Cold war geopolitics and the making of the oil curse

Abstract

Does oil hinder democracy? The prevailing wisdom holds that, since 1980, oil has hindered democracy by enabling oil wealth to flow to state-owned oil companies, breaking the fiscal contract with society, and endowing oil-rich regimes with means to invest in repression and accommodation. However, these arguments do not account for system-level factors that might affect the oil-democracy relationship. I argue that a structural break in the oil-democracy relationship occurred at the end of the Cold War when the United States and the Soviet Union reduced support for both oil-poor and oil-rich authoritarian regimes in the developing world. The rollback of support facilitated post-Cold War democratization of the resource-poor regimes, while oil-rich regimes were better positioned to stave off pressures to democratize. Based on a re-analysis of two prominent studies, I find the oil curse to be a post-Cold War phenomenon, with negative consequences for democracy of a magnitude roughly 80 percent larger than previously estimated. I further explore these dynamics via comparative case studies of Azerbaijan and Georgia. The evidence shows that the oil curse is a function of geopolitical dynamics, not just international market conditions.