the fractured nature of internal politics. sector, theyhe oil have done a good job in recent months of moving toward paying the exporting oil companies in terms of the contracts they
signed. over the last four months, they have made payments as per the terms of the contracts. they haven't been able to dip into the excess of $2 billion they owe for back due. he last bit i am summarizing, because the kurdistan region is tate entity, they are not eligible for the same assistant a state government will be. they're going to oil trading houses for loans, which have less forgiving terms than the imf. fromare getting loans places like turkey which are, i would anticipate probably have some -- there is something
expected in return in terms of political allegiance and addressing issues in syria and that kind of thing. so, it is a challenge being a reforming andy dealing with low oil prices. >> thank you very much. that was great. [applause] >> and thank you to each of you. it's no small toosk take countries as complicated as you are doing and do it in 15 minutes. we do appreciate it. the juxtaposition laid out in the front sort of you said something was the failure to inoculate. no country we talked about has not been in this period before, though there's a lot of color around why this time is different and complicated for each of those countries. i'm going to open it up for questions. i would ask you to please state your name and your question. i'm going to take a few of them
together to try to address them. we did start a little late so i'm going to let this go about ten minutes on. but my question just throw into the mix for all of you is what a lot of people wonder is so prices go up. does any of this stick? how does that change what we have seen under way and does it change the chances of succeeding or failing? >> thank you, my question, nobody mentioned the specifics about the organization of petroleum in exporting countries. i would like to know if opec is as part of the problem or part of the solution. thank you.
>> a solution, problem, or relevant. who would like to start? >> i'll tackle yours briefly first. i think there's some optimism amongst folks i have talked to in the kurdistan region particularly that it's been something of a wake up call . where there were some institutional problems that could be glossed over before that have just become readily apparent now. and they are actually seeking advice from external experts now. there's a recognition of the need need to get away from subsidies. one thing i didn't get to, they have gotten out of providing gasoline. that's been turned over to the private sector. and i think that's something that will probably survive this
current low price environment. there was other stuff around electricity tariffs that probably will also. so i think there are some elements that will. i am sure there are some that people will go back to old bad habits. opec, i'm going to leave that to my colleagues. >> i'll address your question as well. in algeria, even during the years of high oil, they were taking various steps to try to improve their position. they paid down all the external debt. they saved and built up their foreign currency reserves. they built up their rainy day fund. they were taking steps to prepare for this moment or this period. i'm not sure they expected it to be this drastic in such an insecure sort of security political environment in the region, which makes it more difficult. but in 2013 there was the
revised hydrocarbon law. there's been an ongoing effort to talk about reform. while the reforms are not inevitable, the debate over reform has become part of the political climate in algeria. >> in terms of prices go up, will that resolve the problem? i would say no. if you look at that chart i was showing, the problem is, the next -- unless reduce me to save more once prices go up we will be stuck in the same situation. encouraging thing is when countries have done energy pricing reform. the next time prices go up, gasoline prices should go up in these countries. that is really key.
we have seen some producers taking steps to address this like angola. there are a number of countries that have done this. this is key to make sure that we are ready for the next reform. also, this to put in place now systems.venue don't want to does have ad hoc measures right now without putting in place these changes in the revenue system. >> i have no idea how opec works. sorry, can't help. i know the abbreviation. of opec, andmember has been lobbying fairly hard for the obvious solutions. but nothing really has happened with that so far.
it doesn't have the clout to make that happen. in terms of when the price goes up, for nigeria, during that question, the question that it raises in my mind is when. if prices went up in six months, there might still be a ofbination of a backlog difficult this and monetary conditions and political will even though i detest that phrase . to sort of continue with a limited program of reforms. worst case scenario that i can imagine is if prices went up a year or 18 months before are the next presidential elections. elections in nigeria are very expensive. and there's no meaningful
distinction in the minds of many politicians between public funds and campaign finance. a lot of the stuff a talked about earlier about trucks leaving the central bank with hundreds of millions of dollars at a time, that his campaign money. also publicit was money. if the oil price for to raise in the time window, i can imagine a lot of the progress, such as it is, being very rapidly swept away and people saying i think it depends on the time frame. >> i was hoping someone else would take the bull by the horns. the one thing i'll say, and i'm sort of stepping a bit outside of what i'm commenting on here.
i'm not in a position to say whether the organization is a part of the solution or the problem, but i think there's some mistrust between members that make it less effective than it could be if some of those trust deficits were addressed. so, i'm not sure that all of the member countries believe the goods will operate in faith, and their interests will be looked after. >> an extension of that is not only the decision-making structure within opec, but what andr countries within opec is that relevant. are the reform elements being made by other countries extremely relevant in driving the decision, or capability?
or is it all politics is local, and therefore it doesn't really factor into very much. have a burst of questions. i'll take them very quickly. and then we'll go to the back. >> my question is mainly for you, i would say this is fairly pessimistic outlook on how resilience to boom bust cycle's look. my question is, how of thentative is this universe of oil dependent economies. norway aside, they have had a long time. is this one and of the spectrum? or it pretty good look at how things are for these large countries. >> right here? is for they question
three countries are looking at, what are some things u.s. policymakers could do better in terms of of transparency, better fiscal management in terms of dealing with your countries specifically or conversely maybe missteps or mistakes being made now that sort of play into some of these bad habits? thanks. >> one in the back. >> my name is scott morgan. i do security analysis. first part is for erin regarding it risk. as a potential risk, as this can be and how this could be an effect. the second part is for erin and the chairman. how about theft? when people still from the pipeline to they can actually fund raise to afford attacks and things like that.
how can that be prevented? >> with one directly for you, ben, and some others that our elevator speeches. repetitive, i think i would say yes, but there's a lot of variation within that. you look at which countries saved a lot. that does vary a bit. so i think it's some ways more optimism if you look at the lessons from some of the nonoil commodity producers. the gucci chili, columbia, some countries have been able to manage resources. now they have fiscal space to use that to help offset the adverse effects of commodity price shocks. so i think there are cases where in effect countries can do a good job of managing volatility and saving during good times to
-- so they can spend in bad. a lot of it will be particular depending on the quality in the institution. it is not just the oil sector. in some sense come it is broader when you have good fiscal institutions that can help you manage the revenue as well. >> then you can add on to some others. >> thank you. i think historical experience is crucial to understanding(ve question about u.s. interaction and engagement with algeria or any country for that matter. u.s.-algerian cooperation is better than it's ever been. it's more robust and addresses more issues than ever before. in many ways, this relationship has improved medically sense 2001. but we have to understand that
algeria fiercely guards its sovereignty and doesn't like foreign government or institutions telling it how to run its affairs. you want toed, if understand algeria, we have to start in 1830 with french colonization. the colonization process, which many people dismiss as ancient history, is something still fresh in the mind of many people in algeria. they wanted independence of brutal struggle only in 1962. there are people in the room that were alive then. i wasn't. but that's had a major impact on the way algeria views foreign intervention and foreign plans to reform its economy and banking system. in the 1990s it was forced to undertake a series of imf restructuring which exacerbated many of the socioeconomic and security challenges that i laid out earlier. moving forward in terms of
, u.s. heaven of june cooperation it has to be , cautious and take into effect those historical experiences. >> i guess i will be intentionally vague here. so an observation at first. i would say what's happened with isis since mid-2014 is sort of reshaped how the u.s. administration views its relationship with both iraq and kurdistan regional government. this has been striking with kurdistan where it's more how do we deal with the relationship to the valuable part partner in fighting isis. and similarly i think with the central government there's been a lot more effort put into training, equipping, pushing the
idea of some -- what was probably branded as the national guard but we're now calling a national mobilization, which is sort of the equivalent of popular mobilization. so i don't really want to get into what i think policymakers should do, but i would say, in this reshaping relationships with the baghdad built based on security concerns over isis, people should keep in mind that isis will probably be gone at some point. thinking about what will the impact of the post isis landscape be at how we changing our relationships now. >> in terms of u.s. policy, in
the energy sector, to be honest, i don't see the u.s. has a ton of policy levers that it can pull. either in the energy sector specifically, or fiscal or monetary policy. whether we like it or not. i'm an anti-corruption person, so i'm going to talk about corruption. i can't help it. so specifically for nigeria, i think the biggest question for the u.s. government particularly when you see all that went on under the last administration corruption wise is where were you when that billions of dollars or so a month that was being wired out of the country from private accounts, you might like to think it's all going to
some place like that, but if you dig into the details, a lot of it is here either physically or invested in one way or another. so going forward, i personally think the u.s. owes a little bit of debt to nigeria to assist with some of its asset recovery work in particular. the fbi and doj seem like they are heavily invested in that. but other organizations so there will still be a lot of money coming into this country. targetedin terms of , dotions, and travel bans not trade lists, that sort of stuff.
standard stuff, it seems perfectly applicable to a country like nigeria with the levers of illicit financial flows that it has. say, you thing i would would probably agree with this, we talked about it before. that for u.s. aid to nigeria, i would point out the security if -- we particular, talk a lot about aid being conflict sensitive in the security sector. if we could be a bit more corruption sensitive as well if due diligence could be done more thoroughly, i'm not there at the negotiating table, but if a few more conditions could be imposed because it is all fine to want to help our allies with security challenges and all that, but
when he seen the papers nigeria saying things like $15 billion in recent years was spent on ,raudulent security contracts and a lot of that was money that came out of the back of the central bank in a truck. sensitive and realistic about those sorts of things that would be a big help. theft, ipiracy and oil didn't mention a partly because it on the queen know yet where it is going. or how much of a problem and is going to be. piracy i would say specifically, it's not always a huge threat to the oil sector. most of the ships that get hijacked are not oil tankers. most of the pirates are not sophisticated to know what to do. so they would rather take gas that we can off load for money.
and then in terms of oil theft, when you're at $37 a barrel, it's a lot less attractive to steal oil because along the way there are a lot of people you have to pay. not that you can't still make money, but it's a little more of a headache. now you have a government that is watching a little bit more closely than the prior one. there are still some risks involved. right now there's a whole stream of crude oil in nigeria that is out. it produces about 250,000 barrels a day and has been out since late january because someone have the sophistication to put on a scuba suit and dive under the water and install an illegal path onto the line. in the course of doing that, they damaged the line now it is going to be out until june or so.
day in a0 barrels a low price is a big deal for a country like nigeria. if we keep seeing more of those, that could be a big problem. in terms of how you address it, i think my time is up. [laughter] >> it is. you could always talk about it after. two of our panelists have to go, so to cut it all. want to thank you for being part of this discussion. please join me in thanking the panel. [applause]
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mr. haskins: welcome to brookings. i am the codirector of the center on children and family. we study kids, obviously, and where incident poverty issues and issues of economic mobility. i am also an editor of "the future children" which we published twice a year with colleagues from princeton. sarah is the editor in chief, and the managing editor jonathan wallace is here in the audience today. jonathan, thank you for coming. you're primarily keeping an eye on us, i think. whenever we release a item, which we do twice a year, we write 3,000 word policy brief about some issue that's covered in the volume, and we try to pick an issue that's related to public policy.