Africa Press-Nigeria:
Given the tight supply and surging demand of the world oil market, small countries that produce oil can have a major impact on global markets. This is in contrast to many previous oil shocks, when international cartels like the Organization of Petroleum Exporting Countries (OPEC) effectively controlled world oil supply. As a result, the impact of corruption and mismanagement in countries like Angola, Chad, and Nigeria-which can lead to unrest and force halts to production-are magnified on a global scale. For example, ethnic strife in the southern Nigerian town of Warri in March 2003 shut down 40 percent of Nigeria’s oil production for several weeks. “When the market’s as tight as it is now, every barrel of export counts,” says Richard Karp of the American Petroleum Institute, a trade organization. “Community strife or local unrest” in small countries can raise oil prices around the world, he says.
The Cost of Corruption
Exacerbating the problem in many of these countries is entrenched graft. Corruption “makes it very difficult to create governments that are accountable to people in their own countries, and hurts efforts in those countries to build sustainable development,” says Edward Morse, former deputy assistant secretary of state for international energy policy. Throughout the 1990s, he says, there were a number of international initiatives to increase transparency in oil-producing countries, made possible because oil prices were low. Since oil-rich countries couldn’t earn enough on oil revenues alone to run their states, they had to think about cooperating with international efforts toward diversification and more responsible governance. “That was working very well, until prices went up,” Morse says. With prices currently over $60 a barrel, “it’s far more difficult to ensure transparency,” he says.
At the same time, “Western governments were giving hundreds of millions of dollars” to many of these same countries to help build hospitals, feed the hungry, and otherwise improve society, says Clarence Daryl Edwards of the Britain-based nonprofit advocacy group Global Witness. These funds were stolen or wasted, as oil revenues were diverted to the top 1 percent of these countries’ populations, leaving the vast majority of their citizens still poor. Unequal oil revenue distribution also exacerbates tribal and ethnic conflicts, such as those between Muslims and Christians in Nigeria, or Nuer [cattle herders] and Muslims in Sudan. As revenues grow, experts say, the number of stakeholders in the oil industry also grows; tribal leaders, local government, national government, armed militias, and the military all want a share of the pie.
Many oil-producing nations, particularly in Africa, are widely viewed as corrupt, with elites who embezzle oil funds and governments that can barely provide security for oil production, much less housing, education, or services for their citizens. Since these countries are so-called rentier states-that is, they derive all or most of their income from renting or selling natural resources to outsiders, instead of collecting taxes from their citizens-they have no accountability to their people and little incentive to democratize. Instead, the government focuses on “keeping its people in line so they do not overthrow it and start collecting the oil rents themselves,” Noah Feldman writes in his book After Jihad.
The international community also has limited power over rentier states. “The leverage the international community had was over debt payments [from developing countries], and when the oil price is high, oil-producing countries can service their debts with the money they’re making, and the leverage is lost,” Morse says. “Venezuela, for example, made enormous strides toward greater transparency-until the election of Hugo Chavez. Now we don’t know if Venezuela even knows how much oil it’s producing.”
