Natural resources are a source of
economic rent which can generate large revenues for those controlling them even in the absence of political stability and wider economic growth. Their existence is a potential source of conflict between factions fighting for a share of the revenue, which may take the form of armed
separatist conflicts in regions where the resources are produced or internal conflict between different government ministries or departments for access to budgetary allocations. This tends to erode governments' abilities to function effectively. Even when politically stable, countries whose economies are dominated by resource extraction industries tend to be less democratic and more corrupt.
Violence and conflict A 2019 meta-analysis of 69 studies found "that there is no aggregate relationship between natural resources and conflict." According to a 2017 review study, "while some studies support the link between resource scarcity/abundance and armed conflict, others find no or only weak links." According to one academic study, a country that is otherwise typical but has primary commodity exports around 5% of GDP has a 6% risk of conflict, but when exports are 25% of GDP, the chance of conflict rises to 33%. "Ethno-political groups are more likely to resort to rebellion rather than using nonviolent means or becoming terrorists when representing regions rich in oil." There are several factors behind the relationship between natural resources and armed conflicts. (the "resource curse" argument). Secondly, conflicts can occur over the control and exploitation of resources and the allocation of their revenues (the "
resource war" argument). Thirdly, access to resource revenues by belligerents can prolong conflicts (the "
conflict resource" argument). A 2018 study in the
Journal of Conflict Resolution found that rebels were particularly likely to be able to prolong their participation in civil wars when they had access to natural resources that they could smuggle. A 2004 literature review finds that oil makes the onset of war more likely and that lootable resources lengthen existing conflicts. One study finds the mere discovery (as opposed to just the exploitation) of petroleum resources increases the risk of conflict, as oil revenues have the potential to alter the balance of power between regimes and their opponents, rendering bargains in the present obsolete in the future. One study suggests that the rise in mineral prices over the period 1997–2010 contributed to up to 21 percent of the average country-level violence in Africa. Research shows that declining oil prices make oil-rich states less bellicose. Jeff Colgan observed that oil-rich states have a propensity to instigate international conflicts as well as to be the targets of them, which he referred to as "
petro-aggression". Arguable examples include Iraq's invasions of Iran and Kuwait; Libya's repeated incursions into Chad in the 1970s and 1980s; Iran's long-standing suspicion of Western powers; and the United States' relations with Iraq, Iran, and Venezuela. It is not clear whether the pattern of petro-aggression found in oil-rich countries also applies to other natural resources besides oil. A 2016 study finds that "oil production, oil reserves, oil dependence, and oil exports are associated with a higher risk of initiating conflict while countries enjoying large oil reserves are more frequently the target of military actions." As of 2016, the only six countries whose reported military expenditures exceeded 6 percent of GDP were significant oil producers: Oman, South Sudan, Saudi Arabia, Iraq, Libya, Algeria (data for Syria and North Korea were unavailable). A 2017 study in the
American Economic Review found that mining extraction contributed to conflicts in Africa at the local level over the period 1997–2010. A 2017 study in
Security Studies found that while there is a statistical relationship between oil wealth and ethnic war, the use of
qualitative methods reveals "that oil has rarely been a deep cause of ethnic war." The emergence of the
Sicilian Mafia has been attributed to the resource curse. Early Mafia activity is strongly linked to Sicilian municipalities abundant in sulphur, Sicily's most valuable export commodity. A 2017 study in the
Journal of Economic History also links the emergence of the Sicilian Mafia to surging demand for oranges and lemons following the late 18th-century discovery that citrus fruits cured
scurvy. A 2016 study argues that
petrostates may be emboldened to act more aggressively because of the inability of allied great powers to punish the petrostate. The great powers have strong incentives not to upset the relationship with its client petrostate ally for both strategic and economic reasons. The study found that "In places where mineral discoveries occurred before formal institutions were established, there were more homicides per capita historically and the effect has persisted to this day. Today, the share of homicides and assaults explained by the historical circumstances of mineral discoveries is comparable to the effect of education or income." The study argues that states which have onshore oil wealth tend to build up their military to protect the oil, whereas states do not do that for offshore oil wealth.
Democracy and human rights Research shows that oil wealth lowers levels of democracy and strengthens autocratic rule because political leaders in oil-rich countries refuse democratic development because they will have more to give up from losing power. Similarly, political leaders of oil-rich countries refuse democratic development because the political elite collects the revenues from the oil export and use the money for cementing its political, economic, and social power by controlling government and its bureaucracy, Military spending generally increases with oil wealth and so a military coup, one of the strongest tools in toppling autocracies, is less likely in oil-rich countries since dictators can quell resistance through additional funding. According to Michael Ross, "only one type of resource has been consistently correlated with less democracy and worse institutions: petroleum, which is the key variable in the vast majority of the studies that identify some type of curse." A 2014 meta-analysis confirms the negative impact of oil wealth on democratization. A 2016 study challenges the conventional academic wisdom on the relationship between oil and authoritarianism. A 2022 study found that the resource curse is tied only to easily extractable oil, not to oil that requires complex extraction. Other forms of resource wealth have also been found to strengthen autocratic rule. A 2016 study found that resource windfalls have no political impact on democracies and deeply entrenched authoritarian regimes, but significantly exacerbate the autocratic nature of moderately authoritarian regimes. A third 2016 study finds that while it is accurate that resource richness has an adverse impact on the prospects of democracy, this relationship has held only since the 1970s. A 2017 study found that the presence of multinational oil companies increases the likelihood of state repression. Another 2017 study found that the presence of oil reduced the likelihood that a democracy would be established after the breakdown of an authoritarian regime. A 2018 study found that the relationship between oil and authoritarianism primarily holds after the end of the
Cold War. The study argues that without American or Soviet support, resource-poor authoritarian regimes had to democratize, but resource-rich authoritarian regimes resisted domestic pressures to democratize. Prior to the 1970s, oil-producing countries did not have democratization levels that differed from other countries. Oil-abundant authoritarian governments are suggested to earn high levels of income for oil but spend an extremely minimal amount on social expenditures for individuals being ruled and democracies are suggested to do the opposite. Research by
Stephen Haber and Victor Menaldo found that increases in natural resource reliance do not induce authoritarianism but may instead promote democratization. The authors say that their method rectifies the methodological biases of earlier studies which revolve around
random effects: "Numerous sources of bias may be driving the results [of earlier studies on the resource curse], the most serious of which is omitted variable bias induced by unobserved country-specific and time-invariant heterogeneity." Both pathways might result from the ability of oil-rich states to provide citizens with a combination of generous benefits and low taxes. In many economies that are not resource-dependent, governments tax citizens, who demand efficient and responsive
government in return. This bargain establishes a political relationship between rulers and subjects. In countries whose economies are dominated by natural resources, however, rulers don't need to tax their citizens because they have a guaranteed source of income from natural resources. Because the country's citizens aren't being taxed, they have less incentive to be watchful with how government spends its money. In addition, those benefiting from mineral resource wealth may perceive an effective and watchful civil service and civil society as a threat to the benefits that they enjoy, and they may take steps to thwart them. As a result, citizens are often poorly served by their rulers, and if the citizens complain, money from the natural resources enables governments to pay for armed forces to keep the citizens in check. It has been argued that rises and falls in the price of petroleum correlate with rises and falls in the implementation of
human rights in major oil-producing countries. Corrupt members of national governments may collude with resource extraction companies to override their own laws and ignore objections made by indigenous inhabitants. The
United States Senate Foreign Relations Committee report entitled "Petroleum and Poverty Paradox" states that "too often, oil money that should go to a nation's poor ends up in the pockets of the rich, or it may be squandered on grand palaces and massive showcase projects instead of being invested productively." A 2016 study found that mining in Africa substantially increases corruption; an individual within of a recently opened mine is 33% more likely to have paid a bribe the past year than a person living within 50 km of mines that "will open" in the future. The former also pay bribes for permits more frequently, and perceive their local councilors to be more corrupt. Their findings were consistent with the hypothesis that mining increases corruption. The
Center for Global Development argues that governance in resource-rich states would be improved by the government making universal, transparent, and regular payments of oil revenues to citizens and then attempting to reclaim it through the tax system, which they argue will fuel public demand for the government to be transparent and accountable in its management of natural resource revenues and in the delivery of public services. One study found that "oil producing states dependent on exports to the USA exhibit lower human rights performance than those exporting to China". The authors argue that this stems from the fact that US relationships with oil producers were formed decades ago, before human rights became part of its foreign policy agenda. One study found that resource wealth in authoritarian states lowers the probability of adopting
freedom of information laws. However, democracies that are resource-rich are more likely than resource-poor democracies to adopt such laws. A 2018 study in
International Studies Quarterly found that oil wealth was associated with weaker private liberties (freedom of movement, freedom of religion, the right to property, and freedom from forced labor). Research by Nathan Jensen indicates that countries that have resource wealth are considered to have a greater political risk for foreign direct investors. He argues that this is because leaders in resource-rich countries are less sensitive to being punished in elections if they take actions that adversely affect foreign investors. Countries with higher natural resource export share show a correlation between receiving
Foreign direct investment and decreasing
democracy index, while this correlation is opposite for countries with low natural resource export share.
Distribution According to a 2017 study, "social forces condition the extent to which oil-rich nations provide vital public services to the population. Although it is often assumed that oil wealth leads to the formation of a distributive state that generously provides services in the areas of water, sanitation, education, health care, or infrastructure... quantitative tests reveal that oil-rich nations who experience demonstrations or riots provide better water and sanitation services than oil-rich nations who do not experience such dissent. Subsequent tests find that oil-rich nations who experience nonviolent, mass-based movements provide better water and sanitation services than those who experience violent, mass-based movements."
Gender inequality Studies suggest countries with abundant natural resources have higher levels of
gender inequality in the areas of wages, labor force participation, violence, and education. Research links gender inequality in the Middle East to resource wealth. According to Michael Ross:Oil production affects gender relations by reducing the presence of women in the labor force. The failure of women to join the nonagricultural labor force has profound social consequences: it leads to higher fertility rates, less education for girls, and less female influence within the family. It also has far-reaching political consequences: when fewer women work outside the home, they are less likely to exchange information and overcome collective action problems; less likely to mobilize politically, and to lobby for expanded rights; and less likely to gain representation in government. That leaves oil-producing states with atypically strong patriarchal cultures and political institutions. This hypothesis has received further support by the analysis of mining booms in Africa. For the United States, the evidence is mixed. State-level comparisons suggest that resource wealth leads to lower levels of female labor force participation, lower turnout and fewer seats held by women in legislatures. On the other hand, a county-level analysis of resource booms in the early 20th century found an overall positive effect of resource wealth on single women's labor force participation. Research has also linked resource wealth to greater domestic violence, and a gender gap in education.
International cooperation Research finds that the more that states depend on oil exports, the less cooperative they become. They become less likely to join intergovernmental organizations, accept the compulsory jurisdiction of international judicial bodies, and agree to binding arbitration for investment disputes.
Foreign aid There is an argument in political economy that
foreign aid can have the same negative effects in the long run towards development as in the case of the resource curse. The so-called "aid curse" results from giving perverse political incentives to a weak body of civil servants, lowering politicians' accountability towards citizens and decreasing economic pressure thanks to the income of an unearned resource to mitigate economic crisis. When foreign aid represents a major source of revenue to governments, especially in low-income countries, state-building capacity is hindered by undermining responsiveness toward taxpayers or by decreasing the incentive for governments to look for different sources of income or the increase in taxation.
Crime A 2018 study found that in
Texas, "a 1% increase in the value of oil reserves increases murder by 0.16%, robbery by 0.55% and larceny by 0.18%." ==Petro-aggression==