Ending the Curse of Oil: Is It Possible?

Blood Oil: Tyrants, Violence, and the Rules that Run the World
By Leif Wenar
Oxford University Press, 2015, $27, 552 pages

The oil magnate J. Paul Getty once described his formula for success: “Rise early, work hard, strike oil.” He could not have been more wrong when it comes to states with substantial endowments of natural resources. Too often the result of Getty’s prescription is not success but disaster: repressive autocracies, weak economies, corruption, violence, and war. The severity of these problems varies widely, from the repressive yet prosperous states of the Persian Gulf, to conflict-ridden states like Nigeria or Liberia, to massively corrupt and unequal nations like Equatorial Guinea — where, as one economist noted, “an opulent minority sails in a sea of misery.” Yet the common thread among oil-rich states is failure — institutional, governance, and economic — a set of maladies so ingrained in the popular imagination that oil-rich states are often described as “cursed.”

Leif Wenar’s Blood Oil prompts us all to think a little more closely about the terrible side effects of oil production and about the role that our own consumption plays in that cycle. Indeed, petrostates are not themselves dependent on oil. It is our consumer dependence on oil that fuels their revenue dependence, a state Wenar likens to drug addiction. Oil wealth pours into these states, enriching elites, enabling corruption and repression, and damaging the prospects for economic development and good governance. In buying their oil, we are enabling the addiction.

Blood Oil raises a series of rarely considered, yet important questions.

Nor are the impacts of oil purely domestic. Though Wenar focuses largely on the human costs of excessive oil wealth, he is quick to point out that it impacts the global strategic environment. Russian military spending and adventurism in Ukraine and Syria is bolstered by energy revenues. Conflicts in oil-rich states like Libya and Nigeria have ramifications for counterterrorism and regional security. Oil money from Saudi Arabia, Qatar, and Iran has helped to finance Syria’s brutal civil war, while Saudi Arabia’s vast wealth has helped to fund a global network of Salafist extremism. And even crises that seem wholly unconnected from oil can be impacted by it: The sudden spread of Ebola through West African states was facilitated by weak public health institutions, a result of revenue dependence.

And yet, at times Wenar overstates his case. Scholars still debate the extent to which the resource curse impacts states, particularly its role in causing civil conflict, and the extent to which it can be mitigated. On foreign policy in particular, Blood Oil overplays the importance of oil in global events. Oil has certainly played a role in American involvement in the Middle East throughout the last 25 years, with energy security concerns often acting as a justification for the disproportionate amount of blood and treasure that the United States commits to a region with only five percent of the world’s population. Yet it is disingenuous to imply that America’s wars in the region are entirely the result of oil, directly or indirectly. Counterterrorism, humanitarian impulses and the Cold War-era struggle against communism have all played a distinct role.

Despite overstressing the effects of the petroleum trade, Wenar makes a coherent case that the world’s dependence on oil is problematic. Unlike most scholars who work on issues of the resource curse, Wenar himself is neither a political scientist nor an economist, but a philosopher. It is perhaps not surprising then that the book’s foundation is moral and philosophical, focusing on our understanding of property rights. In what other sphere of commerce, he asks, would we accept the primitive principle that might makes right? We wouldn’t purchase cars seized by a rebel group from innocent civilians, so why are we so comfortable with purchasing oil seized by authoritarian strongmen? Though the first article of the UN human rights covenant states clearly that natural resources belong to the people, this is rarely the case.

Yet I suspect that for many — myself included — the strategic arguments lurking behind Wenar’s ethical ones may be more compelling. The flow of wealth from large industrialized nations to repressive, militarized autocracies enables conflict and unrest. Thanks to the growth of U.S. shale production and other unconventional drilling technology, energy security concerns are becoming ever less important. It is increasingly unclear why America maintains close strategic relationships with petrostates like Saudi Arabia or Qatar, which repress their own populations and spread extremist ideologies. The cost of our oil dependence is not simply measured by the barrel, but in the indirect military and humanitarian costs we devote to the problems created by our oil dependence.

So what is to be done? Blood Oil comprises two distinct sections: the philosophical and scholarly justification for Wenar’s rejection of the oil-based global economy, and his proposed policy solutions. Drawing strong parallels to the British choice to end the slave trade in the 18th century, he proposes a radical divestment and transparency strategy designed to force autocrats to allow popular resource sovereignty. First, the United States and European Union would end any and all purchases or investment in oil in states where the population doesn’t control their resources. In Blood Oil, The Financial Times’ Nick Butler estimates that the U.S. and Europe could relatively easily find substitutes for authoritarian energy sources. Oil could be replaced within a matter of months by supplies from democratic producers, though Europe’s switch from authoritarian natural gas would likely take several years.

The next step is more difficult: Western divestment from authoritarian oil matters little if that oil is simply snapped up by third-party states like China. Discouraging these states from buying authoritarian oil is key. Wenar’s proposed Clean Trade Act would place tariffs on U.S. imports of Chinese goods, holding the money in trust in an account designed to compensate oppressed populations in resource states for the sale of their resources, discouraging trade in authoritarian oil by any state. Over time, he theorizes, authoritarian rulers would have to provide their populations with resource sovereignty, or be left with no markets for their oil exports.

Unfortunately, it is here that the focus on philosophy over pragmatism becomes problematic. Wenar presents an ethical and just solution for the poor and repressed inside the world’s petrostates. Yet it is entirely impractical. The tariffs required to encourage states to switch away from authoritarian oil are politically impossible. And he seems to assume that petrostates will automatically see improvements in governance and growth once popular resource sovereignty is initiated. Yet the institutional and societal damage done by oil in petrostates is likely to be difficult to reverse. Saudi Arabia will not suddenly become Denmark in the absence of oil. It will simply be a poorer, less stable Saudi Arabia.

Here too, the distinction between ethical and strategic costs of the global oil trade is relevant. Such a plan would be inordinately costly: Wenar notes that Britain’s choice to end slavery cost 40 percent of the state’s budget and the lives of over 5,000 soldiers. Such high costs were justified in seeking to end the abominable trade in human beings. But are comparable costs really acceptable to end the negative effects of oil? If, as the book suggests, the global oil trade is an absolute evil, a moral failing which we cannot tolerate, then the cost of ending our dependence becomes less relevant. There is no cost-benefit analysis for an absolute moral stance. Yet if we view the costs of the oil trade as primarily strategic — that they make the world a more dangerous place for America and its allies — then the costs of ending the global trade in authoritarian oil must be compared to the costs of leaving that trade intact. Here I am skeptical: For all the author’s protestations to the contrary, the proposed plan would undoubtedly involve military conflict. At the very least, states like China and Russia are not likely to take kindly to these proposals.

Yet for all of these problems, Blood Oil raises a series of rarely considered, yet important questions. True, the policy prescriptions presented are largely unrealistic. But they present a first attempt to understand how we might more effectively mitigate the negative impacts of oil, whether on human rights and democratization, or on global conflict and unrest. Wenar’s analysis opens the door to a discussion of more realistic steps — such as gradually deleveraging ourselves from authoritarian oil or distancing ourselves from petrostate allies — which policymakers could seriously consider.

And by putting a human face on the “resource curse” — a discussion which is too often confined to dry academic and statistical texts — the book’s central contribution is in forcing us to confront our own role in enabling the damaging domestic and international effects of oil production. For those who think that the only tie between oil and U.S. foreign policy is the question of energy security, this book offers a valuable corrective. For that alone, it is well worth reading.

Emma Ashford is a Visiting Fellow in Defense and Foreign Policy Studies at the Cato Institute. Her research focuses on foreign policy decisionmaking and implementation in oil-rich states.