Reference no: EM133674069

Question: Iraq is a land of opportunity for foreign oil companies. Thanks in part to increased political stabilization, Iraq's oil production has reached levels near peak-output before the US invasion in 2003. Further, according to the US Department of Energy, ten undeveloped oil fields in the country have a potential value of $3 trillion. Any MNE that would seek to exploit this lucrative source faces steep institutional obstacles. For one, with national elections approaching, politicians eager to sound a nationalist tone are hesitant to facilitate the entry of foreign companies. To make matters worse, Iraq's oil ministry has been moving extremely slowly in approving exploration licenses and even in signing contracts for completed deals. The irony of all this is that because of the political turmoil of the past decade, most native oil experts left the country, leaving Iraq in sore need of an infusion of foreign expertise. (Source: "Deterring Foreign Investors" The Economist, September 26, 2009, pg. 61-62).

How can your firm respond to the institutional challenges presented by Iraq's political situation? What is the most effective strategy for entering into this unstable, unpredictable market? How would a particular strategy allay or compound Iraq's fears of being dominated by foreign companies? How would you (legally) encourage institutional changes that would facilitate foreign investment?