Academic journal article Journal of International Affairs

Is Russia Cursed by Oil?

Academic journal article Journal of International Affairs

Is Russia Cursed by Oil?

Article excerpt

Russia is often thought to be a classic case of the resource curse--the idea that natural resource wealth tends to impair democratic development. (1) Some see the country as doomed to authoritarian politics by its enormous endowments of oil and gas. "Russia's future will be defined as much by the geology of its subsoil as by the ideology of its leaders," writes Moises Naim, editor-in-chief of Foreign Policy magazine and former trade and industry minister of petroleum-rich Venezuela. "A lot of oil combined with weak public institutions produces poverty, inequality, and corruption. It also undermines democracy." (2) New York Times columnist Thomas Friedman sees a close relationship between world commodity prices and the extent of liberty in resource-rich states: a higher oil price means less freedom. Friedman suggests that Russia, from Gorbachev to Putin, fits this relationship perfectly. (3)

This view is immediately plausible. There is no question that oil and gas have been at the core of Russia's political economy in recent decades. The plunge in petroleum prices in the 1980s helped create the economic crisis that the former Soviet governments failed to overcome. (4) Surging commodity prices after 1998 coincided with the re-centralization of power under Putin, the reassertion of Kremlin control over national television, the spread of credible reports of electoral fraud, and the harassment of independent social and political organizations. The leading state-controlled oil and gas companies even served as the regime's favored tool for chipping away at civic freedoms. Kremlin-controlled gas monopoly Gazprom, using a mixture of business maneuvers and administrative muscle, took over previously critical media outlets. State-owned oil company Rosneft swallowed assets owned by the oligarch Mikhail Khodorokovsky, who had been funding political opposition and civil society groups.

Arguments that seem to fit so well, however, deserve particular scrutiny. Were oil and gas--and the fluctuations in their prices--as central to determining the course of political development in Russia as advocates of this view suggest? If so, by what pathways did the resource curse operate? Is Russia condemned to endure authoritarian government--in the worst case, to degenerate into the kind of oil-fueled autocracy characteristic of the Persian Gulf? This paper briefly examines the evidence for the resource curse worldwide and uses cross-national experience to gauge the likely effect of resource wealth on political institutions in Russia.

The evidence is consistent with the claim that Russia would be somewhat more democratic if it had no oil or gas. International comparisons, however, suggest that very little of the variation in Russia's political regime since 1985 can be attributed to changes in its oil and gas income or reserves. When studied systematically, cross-national data imply that for countries with an established petroleum industry like Russia, even large gyrations in oil revenues have a relatively minor impact. Based on this experience, there is little reason to fear that petroleum wealth will cause Russia to sink deep into autocracy even if oil prices rise to unprecedented heights.

WHAT DO WE KNOW ABOUT THE RESOURCE CURSE?

In the last decade, scholars have used statistical methods to test the hypothesis that oil and gas wealth is inimical to democracy. Most believe there is evidence of a statistically significant relationship, although there are some dissenters. (5) At the same time, recognition has been growing that the effects of oil can be quite different in different types of countries and in different periods.

Figure 1 plots the political regimes of the world's thirty-two largest oil and gas producers from 2000 to 2005, including all countries having an average annual output of oil and gas worth at least $400 per capita at world prices. (6) To classify the countries' political regimes, the ratings of the Polity IV dataset (September 2009 revision), compiled by a team under Monty Marshall and Keith Jaggers at George Mason University, have been used. …

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