More Oil Money, Less Democracy?

This article was published in El Comercio, a leading Ecuadorian daily paper, under the headline of ‘Democracia y crudo no se llevan bien...’ The text as published in Spanish is available on the ElComercio.com; the English version is posted below in its entirety.

Long before he became Vice President of the United States, back when he was just the CEO of a company called Halliburton, Dick Cheney was asked about oil and democracy. He famously quipped: “The problem is that the good Lord didn't see fit to put oil and gas reserves where there are democratic governments.”

Blaming the Lord might be a bit of a stretch, but he had a point: democracy and oil do not seem to mix. Just look at the world’s top oil exporters: Of the top ten, only three -- Mexico, Venezuela and Norway are fully functioning democracies according to the U.S. State Department, and of those only Norway has a squeaky clean human rights record.

Saudi Arabia is a monarchy; the United Arab Emirates and Kuwait are emirates. Iran is a theocracy where the last truly democratic election took place in 1951. Algeria and Nigeria go through the motions of elections, but state repression renders them democracies in name only. Russia is characterized as a “managed democracy” led by a man with little interest in ceding power.

These ten nations account for about 65% of the world’s oil exports -- pumping nearly 25 million barrels of oil into pipelines around the world each day. And with oil hovering at around $90 a barrel, a lot of money is packing the pockets of some of the world’s most repressive regimes.

What is that money spent on? The New York Times (11/28) reports that one Saudi prince now owns considerable stakes in Citigroup, PepsiCo, Tim Warner, Disney and many other familiar brands; and that oil rich Gulf states like the UAE and Kuwait are struggling to invest $5 billion a week in oil revenue.

Many more of those billions are invested in weapons. The U.S. is the world’s largest weapons exporter and it does not sell much in weaponry to its former Cold War rival Russia or to Iran, a member of the so-called “axis of evil.” A review of Foreign Military Sales data from 2001-2005 (the last year for which full Pentagon data is available) reveals that the eight oil exporters in good standing with Washington received a total of more than $8.8 billion in U.S. weapons sales. And this figure does not include any sales made in the last two years or President George W. Bush’s proposed $20 billion weapons package to Saudi Arabia, Kuwait and neighboring countries.

Oil wealth plus weapons is an incendiary mixture, and without strong democratic institutions political upheaval, repression and even dictatorship are real dangers. Global Witness has developed a project to help countries with extensive oil reserves or other natural resource wealth chart a course out of the “resource curse” of wealth creating stagnation and conflict rather than economic growth and development. Their “Publish What You Pay,” effort encourages oil exporters to be more transparent about how they invest their oil revenue as a first step to ensuring that wealth is invested in ways that serve citizens, develop the nation and build democracy. It seems like a good first step, putting the brakes on weapons sales would be a significant second step.