The linked working paper is authored by Cullen S, Hendrix,
a nonresident senior fellow at the Peterson Institute for International
Economics. In the realm of international economic studies there exists this
conjecture that anecdotal evidence suggests high oil prices embolden leaders in
oil-rich states to pursue more aggressive foreign policies. This paper seeks to
test this theory by using a sample of 153 countries from 1947-2001.
Where we are used to analyzing the effects of war in oil
exporting regions on the prices of natural resources, this paper chooses to
focus on how the movements in the price of oil can lead to aggressive foreign
policies from oil exporters which can in turn spawn those acts of aggression. While
the paper utilizes sample data that dates back to the mid-20th century, we only
have to look back to the past half-decade to assess the validity of Thomas
Friedman's First Law of Petropolitics( the basis of Hendrix's analysis): that
high oil prices embolden producers to adopt more confrontational foreign
policies (2006). For example, in August of 2008 Russia invaded neighboring
Georgia-presumably in response to Georgian aggression against the breakaway of
South Ossetia-just one month after crude oil prices secured record high marks
since 1980. Just this year Russia has annexed the Crimean Peninsula and upon
doing so its state owned Gazprom-the world's leader in extracting natural gas-
has doubled the price it charges the Ukraine for natural gas.
The paper concludes by asserting that Friedman's First Law
of Petropoltics is consistent with its pooled data and that democracy and oil
wealth are inversely related and as the price of oil rises, democracy in
oil-producing states wanes. Personally, I do not quite understands the
correlation between "democracy” and rises in prices of oil as I do acts of
aggression in response to rising prices of oil in exporting zones. If the paper
is suggesting that democracy is equivalent to peacefulness, then it would be an
absurdity. Moreover, in terms of its arguments on the effects of oil prices and
interstate conflict behavior, I tend to agree that high prices of oil in
exporting countries lead to more aggressive foreign policy.
Natural resources, oil and gas, energy are very sensitive, and the conflicts about them can lead to aggressive foreign policy, or even wars. As we can see in your examples, it is not hard for a big country to find reasons to invade other countries for their resources. About the correlation between democracy and oil price, I have some ideas based on my experiences. When the price of oil increases, democracy wanes. In the U.S., the government does not control the oil price hardly, but in Vietnam, they do. They have their own budget, collected from taxes, to control oil prices. If the price is increased too much, they will open the budget to low it down. For example, if the world's price in oil is increased 3 times, the price in Vietnam is increased only 1.5 or 2 times. Therefore, the oil price is not changed sharply, and investing in oil industry is very safe. However, it will decrease the government's budget.
ReplyDeleteI think this post and working paper are very intriguing. On my personal perspective and observation, the high oil prices partly emboldens the energy exporting countries to implement more aggressive politic policies, because the higher prices weighted the success of executing the policies, which might lead to global economic sanctions and deteriorate their economic situation. Furthermore, I agree with you that democracy does not tend to pursue peacefulness.
ReplyDeleteEvidence on commodity exports (and prices) on conflict is mixed. See, for example Collier and Hoeffler (2004), http://www.uky.edu/~clthyn2/PS439G/readings/collier_hoeffler_2004.pdf; Fearon (2005), https://web.stanford.edu/group/fearon-research/cgi-bin/wordpress/wp-content/uploads/2013/10/Primary-Commodity-Exports-and-Civil-War.pdf; or Bazzi and Blattman (2011), http://www.cgdev.org/files/1425755_file_Bazzi_Blattman_price_shocks_FINAL.pdf.
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