The Failed States Index 2005: Fueling Failure

The discovery of large oil and gas reserves has been a boon to many national economies, and countries often spend decades trying to strike it rich. But is black gold actually good for stable government?

Political scientists have coined the term “petrostate” to describe a country that is dependent on income from oil and gas yet plagued by weak institutions, a poorly functioning public sector, and a gross disparity of power and wealth. Some experts have argued that large oil economies often stunt the development of stable, transparent institutions — a phenomenon that has been labeled the “resource curse.” José Ramos-Horta, the foreign minister of East Timor, has openly worried that his small country might not be able to handle the temptations that will arise when it begins to exploit its offshore oil and gas fields with Australia’s help. “While oil and gas revenues can be a blessing,” Ramos-Horta has said, “we are conscious that our public administration, our Treasury, and other branches of government are very weak.”

The index suggests that many states with oil and gas are indeed vulnerable. Iraq, home to the world’s second-largest oil reserves, is the fourth most vulnerable country, although the causes of its instability are manifold. Chad, which has negotiated a major oil pipeline deal with private companies and the World Bank, is the seventh most vulnerable. Oil-rich Venezuela, under the mercurial leadership of President Hugo Chavez, is 21st.

Most of the energy-rich states, however, are clustered toward the back of the index, indicating that they are vulnerable but have also managed to craft and preserve a semblance of stability. These states — Saudi Arabia, Indonesia, Bahrain, and Nigeria, among others — have filled their coffers with oil money. But those funds may come at a steep political cost.