Resource Curse

Resource-Induced Conflicts, Part I: Resource Wars

September 14, 2016 by Jasper Humphreys

By: Jasper Humphreys

f-14a_vf-114_over_burning_kuwaiti_oil_well_1991 — 1991 picture of a United States Navy Grumman F-14A Tomcat from Fighter Squadron 114 (VF-114) Aardvarks. Courtesy of Lt. Steve Gozzo, USN – U.S. DefenseImagery photo VIRIN: DN-SC-93-03891

Fighting over resources has been going on since Mankind started trading with one another, even though the phrase ‘resource wars’ is a modern invention.

With the period known as the Bronze Age emerging roughly six thousand years ago, the outlines of what today we regard as ‘resource wars’ became apparent: globalisation, the ‘pull’ factor of technology, improving communications, commercial sophistication, empire-building, and of course, the ability to fight.

Bronze is an alloy made principally from copper and tin. Its strength and durability characteristics made it perfect for forging swords, axes and shields. Thus revolutionising warfare from club-wielding skirmishes to mass kinetic encounters that sometimes led to death and occasionally, annihilation. However, not every country is blessed with copper and tin. In such instances, the only option available is to rob these resources by force from other political, and potentially unfriendly powers. This added an additional layer of complexity to the logistics and strategy of the plundering army, as exiting the land with the booty would prove as difficult as entering the forbidden territory in the first place. The discovery of bronze allowed armies to grow and become more heavily armed (including the use of cavalry), made possible through involving complex logistics alongside good leadership.

Nothing has changed since those ancient times about the two simple identities of ‘resource wars’: they are either i) about plundering and grabbing, or ii) about holding on with force to what you already have. It is here that the problems associated with ‘resource wars’ emerge, stemming from both identifying the motivation of the parties involved and how to devise an appropriate response to end hostilities.

Until the modern era, economists generally saw a large amount of natural resources as being an advantage; that view changed in the 1980’s as new scholarship sparked by Jeffrey Sachs and Andrew Warner focused on what was labelled the ‘natural resource curse’: this suggested that actually having an abundance of natural resources created a negative impact, as it could lead to slower growth, undemocratic regimes and violent civil conflict; all part of ‘resource wars’.[1]

It was this thinking that prompted moves to ban the trade of resources originating from conflict zones, highlighted in ‘blood diamonds’, ‘blood ivory’ and so on. This new research also highlighted the concept of ‘resource dependency’. This is when a country relies on one or two resources for its income, with obvious contemporary examples being Saudi Arabia and its oil and Botswana and its diamonds.[2]

When looking at resources as a cause of civil wars, several important debates can be identified. Firstly, ‘greed or grievance’, heavily associated with Paul Collier who saw ‘greed’ as one form of motivation for the fighters who pursued economic gain, while working on the assumption that the rewards of joining a fight were much greater than if they did not join the fight. ‘Grievance’, however, was a stronger motivation for Collier, who reckoned that people were much more motivated to fight over issues of identity like ethnicity or religion than being driven solely by ‘greed’.[3] However, others view the ‘resource curse’ totally differently, seeing greater resource wealth as lowering the probability of conflict and not leading to civil war.[4]

The alternative debate centres on the theory that poor environmental conditions forces people to fight to satisfy their basic survival needs, such as cutting down timber, poaching or plundering as an economic resource. This link between ‘environmental scarcity’ theory and conflict is most heavily associated with Thomas Homer-Dixon and the Toronto School. Sometimes referred to as ‘environmental conflicts’, where these conflicts typologies originate from human-made disturbances so great that the environment is unable naturally regenerate. Examples include fighting over water that is diminishing due to the construction of a dam upstream, or having land overgrazed to such an extent that competition (over its use?) leads to fighting.[5]

Conflicts that involve natural resources and are caused by physical, geopolitical or socio-economic problems are not environmental conflicts. They are actually traditional conflicts over resource distribution. In the same way, conflicts over agricultural land can only be called an ‘environmental conflict’ if the land is under contest because of soil erosion, climate-change, or other environmental degradation. Otherwise they are simply ‘contests of territory’ like any war or conflict that we commonly think of. So far, so confusing. To provide some analytical rigour, the phrase ‘resource wars’ is restricted to only inter-state conflicts; while distinguishing between the types of resources. A ‘resource’ is defined as being those elements that are key to human survival. Water, soil, air and eco-systems are defined as Resources-Life, while oil and gas are Resources-Strategic; the latter being the realm of traditional geo-strategic ‘high politics’. Here the price is controlled not only by supply/demand, but also by the additional costs relating to the environmental and securitisation impact of changes in the supply, such as the costs tied to the distribution of water in the Jordan Valley.

By contrast, those conflicts linked to resources that are not considered as part of ‘high politics’ might be given another description – ‘commodity conflicts’. Here the identity of a ‘commodity’ lies in that it is controlled by market-forces that are accompanied by a sliding-scale of ‘conflict-risk’ that ranges from high (cocaine, coltan, diamonds) to mid-low (copper, gold, rhino horn) to very low (coffee, tea). Additionally, it is important to make a distinction between the illegal and legal forms of ‘commodity conflicts’: in the former category they would be defined as ‘lootable’ and the latter as ‘extractible’. The basic profile of ‘commodity conflicts’ is that they have been:

> Localised

> Based on extractive/ ‘lootable’ commodities.

> Violent in short bursts, sometimes over long periods.

> Difficult for outside forces to quell.

> Often linked to power struggles within the ruling elite.

To provide even greater clarity, another category in the resource-conflict spectrum could be referred to as ‘environmental confrontations’. This gathers in the wider spectrum of conflict that has some element of the environment at its core, which range from over-fishing, riparian access, to animal rights, wildlife poaching, illegal timber-felling and environmental campaigns of all types.

Finally, there is a fourth category. This is the most problematic as it contains elements of both resources and commodities, and so makes devising a response especially difficult. It covers five broad issues:

> Food security: food is both a commodity and a resource. For example, the cocoa commodity market was targeted in 2010 by British financier Anthony Ward by developing a hoarding strategy; meanwhile the British investment fund, African Century, are looking to develop fish and chicken farms to provide a major source of food in southern Africa.

> New sources of energy.

> Land sales/rights: land is a resource that is both publicly and privately owned and is often sold as commodity.

> Drugs trade: drugs are a commodity controlled by market-forces for which the suppliers use drug-users as a resource to be exploited, with ramifications of national and global importance.

> Flora and fauna: both are a commodity and a resource (for firewood and eating).

Throughout post-Biblical history wars within the category of Resources-Life have never occurred, and follow the logic that these resources are so crucial that even though war theoretically could rapidly escalate, in practice it is in the interest of all parties to negotiate rather than to fight. This is borne out in the story of the so-called ‘water wars’, both past and present, where disagreements and confrontations have not erupted into fighting, and from which emerges a school of thought that sees negotiations over water access creating a ‘neutral’ zone from which wider antagonisms can be discussed, such as in the Middle East.[6]

Regarding conflicts within the category of Resources-Strategic, the two Gulf Wars illustrated the sharp limits to American geo-strategic endurance when its oil supplies in the Middle East were threatened; it was a similar perception from the earlier Soviet invasion of Afghanistan that gave rise to the 1980 Carter Doctrine of ‘red-lines’ in the sands of the Middle East.[7] Furthermore, there was a surge in ‘commodity conflicts’ after the post- Cold War euphoria had ebbed and ushered in a new wave of ethnic conflicts with unprecedented dimension and geographical spread. These conflicts, predominately in the global South, often witnessed an overlap between criminal ‘lootability’ and long-standing ethnic or religious grievances; ‘blood diamonds’, ‘conflict minerals’, gold and illegal timber extraction all helped to fuel conflict. In the post-colonial dawn, groups have battled each other for power within the realm of modern globalisation; combining new technological developments in communications and transportation, with market forces and the ‘shadow economy’ of undeclared and illegal trading.

And the future. The iron rule of the commercial market-place means that some resources and commodities fade due to lack of demand and the rise of others. Who today would think of fighting to control the spice and fur trades as in the past? Instead, today’s insatiable need for tantalum capacitors inside mobile-phones and other electronic devices has put a premium on coltan (short for columbite-tantalite). The fact that coltan is found in both developed countries such as Canada, and under-developed countries such as the Democratic Republic of the Congo (DRC), has led to the emergence of parallel extractible/regulated and lootable/unregulated markets – buyers make their choice, it’s a free market.

The wide range of ‘lootable’ resources has caused an entwining with the ever-growing ‘shadow’ economy of transnational criminal networks, especially in countries and areas that have been ‘wasted’. These ‘wastelands’ can either occur through conflict, such as in the DRC, or severe deprivation, as in parts of Mexico and much of Central America. The absence of an effective and centralized authority in these ‘wastelands’ makes them, in the view of political geographer, Derek Gregory, ‘pre-constituted as fallen, violated and damaged, always and everywhere potential targets for a colonising capitalist modernity.’ Furthermore, the state’s monopoly of violence may have collapsed, meaning for Gregory that ‘non state actors (warlords, local and ethnic militia) are able to establish alternative, territorially restricted forms of centralised violence.’[8]

Jasper Humphreys is Director of External Affairs of the Marjan Centre for the Study of War and the Non-Human Sphere in the Department of War Studies, King’s College: this centre is unique in studying the overlap of conflict and biodiversity. Formerly, he was a journalist with over thirty years of experience, writing for various national newspapers.

Notes:

[1] Jeffrey D. Sachs/Andrew M. Warner, ‘Natural resource abundance and economic growth’, working paper Center for International Development and Harvard Institute for International Development, Cambridge, Massachusetts, 1997, accessed 15 December 2011.

[2] Kenneth Good; ‘Diamonds, Dispossession and Democracy in Botswana’, Boydell and Brewer, Rochester, New York, 2008

[3] Paul Collier/Anke Hoeffler, ‘On economic causes of civil war’, Oxford Economic Papers 50(4),1998.

[4] Christa N. Brunnschweiler/Erwin H. Bulte, ‘Natural resources and violent conflict: resource abundance, dependence, and the onset of civil wars’, Oxford Economic Papers 61, 2009, pp.651-674.

[5] Thomas Homer-Dixon, Environment, scarcity, and violence (Princeton: Princeton
University Press, 1999).

[6] Tony Allan; ‘The Middle East Water Question: Hydropolitics and the Global Economy’, I.B Tauris, London, 2012

[7] Andrew J. Bacevich, ‘The Carter doctrine at 30’, World Affairs, 1 April 2010.

[8] Derek Gregory, ‘War and Peace’, Transactions of the Institute of British Geographers, 35, 2010, p. 166.

Image Source: https://en.wikipedia.org/wiki/Kuwaiti_oil_fires#/media/File:F-14A_VF-114_over_burning_Kuwaiti_oil_well_1991.JPEG

Oil, patronage and corruption in the MENA region: the case of Saudi Arabia

February 21, 2014 by Strife Staff

By Ibrahim Gabr:

Saudi Arabia is a country built on oil. By looking at the country through the theoretical lens of the resource curse, we can gain more insights into the relation between political patronage and this ‘resource curse.’ By examining a case study of patronage in Saudi Arabia, as well as the resource curse and the political patronage and corruption which are associated with it in the Kingdom, it is proposed that economic diversification represents one of the most critical policy avenues for this resource-dependent government. In the context of the Middle East and North Africa (MENA) region, the Kingdom has brought about the deep entrenchment of monarchical regimes that use patronage so as to secure the loyalty and quiescence of their domestic populations without making any legitimate efforts towards democratic reform.

On the basis of these realities, and in the context of the resource curse, a clear and negative causal relationship exists between a country’s degree of economic diversification and the amount of patronage which occurs in its society. Examining the regional level for a common denominator which serves to perpetuate patronage within the reason, the Organization of the Petroleum Exporting Countries (OPEC), as a centralizing force in the MENA region, is potent in allowing these regimes to perpetuate their unhealthy and undemocratic reliance on patronage as a pathway to regime stability. Thus, there is a certain extent to which the boom-bust cycle of the energy market, which is what lies at the crux of the resource curse, facilitates this type of patronage-based governance. On this basis, in spite of significant and publicly-disseminated promises of reform, the occurrence of an endogenous or exogenous shock in the international energy market could completely derail the Monarchy’s plans. With this, it would appear that patronage, in the context of the MENA region’s oil-producing states, is likely to continue well into the foreseeable future.

The nature of the resource curse and economic diversification as a solution

Many countries which have abundant mineral, gas and oil wealth have suffered from poor economic performance, and entrenched autocratic or dictatorial regimes. The notion of the curse is premised on poor policy because it is a corollary of states misusing the rents, which are accrued from their resource wealth and widespread corruption.[1] Much of this has to do with the fact that natural resources, in developing world contexts, are difficult to manage. As some of the countries’ governments do not have far-reaching administrative powers, they are often dependent on foreign oil companies, and have regime-based needs that are different from those of the population; they thus misuse their mineral and oil wealth and thus preclude the country’s economic or political development.[2]

In this context, the resource curse is thus a problem that tends to plague states that are newly beginning to produce oil or other mineral wealth, and absent optimal fiscal management, can continue to haunt them across decades of production. In other cases, like that of Saudi Arabia, a wealthy and long-standing oil-producing regime, the consequences of the Oil Curse have more saliently pertained to leading to the entrenchment of sub-optimal forms of governance, and to less effective production paradigms. Writ-large, the oil curse’s enduring reality is thus one of sub-optimal natural resource management which precludes both longitudinal economic development and governmental reform. In this context, economic diversification emerges as the key to eliminating patronage in these resource-driven contexts. Because patronage prevents democratization from emerging in these countries, the democratic corollaries of economic diversification are important in building a middle-class capable of pushing for democratic reform.[3] Contra-existing dynamics wherein these patronage-based regimes are capable of buying off important domestic stakeholders, because of wealth concentration, the pursuit of diversification allows for such a middle-class, educated in nature, to make a whole-hearted push for democratization, and the decline of patronage which is attendant to it.[4]

Saudi Arabia – high dependency/high patronage

The degree of political patronage and rent-seeking which exists in the country is perhaps one of the most significant in the MENA region. As noted by one regional commentator, the Saudi regime has completely obviated any shift towards economic reform, and has preferred to embrace policies which allow it to maintain a significant degree of control over the international oil market all the while engaging in significant patronage-based expenditures at home. Thus, because the Saudis do not have a legitimate program for the purposes of economic diversification, examining their case requires understanding how the country has sought to perpetuate its policy of regime stability through patronage by stabilizing its ability to meet expenditure needs in the contexts of an international energy market that still functions on the basis of a boom-bust logic.[5]

With this in mind, stabilizing expenditures has always been one of the most significant problems faced by oil-producing countries like Saudi Arabia. Due to the boom and bust nature of the oil economy, these countries require strong fiscal policies that are simultaneously responsive, responsible and transparent in nature. With this in mind, some of the best approaches to stabilizing these expenditures lie in creating sources of control, which are external to the state. Thus, one option is to use cash transfers to redistribute oil revenues throughout the population. In doing this, it then becomes possible to create a population that has a stake in the oil economy, and which is thus responsive in pressuring the government to stay responsible. In a similar regard, another option is to privatize domestic oil ownership, and thus create a structure in which the domestic private sector exerts similar fiscal pressure on government so as to create some aura of legitimacy for a government that would be otherwise nothing more than based on its ability to provide rents through patronage.[6]

These solutions are important because stabilization funds have simply not been efficient in precluding the oil curse or the economic suffering which occurs during bust portions of the boom-bust cycle. As all of these oil curse-related variables relate to improper fiscal management of the oil economy, stabilization programs are nothing more than a Band-Aid on a wound that is already infected. Given that some of these countries lack structures of governance needed for proper fiscal management, there is thus no way for their stabilization funds to be well-maintained or appropriately-managed. As such, these do not represent a reliable fix for either the problems of the oil curse or the boom-bust cycle.[7] Even where the potential for such structure exists, in wealthier contexts like Saudi Arabia, the insularity of the regime, combined with its ability to use patronage to buy off potential opponents, creates a context of insularity which detracts from the potential for reform.

In terms of the Saudi Arabian context, its stabilization is, to a very large extent, ensured by the volume of the oil which it exports, and its influential position in terms of international oil diplomacy. In truth, the Kingdom has done very little to diversify or stabilize its economy, especially when compared to a country like Qatar or the UAE. Instead, the Kingdom has relied on its sheer volumes, and the rents captured by the ruling family and dispersed throughout the population, so as to maintain stability in the contexts of downturns. With this, the Saudi strategy has always been to use volume and wealth for stabilization, rather than to embrace the type of domestic economic differentiation and diversification which might represent a solution or buffer vis-à-vis the shocks of the international energy market. Thus, it would appear that Saudi Arabia has not made a legitimate attempt to move away from the dependence on oil which lies at the heart of its patronage-based political system.

The perpetuation of patronage: the US as a facilitating institution

The relationships between the USA and KSA have themselves taken on characteristics analogous to those of client-patron relations. As MENA region oil powers like Saudi Arabia have such strong protectors, in this case in the form of the American hegemon, they do not necessarily face significant exogenous pressure for reform. Indeed, America and Saudi Arabia, as an example, are trapped in a dyad of mutual dependency wherein the Saudis can count on the Americans to protect them from regional or even domestic threats. Simultaneously, the Americans are guaranteed relatively open access to oil markets in periods of crisis inasmuch as they are aware that the Saudis can increase production so as to maintain price stability throughout the international system. Thus, this mutual dependency reinforces these MENA region states’ abilities to maintain regimes premised on patronage even in a context where economic diversification would represent a far superior long-term solution to the structural economic and political issues which they face.

Conclusion

In the end, the case of Saudi Arabia demonstrates a clear causal relationship between significant energy reserves, the occurrence of the oil curse, low levels of economic diversification, and the perpetuation of political patronage and corruption. Tangibly, efforts which have been made to bring about diversification and thus endogenous economic growth across these countries have been modest. The likely reason for this continuing reality is that, even in the context of high state expenditures in a boom-bust market, the logic of patronage which underlies the stability of these oil-producing MENA-region regimes is one that is beneficial to their long-term political viability. Thus, absent an endogenous or exogenous shock, either in the form of an Arab Spring analog or a massive global energy disruption, the future of these states, as it pertains to the perpetuation of patronage, is likely very bleak indeed. While some states in the region have already taken anticipatory reforms to preclude the denouement of such revolutionary patterns in their own territories, such exogeneities remain a perpetual vulnerability, and thus dramatically shape the risk profile of the region.

Ibrahim Gabr is currently an honours undergraduate student in political science at McGill University in Canada.

____________________
Notes

[1] M.L. Ross, ‘The political economy of the resource curse’, in World Politics, 51:2 (1999), pp. 297-322.
[2] M.L. Ross, The Oil Curse: How Petroleum Wealth Shapes the Development of Nations (Princeton, NJ: Princeton University Press, 2013).
[3] A. Gelb, Oil Windfalls: Blessing or curse? (Washington, DC: World Bank, 1988).
[4] Ibid.
[5] M. Al-Rasheed, A History of Saudi Arabia (New York, NY: Cambridge University Press, 2010).
[6] M.L. Ross, ‘Will oil drown the Arab Spring? Democracy and the resource curse’, in Foreign Affairs (September-October 2011).
[7] Ross, The Oil Curse.

Additional Sources

Alexeev, M. & R. Conrad, ‘The Elusive Curse of Oil’, in The Review of Economics and Statistics, 91:3 (2009), pp. 586-598.
Alhajji, A.F. & D. Huettner, ‘OPEC and Other Commodity Cartels: A Comparison’, in Energy Policy, 28 (2000), pp. 1151-1164.
Fasano, Ugo & Zubair Iqbal, GCC Countries: From Oil Dependence to Diversification (Washington, DC: International Monetary Fund, 2003).

Resource Curse

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