Why nations rich in oil are often plagued by poverty and corruption.

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SEPTEMBER 23, 2009

A Gusher Of Trouble
Why nations rich in oil are often plagued by poverty and corruption.

By ROBERT D. KAPLAN
WSJ

Just as there was the Bronze Age and the Iron Age, there is now the Oil Age, and we are living through its last waning decades. Juan Pablo Perez Alfonzo, a former Venezuelan oil minister who came up with the idea for a cartel in the 1960s, called oil the "devil's excrement." Peter Maass, in "Crude World," a spare, engaging work of reporting and travel writing, calls oil "black oxygen." It is a neat phrase because, as Mr. Maass demonstrates, oil is almost as essential to our lives as the air we breathe, yet its effect on the countries that produce it, and on the super-alpha males who run the oil industry, is quite sinister. This is a dark book, though not because Mr. Maass is a pessimist — he isn't. It's just that his itinerary (Equatorial Guinea, Nigeria, Russia, and other benighted locales) lends itself to deep foreboding about the human condition.

Oil corrupts, Mr. Maass says, because it is an "extractive" industry. The computer business and other industries actually design and produce something, but oil is simply taken out of the ground. Thus power lies in the hands of the king, dictator or prime minister who controls the real estate and with whom all sorts of unsavory deals can be struck. Extractive industries "do most of their business in compromise-inducing countries," Mr. Maass explains. "The problem is not that extractive industries have lower principles than other industries. The problem is that they must have better principles"—something that shareholders do not necessarily encourage. Because the number of oil fields on the planet is finite, and the oil in many of them is difficult to extract, the industry is governed by a zero-sum and aggressive realism of the bleakest sort.

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The moral pit of the oil world is Equatorial Guinea, a country in west-central Africa ruled by the violent dictator and torturer Teodoro Obiang, with whom Big Oil made a deal in the 1990s. The hundreds of millions of dollars spent to extract oil from the country has done nothing for the local economy, which remains one of the poorest on Earth. Mr. Maass's visit to a Marathon natural-gas facility in Equatorial Guinea is like a visit to another planet. Everything is imported, even the South Asian labor. The cement for construction is produced on site; the facility has its own water-purification and sewage system. There is almost no contact with the host country. The profits go to Marathon, a Houston company, and to Mr. Obiang's private bank accounts. A man given to excess, Mr. Obiang once bought, for $49.5 million, a Boeing 737, in which the bathroom fixtures were gold-plated.

Then there is Nigeria, which has earned $400 billion from oil profits in recent decades; yet, as Mr. Maass tells us, "nine out of ten citizens live on less than $2 a day, and one out of five children dies before his fifth birthday." Senegal, which exports fish and nuts, beats Nigeria in per capita income. According to the World Bank, 1% of the Nigerian population—presidents, generals, executives, middlemen and so on—have grabbed 80% of the country's oil wealth. This is how an extractive industry operates in a politically fractured land of weak and nonexistent institutions. Whether Mr. Maass is in the primeval, environmentally ruined Niger Delta region of southern Nigeria, or in a Venezuelan slum where "even the jobless are mugged," or in a menacing and soulless Moscow high-rise, or among wayward, spoiled-brat Saudi youth, he shows how the trail of oil leads a traveler to either grim poverty or repulsive wealth. Oil, he seems to say, exaggerates the worst human tendencies.

Iraq is also part of the author's itinerary. Mr. Maass acknowledges that the idea of the Iraq war being waged for oil is largely a conspiracy theory. But he suggests that behind the established motives of the Bush administration — finding weapons of mass destruction, instilling democracy, ridding the world of one of its worst dictators — the war in Iraq, on a deeper geopolitical and historical level, was indeed about oil. And I agree with him; for without oil, the importance of Iraq greatly diminishes. Without oil, there could not have been a WMD program, real or imagined, in the first place. It was oil wealth that gave Saddam Hussein such sway over the Arab masses. It was oil that held out the promise of a prosperous and democratic Iraq in the minds of those who favored regime change.

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Mr. Kaplan is a senior fellow at the Center for a New American Security and a national correspondent for The Atlantic.

Printed in The Wall Street Journal, page A23

http://online.wsj.com/article/SB10001424052970204488304574427213330151076.html

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