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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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

14. Interstate Conflict Rate by Government Type

15. 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

16. 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