Iran exports the resource curse

Iran exports the resource curse

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.