Why oil autocracy is a complicated thing

The Arab Spring has added the appearance of fragility to almost all petro-states regardless of their location. In Venezuela, President Hugo Chavez, back in Cuba for follow-up cancer treatment (pictured above on arrival in Havana with his daughter Rosa and Raul Castro), has triggered speculation on what will happen should he become incapacitated or die. Among the questions — would Chavez’s successor revive an oil industry whose reserves have officially surpassed Saudi Arabia’s but whose production is just a third of the kingdom’s? Similar questions are being asked anew about oil-rich Kazakhstan, prompted by the 11-day disappearance of leader Nursultan Nazarbayev, who it turns out was undergoing secret prostate surgery in Hamburg, reports Germany’s saucy newspaper Bilt.

The root of all this inquiry is the Saud family of Saudi Arabia — a few months ago, oil prices went through the roof over the issue of what would happen to the global economy if the guardians of the entrepot of global oil went south. That shudder didn’t last long because the premise was thin, and became thinner when King Abdullah laid some $130 billion in largesse on his population, and sent troops to shore up the neighboring monarchy in Bahrain, home to the U.S. 5^th naval fleet.

Till today, though no full-fledged petro-state has been caught up in the Arab Spring, we remain jittery because of the possibility for more economic havoc should the turbulence strike a big oil producer. Yet Venezuela tells us that the range of possible outcomes includes not only the recurrence of a Yemen or Libya scenario; it is also changes to the market status quo in a simple change of leadership.

But are we talking material change? For example, would a Chavez successor suddenly open up the fabulously rich Orinoco Belt, and start churning out production on a scale of Russia and Saudi Arabia? At $100-a-barrel oil, even Venezula’s expensive-to-produce oil would be highly profitable. Such a ramp-up could shift the balance of global oil politics, and do away with U.S. oil supply worries. One has doubts of such a shift, yet those are among the stakes.

As for Kazakhstan, oilmen and political observers worry of political instability after Nazarbayev as regional clan leaders, his old guard intimates, young politicians and business tycoons vie to succeed him.  And then what would happen with this young petro-state’s oil? But this seems a highly exaggerated scenario.

First, look at two very different regional examples of succession — in Azerbaijan, Heydar Aliyev managed to pass along power pretty much intact to his son, Ilham, when he died in 2003; in Turkmenistan, Saparmurat Niyazov’s sudden death in 2006 resulted in the relatively smooth transfer of power to his dentist, Gurbanguly Berdymukhamedov. Chaos had been forecast for both countries in a succession, but nothing of the sort occurred.

A clue for what follows Nazarbayev might be found in an examination of his own wishes. Since he has not revealed them, let’s conjecture a bit. Seeing himself as his country’s main visionary, Nazarbayev more than likely would prefer his policies to remain in place while a technocrat-type manages the oil-fueled economy.  He would also prefer his family’s place in society to remain intact, along with its prestige and wealth. Who would best carry out those preferences? The first name that comes to mind is the obvious choice — his second son-in-law, Timur Kulibayev, a billionaire who runs the country’s oil industry.

My own feeling is that Kulibayev will succeed Nazarbayev. If he does, do not look for any important changes to the country. Kazakhstan, having far more vibrant politics than its neighbors, might have electoral turbulence. But that is different from dangerous turmoil and any serious shift in geopolitical or economic policy.