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Stephanie Cohen

New Atlantis blogger Stephanie Cohen is a journalist who covers energy and environmental issues for a wide range of print and online publications. She can be reached at scohen@thenewatlantis.com.
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Power Politics

Wednesday, April 16, 2008

The Curse of Oil Wealth 

In an article in the new issue of Foreign Affairs (“Blood Barrels: Why Oil Wealth Fuels Conflict”), UCLA political scientist Michael L. Ross argues that while the world has generally grown much more peaceful over the past fifteen years, oil-rich countries are a mess.

How do we know the world is more peaceful? Ross looks at the number of civil wars: at the end of the Cold War there were seventeen major civil wars going on in the world (meaning civil wars in which more than 1,000 people were killed). In 2006, there were just five. The number of “smaller conflicts” also dropped 18 percent from 33 to 27 over the same period.

But Ross’s main thesis is that “despite this trend, there has been no drop in the number of wars in countries that produce oil” and “oil-producing states make up a growing fraction of the world’s conflict-ridden countries.” The main reason, according to Ross, is that oil wealth often wreaks havoc on a country’s economy and politics, makes it easier for insurgents to fund their rebellions, and aggravates ethnic grievances.

Ross tries to weave the Iraq war into his essay, writing that “according to some, the U.S.-led invasion of Iraq shows that oil breeds conflict between countries, but the more widespread problem is that it breeds conflict within them” (emphasis added).

And the correlation between oil and violence is likely to grow stronger, since as Ross points out, countries in Africa, the Caspian basin, and Southeast Asia will soon become “significant oil and gas exporters. Some of these countries, including Chad, East Timor, and Myanmar, have already suffered internal strife. Most of the rest are poor, undemocratic, and badly governed, which means that they are likely to experience violence as well.”

Ross is careful to point out that “oil is not unique; diamonds and other minerals produce similar problems.” And he makes clear that oil does not guarantee strife: “Oil alone cannot create conflict,” and indeed, “almost half of all the states that have produced oil since 1970 have been conflict-free.”

Nevertheless, there almost seems to be what Ross calls an “oil curse.” Great oil wealth often deprives a country “of the benefits of dynamic manufacturing and agricultural bases ... leaving it dependent on its resource sector and so at the mercy of often volatile international markets.” And a sudden glut of oil revenue can be highly disruptive: “Few oil-rich countries have the fiscal discipline to invest the windfalls prudently; most squander them on wasteful projects.”

Oil wealth, Ross writes, “both exacerbates latent tensions and gives governments and their more militant opponents the means to fight them out.” International sanctions are likely to be useless to quell the violence in countries where deadly conflict has broken out, since the coffers in those countries are flush from oil revenue. And the solution Ross considers ideal — essentially making those countries poor again and challenging them to find a new source of revenue — is, he concedes, not very realistic. Instead, he proposes a mix of other mild and meek solutions, including encouraging the governments of resource-rich states to be more transparent; having oil-importing countries like the United States disclose where their petroleum supplies come from; and help oil-exporting states better manage the flow of their oil revenues. And in some cases, Ross notes, “the best way to steer clear of the oil curse may be not to sell oil for cash at all but to trade it directly for the goods and services their people need,” as Angola and Nigeria are attempting to do.

Again, Ross’s article can be read here.

posted by Stephanie Cohen | 9:26 am
File As: Energy