NS4960 Spring Term 2018 Jeff Colgan, The Petrostate Chapter 11 in Steven, O’Brien and Jones

Overview I Jeff Colgan, Oil, Domestic Politics, and International Conflict, Chapter 11 in Jones et al. Focus is on the security dimensions of energy – particularly oil. Oil has specific characteristics not necessarily shared by other energy sources Ease of centralization of revenues and A fungible world commodity market based on ocean-going shipping

Petrostate Syndrome I Defines petrostate as any country that has annual net oil export revenue of at least 10% of its gross domestic product (GDP). Examples include: Saudi Arabia Iraq Iran Russia Norway Venezuela Ecuador Nigeria Angola, Algeria, Libya and Sudan

Petrostate Syndrome II Similarities (except for Norway) striking given their differences in Geography Culture and Economic setting Norway largely unaffected by the negative side of the effects of the oil industry in many petrostates Other oil producers not meeting definition of petrostate experience some petrostate characteristics. Mexico Malaysia Egypt Colombia and Argentina

Resource Curse I Best known trait of petrostates is they suffer from the “resource curse” Not one characteristic, but a collection of negative Economic and Political phenomena Economically the resource curse typically means Increased corruption High income inequality Currency volatility and appreciation (Dutch Disease) Uneven regional economic development High unemployment Low rates of female-labor force participation Increased state ownership of business

Resource Curse II The Dutch Disease by which changes in the petrostate’s currency affects the viability of other economic sectors, especially manufacturing and agriculture Is though to be responsible for some, but not all economic problems The usual pattern is for these countries to sustain lower long run rates of economic growth than the case with non-resource economies

Resource Curse III Politically, the resource curse typically produces Durable authoritarianism Low levels of political accountability More frequent civil violence, possibly including civil war Weak governance institutions Increased gender inequality Grievances stemming from environmental degradation or Forcible migration in oil-producing regions As with economic effects the exact symptoms and causal mechanisms linking oil to politics are debated by scholars

Resource Curse IV Many studies have considered the effect of oil on democratization and regime type General agreement on many areas such as why resource-rich governments maintain their authority by using Low tax rates, High public spending and Patronage Low rate of tax collection critical because taxation An important step in state formation Helps to cement a social contract between a state and its citizens Is a key element in governance capability Absence (or reduced role) in petrostates viewed as hindering institutions and democracy

Resource Curse V Proclivity to Provide Energy Subsidies Energy subsidies common in the petrostates Cost governments billions of dollars globally In 2012 the total cost of fuel subsidies was $525 billion an 30% increase over 2011. Fuel subsidies politically popular but can be fiscally unsustainable, especially when combined with rapid demographic growth and rising energy prices Given in part because Domestic populations often feel some sense of national ownership over oil reserves Easy way to redistribute some of that wealth

Resource Curse VI One established fuel subsidies are very hard to reduce or eliminate. Withdrawal often results in Political demonstrations and Riots Concern of regimes over spread to broader population threatening regime survival Successful energy subsisdy reform is relatively rare

Common Foreign Policy Behaviors I Typical foreign policies among petrostates Elevated military spending Large foreign aid donations to other developing countries Funding of foreign insurgencies or terrorist or both, and Checkbook diplomacy (use of foreign aid and commercial relationships to accomplish foreign policy objectives). All derive from ease with which oil revenues can be centralized and controlled by the state’s leadership Each of these tendencies especially likely in periods of high oi prices

Common Foreign Policy Behaviors II Research has identified eight different causal mechanisms linking the global oil industry to international conflict Resource wars – acquisition of oil reserves by force Petro-aggression – oil facilitates domestic political control of aggressive leaders like Saddam Financing for insurgencies – Iranian oil money to Hezbollah Conflicts over potential oil market domination – U.S. conflict with Iraq over Kuwait in 1991 Control over transit routes, such as shipping lanes or pipelines Oil related grievances – presence of foreign workers in petrostates helps extremist groups like al Qaeda to recruit locals

Petro-Aggression I Petrostates differ in one important respect – degree to which they engage in aggressive foreign policy Willingness often shaped by whether the government came to power through a domestic revolution Petro-revolutionary states three and a half times as likely to engage in militarized interstate dispute than are non-revolutionary, non-petrostates

Interstate Conflict Rate by Government Type

Petro-Aggression II Why oil and Revolution Produce Aggression Oil income easily seized by head of state Petrostate leader often faces little political accountability Reduces leader’s risk of domestic punishment for risky decisions like starting wars

Assessment In the interest of developed countries in managing the resource curse to obtain more stability in oil markets. Several attempts include encouraging Citizens to demand more transparency in oil transactions – publishing of data on receipts and expenditures Establishing oil wealth funds Direct payments to population