Black Gold: The Geopolitics of Oil

I recently read Oil: Money, Politics, and Power in the 21st Century, a book by Tom Bower. Readers of this blog will find the book compelling for many reasons. Even so, Bower’s blind spot on climate change is a serious problem, and still symptomatic of the views of many of the world’s political and business leaders.

Oil – published in 2009 – provides a detailed account of the Western oil majors and their interactions with governments during the 1990s and 2000s. The book profiles a number of key industry executives – notably John Browne (former head of BP), and Lee Raymond (former head of ExxonMobil) – as it paints a nuanced picture of the risks and rewards of extracting “black gold.” Too often, ordinary consumers of oil do not comprehend the challenges associated with oil extraction, transportation, and refining. Companies often drill “dry wells” in the exploration process, which bring significant risk and cost to their operations. In many cases, host governments abandon negotiated contracts, leaving companies like Shell, Chevron, BP, and ExxonMobil in precarious financial situations. At the extreme, governments nationalize resources, as has happened in Russia, Venezuela, and the Middle Eastern states before them. Indeed, after the recent wave of energy nationalism, the Western oil majors (i.e. the world’s main privately held oil companies) now control a surprisingly small fraction of the world’s petroleum reserves.

Vladimir Putin Doll

Russia, more than any other state, has been closely associated with geopolitics and energy nationalism. The main architect of Russia’s energy geopolitics is Vladimir Putin. Photo credit: monkeyatlarge (via Flickr, Creative Commons license).

The most interesting geopolitical coverage in Bower’s excellent book is his discussion of Russia and the post-Soviet region. The book’s account of Russia’s wild 1990s period is stunning for its treatment of (oil) oligarchs such as Mikhail Khodorkovsky and Vladimir Potanin. As this and other cases from the book show, black gold has a way of undermining the rule of law and stimulating pervasive corruption. Bower also does an excellent job detailing the rise of Vladimir Putin and Russia’s resource nationalism. One compelling sub-theme related to Russia is the Clinton administration’s (1993-2001) aggressive efforts to channel Central Asian energy resources to the West, but not by way of Russia.

Now more than ever, the oil business is not for the faint of heart. Added to longstanding cycles of boom and bust are major geopolitical risks associated with unstable and uncooperative oil-producing states. And, critically, there is the core unresolved issue of climate change. Unfortunately, Bower mostly treats climate change as a difficult public relations issue for the oil companies. He seems to pat the companies on the back when they eventually concluded that they could not be both fossil fuel extractors and alternative energy leaders. That might be the right short-term business decision for these companies, but heavy global reliance on fossil fuels is not a wise path for our future. We must settle the climate change debate in the public arena, not in corporate boardrooms.

***  A new book by this blogger:  Failed States: Realities, Risks, and Responses

Helping Failed States in an Age of Austerity

Anti-austerity Protestors in Ireland

Protestors of austerity budgets in Dublin, Ireland, November 2012. Photo credit: informatique (via Flickr, Creative Commons license).

According to traditional wisdom, helping failed states is expensive. Right now, Europe, Japan, and the United States are loaded down by a massive debt burden. Emerging powers – including China, India, Brazil, Russia, and South Africa – don’t seem too interested in bankrolling expensive new state-building missions. So, it looks as though we are at an impasse. Except, that we’re not.

The first premise – on the financial costs of helping failed states – is not necessarily true. Successful state-building / reconstruction can involve long deployments of foreign militaries and billions of dollars in international aid. Foreign engagement in Afghanistan, for example, has been anything but cheap. Yet, this costly “big footprint” approach is not the only available option in assisting fragile states. And that is a good thing, given the unavoidable reality of this age of austerity.

Europe, Japan, and America are clearly in the midst of an age of austerity. “Austerity” simply refers to a massive and sustained program of public spending cuts (and tax increases). Even without the massive deficit spending associated with the Great Recession (2007-), these established industrial states were facing structural imbalances. In all of these areas – but especially in Japan and most of Europe – rapidly aging populations are severely straining prior social welfare commitments. In the U.S., a pervasive anti-tax culture has also starved the state, and therefore led to more dramatic tradeoffs between domestic spending and foreign assistance. On current trends, the present decade is likely to remembered by much of the world as a “lost decade” economically, due to the circumstances of austerity.

No matter. The onset of austerity could actually be a helpful stimulus to creative thinking about responses to state failure. Because we must come up with low-cost solutions to state decay, it is more likely that we will do so. Two key options are the following: 1) provide diplomatic flexibility to redraw the territories of existing states and 2) in rare cases, allow “stateless zones,” rather than push the development of modern states where they are not wanted. You can read more about these and other low-cost solutions to state failure in my new book, State Failure: Realities, Risks, and Responses ($4.99, available from Amazon, Barnes and Noble, and Kobo).

Measuring Corruption (in Failed States)

Earlier this month, the respected NGO Transparency International released its annual survey of public sector corruption around the world. The Perceptions of Corruption Index is the most influential effort to assess the relative cleanness of governance throughout the world.

First, here are a few highlights from the 2012 survey, which assigns a score of 0 to 100 to each state, with 0 representing a highly corrupt public sector and 100 representing an extremely clean public sector.

Anti-corruption poster in Port Moresby, Papua New Guinea. Photo credit: Raymond June (via Flickr, Creative Commons license).

Anti-corruption poster in Port Moresby, Papua New Guinea. Photo credit: Raymond June (via Flickr, Creative Commons license).

The cleanest clusters and states are: Scandinavia, the Netherlands, Switzerland, Australia and New Zealand, and Canada. Others scoring fairly well are Chile, Uruguay, Japan, the United States, and a few other European countries.

When examined by world region, Eastern Europe and Central Asia – including Russia, Ukraine and the “-stans” – fare the worst for public corruption. Ninety-five percent of these countries score below 50 points out of 100. (For comparison, 70 percent of the world’s states also score below 50.) Sub-Saharan Africa has the next worst scores overall, with 90 percent of the region’s states scoring below 50 points.  The Middle East and North Africa ranks as the third most corrupt region in the world. And the Americas and Asia Pacific are slightly below the world mark, with 66 percent and 68 percent, respectively, of countries scoring below 50 points.

Figures for the world’s key failed states are fairly predictable. The ten lowest ranking countries – meaning those where bribery, rent-seeking behavior, and corruption are entrenched – include the following failed states: Afghanistan, Haiti, Myanmar (Burma), North Korea, Somalia, and Sudan. Other critically weak and failed states score very poorly on the survey, including: Chad, the DRC, Burundi, Zimbabwe, Equatorial Guinea, and Pakistan.

But how do we know that these scores are valid? Transparency International freely acknowledges that they are assessing perceptions of corruption, and not absolute levels of public sector impropriety. Just a cursory look at the summary index map reveals an  old pattern, with Western countries judged as less corrupt and non-Western states labeled more corrupt. Perhaps the old process of Orientalism is at play in this influential global assessment.

A more careful look at the numbers, though, reveals some subtle differences that matter. In Africa, Botswana has a score that is identical to Spain’s and a bit better than Portugal’s. Ghana’s mediocre score is meaningfully better than those of Italy and Greece. Chile and Uruguay have similar scores to that for the United States.

What are your thoughts about this survey? Do you give much credibility to these scores and rankings?

Geopolitical Hotspots: Nagorno-Karabakh (Armenia and Azerbaijan)

Though the era of globalization has heightened concerns about terrorist groups, organized crime rings, and other non-state networks, geopolitics is still dominated by discussions of territorial control and influence. Sovereign states remain vitally interested in controlling territory in order to regulate resources and flows of people, and for the purpose of nationalist propaganda. In this post and others to come, I’ll highlight a few key geopolitical hotspots.

Though the breakup of the Soviet Union (1991) was remarkably peaceful, the Caucasus Mountains region was the main exception. In this cultural transition zone between Russian, Persian, and Turkish spheres, rugged topography and problematic Soviet-era borders have led to significant tensions in Georgia, southwestern Russia, and Azerbaijan.

With the fragmentation of the U.S.S.R., the old Soviet Socialist Republic borders were generally accepted to be the new boundaries of the 15 newly independent states. Overall, these borders have worked out fairly well. In the case of Armenia and Azerbaijan, though, 21 years have passed without resolution of a basic territorial dispute. In particular, the area of Nagorno-Karabakh, which extends well into Azerbaijan’s internationally-recognized territory, is claimed by Armenia.

The core geopolitical issue here is familiar. In simple terms, Nagorno-Karabakh has a population that is composed mostly of ethnic Armenians. The population in this disputed territory is predominantly Christian (in contrast to the Muslim majority for the rest of Azerbaijan), and they speak a distinct mother tongue. And, since the Soviet breakup, the government of Armenia has occupied Nagorno-Karabakh (and surrounding Azeri territories), claiming these areas on the basis of cultural ties (or irredentism).

For its part, the government of Azerbaijan has predictably resisted the loss of up to 20 percent of its sovereign territory. The recent case of Ramil Safarov has dramatically heightened tensions between the two countries, and between Azerbaijan and the West.

*** Did you like what you read here? You might be interested in the new book by this blog’s author, Failed States: Realities, Risks, and Responses.

Waiting on the Security Council

Once again, human rights activists and proponents of a “responsibility to protect” are decrying the inaction of the United Nations Security Council. The current unease is over the failure of the world body to promote resolution of the Syrian bloodbath.

After the successful 2011 intervention in Libya, human rights activists have grown weary after 17 months of repression and civil war in Syria. If we look closely at the public statements of Russia and China, though, we should not be surprised at their present opposition to more concerted action on Syria. Both Asian powers chafed at what they saw as NATO’s stretching of the Security Council mandate on Libya. For Russia and China, active support for regime change was not supposed to be part of the UN intervention in Libya.

With Libya behind us, it is no surprise that Russia and China have returned to their default stance of non-intervention in the “internal affairs” of sovereign states. We now seem to be back to a much longer pattern of mixed and disappointing results from the Security Council, as described in an excellent book by Paul Kennedy. Yes, democratization in Russia and China would promote more coherent action by the Council over the longer term. Even so, a permanent five membership composed solely of democracies would still face struggles over lack of political will for interventions. And, as some have observed about the present crisis in Syria, aggressive intervention could actually lead to a greater conflagration.

*** Did you like what you read here? You might be interested in the new book by this blog’s author, Failed States: Realities, Risks, and Responses.