, , ,

How the Decline in Oil Impacts Azerbaijan’s Economy

The Impact of the Decline in Oil Prices on the Economy of AzerbaijanAzerbaijan is located in the Caucasus region and situated at the crossroads of Europe and Western Asia. The country is bordered on the north by Russia and on the south by Iran. Since October 18, 1991, Azerbaijan has been an independent nation. Before the announcement of independence, Azerbaijan was a member state of the Union of Soviet Socialist Republics (USSR). After declaring sovereignty, the country had political instability for several years. In addition, Azerbaijan fought a bloody war over the territorial dispute with Armenia in the late 1980s and early 1990s. As a consequence of these events, economic, political and social development slowed down. However, after the establishment of political stability and ceasefire agreement between the two sides, Azerbaijan entered a new stage of development. With the onset of the COVID-19 pandemic, the country faces further hardship as the decline in oil prices impacts the economy of Azerbaijan and causes a current financial crisis.

The Oil Production in Azerbaijan

To turn Azerbaijan into a powerful state with a sustainable economy, the previous president Heydar Aliyev had an oil-based national development strategy. On September 20, 1994, the Production Sharing Agreement (PSA) was signed between the State Oil Company of Azerbaijan Republic (SOCAR) and 11 foreign oil companies from six nations. In the beginning, the contract covered oil companies such as BP, Amoco, Unocal, LUKoil, Statoil, Exxon, TPAO, Pennzoil, McDermott, Ramco and Delta Nimir. The oil companies represented six countries. These included the U.K., U.S., Russia, Norway, Turkey and Saudi Arabia. The PSA was the first large-scale investment by western companies in any former USSR country. Later on, the agreement got famous and was known as “The Contract of Agreement.” It was a success for Azerbaijan to invite foreign oil companies and benefit from oil production. Because of this achievement, Azerbaijan managed to develop its economy and invest in social programs.

On the other hand, to export oil to the world market, Azerbaijan decided to build the Baku-Tbilisi-Ceyhan pipeline with the help of geopolitical partners. This pipeline transformed Azerbaijan’s oil industry and became operational in June 2006. The overall length of the pipeline is 1768km, and 443km of it crosses from Azerbaijan, 249km in Georgia and 1,076km in Turkey.

The Decline in Oil Prices Impacts Azerbaijan’s Economy

The economy of Azerbaijan is predominantly dependent its oil export. As mentioned above, the agreements with international companies and the successful export of oil to the world market led to the development of Azerbaijan. However, because of oil money, the country could not manage progress in the political sphere. The level of corruption increased, and the government did not fairly distribute oil money among the citizens of Azerbaijan. As a result of the financial crisis in 2014, the economy of Azerbaijan faced severe difficulties. In 2014, the oil price dropped by 59.2% in seven months. On June 20, 2014, the oil price peaked at $107.95 a barrel, but by June, prices plunged to $44.08. In 2014, the GDP per capita in Azerbaijan was $7,891.313, and in 2015, it decreased to $5,500.31. In 2016, the GDP declined to $3,880.739 — the lowest level since 2007. After 2016, the economy of Azerbaijan started to rise again. In 2017, the GDP per capita was $4,147.09.

The Effects of the COVID-19 Pandemic

With the beginning of COVID-19, the economy of Azerbaijan began to face difficulties again. Because of the financial crisis, the prosperity of Azerbaijani citizens decreased drastically. People started to lose their jobs, and prices in the market increased. Also, as oil prices declined, several international companies decided to leave the territory of Azerbaijan. During the financial crisis, the president of Azerbaijan, Ilham Aliyev, said that Azerbaijan should “work and live as if we live in the post-oil era.” It was a strong statement by the president, and it also was the signal of the beginning of a new economic era for Azerbaijan. After the crisis, the government decided to improve the business environment and diversify to non-oil sectors.

Conclusion

As an oil-rich country, it is not surprising that the economy of Azerbaijan is highly dependent on oil revenues. Unfortunately, the government failed to develop other profitable fields for the economy in the last decades. That is why the financial crisis in 2014 increased the level of poverty in Azerbaijan. From 2014 until 2017, the GDP decreased significantly. However, in the latter stages of the financial crisis, the government managed to stabilize the overall situation.

– Tofig Ismayilzada
Photo: Flickr

, , ,

Oil Find and Economic Growth in Guyana

economic growth in Guyana
Guyana discovered oil off its coast in 2015 and is on the brink of major economic growth. According to the International Monetary Fund (IMF), the projected economic growth in Guyana for 2020 is 86 percent. The projected growth rate is high for 2020 due to ExxonMobil’s oil find in the Caribbean Sea in 2015, which brought hope for change to poor Guyanese. For 2019, GDP growth was 4.4 percent, almost double from the previous year, and the 86 percent projected growth by the IMF shows an increased interest in the development of Guyana. Oil production in 2020 and in the future could bring economic growth in Guyana and add thousands of jobs.

A Potential Future in Oil

Guyana found an estimated 3.2 billion barrels of oil off its coast, with oil production beginning in late December 2019. More than 1,700 Exxon employees are working on extracting oil from Stabroek Block, the oil reservoir, and transporting oil to the Liza Destiny, a storage and offloading vessel. About 50 percent of the 1,700 workers are Guyanese. Exxon expects to produce 120,000 barrels of oil a day in 2020 and estimates 750,000 barrels a day by 2025. The 2025 estimated production would position the South American country in the top 30 countries for oil production. The 750,000 barrels a day estimate would be more oil than India produced daily in 2018. This is one reason for the IMF’s projection of a high growth rate for Guyana, as oil could transform the economy.

Uses of Future Revenue

Oil production in 2020 is exciting Guyanese about the possibilities of changing the country and its people. President David Granger commented, “Every Guyanese will benefit from petroleum production. No one will be left behind.” Guyana’s GDP per capita is about $8,100, which ranks among the lowest in the world. With oil now in production, there is potential to improve its lagging infrastructure and low income. Guyana only has about 500 miles of paved roads, yet almost 2,000 miles of unpaved roads. The President stated that oil could transform the developing country and improve life for hundreds of thousands of Guyanese.

Guyana’s government expects oil revenue of $300 million in 2020 and $5 billion for 2025. This could further enhance economic growth in Guyana and bring the possibility of distributing the money to lagging sectors. In 2019, the government spent $2 billion in its infrastructure. This included constructing or upgrading roads, bridges, highway lights and drains. The East Coast of Demerara Road Widening Project affects more than 100,000 of Guyana’s 777,000 population. Guyana approved about $500 million for the project that focuses on upgrading roadways along the coast. Most of the population resides near the coast and along the Demerara River. Guyana could not only use oil revenue to further develop Guyana but also to add jobs, as the ExxonMobil operation is already showing.

The Impact of Guyanese Oil Revenue

There is steady economic growth in Guyana, as one can witness from its GDP rising from 2.1 percent in 2018 to 4.4 percent in 2019. The IMF’s projected 86 percent growth rate for Guyana in 2020 expresses big expectations for the South American country. Although Guyana’s potential future wealth is good news, the developing country will need support in transforming its newfound wealth into positive change for its people. Every poor country that strikes oil does not always manage natural resources well, yet with the right tools and guidance, Guyana could reduce its 35 percent poverty rate by adding jobs and transforming into a developed economy.

– Lucas Schmidt
Photo: Wikipedia Commons

, , ,

Oil Spills Are Contaminating the World’s Water Sources

Oil Spills Are Contaminating the World's Water Sources

Oil spills happen all over the world. These oil spills are contaminating the world’s water sources and destroying marine life. Every year, the U.S. Department of Energy estimates that more than 1 million gallons of oil contaminate the oceans. These oil spills cost the world important natural resources. Oil spills can happen in many ways. Some are accidental spills while mining the oil from the Earth; others happen due to oil rig malfunctions, attacked tankers or drowned tankers. The containment and clean-up of these spills can cost millions even billions of dollars.

Top 6 Major Oil Spills

The top six major oil spills in the world as of early 2019 are:

  1. The 1991 Gulf War Oil Spill resulted in 240 million gallons of oil spilled.
  2. The 2010 Deepwater Horizon Spill (also considered the Gulf of Mexico Oil Spill) resulted in an estimated 53,000 barrels of oil spilled into the ocean every day for 3 months.
  3. The 1979 Ixtoc 1 Oil Well Spill resulted in 140 million gallons of oil spilled.
  4. The 1979 Atlantic Empress Oil Spill spilled 88.3 million gallons of oil.
  5. The 1983 Nowruz Field Platform Oil Spill spilled 80 million gallons of oil.
  6. The 1991 ABT Summer Oil Spill resulted in 51 million gallons of oil spilled.

 Just these oil spills alone have caused many lost lives and damage to marine life and the ecosystem on which humanity depends. When marine life is attacked, it has an effect on world populations. Oil spills kill thousands of marine life species when they occur. While cleaning the oil spills does save some, it is not before the damage has been done. Humans partly rely on marine life to survive.

Poverty and Water Contamination

Oil spills are contaminating the world’s water sources because it makes water unconsumable. It contaminates parts of the ocean and can seep into the clean water supply that humans and other species need in order to survive. It can seep into rivers, lakes and other bodies of water naturally connected to the ocean. While developed countries have access to clean water by manufacturing companies, many underdeveloped countries do not. Poverty ridden countries tend to suffer the most when water is contaminated due to lack of access to water bottles or barrels to collect rainwater.

Furthermore, the World Wildlife Fund posits that approximately three billion people around the world rely on seafood as their only source of protein. Oil spills continue to impact an already suffering ecosystem. Around 85 percent of marine fish stocks have already been either fully exploited or overfished. Add these two factors together and the marine life that poverty-ridden countries rely on begins to decrease and an already struggling country begins to fall even more.

ISCO Is Trying to Clean Up the Oceans

The International Spill Control Organization (ISCO) is a nonprofit NGO that was established in 1984 and has members in over 45 countries. ISCO has helped clean up multiple oil spills including Exxon Valdez in 1989, the Gulf War Oil Spill in 1991, Lebanon Oil Spill in 2006 and the Gulf of Mexico Oil Spill in 2010.

Along with the aiding of cleaning up oil spills, ISCO also helps to raise co-operation and preparedness worldwide, promoting technological development and making knowledge on spill control available for all organizations when needed. Some recommended safety tips on preventing spills include regular inspections of containers including both piping and mechanical properties, proper loading and unloading procedures and proper training.

Why and how oil spills are contaminating the world’s water sources are important for society to take notice in because it costs hundreds to millions of dollars to clean up but will already have done damage towards contaminating water sources and damaging marine life ecosystems which affects poverty-ridden countries. Many oil spills can be avoided if more action towards taking safer steps to obtaining and transporting oil is taken. By increasing the safety of these actions, oil spills can begin to stop contaminating water sources.

– Chelsea Wolfe
Photo: Unsplash

, , , , , , , , ,

The Link Between Oil and Poverty

Oil and Poverty
Oil has been a massive drive for inequality in the modern world, especially The Organization of the Petroleum Countries (OPEC) member states. Oil and poverty intertwine, especially in OPEC nations. OPEC, at its core, is a union of oil-producing countries that work together to make decisions on how much oil countries extract and export around the world. While OPEC strength has diminished in the world with increased oil supply coming in from Canada and The United States, OPEC nations still have stranglehold grips on their economies and governments. OPEC found its beginning in the 1960s with five countries, including Kuwait, Venezuela, the Islamic Republic of Iran, Saudi Arabia and Iraq.

Reliance on Oil Revenue

One thing that all the founding OPEC nation members have in common is a poor Freedom House Index score. Kuwait currently has the highest score with Freedom House giving it an overall score of partly free while the other four have a score determining them not free. With five distinct countries with different styles of government and cultures with one being across the globe, the one common thread is the large oil reserves that each of these countries relies on. For instance, a report by export.gov finds that “oil comprises nearly half of Kuwait’s GDP, around 95 percent of exports and approximately 90 percent of government revenue.”

The fact that government revenue comes mostly from Kuwait’s nationalized oil industry and the Kuwait Petroleum Company (KPC) shows an alarming trend. With the country relying mainly on oil revenue, the government taxes the population less, meaning that the government can ignore the requests for policy reform for less risk. If everyone in the United States decided to protest government activity, the federal government would have a serious fiscal issue on its hands, but if Kuwait’s population decided to stop paying taxes, the overall fiscal attitude of Kuwait would only change minimally.

Kuwait’s failure to support its people reflects in the numbers. According to the Central Intelligence Agency (CIA) Factbook, the total unemployment rate in Kuwait is 15.4 percent, with women being 30 percent unemployed and men being 9.4 percent unemployed. The CIA also cites that current health expenditures are only 4 percent of the economy, and there are only two beds per 1,000 people. These three simple metrics show a blatant disregard towards social issues such as women’s rights and political/economic issues such as health care and infrastructure.

Solutions

In some ways, the problem of oil and poverty and OPEC is self-repairing. As large and easy oil reserves start to dry out, the cost of obtaining more oil will increase to the point where it is no longer economically feasible to extract it. There is much debate as to when this will occur, but for many western countries, green energy has already become cheaper than traditional fossil fuels. This trend reflects in its GDP growth rate, which the CIA has concluded to be negative 3.3 percent and has been negative since 2015. With 90 percent of the countries’ GDP tied up in oil and the growth rate being negative, one can infer that as the world’s oil supplies dry up and people’s preferences shift towards green energy, Kuwait will eventually have to find another way to support itself.

Fighting the fight against OPEC and oil and poverty is easier than one might think. Since OPEC operates as a union based on exports, supporting NGOs and governmental policies towards green energy in any capacity either directly on indirectly damages OPEC. A great NGO to support is Green America which has the mission statement, “Our mission is to harness economic power—the strength of consumers, investors, businesses, and the marketplace—to create a socially just and environmentally sustainable society.” With Green America’s goals of social equity and sustainability, it is the perfect NGO to counter oppressive regimes that profit from killing the planet.

– Spencer Julian
Photo: Wikipedia

 

, , , ,

The Oil Discovery in Guyana and Plans for the Future

Oil Discovery in Guyana
The 2018 oil discovery in Guyana means this former British Colony can expect a massive increase in wealth by the early 2020s. The country found over three billion barrels worth of oil off its coast and it will likely positively impact its future economy. By 2020 Guyana will be a major petroleum producer. This may lead to a 300 percent increase in Guyana’s GDP by 2025.

For a country that heavily relies on agricultural, mining and lumber exports such as sugar, rice, bauxite, timber and gold, the oil revenue will heavily impact the Guyanese economy. As of now, Guyana’s agriculture industry experiences many ups and downs because of its vulnerability to floods. Between 1990 and 2014, floods were responsible for 93.6 percent for Guyana’s economic inactivity.

Currently, the oil project is still under production so it does not account for any percentage of the GDP. The oil and gas revenue, however, for the 2017 fiscal year is $2.8 billion. This accounts for only 14 percent of the Guyanese revenue generated by extractives.

As of 2017, 36 percent of Guyana’s population lived in poverty with unemployment rates almost reaching 12 percent. Education and trade learning are essential for the elevation of a country out of poverty. However, many are unable to continue their education after primary school. Youth from 15 to 24 make up 40 percent of the population, yet unemployment rates for them are 22 percent. Fortunately, with the recent oil discovery, Guyana’s oil industry has hired 10 more graduates of the University of Guyana in 2018 than it did in 2017. However, since the oil discovery, Guyana’s unemployment rates have remained around 11 to 12 percentage. As of 2019, oil and gas companies claimed 51 employees making up only 0.02 percent of the population.

What is the Resource Curse?

The resource curse refers to the idea that countries with a significant amount of their own natural resources experience little economic growth, development and more authoritarianism. The oil industry is unpredictable, and when governments tend to rely on it, citizens suffer. Several countries that were once in Guyana’s shoes, like Nigeria and Venezuela, experienced corruption and a contradicting lack of economic growth when their oil business began to boom. The influx of wealth that accompanies the discovery of oil, transparency, accountability and active oversight are important for avoiding the feared resource curse.

Venezuela, Nigeria and the Resource Curse

Venezuela’s oil reserves are larger than any other country’s. Since Venezuela’s focus on oil meant that it ignored other industries, however, poverty in Venezuela has reached devastating highs. Children have been suffering from malnutrition at alarming rates, and as of 2018 up to two million people have fled the country.

In Nigeria, the influx of oil came with a bevy of problems including theft of oil pipes, damage to nearby ecological systems, oil spills and abuse of the natural resource wealth. According to the World Bank, only one percent of the Nigerian population benefits from just 80 percent of the revenue brought in by the oil. The attention and support that Nigeria received for its oil industry also meant that the country neglected other industries like agriculture.

The EITI and NPPDG in Guyana

Upon the recent oil discovery in Guyana, the country has become apart of the Extractive Industry Transparency Initiative (EITI) and the New Petroleum Producers Discussion Group (NPPDG).

The goal of the EITI is to ensure that a country is managing its natural resources in a way that benefits its citizens as much as possible. Some key standards of the EITI include informing the public, providing transparency within governments and companies dealing with the natural resources and holding those in power accountable.

As of 2019, the EITI has introduced new transparency requirements. One requirement impacting Guyana specifically is the contract transparency requirement. This states that by the year 2021, all participating countries must publish new oil, mining and gas contracts. Guyana has committed itself to the formulation of new contracts along with three other countries.

The purpose of the NPPDG is to help emerging oil producers make effective policies and decisions and remain proactive. Governments receive training sessions, mentorships and existing techniques via current successful oil-producing countries. Countries can provide one another with advice and support when facing novel challenges. In a summary of the most recent NPPDG meeting, consistency and politics were topics of discussion for Guyana. Because oil-production is a long-term project, keeping plans consistent and on track despite the occasional election of new leaders is a topic of concern for Guyana. This is mainly because prior to the discovery of the oil, Guyana began its Low Carbon Development Strategy. In this strategy, the country developed plans to fight climate change through sustainable development. According to the report, participants of the meeting are concerned that the recent oil discovery and subsequent oil production may not fit in with the Low Carbon Development Strategy.

Guyana’s New Sovereign Wealth Fund

Another proactive step taken by the Guyanese government since the oil discovery in Guyana includes the recent approval of the creation of a sovereign wealth fund. A sovereign wealth fund comprises of money from the country’s natural resources and a country uses it to boost its economy. With a sovereign wealth fund, Guyana has allowed the opportunity for other industries it relies on, such as sugar and gold, to benefit from the revenue that the oil will produce. Furthermore, since the oil industry is somewhat unpredictable, the sovereign wealth fund will allow the country to save up money in the event of hard times.

All in all, this oil discovery in Guyana could have an extremely positive impact on the Guyanese economy. Looking at other successful oil-producing countries for guidance, and learning from other country’s mistakes will allow Guyana to make the best decisions for its citizens.

– Desiree Nestor
Photo: Flickr

, , , ,

Fuel Shortage in Venezuela Impacts Agriculture

Fuel Shortage in Venezuela
In 1960, the Organization of Petroleum Exporting Countries (OPEC) established to coordinate and unify policies around the price of oil. This intergovernmental organization consists of 15 nations that produce 44 percent of the world’s oil and own 81.5 percent of the world’s oil reserves. Given the importance of oil in today’s economy, it is reasonable to assume that OPEC members are well-off, especially those with vast oil reserves. However, the fuel shortage in Venezuela proves otherwise.

Fuel Shortages Starve the Country

Venezuela, one of the five OPEC founders, boasts the world’s largest oil reserve. Although this South American country sits on a vast reservoir of mineable liquid gold, there is a fuel shortage in Venezuela that starves it. Due to years of mismanagement and corruption, the oil-rich nation has dried up its gasoline pumps, leaving lines trailing from gas stations that last hours. People can sometimes wait for days to fill their tanks. In the southern and western states of Tachira and Bolivar and the central states of Carabobo and Aragua, people can wait in line for five hours or more. Venezuela has limited power so it rations it; periodic power outages means that people cannot pump gas. However, there are no gas shortages in the country’s capital, Caracas; oil tankers divert into the capital to supply its six million citizens, but also to prevent political unrest around the Parliament.

These fuel shortages and gas station lines are impeding on already troubled Venezuelan lives. The hyperinflation and lack of job opportunities in the country hinder a good quality of life and gas shortages push this even further. Citizens cannot get to their jobs when their cars are empty on fuel or when they are stuck in line to fill up.

However, the fuel shortages in Venezuela are troubling to not only the day-to-day lives of citizens but also the entire agriculture industry that feeds the population. Fuel shortages compound the effect of food insecurity. When there is a shortage of fuel, food cannot make it from farm to market or from city to city. There is no rail system to move food either. Farmers leave harvested produce to rot, simply because the truck that transported vegetables to the market never arrived. On May 20, 2019, the National Federation of Cattle Ranchers in Venezuela issued a public plea to the government citing its difficulty moving cattle across the country.

Delayed shipping dates are not the only way fuel shortage in Venezuela impacts agriculture. Farmers might have nothing to sell because pesticide shipments might not arrive to prevent insects ruining their harvest. Without the shipment of crucial parts, farmers cannot operate basic equipment and without a reliable gas pump, workers cannot take the bus into work. Fuel shortage in Venezuela impacts not only the food but the equipment and the workers necessary to cultivate crops.

Plummeting Oil Production in the World’s Largest Oil Reserve

In the past, Venezuela has provided generous gas subsidies to make fuel almost free. However, the issue of fuel shortage began in 1989, when then-President Perez announced an end to the gas subsidy. The announcement resulted in large riots and since then, the suggestion of increased prices of oil is taboo. Thirty years later and after six years of economic crisis and recession, oil is still cheap, but production has dropped significantly. At the beginning of 2019, PDVSA, the state-owned oil and gas company, produced 1.2 million barrels of oil. On April 2019, this figure dropped down to 830,000. This decrease in production is due to obsolete machinery and under-resourced facilities. Additionally, as of now, only two refineries are in operation.

In addition to the mismanagement and corruption that has caused these plummeting oil production rates and shortages, the Maduro government also blames the corruption of former management of resources and U.S. sanctions. These sanctions prevented the export of specific materials that refine crude oils into usable fuel.

Solutions

Corruption, mismanagement and sanction stand-offs are difficult to address. However, there are many NGOs that operate on a community level and provide for those immediately in need. The Venezuelan Engagement Foundation Group (VEFG) is one of these NGOs with programs that address the effects of the fuel shortage and resulting food insecurity. One of its top missions is to provide nutritional meals to children in need through food programs. This year, its food programs have targeted communities in need, mainly children who are the most impacted demographic regarding food shortages. VEFG’s #FeedAKid campaign guarantees that $1 can give a child one meal a day through community kitchens and school canteens. Currently, VEFG feeds 3,000 children, teenagers and elders in 32 different centers worldwide or 90,000 meals a month.

Venezuela’s position is full of contradictions. As an oil-rich OPEC country with fuel shortages and once the richest country in South America, it is now grappling with hyperinflation, failing job markets and food insecurity. The corruption and mismanagement in government have failed to convert the potential of oil into social welfare. Venezuela has limitless potential in terms of its crude oil reserves ready for refinement. The efforts of NGOs on the local level and change on the national level will refine the crudity of poverty into prosperity.

– Andrew Yang
Photo: Flickr

, , , ,

How the Breakdown of the Nuclear Deal has Affected Poverty in Iran

How the Breakdown of the Nuclear Deal has Affected Poverty in Iran
As the relationship between Iran and the U.S. deteriorates, Iran’s quality of living is plummeting, the cost of living is soaring and Iranian citizens are feeling the pressure.

Since the dissolution of the Joint Comprehensive Plan of Action, more commonly known as the Iran Nuclear Deal, in May 2018, extreme hardship has hit the West Asian country. Economic sanctions that the nuclear agreement thwarted are in place again and are damaging Iran’s oil and precious metal sectors, handicapping the country’s export potential.

The primary component of the economic decline is the dent that sanctions are making in the oil sector–which, according to the World Bank, accounts for two-thirds of Iran’s economic growth.

Post-Breakdown Economic Turmoil

Iran’s oil production has already fallen steadily every month since the breakdown of the nuclear deal, according to the U.S. Energy Information Administration, and the resulting impact on the economy is devastating. In April 2019, the World Bank reported that Iran’s economic growth slowed to 1.8% in the first quarter of 2018/2019–down by 4.6% from the previous year. Compounded with years of corruption and mishandling of public funds, the breakdown of the nuclear deal has positioned the Iranian economy in a state of stagflation (negative GDP growth) estimated to continue until April 2020.

Compounding the decline in GDP, the national currency has depreciated by around 60% on the U.S. dollar. An IMF senior official revealed that the inflation rate could reach 40% by the end of 2019. This economic turmoil has reduced accessibility to living essentials, increased societal instability and swelled poverty rates.

Increased Poverty

The World Bank reports that the upper-middle-class poverty rate, which is classified as at or under $5.50 PPP (Purchasing Power Parity), is at an estimated 11.6% for 2018/2019 and forecasted to grow to 12.6% in 2019/2020.

It is essential to note that $5.50 PPP is not a daily income. That figure is usually much lower. According to the Global Basic Income Foundation, PPP is the amount a person can afford to spend on any given day, taking into account both earnings and savings. To put this into perspective, 11.6 percent of people in Iran could not afford to buy something today that costs $5.51.

Higher Prices

With the reimposed sanctions resulting from the breakdown of the nuclear deal, accessibility to living essentials is rapidly shrinking. Even humanitarian organizations struggle to acquire adequate supplies to carry out their work due to soaring prices.

A recent report from the Statistical Centre of Iran revealed eye-opening inflation statistics. Between 2018 and 2019, the price of food and drink increased by 43.5%, clothing and footwear by 33.9%, housing and utilities by 18.2% and health and medical services by 18.8 percent. The overall Consumer Price Index is up by 30.6%.

The amalgam of decreasing wages and currency devaluation is restricting Iranian citizens’ ability to acquire necessities. The World Bank expects Iran’s poverty rate to rise to 12.8% by 2021.

Humanitarian Response

With poverty levels rising in Iran, humanitarian agencies are stepping up to meet the need. Moms Against Poverty is a nonprofit organization that is working to alleviate poverty in Iran through hunger relief, education and orphan care. Since the breakdown of the nuclear deal, Iran has had a 6.3 magnitude earthquake and major flooding. Moms Against Poverty provided natural disaster victims with food, water and blankets, distributed safe heaters and helped rebuild and furnish health clinics and pre-schools in the flooded areas. The organization also funded 2,000 food baskets for the Persian New Year across three Iranian provinces.

The breakdown of the nuclear deal has been economically painful for Iran. Tensions have only risen since the reimposition of sanctions and, as of now, show no signs of alleviating. There have already been multiple conflicts between the U.S. and Iran in the Strait of Hormuz, Iran’s main shipping route, since the breakdown.

Organizations like Moms Against Poverty provide some poverty relief and help the quality of life for many citizens. However, relief on a nationwide scale could be achieved if U.S.-Iran relations are restored or if Iran can boost its economic growth and halts the devaluation of the national currency. For now, the citizens of Iran are feeling the pressure.

– Zach Brown
Photo: Flickr

, , ,

Top 9 Facts About Living Conditions in Kuwait

Top 10 Facts About Living Conditions in Kuwait
Kuwait is a small country in Asia that has an undeniable amount of wealth. Many of the citizens of Kuwait still live in extreme poverty, however. Kuwait’s wealth through natural oil reserves often masks the country’s poverty issues. Oil is the most important industry within the country and Kuwait’s top percentage of citizens possess most of the wealth. The nation only employs about 70 percent of its citizens leaving one in four people without incomes to support their families, a half a million people living in rental houses and over 100,000 people looking for a home. While conditions are difficult for citizens that do not profit from natural oil, Kuwait also has a negative reputation for being a challenging country to live in for expats. These top 9 facts about living conditions in Kuwait acknowledge both internal and external issues facing the country.

Top 9 Facts About Living Conditions in Kuwait

  1. Kuwait’s public transportation primarily includes buses and taxis. Kuwait has a very poor safety record on the roads with one of the highest accident rates in the Middle East. A government solution has proposed a plan to install GCC-railway terminals so that citizens and tourists can get around safely.
  2. Kuwaitis receive high medical care and are entitled to free medical treatment at government facilities. Kuwaitis always get priority over expats, which can make the cost and wait time for tourists a nightmare. A governmental implementation that segregates local and expat patients and foreign medical staff ensures that Kuwait’s citizens receive the highest and fastest level of care first.
  3. The overall environment of Kuwait is extremely unclean. The country has a significant litter problem as citizens tend to throw garbage in the streets. It is common for citizens and expats to drive around with piles of trash on the side of the road. The government is working with nonprofit organizations such as Operation HOPE in forming groups to clean litter on the roads weekly.
  4. The cost of living poses a challenge for the Kuwait people. Housing, education and clothing are too expensive for citizens not working in the natural oil industry. With only 70 percent of the country employed, half a million can only afford rental homes while 100,000 people are homeless.
  5. Women in Kuwait are making progress but there is still a long way to go. Women have been trailblazers in turning the country around following the Kuwait Parliament Act signed in 2005, granting women full suffrage. Kuwait still lacks laws against domestic abuse and husbands can prohibit their wives from working, though.
  6. Kuwait has an issue with extremely high temperatures, especially during the summer season. The average temperature from June through August is 101 degrees. The country has many months’ worth of dry periods making agriculture extremely difficult in producing a profit. The winter months are cooler but still face an average of 70 degrees.
  7. Operation HOPE in Kuwait is one of many nonprofit organizations working toward bettering the country. HOPE stands for Helping Others Practically and Everyday without discrimination or disrespect to anyone. Members of the organization do many things from cleaning the streets to making blankets for prisoners. The organization also provides food, toiletries and bedrolls to those in need.
  8. Non-citizens that came from tribal families and settled in the community over 50 years ago face the most serious economic problems. No citizenship means segregation by the government which makes earning a living extremely challenging. People can apply for citizenship, yet the process is long and challenging.
  9. Although the natural oil industry is the backbone for wealth in Kuwait, oil prices worldwide have dipped 60 percent since 2014 challenging the country to buckle down on spending and begin finding alternative ways to make revenue. This solution can lead to unemployed citizens finding work in whatever the government is going to deem profitable.

These top 9 facts about the living conditions in Kuwait expose some issues that the country faces for citizens, non-citizens and expats settling into the country. The top 9 facts about the living conditions in Kuwait also acknowledges that the Middle Eastern nation has promise and viable solutions to issues facing the country. If the government can continue to implement and think of new and effective measures, Kuwait should continue to prosper into a successful nation.

– Aaron Templin
Photo: Flickr

, , , , ,

US Cracks Down on Venezuela’s Oil-Backed Cryptocurrency

Venezuela's Oil-Backed CryptocurrencyVenezuela is a region rich in oil and minerals, yet it suffers from poverty and political turmoil. Venezuelan president Nicolas Maduro is launching a new blockchain currency called Petro, an oil-backed cryptocurrency. The U.S. believes this to be an attempt to circumvent sanctions against the Venezuelan government and is cracking down on Venezuela’s oil-backed cryptocurrency.

Venezuela suffers from the “resource curse,” a phenomenon whereby its large reserves of oil negatively impact its economic growth and stability. Rather than a blessing, these energy reserves lead to fraud, corruption, wasteful spending, military adventurism and the authoritarianism of the Maduro regime. This curse exacerbates global poverty through the destabilization of the oil industry, dulling the effect of foreign assistance and creating a breeding ground for terrorism and instability.

Although the country has a vast supply of oil money, instead of going to Venezuela’s poor, the money ends up in the pockets of the rich. U.S. Senator Marco Rubio tweeted on February 9, 2018, regarding the Maduro regime, “Soldiers eat out of garbage cans & their families go hungry in #Venezuela while Maduro & friends live like kings & block humanitarian aid.”

Venezuelans are deprived of human rights guarantees and press freedoms, facing political persecution and public corruption by the Maduro regime. The U.S. regards the Maduro regime as a dictatorship, whose power has overridden the democratic will of Venezuelans. The nation’s population is greatly subjected to sex trafficking and forced labor, sexual exploitation and domestic servitude. People from other nations are trafficked for sex and labor in Venezuela. Cuba trafficks thousands of Cuban citizens and doctors into forced labor in Venezuelan social programs, in exchange for the provision of resources to the Cuban government.

The most recent U.S. sanctions were imposed in August 2017 against Venezuela’s dictatorship, blocking U.S. citizens from buying new debt, bonds, dividends or other distributions or profits from Venezuelan government-controlled entities and its state oil company, Petroleos de Venezuela (PDVSA). This followed December 2014 sanctions imposed by the U.S., aimed at preventing U.S. entry by persons involved in the erosion of human rights guarantees, political persecution and public corruption. These sanctions do not target the people or the economy of Venezuela; they are aimed at protecting the will of Venezuelans and preventing U.S. involvement with the corruption of the Maduro regime.

Maduro responded to these sanctions by implementing strategies to free the oil-centered economy from the U.S. dollar, despite its universality in global trade. In September 2017, Maduro ceased publishing Venezuelan crude oil market prices in U.S. dollars, instead publishing prices in Chinese yuan. His December 2017 announcement to implement the oil-backed cryptocurrency was in direct response to the August 2017 sanctions, stating that Petro could “help defeat the financial blockade.”

Cryptocurrency is decentralized, uncontrolled by banks or governments. It can benefit those living in politically unstable regions, because the government can neither control its value nor transfer it from state to state. In Venezuela’s case, the cryptocurrency will be backed by oil, an industry largely controlled by dictators. Because Petro is a cryptocurrency, it is difficult for the U.S. government to regulate, threatening the U.S. sanctions that prohibit investing in PDVSA.

Petro is one of many foreign exchange (FX) mechanisms introduced by Venezuela. Most of the FX failed to meet market demand for dollars, resulting in Venezuela’s robust black market. Although FX is prohibited on the black market, it is the driving force of hyperinflation. Continuously on the rise, one U.S. dollar is now equivalent to 9.9875 Venezuelan bolívar.

The U.S. addressed Venezuela’s oil-backed cryptocurrency in a letter by senators Marco Rubio and Bob Menendez to the U.S. Department of the Treasury, stating “we are concerned that a cryptocurrency could provide Maduro a mechanism by which to make payments to foreign lenders and bondholders in the United States, actions that would clearly thwart the intent of U.S.-imposed sanctions.”

In early February 2018, U.S. Secretary of State Rex Tillerson toured Latin America and the Caribbean. Afterward, Tillerson alluded to U.S. considerations of restricting oil sales from Venezuela due to its worsening political situation. Developments in trade sanctions are imminent as the U.S. cracks down on Venezuela’s oil-backed cryptocurrency.

In opposition to the Maduro regime, the Venezuelan Parliament stated that Petro’s creation only serves to “evade financial sanctions, [and is] openly violating the Constitution and legitimizing illicit transactions.”

As the U.S. cracks down on Venezuela’s oil-backed cryptocurrency, the government aims to combat the use of Petro to circumvent U.S. sanctions, prohibiting investors on U.S. soil from profiting or investing in the PDVSA, the driving source of Venezuela’s poverty and humanity crisis. These policies and sanctions will be heavily enforced in the face of Petro’s introduction to the market and will serve to reject the political corruption and economic failure to its people of the Maduro regime.

– Alex Galante

Photo: Flickr

, , ,

Oil Infrastructure in Libya: The Key to Rebuilding its Economy


Lacking stability in politics and social structure, Libya is a state susceptible to widespread volatility. Its economy is no exception. Developing infrastructure in Libya is key to rebuilding its economy.

Before the 2011 Arab Spring Revolution, Libya exported large quantities of oil to China, Italy, Germany, Spain and Turkey, among other countries. In 2010, Libya had a GDP of $74.76 billion, while Tunisia, a bordering state, had a GDP of $44.43 billion. Following the death of Muammar Gaddafi in late 2011, the country’s GDP fell to $34.7 billion, almost half that of the previous year.

While Libya exported 1.6 million barrels of oil per day before the revolution in 2010, in August 2016, just over 200,000 barrels per day were exported. This dramatic fall can be traced to considerable damage to oil infrastructure in Libya as a result of rival factions and militias feuding after the Revolution. The power struggles were not only the result of seemingly endless internal instability but also the ongoing proxy wars in the Middle East.

The struggle for control over Libya’s oil continues even within the high levels of government, especially between the United Nations-backed Libyan Government of National Accord (GNA) and the Libyan National Oil Corporation (NOC). NOC chairman, Mustafa Sanalla, warned the GNA that the new government had overstepped its bounds by closing the oil ministry and by commandeering some of the NOC’s role.

Without an agreement between the rivaling political parties, the future of oil in Libya remains bleak. In an Op-Ed piece penned for the New York Times, Libyan oil boss Mustafa Sanalla suggests that the only way to “save Libya from itself” is to keep oil and politics separate. However, even as Sanalla has been urging investors to have confidence in the oil infrastructure in Libya, it has continually proved to be turbulent.

The Petroleum Facilities Guard, charged with protecting oil infrastructure in Libya, has fallen into a network of local fiefs. The tension between these competing pockets of power has blockaded nearly all of Libya’s main oil ports, costing the country over $120 billion in lost revenue.

A Brookings Institution report on Libya’s economy recommends that the country “drastically change the management of revenues to ensure they are used in the best interests of the population, for example by using revenues to finance large infrastructure investments, creating productive jobs for Libyans in the process.” Sanalla agrees with this sentiment.

According to the NOC, oil production will reach one million barrels per day for the first time since 2013. This milestone, says Sanalla, would give the NOC the opportunity to “restart the economy” using “oil-sector investment to help develop local industry.”

Stabilizing oil infrastructure in Libya could lead to sustained exports and a more stable economy, and country, for all of its citizens.

– Richa Bijlani

Photo: Flickr