Oil and Democracy

Introduction

In the mid ’eighties, I was working in Amman, Jordan as economic consultant to the government. At lunch one day, I asked a taxi to take me “to the desert”. After 10 minutes of driving, we were in the desert and I saw a sight I will never forget.

We came to a road that was lined with oil trucks as far as I could see in both directions. There were problems getting oil out via the Persian Gulf, and oil was being transported through Jordan to the port of Aqaba for export. I realized that the world depended on that line of trucks for its oil. It appeared quite fragile. Things do not seem much better today.

Today

Table 1 indicates what countries are today’s leading oil exporters. Fortunately, Tunisia, Jordan, and Egypt are not on the list. But look who is. I have highlighted in bold the countries where political problems exist or might soon develop.

Table 1 – Leading Oil Exporters, 2008 (thousands barrels per day)

Country Exports
Saudi Arabia 8,406
Russia 6,874
United Arab Emirates 2,521
Iran 2,433
Kuwait 2,390
Norway 2,246
Angola 1,948
Venezuela 1,893
Algeria 1,888
Nigeria 1,883
Iraq 1,769
Libya 1,597
Kazakhstan 1,185
Canada 1,089
Qatar 1,085

Source: US Department of Energy

Where will the Desire for Freedom and Democracy Lead?[1]

Saudi and Qatar are absolute monarchies. The UAE is a federation of seven absolute monarchies. Iran is politically unstable. Angola changed from a one-party Marxist-Leninist state to a formal multiparty democracy following the 1992 elections. President dos Santos won the first round election with more than 49% of the vote to Jonas Savimbi’s 40%. A runoff never has taken place. The subsequent renewal of civil war and collapse of the Lusaka Protocal have left much of this process stillborn.  

Venezuela is not on a viable path. Civil strife in Nigeria continually creates problems in its oil fields. Iraq? Who knows what will happen when the US leaves? In Libya, the “revolutionary sector” comprises Revolutionary Leader al-Qadhafi, the Revolutionary Committees, and the remaining members of the 12-person Revolutionary Command Council, which was established in 1969. The historical revolutionary leadership is not elected and cannot be voted out of office

In Kazakhstan, the president is head of state. He also is the commander in chief of the armed forces and may veto legislation that has been passed by the Parliament. President Nursultan Nazarbayev, who has been in office since Kazakhstan became independent, won a new 7-year term in the 1999 election that fell short of international standards. A major political opponent, former prime minister Akezhan Kazhegeldin, was prohibited from running against the president because he had attended an unauthorized meeting of “the movement for free elections”. On top of this the election was unconstitutionally called two years ahead of schedule. Free access to the media is also denied to opposing opinions. In 2002 a law set very stringent requirements for the maintenance of legal status of a political party.

Investment Implications

So the stock markets have dismissed the Egyptian uprisings as “yesterday’s news”. Perhaps it would be wise to buy some oil stocks, preferably those with relatively small holdings in the countries mentioned.


[1] Much of the country information in this section comes from Wikipedia.

The content above was saved on the old Morss Global Finance website, just in case anyone was looking for it (with the help of archive.org):
Scroll to Top