Oil-rich countries revel in their economic boon, but possessing such reserves can also be a curse. In many countries, oil money tends to fuel civil and international conflicts.
“In domestic politics, oil has some perverse effects,” said Wilson Center Fellow Jeff Colgan. “It fosters autocracy, corruption, and inequality.” Political leaders in these countries often face less accountability, he said; they become more authoritarian.
Petro States and Conflict
Colgan is finishing a book due out in February 2013 to be titled, Petro-Aggression: When Oil Causes War. He defines petro-states as nations whose revenues from net oil exports comprise at least 10 percent of GDP. His research, which examines the period from 1945 up until 2010, focuses on Iran, Iraq, Libya, Venezuela, and the non-revolutionary case of Saudi Arabia.
Moammar Qaddafi in Libya and Saddam Hussein in Iraq, for example, both came into power through revolution and remained aggressive as heads of state.
“These leaders tend to take risks that non-petro states cannot take,” said Colgan. One such risk is getting into wars. The Iran-Iraq war lasted eight years and, when it concluded, Saddam Hussein remained in power. Similarly, after the 1991 U.S.-Iraq war, Saddam Hussein continued in power for another decade. Whereas war tends to topple regimes, Libya’s Qaddafi also remained in power despite decades of war that included sending troops into Chad, Egypt, and Tanzania. Colgan observed, “Oil creates durable, authoritarian states.”
For the United States, Colgan recommends reforming energy policy to reduce dependence on oil. “We have to get off of oil in the medium to long term,” he said. “It’s desirable and feasible but of course not easy. The less money the world puts into the oil market, the better.”
One specific idea in the United States would be to create incentives for truckers to use compressed natural gas (CNG) rather than gasoline. Colgan admits this would require retrofitting trucks and building an extensive network of CNG pumps at fueling stations, but he believes it to be a worthy investment. He is also a proponent of a carbon tax. In addition, he said, the federal gas tax, at 18 cents a liter, has not been raised in nearly two decades and current revenues do not cover the cost of highway maintenance.
The SEC & Accountability
In August, the U.S. Securities & Exchange Commission (SEC) passed a regulation that requires all oil companies listed on U.S. stock exchanges to report payments to U.S. and foreign governments, thus holding governments accountable for those revenues. Such a rule, said Colgan, should increase accountability, reduce corruption, and might even reduce the likelihood of war. In fact, some European nations and Canada are looking toward this model to potentially create a similar law.
Setting an Example
With more than a dozen developing countries slated to become new oil-exporting states, there is heightened risk for additional oil-fueled conflicts.
As Colgan wrote in an August 27 article in Foreign Policy, “Among those that have recently uncovered oil reserves are Liberia, Mali, Sierra Leone, and Uganda—all of which were recently entangled in civil or interstate war, or both. Providing these governments with oil income—especially without transparent financial procedures and political institutions—is an invitation to disaster.”
While much of the world remains oil dependent, the responsible path is to promote sustainable management of oil and set a good example for rising oil exporting nations. Colgan said, “We must help these countries make sure the money is well managed so they do not go down a corrupt path.”
Jeff Colgan is an assistant professor in international economic policy at American University’s School of International Service. He is interested in the geopolitics of oil, the resource curse, international security, and international trade. He completed his doctorate at Princeton, with a dissertation titled, "Oil, Revolution, and International Conflict." He has published in International Organization, Journal of Peace Research, and Foreign Policy. He also published a book, The Promise and Peril of International Trade (2005), focusing on the politics of free trade in Canada. Previously, Colgan worked as a consultant for McKinsey and Company, the Brattle Group, and the World Bank.