"The Most Inconvenient Truth:" The Necessity of Good Governance in Oil-Exporters
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Stanford Journal of International Relations
"The Most Inconvenient Truth:"
The Necessity of Good Governance in
Oil-Exporters
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By Andrew Lawrence
Political leaders in the West have long promised to end their reliance on foreign oil. Decades
later, Western dependence on Middle Eastern, African, and South American oil has never been
greater, and today the United States imports more than 50 percent of its oil from politically
volatile countries like Nigeria and Venezuela. Yet with concerns over climate change growing
by the day and with President Barack Obama committed to investing in a “green” economy
in the near future, the prospects for reducing dependence on foreign oil have never appeared
more likely. However, while the big push away from foreign oil dependence fulfills long-term
environmental needs, the United States must first ensure that good governance exists in what
have traditionally been some of the most volatile areas in the world.
Stock Xchange
As the sun sets on oil dominance in energy markets, what will happen to nations that rely exclusively on oil exports for revenue?
60 • Fall/Winter 2008
Good Governance in Oil-Exporters
T
he need for the international community –
especially the United States – to immediately
address the problem of fossil fuel reliance is more
pressing than ever. The United Nation’s Intergovernmental
Panel on Climate Change (IPCC) recently announced
findings that current patterns of oil consumption will
lead to water shortages, the loss of arable land, and drastic
weather changes. However, while a cessation of fossil fuel
usage in favor of cleaner energy sources will indeed benefit
the environment, such a policy could produce offsetting
political, economic, and social effects in oil-exporting
countries – most of which rely on oil revenues to fulfill their
public-spending budgets and most of which retain “weak,
or in some cases, nonexistent political and economic
institutions.”1 As a nation more dependent on foreign
oil than ever before, accounting for nearly 25 percent of
global oil usage, the United States has contributed to this
international oil regime and cannot abandon oil-exporting
countries in the transition towards alternative, more
efficient energy sources. Indeed, devastating conflict so
often arises in oil-dependent countries precisely because
these producers “have relatively low state capabilities,”2
thus suggesting that an end to the world’s status quo oil
regime will leave oil producers politically vulnerable and
prone to conflict. Although the transition towards a ‘green’
economy will occur on a timescale of decades and not
years, even this amount of time may not suffice to establish
credible governance in oil-dependent countries. Moreover,
should the new Obama Administration fully commit itself
to energy independence, this transition could occur far
before oil exporters have had the requisite time to prepare.
Just as corporate oil titans – many of them American– Stock XChange
exploited oil reserves in these countries after establishing The move to cleaner, alternative energy necessitates a closer look at the
the necessary resource extraction infrastructure, so too entire world system created by the current oil regime.
must the United States assume a leadership position in
states.
establishing the political infrastructure (i.e. bureaucracy,
Granted, while a big push away from fossil
taxation, and transparency) that allows governments
fuel dependence no doubt serves America’s long-term
to succeed. Put simply, while the United States must
environmental and security interests, the problems facing
eventually cease its addictive consumption of black gold,
countries dependent on oil production similarly deserve
oil producers need the US to do so judiciously to allow
instant attention since most – with the exception of Norway
themselves the opportunity to adjust politically – a task that
– lack effective and efficient governance. More importantly,
can be made possible by increasing transparency between
the United States maintains a particular responsibility to
oil corporations and governments and through robust
these countries since it currently consumes oil at a rate over
international peacekeeping initiatives in oil-exporting
20 times the global average3– a habit that, while untenable,
Andrew Lawrence is a junior majoring in International fundamentally links the political situations in oil-exporters
Relations. He plans to write a senior honors thesis that to American policy decisions. Consequently, should the
examines the geopolitical, economic, and foreign policy effects new Obama administration adopt a nationwide clean
of a “green economy” on the United States and on oil-exporting and “green” energy program that eventually restructures
countries. Originally from Los Angeles, Andrew is currently the current oil regime, oil-exporting countries will likely
studying overseas at Oxford University.
Vol. X | No. 1 • 61
Stanford Journal of International Relations
struggle to adjust because they lack the political framework violence). Furthermore, with a military budget near $500
necessary to sustain a nation bereft of oil revenues. billion and a military stretched thin by simultaneous wars,
The current political science literature refers to the the United States cannot afford to shock the international
problem plaguing oil-dependent nations as the “resource oil regime by ceasing its expenditures on oil without
curse” – a term that invokes the “inverse relationship precipitating conflict – conflicts that would likely require
between high levels of natural resource dependence and foreign (most probably American) military intervention.
growth rates.”4 As part of this resource curse, “widespread In addition, because expenditures on military and
poverty persists amid a surge in natural resource-driven security forces as a percentage of revenues are greater in
wealth,” the potential for armed conflict over the resources oil-exporting countries than those of their importing
increases dramatically, education levels plummet, life counterparts,10 a trauma to the international oil system
expectancy decreases, and healthcare quality collapses.5 may allow for the proliferation of heavily-armed factions
Because 80 percent of hydrocarbon-rich countries have in otherwise lawless environments. Especially with
autocratic regimes, many researchers attribute the resource populations historically plagued by widespread poverty,
curse not to the presence of oil itself, but rather to the feeble the availability of weapons in oil-exporting countries could
and corrupt governance arrangements within the oil- potentially create insurgencies composed of poor citizens
exporters.6 In reality, heavy oil importers like the United seeking to address grievances against the prosperous
States do not represent the only countries addicted to oil; political elites. The Niger Delta, for example, currently
the exporting nations have effectively tied their existence contains heavily-armed, anti-government factions
to oil consumption as well. aggrieved by their exclusion from petroleum revenues.11 As
For example, because oil-exporters often lack both such, should the United States hastily abandon the current
the technical expertise and the capital required to extract oil regime and withdraw its military and political support
crude oil, the political leadership in oil-rich countries from the oil export-dependent Nigerian government,
often negotiates directly with foreign corporations, with the long-oppressed yet oil-rich communities in the Delta
these two shareholders dividing the profits generated on region may seize upon the opportunity to exact revenge for
the international oil market.7 Therefore, as rent accrues historical injustices.
directly to the executive branch, the president centralizes Nigeria is not the only country susceptible to conflict
authority while effectively leaving much of the domestic as oil revenues diminish. Just as the oil market developed
population mired in poverty. Moreover, while Western- onto an international scale, so too did the resource curse
style democracies developed strong taxation mechanisms symptoms that so often accompany oil exporters proliferate
that spurred citizens to demand public accountability, from country to country. Russia, for instance, needs high
an oil-exporter’s easy access to rent allows the political oil prices to keep its economy afloat, as nearly 40 percent of
leadership to entrench its grip on power “through low taxes export revenue derives from oil and gas.12 Saudi Arabia – a
and patronage”8– a combination that dampens public pleas country that produced fifteen of the nineteen hijackers in
for accountability and tacitly permits endemic corruption. the 9/11 terrorist attacks – depends on oil revenues for 44
Therefore, any fissure in the international oil regime, percent of its GDP.13 Iran’s oil rents allow the government
which would eliminate an oil-exporter’s revenue stream to subsidize food and gas at a rate that “accounted for 12
and prevent the executive’s ability to appease the public percent” of the nation’s GDP.14 Because oil wealth sustains
through low taxes, could lead to political instability. the economies of so many oil-producing countries, the
Yet because “oil wealth is robustly associated with collapse of oil prices that would surely accompany the
more durable regimes”9 that sometimes remain in power US withdrawal from the international oil regime could
for decades at a time, oil-dependent countries may lack have profound and potentially devastating effects in these
a viable political alternative to the status quo should the countries and, by extension, throughout the world.
government collapse. In fact, even if the government While some political science literature establishes a
exercises an autocratic, unpopular grip on power, “link between the primary commodity dependence and the
opposition movements remain largely untested and could risk of the initiation of conflict,”15 other studies demonstrate
prove equally inept. For example, as the rampant violence that “[c]hronic poverty may also be a significant factor in
in the immediate aftermath of post-Saddam Hussein sustaining wars as violent crime and predation become the
Iraq demonstrated, any abrupt political change in an oil- only viable livelihood strategy for the chronically poor.”16
exporter can lead to a power vacuum and the dangerous Therefore, though America’s shift away from foreign oil
revitalization of embedded social conflicts (i.e. sectarian dependence may cut demand for oil and may reduce future
62 • Fall/Winter 2008
Good Governance in Oil-Exporters
incentive for resource-based hostilities, the strategy may
only further entrench poverty and create conflicts whose
scale equals or surpasses past oil-based wars.
The industrialized world’s insatiable demand for oil
has indirectly fueled conflict in oil regions by increasing
the demand and hence the price of the commodity in the
international market. The United States itself imports
nearly two-thirds of its overall oil supplies from abroad
with a steadily increasing amount coming from politically
unstable and heavily corrupt countries in the global South.
In fact, since the early 1980s when Jimmy Carter first
articulated the United States’ policy of using military force
to ensure the safe flow of oil in the Middle East, America
has only expanded its presence in oil-exporters to include
countries from sub-Saharan Africa to the Caspian Sea.17 As
such, the United States deserves at least partial culpability
for the current unsustainable oil regime and thus has a
responsibility to prudently address the big push away
Abayomi Azikiwe
from oil. However, while the Carter Doctrine may have China and Venezuela recently signed a $4 billion oil agreement.
historically upset the populations in oil exporters, America’s
With such financial transactions available to the public,
omnipresence throughout these troubled regions may
the secrecy that normally encircles natural resource
provide the US with an in-road to assume a leading role
development will no longer exist, political leaders will
in encouraging political reforms in oil-exporting nations
no longer maintain an easy way to accept bribes and
– reforms that allow countries to succeed with or without
kickbacks. To prevent lobbying efforts intended to derail
natural resource rents.
such initiatives, the US will also need to enact campaign
To address the growing threat of climate change
finance reforms to minimize the linkage between politicians
while limiting the political, social, and economic impacts
and big oil companies. As a case in point, the oil industry
on oil-exporting nations, the United States must realize
donated nearly $70 million in campaign contributions
that currently “it is not realistic to expect a one-for-one
to both Republicans and Democrats during the federal
replacement of cheap conventional oil even by all of these
election cycles from 1998-2004.20
other [alternative energy sources] combined.”18 Accordingly,
As citizens in oil-exporting countries verify that
to maintain its economic growth in the near future, the
their political leaders have not embezzled millions or, in
United States will still need to use oil as an energy source
some cases, billions of dollars for personal usage, trust
– albeit at a far-reduced rate. Also, with India's search for
between the executive branch and the general population
newer sources of oil and China’s unprecedented demand
in oil-exporting countries should grow and a major reason
for resources, the United States cannot single-handedly
for public discord and disenchantment, namely, corruption,
solve global warming without the sustained cooperation
will abate. Having established national trust, oil-exporting
of other industrialized countries. Indeed, because such a
governments will find it advantageous to begin enforcing
process will require both time and patience, it may also
classic forms of taxation on income or transactions, marking
provide an adequate window for oil-exporting countries to
a shift from revenues derived exclusively from oil and gas.
adjust to an international order not sustained by oil rents.
Indeed, as with any other politician in any other country,
Given the necessity of using at least some oil in
leaders in oil-exporting nations want to remain in power
the immediate future, the United States can spearhead
as long as possible – even if that entails forswearing bribes
a mandatory transparency program that would require
and slush funds. Because such methods of taxation have
multinational oil companies and oil-exporting countries
historically provided the building blocks for a sustainable
to disclose the funds both paid and received in financial
political structure, oil-exporting nations should grow more
transactions. Because most major oil companies trade
capable of adjusting to the post-international oil regime
shares on international exchanges such as the New York
period, in which oil rent will continually decrease until it
Stock Exchange, American regulatory bodies maintain
becomes nearly non-existent.
unique powers to enforce such transparency initiatives.19
Nonetheless, as evidenced by the failed Chad-
Vol. X | No. 1 • 63Stanford Journal of International Relations
Cameroon pipeline project, a World Bank-sponsored still has the potential to create conflict. Because the world
endeavor that collapsed after the Chadian government will still need to use oil as a secondary energy source in
refused to allocate funds for poverty relief programs, even the short-term future, international bodies can help oil-
the most well-intentioned plans in oil-exporting countries exporters “sow the petroleum” and reinvest oil revenues
have shortcomings. Though encouraging political reform through economic diversification programs. While such
in traditionally autocratic societies may achieve lasting diversification programs in oil-exporters have often failed
results in some oil-exporters, some will surely backlash. in the past, results should improve in these countries
As Chadian president Idriss Deby and Sudanese president since they will have established merit-based civil service
Omar Hassan al-Bashir have demonstrated, leaders who bureaucracies through new taxation programs. Perhaps
owe their power to the international oil regime will not international organizations can even target these old oil-
abdicate control without a fight.21 exporters as hubs for clean energy technology, a strategy
However, with troops stationed throughout the that would diversify their economies while simultaneously
world, the US can help to address these potential conflicts encouraging a green revolution.
by shifting its foreign policy away from energy security Ultimately, however, the United States must realize
and moving more towards international peacekeeping. that its domestic climate change strategies will create
Therefore, should conflict erupt in oil-exporting nations domino effects throughout the world – particularly in oil-
as oil rents decrease, the US can provide peacekeeping exporting countries. Because no existent alternative energy
support to minimize bloodshed. Yet, with a military force source can immediately replace oil, the United States and
overextended from concurrent wars both in Afghanistan the international community at-large have a window of
and in Iraq, the US will unquestionably require multilateral opportunity to aid oil-exporting countries in developing
assistance, presumably from the UN. Such a shift in military sustainable governance independent of resource rents. In
policy to multilateralism comes with a host of other fact, neglecting oil-exporters in the big push away from oil
benefits, and maintaining the stability of oil-exporters is will only exacerbate current conflicts in these countries
certainly high on the list. and further burden the international community. Though
While political changes in oil-exporting countries an inconvenient truth, the proper strategy for addressing
will no doubt improve the governance infrastructure, global warming requires not only fossil fuel reduction but
international bodies such as the UN must also maintain also the institution of good governance in oil-exporters
focus on the countries’ economic progress, as poverty themselves. §
Marcus Bensasson
Gas flaring in the Niger Delta causes health problems and distress for people living nearby and is a major source of CO2 emissions.
64 • Fall/Winter 2008Good Governance in Oil-Exporters
Endnotes 18 Cavallo, Alfred. “World Oil Production: Focus on non-Opec Supplies.”
World Oil. V. 227, n. 4, 2006.
1 Birdsall, Nancy and Arvind Subramanian. “Saving Iraq from its Oil.”
19 Humphreys, Macartan; Jeffrey D. Sachs; Joseph E. Stiglitz. “Future
Foreign Affairs. July/August 2004, pp. 77-89.
Directions for the Management of Natural Resources.” In Macartan
2 Fearon, James. “Primary Commodity Exports and Civil War.” Journal of
Humpheys, Jeffrey D. Sachs, and Joseph E. Stiglitz (eds.) Escaping the
Conflict Resolution. V. 49, n. 4. August 2005, pp. 483-507.
Resource Curse. (New York: Columbia University Press, 2007), pp. 322-
3 Roberts, John. “A Primer on Oil.” Covering Oil: A Reporter’s Guide to
336.
Energy and Development. Revenue Watch, Open Society Institute.
20 Center for Public Integrity. Readings on the Oil Industry’s Campaign
21 Campbell, Kelly. “Sudanese-Chadian Relations: A New Dimension to the
4 Karl, Terry Lynn. “Oil-Led Development: Social, Political, and Economic
Conflict in Darfur?”United States Institute for Peace. Apr. 2006. .
MA: Elsevier Science, 2004), pp. 661-672).
5 Siegle, Joseph. “The Governance Root of the Natural Resource Curse.”
Developing Alternatives. Summer 2007. Additional References
6 Ibid. Barnes, Joe, Amy Myers Jaffe. “The Persian Gulf and the Geopolitics of Oil.”
7 Stephan, Katherine. “Oil Companies and the International Oil Market” in Survival. V. 48, n. 1. 2007, pp. 143-162.
Covering Oil. Revenue Watch, Open Society Institute. 2005. “Budget of the United States Government, FY 2006.” Office of Management
8 Ross, Michael. “How Does Mineral Wealth Affect the Poor?” 2003.“Does and Budget. < http://www.whitehouse.gov/omb/budget/fy2006/tables.
Oil Hinder Democracy?” World Politics. April 2001, pp. 325-361. html>.
9 Smith, Benjamin. “Oil Wealth and Regime Survival in the Developing Edwards, John. “Reengaging with the World: A Return to Moral Leadership.”
World, 1960-1999.” American Journal of Political Science. V. 48, n. 2. April Foreign Affairs. Sept./Oct. 2007. .
Consequences.” “US-China Trade Statistics and China’s World Trade Statistics.” The US-
11 Zalik, Anna. “The Peace of the Graveyard: The Voluntary Principles on China Business Council. 2007. < http://www.uschina.org/statistics/
Security and Human Rights in the Niger Delta.” In Assassi, van der Pijl tradetable.html>.
and Wigan (eds.), Global Regulation: Managing Crises after the Imperial Useem, Jerry. “Exxon’s African Adventure: How to Build a $3.5 Billion
Turn. London. 2004. Pipeline – With the ‘Help’ of NGOs, the World Bank, and yes, Chicken
12 Victor, David; Nadejda Victor. “Axis of Oil?” Foreign Affairs. V. 82, n. 2. Sacrifices.” Fortune Magazine 15 April 2002.
Mar/Apr 2003, pp. 47-61. Zweig, David; Bi Jianhai. “China’s Global Hunt for Energy.” Foreign Affairs. V.
13 “Saudi Arabia Energy Data, Statistics, an Analysis – Oil, Gas, Electricity, 84, n. 5. Sept/Oct 2005, pp. 25-38.
Coal.” Energy Information Administration. Oct. 2007. .
14 “Iran Energy Data, Statistics, an Analysis – Oil, Gas, Electricity, Coal.”
Energy Information Administration. Oct. 2007. . “Escaping the Oil Curse: The Case for a
Transparent Fiscal Social Contract” manuscript, 2007.
15 Collier, Paul and Anke Hoeffler. “Resource Rents, Governance, and
Conflict.” Journal of Conflict Resolution. V. 49, n. 4. 2005, pp. 625-633.
16 Goodhand, Jonathan. “Violent Conflict, Poverty and Chronic Poverty.”
Chronic Poverty Research Center. May 2001.
17 Klare, Michael. “The Futile Pursuit of ‘Energy Security’ by Military Force.”
Brown Journal of World Affairs. Spring/Sumer 2007, pp. 139-153.
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