Oil and political freedom in third world petro states: do oil prices and dependence on petroleum exports foster authoritarianism?

Tarzi, Shah M. ; Schackow, Nathan

INTRODUCTION

Why are so many oil-rich states so frequently undemocratic? Is there a link between an oil-rich state's reliance on natural resource exports as the primary source of government revenue and autocracy? Interest in this topic is in large measure due the persistence of despotism in the oil-rich Middle East. At first glance, there appears to be some degree of correlation. For instance, amongst all the oil-rich states that depend on oil exports for at least 25 percent of their total annual revenue, only Norway is a genuinely functioning democracy. Whereas Mexico and Indonesia have maintained an electoral democracy with some degree of success over the years, the vast majority of oil export-dependent countries have been unable to translate vast oil resources and revenue into either democratization or sustainable economic growth. Regarding economic development and growth in Gross Domestic Product, several authoritative studies have demonstrated an inverse relationship between natural resource export dependence and sustained economic growth. For instance, Jeffrey D. Sachs and Andrew M. Warner conducted a study of 97 countries over a 19-year period, and found that high ratios of natural resource exports to GDP effectively translated into markedly slower rates of economic growth. (1) Several other studies have arrived at similar conclusions. (2) To be sure, as the experiences of Botswana and Norway indicate, natural resource abundance does not drive down economic growth in a linear, deterministic fashion. (3) Rather, the booming oil section potentially discourages investment in ... agricultural and manufacturing exports by raising their prices on international markets". (4) To make matters worse, oil revenue funds monopolies, crowds out entrepreneurship, and increases corruption. The consensus is that in relatively large samples, "higher natural resource dependency is associated with lower economic growth." (5)

In contrast to the issue of economic growth, the empirical data concerning the linkages between natural resources' export dependence and authoritarianism, often referred to as the "resource curse," is not well-established and is subject to debate. (6) In particular, there is a void in the literature regarding the impact of natural resources' price changes, petroleum in particular, and the relative validity of the resource curse hypothesis. (7)

In this study, we will focus on democratic rights and civil liberties in oil-rich states whose economies are most reliant on petroleum exports. Accordingly, the study will address the following key questions: (1) Are governments highly dependent on revenue from the export of oil less likely to embrace political freedoms? If so, has this always been the case?; (2) To what extent do significant changes in oil prices translate into decreased levels of political freedom in such states? The second question is especially important because it points to a dynamic perspective on the relationship between natural resource prices over time and governments' degree of receptivity (or lack thereof) to political freedom. Indeed, most studies on the subject tend to take a snapshot of the resource curse at certain crucial periods. Yet, the prices of natural resources fluctuate dramatically over time. Unless we account for such fluctuations and their subsequent impact on the pace of democratization, a resource curse study of this kind is likely to be incomplete. Thus, a gap exists in the resource curse literature, and we hope to offer preliminary insights to help fill this void. (8) A study of this type is especially warranted because of the dramatic fluctuations in the price of oil and concomitant political changes and. in some instances, upheavals, in oil rich Third World countries, the Middle East in particular. As such this study will help fill a void in the literature.

Specifically, this study will track changes in the price of oil over a significant period of time, pinpoint major oil price swings, and relate these price swings to changes in the level of political freedoms, thereby shedding light on whether changes in oil prices affect political liberalization. However. before addressing the aforementioned key questions, a general overview of the literature is warranted to highlight the degree to which this study may contribute to addressing gaps in the existing literature. The next section offers such an overview. Section three details the methodology of the study. Section four contains data and analysis concerning the link between changes in the price of petroleum and political freedom. A concluding section highlights key findings and offers suggestions for future research.

RESOURCE CURSE AND POLITICAL FREEDOM IN THE THIRD WORLD: AN OVERVIEW

The dependent variable in our study is oil export-dependent countries, variously referred to as "petro-states," "petrolist' states," "oil-rich' states", and "rent-seeking" states. Naim favored the term 'petro-state'. According to him, these oil-rich countries are plagued by weak institutions, and high concentration of power and wealth in conjunction with a poorly functioning public sector, glaring economic inequalities and frustrated populations. Nigeria is a good example. (9) In contrast, Thomas Friedman preferred "petrolist state," or states which were "dependent on oil production for the bulk of their exports or gross domestic product and have weak state institutions or outright authoritarian governments." (10) Gwen Okruhlik adopted the term "rentier state," defined as a country that "depends on external sources for a large portion of its revenue". (11) According to this interpretation, revenue from the international sale of petroleum is a form of rent that accrues to the government.

Regardless of which definition one adopts, it is readily apparent that all these states are endowed with oil wealth, and international sales of petroleum constitute the bulk of government revenue. In addition, these countries usually share several other attributes: relatively weak political institutions, a wasteful public sector, and an extreme concentration of economic and political power.

Following Michael Ross' seminal work on the subject, in this study we adopt the term "oil-rich state." (12) This term appears most appropriate because it is less inflammatory, has common usage, and conveys the significance of international sale of petroleum as the predominant source of revenue with the caveat that the government acquires the revenue rather than citizens, private corporations, or other members of the civil society.

Several studies stress the linkage between natural resource export dependence and the lack of democratic freedoms. (13) One genre of literature posits that because revenue from the sale of petroleum displaces ordinary tax revenue, it makes it easier for governments to be less accountable to public demands. (14) Ross correlated a high ratio of oil and mineral exports to GDP with lower levels of governance. He observed that wealth generated from extracting natural resources does not increase the probability that a state will be a democracy. (15) In addition, Friedman maintained that "the price of oil and the pace of freedom always move in opposite directions in oil-rich petrolist states." (16) Korhonen holds that the resource curse applies to various extractive industries, in addition to petroleum, such as copper and bauxite. (17) Similarly, the Economist reports that in Africa, several resource-rich governments have used the considerably large revenue amassed from the recent commodity boom to maintain control and brutally silence domestic regime critics. (18)

On the other hand, a competing interpretation rejects the afore-stated resource curse interpretation and concludes that there is no significant causal linkage between reliance on revenue from the sale of natural resources abroad, democracy and the state of political and civil liberties in Third World countries. An influential study by Haber and Menaldo offers pivotal arguments. Employing time-series centric methods, they examine the long-term relationship between resource reliance and regime type "both on a country by-country basis and across several different panels." They find that "... increases in resource reliance are not associated with authoritarianism." (19) While these and other studies offer insights regarding the degree to which increases in resource rents affect political developments, the causal mechanism that links resource curse to regime types is ambiguous. (20) Further, these studies fall short of accounting for changes in the prices of petroleum over time and their contemporaneous impact on political development in resource-reliant regimes, a relationship that affects the causal linkages.

Yet another genre of literature holds that oil wealth neither hinders nor promotes democratization and political freedom. Still, a fourth strand of research holds that natural resources, oil in particular, improves political liberalization, provided that private ownership of petroleum industries prevails. (21) Regarding the relationship between changes in oil prices and political freedom, contributors tend to conflate improvements in economic well-being or level of modernization with improvement in political and civil liberties. This line of reasoning does not square with ample empirical evidence. Egypt, Iraq during Saddam's reign, Libya, Azerbaijan, and Kazakhstan, to mention a few, are glaring examples where authoritarianism is fully entrenched in spite of a modicum of economic development. Saudi Arabia has yet to experience socio-cultural modernization and political liberalization. Iran has made strides in electoral democracy without concomitant progress in civil liberties, individual rights, and cultural freedom for women. Finally, scholarship often fall short of disentangling changes in resource income due to fluctuations in the price of the petroleum from the general resource curse proposition. (22)

To understand the causes of the resource curse phenomena, three separate explanations stand out, the 'rent seeking', 'repression' and 'modernization' interpretations. First, the "rent-seeking" interpretation holds that "as oil revenues increase to the point at which they dominate a government's revenue sources the government evolves from an extractive state into a distributive one". (23) Since the government enjoys a fairly large and stable stream of revenue from international petroleum sales used to purchase patronage, it has less incentive to tax its citizens, and in return, its citizens have less incentive to hold their leaders accountable for their actions. Further, strategically allocated bribes, especially to favored social groups, are often used to quell political discontent and buy off political consensus. (24)

According to Karl, 'rent seeking' has pernicious impact on the quality of governance and administrative institutions in less developed countries. He summarizes this dynamics well:

"Ineffective and inefficient governance, perhaps more than any other factor, may explain the extent of poverty in oil-dependent country, but this too is related to the presence of oil. Because the revenue base of the state is the state, oil rents affect state capacity. Oil dependence skews the institutional development of the state because oil rents weaken agencies of restraint. In resource poor countries, intense population pressure on scarce resources reduces the tolerance for inefficiency and predation, and the economy cannot support extensive protection or an over-expanded bureaucracy. But in oil states, the brake of scarcity does not exist. Instead, oil dependence encourages the expansion of states into new arenas while weakening opportunities to strengthen administrative capacities, especially non oil-based tax systems, merit-based civil services, and the rule of law--fundamental elements for creating efficient states. (25)

Second the 'repression' thesis put forth by Ross, among others, maintains that oil-rich natural resource and export-dependent states use huge earnings from the sale of oil abroad to build their police and security forces which, in turn, is unleashed to stifle popular discontent and quell dissent and challenges to the regime. (26) Unlike other interpretations, in this thesis the normal pathway of causality is reversed--while oil wealth itself is often postulated to cause an erosion of democracy, repression theory holds that autocratic rulers use the wealth generated from oil exports to protect preexisting undemocratic institutions. As the noted Harvard scholar Smith has observed, the relative validity of this interpretation is in large measure a function of demonstrating that "highly repressive regimes that confront opposition during a crisis are more likely to survive ..." compared to less aggressive and repressive governments. (27)

The third perspective is the "modernization" interpretation whose origin is rooted in the seminal works of Rostow, Inkles and Huntington. It holds that regimes in oil rich Third World states fail to use the accumulated oil wealth to promote development and economic modernization. The underlying premise is that development triggers social and cultural modernization which, in turn, promotes democracy. (28) Unlike previous explanations, it is not so much the regime type that matters. Rather, capitalist economic development (and consequent socio-cultural modernization) is seen as a vehicle for political liberalization and the push for electoral democracy.

To be sure, no single explanation can account for the complex processes that lead to democratization. Ross, for example, examined "all sovereign states with populations over one hundred thousand" and found tentative support for all three effects. (29) Further, any combination of these interpretations can be valid in explaining aspects of the resource curse phenomena. Alternately, when it comes to the linkage between resource wealth and regime durability in the developing world, as opposed to resource wealth and democratization in the Third World, each explanation has certain limitations. As Benjamin Smith, a keen scholar on the subject has noted, the oil busts of the late 1980s and early 1990s pose a question for the rentier effect since the durability of authoritarian regimes was evidently "independent of consistent access to rents with which regimes can buy legitimacy". (30) Similarly, the repression effect falls short of providing a persuasive account for the fact that despite decreases in state revenue and increases in political unrest during busts, oil-rich states faired much better, and failed significantly less often than the developing nations in general. (31)

Finally several studies have addressed the linkage between resource curse and oil related corruption. Terry Karl in particular offers stunning evidence of extraordinary high level of corruption in oil exporting countries notably Mexico, Venezuela and Nigeria. According to him, a combination of oil rents, ineffective governance and institutional weakness form a vicious circle leading to 'corruption trap', a situation "... where payoffs at the top of political and business institutions encourage the corruption of others until a large percentage of public and private sector figures are involved." (32) Consequently economic and public policy choices that enhance opportunities for rent-seeking and huge payoffs such as huge public sector investments imbued with massive regulations and mega projects are adopted at the expense of those that maximize public welfare and free markets. (33)

Apparently most studies provide a strong rationale for the resource curse hypothesis, short of empirically testing the key hypothesis. This study helps ameliorate the lack of empirical testing of the resource curse theorems. Specifically, the next two sections will offer preliminary empirical tests of the resource curse hypothesis. Among others, a snapshot of the 25 states that relied most on oil exports in 1980, 1995, and 2009 will be offered, and will be paired on the degree of political freedom using the Freedom House data. The comparative data, in turn, will be compared to the so-called "petrolist states" referenced by Thomas Friedman. Finally, for the period of 1980-2005, we will reflect on democratic freedoms in these countries with references to variations in crude oil prices to see if there is correlation between changes in oil prices and democratic freedom, thereby offering a dynamic picture of the relationship between oil-rich states' petroleum export dependence and the importance of oil price changes as a key driver for political liberalization.

METHOD

To determine whether oil export-dependent states are less likely than other countries to democratize over time, we first need to determine which states most rely on oil export revenues. Data from the World Bank on fuel-based exports (as a percentage of merchandise exports), GDP, and the value of merchandise exports, all in current US dollars, can be used to measure a nation's reliance on oil. In particular, the following formula captures the afore-stated statistical metrics used to calculate oil exports as a percentage of GDP, an oil dependence metric referred to here as the Oil Reliance Factor. or ORF. (34)

(% Fuel Exports to Merchandise Exports/100) x (Value Merchandise Exports)/Gross Domestic Product = ORF

For the years 1980, 1982, 1995, 2004, and 2009, the ORF of each country with a fuel-based export percentage at or above 10%, a conservative benchmark, was calculated and recorded. (35) As a result, a list of the top 25 countries according to the ORF was generated. Several caveats are worth noting. First, while data sets for some states were incomplete, the World Bank report of 208 states offered ample coverage. (36) Second, the dates were chosen to take advantage of somewhat robust data sets offered by the World Bank during this time period, and to allow comparison with previous research. (37)

After the top 25 lists for each of the years were completed, our next task was to assign a value to each state that would measure the extent of that state's political liberalization in a given year. This was determined by using data from the widely respected Freedom House, Freedom in the World survey (2006). The survey classifies countries as Free (F), Partly Free (PF), or Not Free (NF), using a scale of numerical ratings ranging from 1 (highest) to 7 (least) degrees of political freedom for political rights and compatible ratings for civil liberties. Countries with an average combined rating (between political rights and civil liberties) of 1.0-2.5 were classified "free," those between 3.0-5.5 as "partially free," and those between 5.5-7.0 as "not free." We were able to trace and retrieve country classifications since 1972. The ratings for each state appearing in our top 25 lists were recorded for the relevant year; the overall results appear in Figure l of our appendix.

A glance at the list of top 25 countries suggests several interesting findings. First, the largest percentage of countries on four of the five top 25 lists appear to be in the Freedom House 'NF' category, confirming the reputation of many oil-rich countries for undemocratic governance. We also noted an apparent trend towards 'Not Free' over time frame of several years. The data from 1982, 1995, and 2004 clearly exhibit this trend, as well as a trend towards decreased representation of "F" states. Moreover, the data from 1980 and 2009 show that "NF" states rose by 8% in these two years, while "F" states fell 4%.

To explore these findings in greater depth, we undertook an elementary statistical analysis for the years 1980 and 2009 to see if any correlations emerged (see Figure 2 in the appendix). For both years, the median of the sample space was determined (0.131 for 1980, 0.161 for 2009). The data points were then organized into subsets of "NF," "PF," and "F" states, and the percentage of states lying above the median in each category were recorded. We then calculated the sample mean and standard deviation for each category. In particular, we found that, in 1980, six out of nine "NF" states tell above the global median, and that this represented a distance of more than six standard deviations away from the expected value of 50%. Similarly, in 2009, eight out of 11 "NF'" states were above the median--just over 14 standard deviations away from 50%. While we found no evidence of a correlation between ORFs and either the "PF" or "F" rankings for 1980, 2009 exhibited inverse correlations ranging from 7 to 15 standard deviations, respectively.

The afore-mentioned statistical analysis yielded several interesting findings. First, the data suggest that oil export-dependent oil-rich states are more likely to be undemocratic at any given time than those not dependent on oil exports. For example, Figure 3 highlights the preponderance of oil rich Arab Middle East and the resource rich states of Central Asia. Second, the data tentatively and cautiously suggests that, over a sustained period of time, the class of heavily oil export-dependent oil-rich states tends to show a propensity to move toward undemocratic governance. In other words, over a period of several years the greater the shift of oil-rich countries toward using international petroleum sales and exports as source of income for the regime, the higher the propensity toward undemocratic forms of governance. Thus, a tentative, albeit important portrait that requires additional research is one of oil export-dependent oil-rich states gradually evolving into autocracies over time. Conversely, we can cautiously stipulate that oil-rich "free" states tend not to rely on the earnings from international petroleum sales for regime durability or for generating economic growth. To be sure, we cannot draw conclusions from the data with any degree of certainty. However, preliminary findings suggest that both themes are plausible and sufficiently interesting to warrant further research.

Finally, a new finding is that a level of ORF exists at which a state's export-dependent practices are deemed unhealthy for promoting democratic practices. We find that an ORF above 0.161 may be a cause of concern, since such values are associated with decreased freedom. Specifically, in the NF categories, in 2009, eight out of 11 states (72.73%) had an ORF above 0.161, significantly exceeding the average of 5.5 (50%). Therefore, this finding suggests a direct positive correlation between higher ORF values and the NF (Not Free) ranking. (38)

RESOURCE EXPORT DEPENDENCE, OIL PRICE CHANGES AND THE EFFECT ON POLITICAL FREEDOM

Thomas Friedman (2006) hypothesized that the "the price of oil and the pace of freedom always move in opposite directions in oil-rich petrolist states". Our task, therefore, was to illuminate whether, and to what extent, changes in oil prices affect democratization in resource export-dependent states. Accordingly, we began by investigating the world's crude oil prices, using Brent (the world benchmark), and accounting for pricing two-thirds of the world's internationally traded crude oil supplies, as the measuring metric. (39) Below is a graph depicting the yearly average Brent crude oil prices from 1980 to 2005.

[GRAPHIC OMITTED]

All oil prices in the above graph appear in constant 2005 US dollars. The time frame in the graph above covers periods of oil booms, busts, and price stability, thereby permitting comparative observations across all relevant scenarios. Thus, in 1980, the average price of a barrel of Brent crude oil was $36.83; adjusting for inflation, this is the equivalent of $87.65 in 2005. Between 1980 and 1986, there was a significant price decline (in effect, an oil bust) followed by a period of relative stability between 1986 and 2003 when prices (adjusted for inflation) fluctuated within a $15-$36 band. In 2004, prices surged to an average of $39.57, and thereafter skyrocketed to high of $54.52 in 2005.

Next, to test this proposition on the inverse relationship between changes in the price of oil and the pace of political freedoms, we used the sum of Freedom House basic data with each nation given a rank between 2 and 14, and 2 being the most free and 14 the least. Correlation coefficients between Brent oil prices and the freedom data sets were calculated for each country appearing on Friedman's list of "petrolist' states or oil-rich autocracies, covering the periods 1980-2005 and 2002-2005 (See figure 3 in the appendix). It is interesting to note that, at first glance, the countries present in our snapshots also appear on Friedman's list, Venezuela and Saudi Arabia being notable exceptions. Beyond these general observations, the findings provide a mixed and complex picture that does not readily support the widely accepted proposition that higher oil prices support autocracy. Thus, for example, at one extreme, Iran exhibited the weakest negative correlation at -0.409 value, whereas at the other end of the spectrum, Russia (0.642) displayed the strongest positive correlation. (40)

In order to lend support to the resource curse hypothesis, one would expect positive correlation coefficients, since a high score from the Freedom House statistics indicates a low level of actual freedom. However, the data suggest a complex relationship between changes and variations in oil prices and their effect on political liberalization. Specifically, we find this to be the case in roughly half of the countries included in this analysis. As a group several countries demonstrated high absolute correlations in the period 2002-2005. However, there were also instances of strong positive to strong negative correlations during this period. In the period 1980-2005 the country with the strongest negative correlation was Syria with -0.725, and one of the weakest, in addition to Iran, was Egypt also at -0.409. The weakest positive correlation was recorded for Kazakhstan with 0.060. Angola, another oil rich state with overwhelming dependence on petroleum export as the primary source of government revenue exhibited the weakest correlation.

As such, it seems that the widely held public view regarding oil-rich autocracies, as embodied in Friedman's thesis, is modestly supported. However, the presence of negative correlations provides evidence that oil revenues often move in the same direction as freedom. Seen from the perspective of the modernization interpretation, one could reasonably stipulate that some oil-rich nations direct the rising stream of revenue due to higher prices to create strong state institutions and regime durability. (41) Likewise, the findings do not negate the rentier state proposition which holds that as oil revenue gain dominance over government financing the state increasingly engage in distributive policies to sustain political power. A safe conclusion to draw is that the presence of both positive and negative correlations indicates that different regimes use their oil wealth in diverse ways.

CONCLUSION

This study offered an empirical test of the "resource curse" theorem according to which there is an inverse relationship between high dependence on revenue from exports of natural resources, petroleum in particular, and political freedoms. A study of this kind was especially warranted because of the dramatic fluctuations in the price of oil and contemporaneous political changes in oil rich Third World countries, an issue largely ignored in the resource curse literature.

This study formulated an Oil Reliance Factor (ORF) to measure reliance on earnings from international petroleum sales and related these to the Freedom House data on freedom. We found that the ORF score suggested a negative correlation between political freedom and dependence on international petroleum sales, indicating that undemocratic states are more likely to be amongst the most reliant on oil exports in any given year. In addition to oil rich Arab states, Iran, Egypt under Mubarak rule, Angola, Nigeria, Kazakhstan stand out as relevant examples and the Central Asian states. In addition, our findings cautiously and tentatively suggest that, over a sustained period of time, the class of heavily oil-export dependent states tends to show a propensity to move toward undemocratic governance. At the very least, the study points to an intriguing question for future research: To what extent are oil-rich states that exhibit long-term and growing dependence on oil exports likely to morph into petrolist states? A complementary hypothesis is: Over time, the greater the move by oil-rich countries toward using international petroleum sales and exports as a source of income for the purpose of regime durability and survival, the higher the propensity toward undemocratic forms of governance. The proposition that petroleum export-dependent oil-rich states can evolve into autocracies over time is a valuable point of departure for future research.

Additionally this study yields refreshing and new policy-relevant information; namely, that a level of ORF exists at which the magnitude of oil revenue from an oil-rich state's exports hinders the promotion of democratic practices and political freedom. We find that an Oil Reliance Factor above 0.161 may be a cause for concern since such values are associated with decreased freedom. It is, in effect, a red flag for oil-rich states that either reach or exceed this ORF score. In addition, we compared changes in freedom levels to changes in crude oil prices over the 1980-2005 period. We found that the two variables were correlated in many key states. However, the study did not support any single interpretation, as the incidence of positive and negative correlations were essentially the same. In short, this study gave credence to the widely held proposition that the level of freedom and the price of oil move ha opposite directions for petroleum export-dependent oil-rich states. However, the findings can also be interpreted to support competing modernization and rentier state perspectives as nations choose to spend their oil wealth in different ways; some leaders invest in the modernization of the country and its citizenry, while others invest in the durability and survival of an undemocratic regime.

Finally, while this study avoided a thorough assessment of the linkage between oil-rich countries' dependence on international petroleum sales and oil-related corruption, a careful study of this linkage is clearly warranted. Indeed, in states suffering from the resource curse often the flow of revenue from natural resources flow straight to the coffers of the governing elite. As a result, corrupt elite become more powerful.

NOTES

(1.) Jeffrey D. Sachs and Andrew M. Warner "National Resource Abundance and Economic Growth" (November, 1997). Available at :http://www.cid.harvard.edu/ciddata/warner_files/natresf5.pdf.

(2.) R.M. Auty, Sustaining Development in Mineral Economies: The Resource Curse Thesis (London: Routledge, 1993).

(3.) Iikka Korhonen, "Does Democracy Cure a Resource Curse?", BOFIT Discussion Papers, Vol. 18 (2004), 1-36.

(4.) Benjamin Smith, "Oil Wealth and Regime Survival in the Developing World, 1960-1999." American Journal of Political Science. Vol. 48, No. 2 (2004), p. 234.

(5.) Iikka Korhonen, "Does Democracy Cure a Resource Curse?", p.31. See also the Economist, issue 12-17, February 2011, p. 12.

(6.) Several major works are reviewed in this essay. Among the most recent notable exceptions, debating the linkage between natural resource dependence and political freedom are: Thad Dunning, Crude Democracy: Natural Resource Wealth and Political Regimes (Cambridge ; New York : Cambridge University Press, 2008); Stephen Haber and Victor Menaldo, "Do Natural Resources Fuel Authoritarianism? A Reappraisal of the Resource Curse", American Political Science Review, Vol. 105, No. 1 (2011), 1-26. Two other works of distinction are, Terry Lynn, The Paradox of Plenty: Oil Booms and Petro-States (Berkeley, CA. 1997): Leonard Wantchekon, "Why Do Resource Dependent Countries Have Authoritarian Governments?" Journal of African Finance and Economic Development, Vol. 2 (2002), 57-77. Two other works of distinction are: Silje Alasken "Oil and Democracy: More than a Cross- country. Correlation?", Journal of Peace Research, Vol. 47, No. 4, (2010), pp. 421-431; and Ellis Goldberg, Eric Wibbels, and Eric Myukiyehe. "Lessons from Strange Cases: Democracy, Development, and the Resource Curse in the U.S. States", Comparative Political Studies. Vol. 41 (2008), pp. 477-514.

(7.) There are a few studies which have addressed the linkage between changes in oil prices and political freedom. In this genre significant scholarship includes the works of Kristen Ardani and Benjamin Jaques, "Petro-Dictators: Does the Price of Oil Impacts Freedom?: A Re-Examination of the Political Dimension of the Resource Curse". The Journal of International Policy Solutions, Volume 12 (Winter 2010), 32-40; Kristopher Ramsay, "Revisiting the Resource Curse: Natural Disasters, the Price of Oil, and Democracy" a Princeton University working paper available at: www.princeton.edu/.../Site/ .../Revisiting the Resource Curse.pdf

(8.) Kristein Ardani and Benjamin Jaques address this issue. They find a positive relationship between oil price hikes and political freedom because, they argue, the government uses extra revenue from higher oil prices to improve the welfare of its citizens. However, they appear to conflate economic well-being funded by high oil prices with increased political freedoms. Yet here are ample examples of oil rich Third World Countries (Saudi Arabia, Libya and several other oil rich countries in the Middle East) where governments co-opt opposition with economic largess funded by high oil prices without offering meaningful political and civil liberties. See Kristen Ardani and Benjamin Jaques, "Petro-Dictators: Does the Price of Oil Impacts Freedom?: A Re-Examination of the Political Dimension of the Resource Curse".

(9.) Moises Naim, "Russia's Oily Future." Foreign Policy (January, 2004) Available at: http://www.foreignpolicy.com/articles/2004/01/01/ russias_oily_future

(10.) Thomas L Friedman, "The First Law of Petropolitics", Foreign Policy, No. 5 (April 2006). Available at: http://www.foreeign policy.com/articles/2006/04/25

(11.) Gwenn Okruhlik, Rentier Wealth, Unruly Law, and the Rise of Opposition: The Political Economy of Oil States, Doctoral Dissertation (1999), PhD. Program in Political Science of the City University of New York, p. 295.

(12.) Michael L. Ross, "Does Oil Hinder Democracy?" World Politics, Vol. 53 (2001), 325-361.

(13.) In addition to the seminal work of Ross, "Does Oil Hinder Democracy?" and other sources referenced in note 6 above, several other important pieces of scholarship shed light on the resource curse debate are T. L. Karl, The Paradox of Plenty: Oil Booms and Petro-States. (Berkeley: University of California Press, 1997); Nathan Jensen and Leonard Wantchekon, "Resource Wealth and Political Regimes in Africa", Comparative Political Studies, Vol. 37 (2004), pp. 816-41; Kristopher N. D Ramsay, "Revisiting the Resource Curse: Natural Disasters, the Price of Oil, and Democracy", International Organization, Forthcoming.

(14.) Kristein Ardani and Benjamin Jaques, "Petro-Dictators: Does the Price of Oil Impacts Freedom?: A Re-Examination of the Political Dimension of the Resource Curse", p. 32.

(15.) Michael L. Ross, "Does Oil Hinder Democracy?"

(16.) Thomas Friedman, "The Firs Law of Petropolitics", p. 31.

(17.) Iikka Korhonen, "Does Democracy Cure a Resource Curse?", p. 7.

(18.) Economist, February 12-18, 2011, p. 12.

(19.) Stephen Haber and Victor Menaldo, "Do Natural Resources Fuel Authoritarianism? A Reappraisal of the Resource Curse", p. 1.

(20.) Ibid. pp. 4-5. Ambiguity arise from Haber and Menaldo treatment of the independent variable pivotal to their study's findings. Specifically, they adopt 'Fiscal Reliance' and three second-order metrics (Total Oil Income, Total Fuel Income, Total Resource Income). Yet, neither 'Fiscal Reliance' nor the secondary metrics collectively measure oil exports as a percentage of merchandize exports or total petroleum exports as a percentage of total exports, nor do these metrics measure the size of petroleum income as a percentage of GDP. However, petroleum rent is an economic concept and most economist studies use these later metrics. Their rationale is two fold. First, they adopt these metrics for convenience sake because these are in common usage in the literature. Ironically, the studies they cite are those whose conclusion their findings question. Second, because the afore-stated metrics, as they define it, lend themselves to the study's method-time series and longitudinal data Thus, one almost gets the impression that the methodology tail is wagging the dog.

(21.) This section draws heavily on Kristein Ardani and Jaques, "Petro-Dictators: Does the Price of Oil Impacts Freedom?: A Re-Examination of of the Political Dimension of the Resource Curse", pp. 32-34. According to Ardani and Jaques, the works of Jones Luong and Weinthal (2006) exemplifies this particular line of reasoning.

(22.) In our judgment Ardani and Jaques thesis suffer from this shortcoming. They find that "... as oil revenue increases in oil-reliant states, the level of freedom in oil-reliant states increases as well." These authors suggest a positive relationship between higher oil prices and political freedom which they attribute to the ability of leaders to payoff bribes and co-op opposition. While it is true that higher oil prices enable repressive regimes to payoff opposition, it does not follow that, as a result, democracy will prevail. Otherwise Saudi Arabia, Libya, Iraq during Saddam's reign and Khamenie's Iran would have already made transition to democracy. See Ardani and Jaques, "Petro-Dictators: Does the Price of Oil Impacts Freedom?: A Re-Examination of The Political Dimension of the Resource Curse", p. 7.

(23.) Benjamin Smith, "Oil Wealth and Regime Survival in the Developing World, 1960-1999", American Journal of Political Science. Vol. 48, No. 2 (2004), p.33.

(24.) Ibid.

(25.) Terry L. Karl, "Oil-Led Development: Social, Political and Economic Consequences", Center on Democracy, Development, and The Rule of Law, Freeman Spogli Institute for International Studies, Number 80 (2007), p. 16

(26.) Michael L. Ross, "Does Oil Hinder Democracy?", 357.

(27.) Benjamin Smith, "Oil Wealth and Regime Survival in the Developing World, 1960-1999." As Smith has amply demonstrated, in the absence of empirical data to show a connection between the build up and use of the repressive apparatus of the state and regime stability, it seems less plausible that oil rich governments will allocate too many resources to repressive state instruments of state power. Because, as history has shown, these repressive institutions and structures can be used to unseat the very leaders they are meant to protect.

(28.) Walt W. Rostow, Stages of Economic Growth: A Non Communist Manifesto (Cambridge University Press, 1969); Samuel P. Huntington, Political Order in Changing Societies (Yale University, Press, 2006); Alex Inkles, "Industrialization, Modernization and the Quality of Life", International Journal of Comparative Sociology, Vol. 34, Nos. 1-2 (1993), 1-23.

(29.) Michael L. Ross, "Does Oil Hinder Democracy?", 351.

(30.) Benjamin Smith, "Oil Wealth and Regime Survival in the Developing World, 1960-1999.", 234.

(31.) Ibid. Apparently a 'rentier effect' occurs between social groups favored by the regime so that such groups, including favored tribes receive financial support. These social groups collect 'rents' somewhat akin to what the respective government garner on the world resources market. In this sense the internal process of the state mimics, albeit imperfectly, the state's external 'rentier' endeavors

(32.) Terry L. Karl, "Oil-Led Development: Social, Political and Economic Consequences" p. 18).

(33.) Ibid. pp. 18-20. Terry L. Karl offers illuminating country-based evidence of oil-related corruption in both the private sector and the state. As he puts it, "The former president of the French state oil company, Elf Aquitaine, is charged with presiding over the commission payments on oil deals with African countries. Mobil oil executives are charged with illegal payments in Kazakhstan. In Angola, more than $1 bill ion per year of oil revenues has disappeared between 1996-2001--a full one sixth of the national income--in a country where more than 70 percent of the population lives on less than $1 per day." I bid. P. 19.

(34.) In this formula the ORF value is derived by dividing the World Bank (WB) compiled statistic "% Fuel Exports to Merchandise Exports" by 100 (i,e, a number between 0-100, as we need a number between 0-1), multiplied by "Value of Merchandising Exports" (another WB statistic) to give the value of fuel exports alone. The final number is in turn divided by total GDP to yield the proportion of the country's wealth which depends on fuel export. This measurement is consistent with the methods used by Ross, Smith and others. As Benjamin Smith points out, measuring oil reliance in this way makes it feasible to transcend the general importance of exports to a given country's macro economic performance and GDP. Smith writes, "The oil dependence variable (OIL/GDP) is a measure of the ratio of the value of oil exports to gross domestic product in a given year." Sec Benjamin Smith, "Oil Wealth and Regime Survival in the Developing World, 1960-1999", p. 236. In a similar vein, Ross writes that "Oil reliance is measured by the value of fuel-based exports divided by GDP". See Michael L. Ross, "Does Oil Hinder Democracy?", p. 326.

(35.) The careful reader may notice that the 10% benchmark could potentially discriminate against countries that have a fuel-based export percentage under 10% but a high ratio of total export values to GDP. However, our lists may underestimate the overall reliance on oil towards the bottom of our top 25 lists. As such our estimates are rather conservative.

(36.) We made minor adjustments, albeit sparingly, so that if information wasn't available for a particular nation in a particular year, data for the next closest year to within six years was used instead. If even this adjustment didn't yield information the state was excluded from the study--such was the case with Equatorial Guinea in 1980, Egypt and Yemen in 2009. Incidentally, these states are not major raw material exporters and thus not germane to this study.

(37.) In data gathering we came across an unexpected externality- some states qualifying for our top-25 lists did not have oil production capabilities. This is due to the fact that some states import fuel-based products, refine them within their borders, and then sell them abroad. To augment our data sets we used the CIA's World Factbook (2006) in conjunction with country and regional profiles compiled by the United States Energy Information Administration. If there was no evidence to show that oil production or oil reserves exist within the territory of a state, or it was explicitly stated that no oil reserves exist within a state or that it re-exports petroleum-based products, then the state was excluded from the list. See, Central Intelligence Agency, United States Government, The World Factbook (2006); United States Government, Energy Information Administration, EIA (2006).

(38.) The ORF is potentially a red flag as it is the value of the median for the 2009 data set, the most recent and robust data set, hence more conservative estimate. However, this 0.161 ORF value is offered as a cautionary, note, not a definitive conclusion as the latter would require elaborate statistical analysis far beyond the mandate of this study.

(39.) Crude oil pricing differ depending on variety, quality, and origin, including oil specific gravity, sulfur content and the weighed system used in measuring a particular blend's production. That said, Brent is the widely accepted benchmark. For an analysis of oil pricing BBC. "Oil Markets Explained," 18 Oct 2007. Also, for the purpose of this study, the data has been augmented by information gleaned from the BP Statistical Review of World Energy. See a major British Petroleum Global study, '"Quantifying Energy: BP Statistical Review of World Energy June 2006." BP Global, 2006. Because data was readily available, it permitted comparison across time. Thus, 2009 was the year for which the latest data was available, 1980 the earliest, 1995 was chosen so that our figures could be compared to the findings of other seminal works, notably those by Ross. The years 1982 and 2004 were chosen in part to take advantage of the somewhat robust World Bank data sets for these years, also to offer additional points of comparison. Further, the CIA World Factbook (2006) data base and the United States Government Energy Information Administration (2006) data bases were used to insure that only countries with significant oil production and oil reserves were considered.

(40.) Regarding correlation coefficients, a brief description of the origin of the statistical method is in order. If X = {[X.sub.1], [X.sub.2], ..., [X.sub.n]} and Y = {[Y.sub.1], [Y.sub.2], ..., [Y.sub.n]} are two random samples for different categories, then their correlation coefficient can be attained by:

[MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII]

Where [bar.X] and [bar.Y] are the sample averages. In our example, X is tantamount to the Freedom House rankings for each year 1980, 1981, 1982, ... (example, [X.sub.1] would be the ranking in 1980, [X.sub.2] the ranking in 1981. etc.). Let Y be the price of crude oil in each corresponding year (example, [Y.sub.1] is the price in 1980, [Y.sub.2] the price in 1981, etc.). We then calculate the correlation coefficient using the above formula. The afore stated formula was adopted from Wackerly, Menden Hall, and Scheaffer's "Mathematical Statistics with Applications", 7th ed, p. 599. Access at: http://www.thomsonright.com

(41.) Smith has suggested that regimes in oil rich countries can use the extra increments of oil income to strengthen state institutions that help extend regime's survival and durability. See Smith, "Oil Wealth and Regime Survival in the Developing World, 1960-1999".

By Shah M. Tarzi and Nathan Schackow *

* Shah M. Tarzi, PHD., is Lee L. Morgan Chair in International Affairs and Professor of International Studies, Institute of International Studies, Bradley University. Nathan Schackow holds a B.A. degree from Bradley University.

Figure 1: Top-25 List Results

Freedo        1980         1982         l995          2004
m              #            #            #         # Countries
House      Countries    Countries    Countries    (% of Total)
Ranking      (% of        (% of        (% of
             Total)       Total)       Total)

F            8 (32)      11 (44)       3 (12)         1 (4)
PF           8 (32)       7 (28)       9 (36)        10 (40)
NF           9 (36)       7 (28)      13 (25)        14 (56)

Freedo        2009
m              #
House      Countries
Ranking      (% of
             Total)

F            7 (28)
PF           7 (28)
NF          11 (44)

Figure 2: ORF Statistics

Year   Sample      F      F s.d.     PF     PF s.d.    NF     NF s.d.
        Media     Mean              Mean              Mean
          n

1980    0.131    0.158      n/a     0.207     n/a     0.458    0.21
2009    0.161    0.127    0.0997    0.156   0.0651    0.290    0.173

Year   Proportion F    Proportion PF     Proportion NF
       above median    above median      above median

1980       4/8             4/8               6/9
2009       2/7             3/7               8/11

Figure 3: Freedom vs. Brent Crude Oil Prices

Country              Correlation   Correlation
                      1980-2005     2002-2005

Azerbaijan              0.061        -0.858
Angola                  0.351        -0.432
Chad                    0.512       no change
Egypt                  -0.409         0.985
Equatorial Guinea      -0.491        -0.985
Iran                   -0.409        -0.912
Kazakhstan              0.060         0.902
Nigeria                -0.657         0.948
Russia                  0.642        -0.864
Saudi Arabia           -0.711         0.797
Sudan                  -0.518         0.427
Uzbekistan              0.078        -0.944
Venezuela              -0.430        -0.797
Algeria                 0.094         0.962
Ecuador                -0.455         0.725
Gabon                   0.601        -0.916
Kuwait                 -0.418         0.905
Libya                  -0.537        -0.584
Syria                  -0.725         0.822