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Oil, arms, and corruption: a poisonous nexus?

While world military spending has fallen slightly in recent years, some regions, notably Africa and the Middle East, have seen continuing rapid increases. When SIPRI published our annual military expenditure data for 2014 this April, we featured a list of the 20 countries with ‘military burdens’ – the share of military expenditure in GDP – above 4%. This compares with only 13 in 2005.

There are three features that are notable of these countries. First, not surprisingly, many (14) were either in conflict or had a recent history of armed conflict. Second, only 3 of the 20 were functioning democracies. The third feature was oil: 13 of the 20 countries, and all of the top seven (Oman, Saudi Arabia, South Sudan, Chad, Libya, the Republic of Congo, and Algeria) are major oil producers.

The Middle East, home to many of the world’s top oil producers, has always been a region of high military spending. In recent decades, however, there has been a surge in military spending in many countries whose oil booms have been more recent affairs. In Africa, most prominent are the continent’s top two spenders: Algeria, whose military spending has trebled in real terms since 2005, and increased seven-fold since 1995; and Angola, whose spending has increased 270% since the end of their civil war in 2002. But also noteworthy are Chad, whose spending increased by a factor of 6.5 in just two years from 2005 to 2007, as their new oil pipeline came online; Republic of Congo (spending quadrupled since 2005); Nigeria, South Sudan, and even Ghana, whose spending almost doubled in a single year in 2011 as their oil revenues came online, albeit from a very low starting point. Outside Africa, Azerbaijan, Russia, Kazakhstan, Ecuador, and Vietnam are notable examples.

Of course, with new oil resources (or high oil prices, as were seen over most of the past decade), comes increased GDP. But in most of the cases above, military spending has increased not only in absolute terms but even as a share of GDP. Why should oil (and more generally natural resource) revenues be linked to high military spending and arms acquisition? There are a number of possible reasons:

  1. Source of revenue: First, the proceeds from resource exports provide a direct source of income to the government without taxing the general population. Large-scale military spending that might be highly unpopular if paid for by the people at large may be easier to get away with if it is from an external source of funding – even though the opportunity cost is the same.
  2. Conflict: Resource exploitation can itself be a source of grievance and conflict, due to environmental damage, the failure to benefit local populations, and/or disputes over how the spoils are divided—and thus of higher military spending. The Niger Delta region of Nigeria is an example of the first two, and the current wars in South Sudan of the third.
  3. Gates_of_Oil_reifnery_in_Port_Harcourt
    Gates of oil refinery in Port Harcourt, Nigeria by sixoone. CC BY 2.0 via Wikimedia Commons.
  4. Corruption in the arms trade: Major international arms deals are frequently the subject of vast bribes, in both the developing and developed worlds. The multi-billion pounds Al Yamamah oil-for-arms deals between the UK and Saudi Arabia in the 1980s and 1990s, where perhaps over a billion pounds were paid in bribes to top Saudi decision-makers, is a particularly egregious example. The secrecy involved in such deals makes them an ideal vessel for corruption, and thus for channeling the proceeds of natural resource revenues into the bank accounts of the elite.
  5. Corruption in the military establishment: It is not just arms acquisition that can be subject to corruption in military spending. Skimming of pay, the use of ‘ghost’ soldiers, corruption in awarding of contracts, selling or renting of military property, and the awarding of senior positions can all be means by which the military budget can be a lucrative source of income for elites. The military may not be unique in this, but blanket secrecy and the effective impunity from investigation and prosecution enjoyed by the military in many countries may make it particularly susceptible. Nigeria is one country where endemic corruption in the military has severely impeded its effectiveness, in particular in the fight against Boko Haram. Angola is one of the most corrupt countries in the world according to Transparency International, and is a major reason why vast oil wealth sits alongside extreme poverty. Despite their $6 billion dollar, 5.2% of GDP military spending, they actually buy very little by way of major armaments. Very little is known about Angola’s military spending, but the question should be asked as to whether it is really providing for national defence, or if it is more a huge vehicle for patronage and enrichment of favoured groups.
  6. The “rentier state”: The idea of the ‘rentier state’ encompasses many of the phenomena discussed above. When a state derives the bulk of its revenues from the sale of natural resources, the whole nature of the state and its priorities may be distorted. Protecting the source of these resource rents may become more important for regime survival than promoting economic development. Politics, even in a nominally democratic country, may become more about the division of the spoils between different groups than about how the country is governed. Thus, the military become a key means by which the continuance of the regime and access to resource rents are guaranteed. In a polity corrupted by the centrality of resource revenues, the military may be the most corrupt institution of all.

The idea of the ‘resource curse’ – whereby natural resource wealth fails to benefit the population as a whole, and instead becomes a source of conflict and corruption – is widely discussed. The role of military spending as a key building-block in this poisonous nexus perhaps merits closer attention.

Image credit: Oil pump in Baku by Gulustan. CC BY-SA 3.0 via Wikimedia Commons.