How an Iraqi Geologist Helped Norway Dodge the Oil Curse

Norway found oil in the North Sea in the late 1960s. Most countries with similar discoveries got poorer. Norway got richer, and an Iraqi petroleum geologist named Farouk al-Kasim deserves much of the credit.

Al-Kasim met his Norwegian wife, Solfrid, while studying under the British-controlled Iraqi Petroleum Company in the 1950s. He returned to Iraq with her for a decade, had three children, and then one child needed medical treatment only Norway could provide. The family uprooted their prosperous Basra life in the late 1960s, forfeiting his high position in Iraq's oil business. With no job and few prospects, al-Kasim knocked on the Norwegian Ministry of Industry's doors asking about oil exploration.

The Norwegians had plenty of test results and exploration data to analyze. Phillips Petroleum, the last major exploration company still searching the North Sea, was about to give up. Al-Kasim was hired to crunch the numbers. He told the Ministry there was definitely oil in those waters, just a matter of time. With threats of government fines, Phillips went ahead one more time and discovered the Ekofisk field, the largest oil field in the North Sea.

Economists call it the "resource curse." Countries blessed with natural resource endowments like oil have repeatedly become poorer, more corrupt, and less productive after discovery. The Dutch disease version sees the resource-rich country's currency bid up, undermining every other sector's competitiveness. The political-economy version makes the government beholden to resource extraction, sacrificing property rights and democratic efforts as distorted price signals replace market activity.

Al-Kasim pulled on his experience working in the Gulf. Instead of expecting oil companies to spend large sums on rigs and drilling only to be opportunistically taxed by the state, the framework he and Norwegian bureaucrats employed in the 1960s and 1970s levied heavy taxation only on net profits, with generous deductions for investments, build-up, and R&D. International investors and oil majors were happy to trade uncertain legal standings or risk of coups in some of the nastiest places on Earth for the secure property rights and predictable rule of law of Norway.

The British example with the same oil in the same North Sea around the same time offers a contrast. From roughly similar economic footing in the 1960s, Norwegians today are some 70 percent richer than Brits.