The rise (and fall?) of petro-states
By Sreeram Chaulia
Even before armed hostilities between Russia and Georgia ended in August, the
ultra-nationalist mayor of Moscow, Yuri Luzhkov, began investing colossal sums
in changing the ethnic geography of the Georgian breakaway state of South
Ossetia in favor of Russia. In one public speech to Ossetians, he exuded the
confidence and chutzpah that has come to symbolize the Russia of Prime Minister
Vladimir Putin and President Dmitry Medvedev. Smug with the knowledge that oil
and gas revenues had raised his country's international stature, Luzhkov wooed
his Ossetian audience with a startling claim, "Russia needs nothing. It has
everything. It is the wealthiest country."
The Kremlin's assertiveness and strident defense of national interests in the
Putin era is ascribed to the boom in world prices
of natural gas and oil, which Russia exports in abundance. Russia reaped direct
dividends from the steep increase in fossil fuel prices by accumulating foreign
exchange reserves to the tune of US$560 billion by mid-2008. Indirectly,
possession of the much-coveted strategic minerals enabled Russia to neutralize
energy-hungry Western European countries, particularly Germany, so that the
"West" was divided over taking an anti-Moscow foreign policy line.
Ever since fossil fuel prices inflated from 2004, the Middle East, Latin
America and Africa saw their own versions of petro-states that turned into
major regional powers to threaten American hegemony. Thanks to steady increases
in the price of oil, Iran's star rose astronomically in the most volatile area
of the world. As the second-largest producer of oil and natural gas, Iran could
build its own web of alliances in Europe and the rest of Asia to counter the
impending American and Israeli threats to its territorial integrity.
Flush with petro-dollars, President Mahmud Ahmadinejad matched American and
Israeli belligerence with a scaled-up defiance that brought back memories of
the Islamic revolution of 1979. The thawing of revolutionary anti-Americanism
of the late 1990s when moderate presidents like Mohammad Khatami were in power
also coincided with artificially depressed world oil prices. When crude sold
for less than $25 a barrel, Tehran had a scantier resource base on which to
strengthen its military and diplomatic fortifications. By the time it peaked to
$145 a barrel, Ahmadinejad could afford to be as hawkish as the ayatollahs who
In Venezuela, too, oil bonanzas helped spur revolutionary policies under the
leadership of President Hugo Chavez, who took over the mantle of resisting
American neo-imperialism from Cuba's Fidel Castro. By floating the Bolivarian
Alternative for the Americas (ALBA), Chavez opened up possibilities of
America's backyard freeing itself from the clutches of Washington's foreign aid
and military monopoly.
That other South American countries accepted Chavez's tutelage and rebuffed US
President George W Bush's proposed Free Trade Area of the Americas (FTAA) owes
to Venezuela's ability to cough up economic development assistance through
ALBA. Instead of the liberal free-trade concept of reciprocity, Chavez invented
the notion of unequal responsibilities of rich and poor members of ALBA on the
basis of availability and need.
This communitarian form of international regional integration came to gain
leverage in South America, thanks to Venezuela's projected promotion in early
2008 as the richest country, surpassing Chile in per capita income. As the
sixth-largest exporter of oil, Caracas was a dependable pivot for a regional
renaissance to counter the informal American Monroe Doctrine.
In southern Africa, the oil-rich state of Angola has similarly climbed up the
ladder of regional power configurations and suddenly posed a major challenge to
the stranglehold of the World Bank and the International Monetary Fund (IMF).
Impoverished parts of Africa have for decades been the experimental
laboratories of neo-liberal Western powers and international financial
When Angola emerged from the shadows of internal war and began pumping out its
offshore oil wealth, the IMF and the World Bank were unceremoniously shown the
door by the government in Luanda. As the sixth-largest exporter of petroleum to
the United States, Angola had enough traction to avoid being pressurized by the
Washington Consensus instruments into submission. The profile of Africa, which
had been crushed under the hammer of the neo-liberal aid enterprise, would look
radical if the other big oil powerhouse, Nigeria, followed in Angola's
The mainstream discourse in political science about petro-states has been about
their internal political repercussions. Through a "rentier effect",
resource-plenty states tend to be plagued with authoritarian regimes in
perpetuity due to low or absent taxation levels and consequent lack of dissent
in society. In this sense, the high oil prices of the past four years were
cementing dictatorial forms of domestic politics.
As crude prices skyrocketed and compelled an overflow of dollars from oil
consumers to these "rentier states", former US secretary of state Henry
Kissinger wrote in The Washington Post in September that the world was
witnessing "the largest transfer of wealth in human history". Thomas Friedman,
a New York Times columnist, went further and coined the term
"petro-dictatorships", which were being funded by oil-guzzling Western
societies "via the greatest transfer of wealth in the history of the world".
Hyperbole aside, American coding of countries as democratic or dictatorial is
heavily influenced by whether or not the cases are pliable for US
foreign-policy ends. The ratcheting up of Western criticism of Russia's
deteriorating civil liberties and press freedom mirrored the adoption of
anti-American foreign policies in Moscow. The same linkage between foreign
relations and classification of domestic political regimes applies to
Venezuela, which is often derided by the American establishment as an
Without question, the landscape of diplomatic battles has been impacted deeply
by the rise of petro-states in the context of ballooning oil prices. The
question now arises whether this is just another bubble that will be pricked by
the sharp recent fall in petroleum prices. Already, Western media outlets are
gloating that the heydays of Russia, Iran and Venezuela are over as oil prices
have plummet in response to decreased world demand. There are doomsday
predictions that the healthy foreign exchange reserves built up by the
petro-states are dwindling and that the next logical step would be a reversal
of their policies of confrontation with the US.
The recently announced coordinated cut in oil production by the Organization of
Petroleum Exporting Countries might not stem the continuous downward spiral of
crude prices because of demand-side shrinkage. Global financial woes have
derailed manufacturing in many oil-importing countries and this is indeed bad
news for petro-states.
However, announcing the "fall" of Russia, Iran and Venezuela as a result of the
about-turn in oil prices would be naive. A state's power in world politics is
not absolute, but relative to the power of other states. If petro-states are on
the back foot on account of the plunging value of their chief export, then the
oil-importing nations of the West are stuck in an even deeper hole. The
relative political power of the US and other Western states has taken a massive
dip as a result of unregulated financial fiction, and petro-states cannot fall
when their rivals are getting battered.
Sreeram Chaulia is a researcher on international affairs at Syracuse
University's Maxwell School of Citizenship and Public Affairs, New York.