28 Foreign Policy

Iran’s president denies the Holocaust, Hugo Chávez tells Western leaders

to go to hell, and Vladimir Putin is cracking the whip. Why? They know

that the price of oil and the pace of freedom always move in opposite

directions. It’s the First Law of Petropolitics, and it may be the axiom to

explain our age. | By Thomas L. Friedman

The First Law of

Petropolitics

[ C O V E R S T O R Y ]

W hen I heard the president of Iran,Mahmoud Ahmadinejad, declarethat the Holocaust was a “myth,” Icouldn’t help asking myself: “I won-

der if the president of Iran would be talking this way

Thomas L. Friedman is a columnist for the New York Timesand author of, most recently, The World Is Flat: A BriefHistory of the Twenty-First Century (New York: Farrar,

Straus & Giroux, 2005).

if the price of oil were $20 a barrel today ratherthan $60 a barrel.” When I heard Venezuela’sPresident Hugo Chávez telling British Prime Min-ister Tony Blair to “go right to hell” and telling hissupporters that the U.S.-sponsored Free TradeArea of the Americas “can go to hell,” too, Icouldn’t help saying to myself, “I wonder if thepresident of Venezuela would be saying all thesethings if the price of oil today were $20 a barrelrather than $60 a barrel, and his country had to

Freedom �Freedom �

Price of Oil � Price of Oil �

1979 1995 2006

May | June 2006 29

this intuition in graph form. Along one axis we wouldplot the average global price of crude oil, and along theother axis we would plot the pace of expanding or con-tracting freedoms, both economic and political, asbest as research organizations such as Freedom Housecould measure them. We would look at free and fairelections held, newspapers opened or closed, arbi-trary arrests, reformers elected to parliaments, eco-nomic reform projects started or stopped, companiesprivatized and companies nationalized, and so on.

I would be the first to acknowledge that this isnot a scientific lab experiment, because the rise andfall of economic and political freedom in a socie-ty can never be perfectly quantifiable or inter-changeable. But because I am not trying to get tenureanywhere, but rather to substantiate a hunch andstimulate a discussion, I think there is value in trying

make a living by empowering its own entrepre-neurs, not just drilling wells.”

As I followed events in the Persian Gulf during thepast few years, I noticed that the first Arab Gulf stateto hold a free and fair election, in which women couldrun and vote, and the first Arab Gulf state to under-take a total overhaul of its labor laws to make itsown people more employable and less dependent onimported labor, was Bahrain. Bahrain happened to bethe first Arab Gulf state expected to run out of oil. Itwas also the first in the region to sign a free trade agree-ment with the United States. I couldn’t help askingmyself: “Could that all just be a coincidence? Finally,when I looked across the Arab world, and watched thepopular democracy activists in Lebanon pushing Syr-ian troops out of their country, I couldn’t help sayingto myself: “Is it an accident that the Arab world’sfirst and only real democracy happens not to have adrop of oil?”

The more I pondered these questions, the more itseemed obvious to me that there must be a correla-tion—a literal correlation that could be measured andgraphed—between the price of oil and the pace, scope,and sustainability of political freedoms and econom-ic reforms in certain countries. A few months ago Iapproached the editors of this magazine and askedthem to see if we could do just that—try to quantify

30 Foreign Policy

[ The First Law of Petropolitics ]

Iran

Tapped out: Iranian students take to the streets in protest, but their leaders can afford to ignore them.

Freedom to Trade Internationally vs. Crude Oil Prices

Measure of freedomPrice of crude oil

Freedom to Trade(with 10 being mostfree and 0 the least)

Oil Prices (in U.S. dollars per barrel)

Sources: BP Statistical Review of World Energy 2005 and IEA; and Fraser Institute Economic Freedom of the World Report

PAG

E 28–2

9:

HEN

RI

BU

REA

U/S

YGM

A/C

OR

BIS

; P A

GE

30:

AP W

IDEW

OR

LD

May | June 2006 31

to demonstrate this very real correlation betweenthe price of oil and the pace of freedom, even withits imperfections. Because the rising price of crude iscertain to be a major factor shaping international rela-tions for the near future, we must try to understandany connections it has with the character and direc-tion of global politics. And the graphs assembledhere certainly do suggest a strong correlation betweenthe price of oil and the pace of freedom—so strong,in fact, that I would like to spark this discussion byoffering the First Law of Petropolitics.

The First Law of Petropolitics posits the follow-ing: The price of oil and the pace of freedom alwaysmove in opposite directions in oil-rich petrolist states.According to the First Law of Petropolitics, the high-er the average global crude oil pricerises, the more free speech, freepress, free and fair elections, anindependent judiciary, the rule oflaw, and independent political par-ties are eroded. And these negativetrends are reinforced by the fact thatthe higher the price goes, the lesspetrolist leaders are sensitive to whatthe world thinks or says about them.Conversely, according to the FirstLaw of Petropolitics, the lower the price of oil, themore petrolist countries are forced to move towarda political system and a society that is more trans-parent, more sensitive to opposition voices, and morefocused on building the legal and educational struc-tures that will maximize their people’s ability, bothmen’s and women’s, to compete, start new compa-nies, and attract investments from abroad. The lowerthe price of crude oil falls, the more petrolist leadersare sensitive to what outside forces think of them.

I would define petrolist states as states that are bothdependent on oil production for the bulk of theirexports or gross domestic product and have weakstate institutions or outright authoritarian govern-ments. High on my list of petrolist states would beAzerbaijan, Angola, Chad, Egypt, Equatorial Guinea,Iran, Kazakhstan, Nigeria, Russia, Saudi Arabia,Sudan, Uzbekistan, and Venezuela. (Countries thathave a lot of crude oil but were well-established states,with solid democratic institutions and diversifiedeconomies before their oil was discovered—Britain,Norway, the United States, for example—would notbe subject to the First Law of Petropolitics.)

To be sure, professional economists have, for a longtime, pointed out in general the negative economic andpolitical impacts that an abundance of natural

resources can have on a country. This phenomenon hasbeen variously diagnosed as “Dutch Disease” or the“resource curse.” Dutch Disease refers to the processof deindustrialization that can result from a sudden nat-ural resource windfall. The term was coined in theNetherlands in the 1960s, after it discovered hugedeposits of natural gas. What happens in countries withDutch Disease is that the value of their currency rises,thanks to the sudden influx of cash from oil, gold, gas,diamonds, or some other natural resource discovery.That then makes the country’s manufactured exportsuncompetitive and its imports very cheap. The citizens,flush with cash, start importing like crazy, the domes-tic industrial sector gets wiped out and, presto, youhave deindustrialization. The “resource curse” can

refer to the same economic phenomenon, as well as,more broadly speaking, the way a dependence on nat-ural resources always skews a country’s politics andinvestment and educational priorities, so that every-thing revolves around who controls the oil tap andwho gets how much from it—not how to compete,innovate, and produce real products for real markets.

Beyond these general theories, some political sci-entists have explored how an abundance of oilwealth, in particular, can reverse or erode democra-tizing trends. One of the most trenchant analyses thatI have come across is the work of UCLA political sci-entist Michael L. Ross. Using a statistical analysisfrom 113 states between 1971 and 1997, Ross con-cluded that a state’s “reliance on either oil or mineralexports tends to make it less democratic; that thiseffect is not caused by other types of primary exports;that it is not limited to the Arabian Peninsula, to theMiddle East, or sub-Saharan Africa; and that it is notlimited to small states.”

What I find particularly useful about Ross’s analy-sis is his list of the precise mechanisms by which exces-sive oil wealth impedes democracy. First, he argues,there is the “taxation effect.” Oil-rich governmentstend to use their revenues to “relieve social pressuresthat might otherwise lead to demands for greater

I couldn’t help saying to myself: “Is it an

accident that the Arab world’s first and only real

democracy happens not to have a drop of oil?”

32 Foreign Policy

accountability” from, or representation in, the gov-erning authority. I like to put it this way: The mottoof the American Revolution was “no taxation with-out representation.” The motto of the petrolistauthoritarian is “no representation without taxa-tion.” Oil-backed regimes that do not have to taxtheir people in order to survive, because they cansimply drill an oil well, also do not have to listen totheir people or represent their wishes.

The second mechanism through which oil damp-ens democratization, argues Ross, is the “spendingeffect.” Oil wealth leads to greater patronage spend-ing, which in turn dampens pressures for democra-tization. The third mechanism he cites is the “groupformation effect.” When oil revenues provide anauthoritarian state with a cash windfall, the govern-ment can use its newfound wealth to prevent inde-pendent social groups—precisely those most inclinedto demand political rights—from forming. In addi-tion, he argues, an overabundance of oil revenuescan create a “repression effect,” because it allowsgovernments to spend excessively on police, internalsecurity, and intelligence forces that can be used tochoke democratic movements. Finally, Ross sees a“modernization effect” at work. A massive influx of

oil wealth can diminish social pressures for occupa-tional specialization, urbanization, and the securing ofhigher levels of education—trends that normallyaccompany broad economic development and thatalso produce a public that is more articulate, better ableto organize, bargain, and communicate, and endowedwith economic power centers of its own.

The First Law of Petropolitics tries to build on sucharguments but to take the correlation between oil andpolitics one step further. What I am arguing in posit-ing the First Law of Petropolitics is not only that anoverdependence on crude oil can be a curse in gener-al but also that one can actually correlate rises and fallsin the price of oil with rises and falls in the pace of free-dom in petrolist countries. The connection is veryreal. As these graphs demonstrate, the pace of freedomreally starts to decline as the price of oil really startsto take off.

VenezuelaFreedom House Freedom in the WorldRankings vs. Crude Oil Prices

Firestarter: The rising price of oil has strengthened Hugo Chávez’s gripon Venezuela and is now fueling his influence throughout the region.

[ The First Law of Petropolitics ]

Oil Prices (in U.S. dollars per barrel)

FreedomHouse Score(with 1 being most free and 7 the least)

Sources: BP Statistical Review of World Energy 2005 and IEA; and Freedom House Freedom in the World 2005

JOR

GE

SILV

A/R

EUTE

RS

Measure of freedomPrice of crude oil

May | June 2006 33

AN AXIS OF OIL?

The reason this con-nection between theprice of oil and thepace of freedom isworth focusing ontoday is that weappear to be at theonset of a structuralrise in global crude oilprices. If that is thecase, this higher pricelevel is almost certainto have a long-termeffect on the characterof politics in manyweak or authoritarianstates. That, in turn,could have a negativeglobal impact on thepost-Cold War worldas we have come toknow it. In otherwords, the price ofcrude should now bea daily preoccupationof the U.S. secretaryof state, not just the treasury secretary.

Since 9/11, oil prices have structurally shifted fromthe $20–$40 range to the $40–$60 range. Part of thismove has to do with a general sense of insecurity inglobal oil markets due to violence in Iraq, Nigeria,Indonesia, and Sudan, but even more appears to be theresult of what I call the “flattening” of the world andthe rapid influx into the global marketplace of 3 bil-lion new consumers, from China, Brazil, India, and theformer Soviet Empire, all dreaming of a house, a car,a microwave, and a refrigerator. Their rising energyappetites are enormous. This already is, and will con-tinue to be, a steady source of pressure on the price ofoil. Without a dramatic move toward conservation inthe West, or the discovery of an alternative to fossilfuels, we are going to be in this $40-to-$60 range, orhigher, for the foreseeable future.

Politically, that will mean that a whole group ofpetrolist states with weak institutions or outrightauthoritarian governments will likely experiencean erosion of freedoms and an increase in corruptionand autocratic, antidemocratic behaviors. Leaders inthese countries can expect to have a significant increasein their disposable income to build up security forces,bribe opponents, buy votes or public support, and

resist international norms and conventions. One needonly pick up the newspaper on any day of the weekto see evidence of this trend.

Consider a February 2005 article in the WallStreet Journal about how the mullahs in Tehran—who now are flush with cash thanks to high oilprices—are turning their backs on some foreigninvestors instead of rolling out the welcome mat.Turkcell, a Turkish mobile-phone operator, hadsigned a deal with Tehran to build the country’sfirst privately owned cell-phone network. It was anattractive deal: Turkcell agreed to pay Iran $300million for the license and invest $2.25 billion in theventure, which would have created 20,000 Iranianjobs. But the mullahs in the Iranian Parliament hadthe contract frozen, claiming it might help foreign-ers spy on Iran. Ali Ansari, an Iran expert at the Uni-versity of St. Andrews in Scotland, told the Journalthat Iranian analysts had been arguing in favor ofeconomic reform for 10 years. “In actual fact, the sce-nario is worse now,” said Ansari. “They have all thismoney with the high oil price, and they don’t need todo anything about reforming the economy.”

Or, how about a Feb. 11, 2006, story in TheEconomist about Iran, which stated: “Nationalism is

Economic Freedom (with 10 being mostfree and 0 the least)

Oil Prices (in U.S. dollars per barrel)

Measure of freedom

Price of crude oil

Sources: BP Statistical Review of World Energy 2005 and IEA; and Fraser Institute Economic Freedom of the World Report

Nigeria Legal System and Property Rights vs. Crude Oil Prices

34 Foreign Policy

easier on a full stomach and Mr. Ahmadinejad is therare and fortunate president who expects to receive,over the coming Iranian year, some $36 billion in oilexport revenues to help buy loyalty. In his first budg-et bill, now before parliament, the government haspromised to build 300,000 housing units, two-thirdsof them outside big towns, and to maintain energy sub-sidies that amount to a staggering 10% of [grossdomestic product].”

Or, consider the drama now unfolding in Nigeria.Nigeria has a term limit for its presidents—twofour-year terms. President Olusegun Obasanjo cameto office in 1999, after a period of military rule, andwas then reelected by a popular vote in 2003. When

he took over from the generals in 1999, Obasanjomade headlines by investigating human rights abus-es by the Nigerian military, releasing political pris-oners, and even making a real attempt to root outcorruption. That was when oil was around $25 abarrel. Today, with oil at $60 a barrel, Obasanjo istrying to persuade the Nigerian legislature to amendthe constitution to allow him to serve a third term.A Nigerian opposition leader in the House of Rep-resentatives, Wunmi Bewaji, has alleged that bribesof $1 million were being offered to lawmakers whowould vote to extend Obasanjo’s tenure. “Whatthey are touting now is $1 million per vote,” Bewa-ji was quoted as saying in a March 11, 2006, arti-cle by voa News. “And it has been coordinated bya principal officer in the Senate and a principal offi-cer in the House.”

Clement Nwankwo, one of Nigeria’s leadinghuman rights campaigners, told me during a visit toWashington in March that since the price of oil hasstarted to climb, “civil liberties [have been] on a hugedecline—people have been arbitrarily arrested, polit-ical opponents have been killed, and institutions of

Russia

[ The First Law of Petropolitics ]

Petrol power: Russian President Vladimir Putin is betting thatwindfalls in oil money will restore Russian might.

Sources: BP Statistical Review of World Energy 2005 and IEA; and Freedom House Nations in Transit

Freedom House Nations in TransitRankings vs. Crude Oil Prices

ITAR

-TASS

/REU

TER

S

Oil Prices (in U.S. dollars per barrel)

ElectoralProcess Score(with 1 being most free and 7 the least)

Measure of freedomPrice of crude oil

around the late 1980s and early 1990s surely played akey role. (When the Soviet Union officially dissolvedon Christmas Day 1991, the price of a barrel of oilwas hovering around $17.) And lower oil prices alsosurely helped tilt the postcommunist Boris Yeltsingovernment toward more rule of law, more opennessto the outside world, and more sensitivity to the legalstructures demanded by global investors. And thencame Russian President Vladimir Putin. Think aboutthe difference between Putin when oil was in the$20–$40 range and now, when it is $40–$60. Whenoil was $20–$40, we had what I would call “Putin i.”President Bush said after their first meeting in 2001that he had looked into Putin’s “soul” and saw in

there a man he could trust. If Bush looked into Putin’ssoul today—Putin ii, the Putin of $60 a barrel—itwould look very black down there, black as oil. Hewould see that Putin has used his oil windfall to swal-low (nationalize) the huge Russian oil company,Gazprom, various newspapers and television stations,and all sorts of other Russian businesses and onceindependent institutions.

When oil prices were at a nadir in the early1990s, even Arab oil states, such as Kuwait, SaudiArabia, and Egypt, which has substantial gasdeposits, were at least talking about economic reform,if not baby-step political reforms. But as prices start-ed to climb, the whole reform process slowed, par-ticularly on the political side.

As more and more oil wealth piles up in petrolistcountries, it could really begin to distort the wholeinternational system and the very character of thepost-Cold War world. When the Berlin Wall fell, therewas a widespread belief that an unstoppable tide of freemarkets and democratization had also been unleashed.The proliferation of free elections around the worldfor the next decade made that tide very real. But thattide is now running into an unanticipated counter-wave of petro-authoritarianism, made possible by$60-a-barrel oil. Suddenly, regimes such as those inIran, Nigeria, Russia, and Venezuela are retreating

May | June 2006 35

democracy have been crippled.” Oil accounts for 90percent of Nigeria’s exports, added Nwankwo, andthat explains, in part, why there has been a suddenupsurge in the kidnapping of foreign oil workers inNigeria’s oil-rich Niger Delta. Many Nigerians thinkthey must be stealing oil, because so little of the rev-enue is trickling down to the Nigerian people.

Very often in petrolist states, not only do allpolitics revolve around who controls the oil tap,but the public develops a distorted notion of whatdevelopment is all about. If they are poor and theleaders are rich, it is not because their country hasfailed to promote education, innovation, rule of law,and entrepreneurship. It is because someone is gettingthe oil money and they are not. Peo-ple start to think that, to get rich, allthey have to do is stop those who arestealing the country’s oil, not build asociety that promotes education,innovation, and entrepreneurship.“If Nigeria had no oil, then the entirepolitical equation would be differ-ent,” said Nwankwo. “The incomewould not be coming from oil andtherefore the diversification of theeconomy would become an issue and private enterprisewould matter more, and people would have to expandtheir own creativity.”

Indeed, the link between oil prices and the pace offreedom is so tight in some countries that even a far-sighted leadership can be diverted from the path of eco-nomic and political reform by a sudden spike in crudeprices. Consider Bahrain, which knows it is running outof oil, and has been a case study of how falling oil rev-enues can spur reform. Even it has not been able to resistthe temporary seduction of higher oil prices. “We arehaving good times now because of high oil prices. Thismay lead officials to be complacent,” Jasim Husain Ali,head of the University of Bahrain’s economic researchunit, recently told the Gulf Daily News. “This is a verydangerous trend, as oil income is not sustainable.[Bahrain’s] [d]iversification may be enough by Gulfstandards, but not by international standards.” Nowonder a young Iranian journalist once remarked tome while we were on a stroll in Tehran: “If only wedidn’t have oil, we could be just like Japan.”

G E O L O G Y T R U M P S I D E O L O G Y

With all due respect to Ronald Reagan, I do not believehe brought down the Soviet Union. There were obvi-ously many factors, but the collapse in global oil prices

If Bush looked into Putin’s soul today—the

Putin of $60 a barrel—it would look

very black down there, black as oil.

36

Foreign P

olicy

from

what

once

seem

ed li

ke an u

nstoppab

le pro

cess

of dem

ocrat

izatio

n, with

elec

ted a

utocr

ats in

each

country

usin

g their

sudden

oil w

indfa

lls to

ensc

once

them

selve

s in

pow

er, b

uy up o

pponents

and s

up-

porters,

and ex

tend th

eir st

ate’s

chokeh

old in

to th

e

privat

e se

ctor,

afte

r m

any

though

t it h

ad p

erm

a-

nently

rece

ded. T

he unsto

ppable

tide o

f dem

ocrat

i-

zatio

n that

follo

wed th

e fall

of t

he Ber

lin W

all se

ems

to h

ave

met

its m

atch

in th

e blac

k tide

of petr

o-

auth

oritar

ianism

.

Although

petr

o-auth

oritar

iansim

does

not r

ep-

rese

nt the

sort

of bro

ad s

trateg

ic an

d ideo

logic

al

thre

at th

at co

mm

unism p

osed to

the W

est,

its lo

ng-

term

impac

t could

nev

erth

eless

corro

de world

sta-

bility.

Not o

nly will

som

e of t

he worst

regim

es in

the

world h

ave e

xtra ca

sh fo

r longe

r than

ever

to d

o the

wors

t thin

gs, b

ut dec

ent,

democr

atic

countri

es—

India

and J

apan

, for

insta

nce—

will

be

forc

ed to

kowtow o

r turn

a blin

d eye t

o the b

ehav

ior o

f petr

o-

auth

oritar

ians,

such

as I

ran o

r Sudan

, bec

ause

of

their

hea

vy d

epen

dence

on th

em fo

r oil.

That

can-

not be g

ood for g

lobal

stabili

ty.

Let m

e stre

ss ag

ain th

at I

know that

the c

orrela-

tions

sugg

ested

by th

ese gr

aphs

are n

ot pe

rfect

and,

no

doubt, th

ere

are

exce

ptions t

hat re

ader

s will

sure

ly

point

out. B

ut I d

o beli

eve t

hey i

llustr

ate a

gene

ral tr

end

that

one c

an se

e refl

ected

in th

e new

s eve

ry d

ay: T

he

risin

g pric

e of o

il clea

rly has

a neg

ative

impac

t on th

e

pace o

f fre

edom

in m

any c

ountries

, and w

hen yo

u get

enough

countri

es w

ith en

ough n

egat

ive im

pacts,

you

start

to p

oison gl

obal polit

ics.

Although

we

cannot a

ffect

the

supply

of oil

in

any

country

, we c

an a

ffect

the g

lobal

price o

f oil

by

alter

ing

the

amounts

and ty

pes o

f ener

gy w

e co

n-

sum

e. W

hen I

say “

we,” I

mea

n the U

nited St

ates

in

partic

ular, w

hich co

nsum

es a

bout 25 p

erce

nt of t

he

world’s e

nergy

, and th

e oil-

importi

ng countri

es in

gen-

eral.

Thin

king

about h

ow to a

lter o

ur ener

gy c

on-

sum

ption pat

terns t

o bring d

own the p

rice o

f oil i

s no

longe

r sim

ply a h

obby for h

igh-m

inded

envir

onmen

-

talis

ts or s

ome

perso

nal vir

tue.

It is

now a n

atio

nal

secu

rity i

mper

ative

.

Therefo

re, a

ny Am

erica

n dem

ocrac

y-pro

motio

n

strat

egy t

hat does

not also

inclu

de a cr

edib

le an

d sus-

tain

able

strat

egy

for f

indin

g alt

ernat

ives t

o oil

and

bringin

g down th

e pric

e of c

rude

is utte

rly m

ean-

ingle

ss an

d doom

ed to

fail.

Today

, no m

atter

wher

e

you a

re o

n the f

oreig

n-polic

y sp

ectru

m, y

ou hav

e

to th

ink li

ke a G

eo-G

reen

. You ca

nnot be e

ither

an

effe

ctiv

e fo

reig

n-polic

y rea

list

or an e

ffect

ive

democr

acy-

prom

oting

idea

list w

ithout a

lso b

eing

an ef

fectiv

e ener

gy en

vironm

enta

list.

[ The First Law of Petropolitics ]

For a detailed look at the link between oil wealth and stunted political systems, see Michael L. Ross’s“Does Oil Hinder Democracy?” (World Politics, April 2001). Sustaining Development in MineralEconomies: The Resource Curse Thesis (New York: Routledge, 1993), by Richard M. Auty, explainswhy countries endowed with natural resources often fail to develop. Jeffrey D. Sachs and Andrew M.Warner flesh out this thesis in “Natural Resource Abundance and Economic Growth” (Washington:National Bureau of Economic Research, 1995).

Political scientist Javier Corrales demonstrates how today’s high oil prices empower modernauthoritarians in “Hugo Boss” (Foreign Policy, January/February 2006). Moisés Naím’s“Globoquiz: Guess the Leader” (Newsweek International, Dec. 1, 2004) notes the surprising, oil-driven similarities between Hugo Chávez and Vladimir Putin, and “Russia’s Oily Future” (FOREIGN

POLICY, January/February 2004) analyzes Moscow’s shift toward petrostate politics.

Thomas L. Friedman contemplates the consequences for the global economy—and energymarket—of the rise of India and China in The World Is Flat: A Brief History of the Twenty-FirstCentury (New York: Farrar, Straus and Giroux, 2005). Daniel Yergin’s Pulitzer Prize-winningThe Prize: The Epic Quest for Oil, Money, and Power (New York: Simon & Schuster, 1991) isthe definitive history on the connections between oil and modern economies.

»For links to relevant Web sites, access to the FP Archive, and a comprehensive index of related Foreign Policy articles, go to www.ForeignPolicy.com.

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