Are We Past 'Peak Petrostate'?

It's the economics of energy production that make petrostates more trigger-happy, Emma Ashford argues in Oil, the State, and War.

Oil, the State, and War: The Foreign Policies of Petrostates, by Emma Ashford, Georgetown University Press, 365 pages, $34.95

It doesn't take a Ph.D. to see that oil drives conflict. Just looking at the recent history of America's interventions in the Middle East will do.

During the Tanker War of the 1980s, the U.S. Navy fought Iran to protect Iraq's oil. Then, during the first Gulf War, the U.S. military fought Iraq to protect Kuwait and Saudi Arabia's oil. After three decades of war in Iraq, the United States came full circle, with the Trump administration threatening Iran while Iran threatened Saudi Arabia's oil.

Less understood is how oil drives conflict. The popular view, espoused both by many anti-war critics and by violence enthusiasts like former President Donald Trump, is that larger countries go to war to steal the oil wealth of smaller ones. Strong consumers take what they can; weak producers provide what they must.

Emma Ashford, a foreign policy scholar at the Stimson Center, makes the opposite claim in Oil, the State, and War. It isn't the need for cheap energy that drives foreign policy, she argues; it's the economics of energy production that make petrostates more trigger-happy. On one hand, control over energy markets removes constraints on warmaking. On the other hand, the "resource curse" warps political institutions. And of course, oil money helps governments buy fancy weapons.

Oil is unique in how it influences state behavior. Like many other natural resources, petroleum is scarce and expensive. Unlike those other resources, oil is necessary for the world economy to keep running. And all oil is bought and sold on the same global market, priced in U.S. dollars, meaning a change anywhere affects prices everywhere.

But not every petrostate is created equal. Oil plays a very different role in Saudi, Norwegian, Iranian, and Mexican societies. While most countries have put their oil resources under government control since the mid-20th century, the United States—the world's largest oil producer—has a private and competitive oil industry.

Rather than discussing petrostates as one bloc, Ashford draws three overlapping categories of oil producers. In oil-dependent states, a large chunk of government revenue is tied up in the petroleum sector. Oil-wealthy states earn a significant amount of income, whether or not they depend on it, from oil production. Finally, super-producers and super-exporters control a substantial percentage of the global oil market.

An oil-dependent nation is the classic image of a petrostate. Rather than providing services to earn the trust of taxpayers, leaders manage a firehose of unearned income, which they use to buy loyalty or pay for the tools of repression. Many scholars have theorized how the "resource curse" damages a country's political culture. Ashford skillfully illustrates those theories with specific, detailed examples of Saudi and pre-2003 Iraqi government dysfunction.

Timothy Mitchell's 2011 book Carbon Democracy contrasts coal-based labor unions' successes in Europe with worker power's failure in societies that are dependent on oil income. In the latter societies, he argues, it is hard for ordinary people to inflict pain on elites, which slows democratic development. Ashford makes a similar argument about the private sector, suggesting that the lack of a business lobby in oil-dependent countries quashes dissent within the ranks of the elite.

Ashford also delves into how great powers use military aid and protection for dictators as a form of "indirect control" over oil-producing states. Yet her book does not ask an obvious follow-up question: Does foreign intervention have an effect on the "resource curse"? The history of U.S.- and U.K.-sponsored coups in the Middle East certainly suggests that it does. When powerful outsiders are interested in local political disputes, it tends to inflame those disputes.

Where Ashford excels is linking the effects of the oil curse to producers' foreign policy processes. Oil dependency concentrates power in the hands of small cliques or single dictators. It discourages the development of diplomatic institutions or intelligence agencies that can provide those leaders with good advice.

Unlike politicians in democratic republics or even well-developed one-party states, petro-tyrants like Saudi Arabia's Mohammed bin Salman or Iraq's Saddam Hussein have been free to act on their wildest impulses. And oil-rich states, dependent or not, have a glut of free money they can spend on large militaries. In fact, Ashford found that high oil prices correlate to increased levels of military spending on a global level. She suggests they have a similar impact on proxy warfare, when states like Iran fund foreign militants or allied countries to do their bidding.

Saudi Arabia's purchases of American-made arms and support for militant groups might be the most infamous example. (Iran was also a major customer for American weapons before an anti-American government took power in 1979.) Russia dumped so much cash into military "modernization" during the last decade, Ashford observes, that "it was near-impossible for Russia's defense sector to absorb the spending." In Carbon Democracy, Mitchell argues that Britain, the Soviet Union, and, above all, the United States were willing to feed petrostates' weapon addiction as a way to keep them using pounds sterling, rubles, or dollars.

Powerful military capabilities are a dangerous temptation for trigger-happy leaders. Iraq and Libya, for example, repeatedly attacked their neighbors. Americans themselves are quite familiar with how a large army makes politicians more eager to go to war.

Armies bloated by oil money also become a source of fear for non-oil-rich neighbors, who build up their own forces in an attempt to keep up. Although neither Israel or Turkey export oil, the cold war between oil-rich Saudi Arabia and Iran has sucked them in all the same.

The combination of oil wealth and oil dependence is especially toxic. Petrostates buy flashy new toys when oil markets are booming, then end up in debt when oil prices fall. The same effect applies to oil-funded social spending, as Venezuela demonstrates. As Ashford puts it, any government spending in an oil-wealthy or oil-dependent state is "a bet on the future price of oil."

The resource curse is not "solely responsible for poor foreign policy decisions," Ashford writes. But in many cases, it clearly contributes to "a chaotic and generally poor foreign policy process."

Oil is most directly linked to foreign policy when it comes to super-producers and super-exporters. Again, because all oil is sold on the same market, changes in supply anywhere affect prices everywhere.

Turning market effects into political leverage is harder than it seems. The one big historical example of the "oil weapon" is the 1973 oil embargo, when Arab states decided to punish international supporters of Israel by cutting oil supplies. While American consumers suffered shortages, which were severely exacerbated by the U.S. government's attempts at price controls, the embargo failed to force Israel or its supporters to make any policy changes. Arab leaders gave up after they realized they were hurting their own economic interests more than anything else.

Russia has been more successful at coercing its neighbors using natural gas, because Soviet-era pipe infrastructure and the fragmented nature of gas markets give Moscow power over supply chains. Even so, this blackmail has undermined Russia's economic power by encouraging Europe to look for alternative energy suppliers.

Beyond their practical impact, the 1973 crisis and the Russian threats have had a psychological effect, making politicians in rich countries obsessed with energy security. While the "oil weapon" is ineffective in reality, Ashford argues, politicians' belief in the danger of oil embargos has given energy producers much more clout—an effect she calls "soft oil power"—and driven international powers to offer their protection to oil producers.

In the 1980s, the small petrostate of Kuwait backed an Iraqi invasion of Iran by opening its ports (and a financial lifeline) to Iraq. When Iran retaliated by attacking Kuwaiti shipping, Kuwait extracted promises of protection from both the Soviet Union and the United States. Thus began a four-decade stretch of U.S. military intervention in the Persian Gulf.

The world may have passed what Ashford calls its "peak petrostate" era. Technological advances such as fracking have opened up new petroleum sources outside of traditional oil-producing regions. At the same time, the fight against climate change has prompted industrialized countries to move toward less carbon-intensive energy sources.

So the trend is toward an economy that does not value or rely on petroleum products as much. But the damage done by oil-fueled rulers may last much longer.