South Sudan can learn from Alaska on oil

The Last Frontier has lessons for the world's newest country

By Nicholas Nehamas

If South Sudan wants to put its oil to good use, Alaska is the model to follow. At least that’s the argument Jason Hickel makes on the South African website Thought Leader.

South Sudan’s vast oil reserves could fuel development for decades. (Reuters)

Hickel, a postdoctoral fellow at the London School of Economics, estimates that South Sudan’s oil reserves will last for another 36 years and generate around $4 billion annually. But under the current “neo-liberal system,” he writes, the world’s newest nation “essentially gives away [oil] for multinational corporations to exploit at will, without any return to the citizens to whom those commons belong.”

As it stands, oil companies in South Sudan are tax-exempt, and the country is locked in a war with its northern neighbor and mother country — Sudan — over export rights. As a result, South Sudan has mortgaged its oil profits away to China and Qatar in exchange for aid.

Hickel sees another way.

In Alaska, he writes, all natural resources are owned in common. Yes, in Alaska, the people — via state government — own the oil, not the energy companies. The state takes oil profits and invests them in a fund, then pays out annual dividends from that fund to every resident Alaskan. Last year, that meant a $1,174 check for each citizen of the state. Alaska’s government uses the rest of the money for development and as a rainy day fund for when the oil runs out. (Contrary to Sarah Palin’s Tea Party-inspired image, Alaska isn’t shy about taxing and spending.)

If it adopted the Alaskan model, South Sudan could disburse $1 billion a year to its citizens, or around 25 percent of average household income, Hickel writes. That would still leave 60 percent of oil revenues available to the state. And Hickel points to data from China, Brazil and South Africa that shows direct cash transfers to the poor attack poverty “more efficiently than most NGO and state-led programs, and without the moralizing bureaucracy.”

Ultimately, the argument goes, following the Alaskan model would help South Sudan avoid the “resource curse,” the phenomenon by which resource-rich nations like Chad, Angola and Nigeria fare worse in terms of development than poorer ones (the curse isn’t accepted as dogma by all experts, however).

While interesting, Hickel’s thesis isn’t completely original. Writing in Business Week in April, Brian Bremmer pointed to Alaska’s sovereign-wealth fund as the perfect model for the oil reserves of newly democratic Libya.

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