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How The Structure of Global Oil Markets Fuels Authoritarianism and War

February 6th 2016

Arab Oil Derick

Almost every day, even if you don't own a car, you probably buy something made from oil. Usually we don't think about where that money goes — because the answer, at least some of the time, is that it ends up lining the pockets of some of the world's deadliest people. The problem, in fact, may be bigger than we think. According to a new book by Leif Wenar, the chair of philosophy and law at King’s College London, the way the global oil trade is set up means that oil isn't just passively funding bad guys — it actively encourages them. In his book Blood Oil, Wenar sets out to explain a striking fact: Much of the world has seen a decline in authoritarianism and war, but oil-rich countries have been left behind. Wenar blames the oil itself: Its profits allow authoritarian states to more effectively repress dissent than non-oil states, and helps militant groups fund their war machines.

Wenar argues that the problem with oil goes beyond the fact that it's so valuable. It's also partly because of the structure of the global oil market. He traces the root of the problem to a part of international law he calls "might makes right": Anyone who controls oil can sell it on the global market, regardless of whether they took it by force. It's not a formal rule so much as a custom that no one has really bothered to change but that Wenar blames for many serious problems. I called up Wenar to expand on these themes: to explain just how the global oil market spreads violence and why "might makes right" is the core of the problem. What follows is a transcript of our conversation, edited for length and clarity.

Zack Beauchamp: You and a lot of other scholars talk about oil as the root cause of authoritarianism, state killing, civil wars, and militia violence. Why do you think that is?

Leif Wenar: Let me give you one summary fact. You know a lot about the amazing strides the developing world has made in the past 35 years in terms of democratization, poverty reduction, and declines in violence, and it has been extraordinary — except for the oil states. The oil states, as a whole, are no richer, no freer, and no more peaceful than they were in 1980, and that's just remarkable. There's something about being a major oil exporter in the developing world that is tremendously hazardous for your political economy. "Oil money has funded our worst crises and threats for 40 years". Basically, now there are huge reservoirs of money underground, and whoever can control the hole in the ground by force gets a gigantic revenue stream from the world, with which they can do whatever they like. They can use it for buying weapons and starting or continuing a civil war; they can use it for coercion, or to stay in power. The money comes with no strings attached, it never has to be paid back, and it can be used for whatever the coercive actors want. My view is that it's this old, bad view of "might makes right" that is causing a lot of the trouble.

ZB: What exactly is that rule? How does it work, and why does it lead to all the ills that you were just talking about?

LW: It's a law of every country that says, "For the natural resources of other countries, whoever can control them by force can sell them to us." For example, when Saddam's Baath party took over Iraq in a coup, the world started buying Iraq's oil from them, and then later, when ISIS took over wells, the world started buying oil from them too. Then you can think of Libya: Qaddafi takes over in a coup, and then when the rebels in the Arab Spring took over the wells from Qaddafi, the world started buying Libya's oil from the rebels. Whoever can seize it can sell it to us, and that means our money that we pay at the pump and in the stores goes back through the world's supply chains to whoever can be most successfully coercive. That's why oil, especially, and other natural resources, too, correlate with authoritarianism and armed conflict.That's a great deal of explanation of why these countries are so disordered.

ZB: I get that "might makes right" allows authoritarian states and militant groups to sell oil, but what is it exactly about oil sales that makes authoritarian states so durable and resistant to democratic revolutions?

LW: The structure of the rule is what sends the money to the authoritarians. Then the authoritarians can do what they need to do with the money to stay in power, and that money is entirely unaccountable. Oil is the largest source of unaccountable power in the world. Some authoritarians have large amounts of oil revenues per capita, and they can take a strategy of both coercion and buying loyalty from their people with benefits, subsidies, jobs, and so on. Most famously, the Gulf states have large oil revenues per capita, and they are quite coercive. They do have very serious security states, but they also give benefits to their people, especially in times of trouble, to try to buy off resistance to their rule." 300 years ago, 'might makes right' was our rule for almost everything, including human beings." The more numerous oil states that have lower oil revenues per capita tend to be more on the coercion side and much less on the benefits side. For example, in the big oil states in Africa, like Nigeria, very little of the money gets down to the ordinary people unless it's time to buy votes, and the security forces are quite severe when they even keep order at all.All authoritarian regimes will take a mixed strategy, and it depends how much money they have per capita, whether they'll be emphasizing coercion, or whether they'll also be able to give benefits to the people to buy off resistance.

ZB: In countries with weaker governments, you say oil can actually cause civil wars and strengthen violent militia groups. How does that work?

LW: It's actually the same mechanism. It really was the case that when the rebels in Benghazi started being successful in the Arab Spring against Qaddafi, they got the money they needed to pursue their military campaign from selling the country's oil. And this is not unusual: Many militia groups have gotten their funds from selling oil and other resources. Armies are very expensive things, and you need a ton of cash to keep them going, so selling oil is a great strategy for getting that money. As you know, ISIS was making $2 million a day before sanctions were imposed from the oil, and that was really a significant boost, when it was getting started [as a caliphate], for its arms activity.

ZB: You also argue that many global crises are the result of bad governments using oil money to fund terrible things.

LW: If you think about all the big crises and threats that we've faced in the last 40 years, what do you see? They have one thing in common. It's not only ISIS, but it was Putin going into Ukraine, and before that, Saddam and Qaddafi, and before that, Iranian support of terrorism around the world. If you want to go all the way back, the Soviet Union was kept afloat for maybe an extra decade, decade and a half, by oil money, and it funded not only their campaign into Afghanistan but their surge ahead of the West in the nuclear arms race.

Oil money has funded our worst crises and threats for 40 years, and the spread of violent extremism is the latest example of that. In a sense, this is our money that's going to people who think of us as enemies, and this is our money going to the spread of ideologies that are hostile to our way of life, so there's a huge national security interest in this, too.

ZB: Why is there this "might makes right" rule when it comes to oil, and what are its implications?

LW: "Might makes right" for resources is one of the few remnants of the old portion-based international system, which has now been substantially replaced in international affairs. Three hundred years ago, "might makes right" was our rule for almost everything, including human beings. Three hundred years ago, the rule for human beings was, "Whoever can seize them by force can sell them to us," and under that rule, the European empires forced 12 million Africans through the gruesome middle passage, where they were bought legally as slaves here in the Americas.

"Might makes right" was the rule for everything, including human beings and a lot more. Back then, if one country could capture territory by force from another country, it got the legal right to rule that territory. Back then, if one country could gain domination over the people of another country, it got the right to rule those people as a colony.

"Might makes right" in those areas, and within countries, too, [meant] whoever had the most coercive power could do almost anything they wanted to to the population. The sovereign could install the racist apartheid regime or engage in ethnic cleansing, or even genocide. All those things used to be legal under international law, but look — all those remnants, all those aspects of the international system, have now been overcome.

Now, we haven't totally abolished power, of course. Power still does what it does, and our modern international laws are still violated much too often. But we're on the right side of history when it comes to things like the slave trade and colonialism and apartheid. It's just that we're on the wrong side of history when we're talking about "might makes right" for natural resources. That bad old rule for resources still zombies on in that international system, and it's one of the few unreformed elements of that bad old system that is still causing us so much trouble.

ZB: That's a pretty bold analogy — the slave trade. It's one you make repeatedly throughout the book as well.

LW: The parallel really is that the two practices operate by the same international principle. Back then, whoever could seize human beings could sell them to us. Now whoever can seize a country's resources can sell them to us. That's crazy. By any sensible market rules, violence should violate property rights. You shouldn't be able to seize a person and sell them; you shouldn't be able to seize a country's resources and sell them.

The rule makes no sense from a market perspective, even from an intuitive perspective. If an armed gang down the street from you there in Washington seizes a gas station, no one thinks that the bystanders get the legal right to buy the gas from the gang. But, again, if an armed group seizes an oil well in a producing country and can keep control of it, we will buy the oil from them.

There's a parallel in terms of the rule that justifies slave trade and the modern trade in stolen oil, and, similar to the slave trade, everyone now accepts our global trade in natural resources as business as usual. Our elites see no problems with it. Very powerful actors are heavily enmeshed in business as usual, and it's only when you see the big picture — not only of the absurdity of the rule itself, but how much trouble it's causing — that you see the rule really has to be reformed.

ZB: And it's not just elites, right? All of us are, basically every day, purchasing products — and not just gasoline — that line the pockets of the world's worst authoritarians and militant groups.

LW: With the latest numbers I could get, it looks like by going to the pump, the average American family sends $275 a year to authoritarian regimes. That, I think, people do have a sense of: that when you're at the pump, the gas goes into your car and the money comes out of your wallet, and some of that money goes back to these awful countries like Saudi Arabia where they crucify their political opponents and so on. It's also true that we pay for blood oil whenever we buy something that's either made with oil or transported with oil, which is almost everything. When it comes to things made with oil, essentially, if it's plastic, it's oil. Oil is part of a huge number of products — crayons and lipstick and golf balls, and of course anything that's technological that has plastic in it, like laptops and game stations. Then, of course, toys, vinyl siding; it's in your shoes, it's in your waistband, you might be smearing it on your face, it might be enhancing your sex life. Oil is everywhere. It's as if there were a huge petroleum volcano in the middle of each country, and a giant geyser of petroleum spewed out over the whole country and formed its road and spilled onto its people and filled up our houses with oil-made goods. We don't realize that oil is ingrained in all aspects of our lives, and that means whenever we fill up at a gas station or check out either online or in person at the stores, we can be sending our money to some of the most violent and aggressive men in the world.


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