Friedman’s First Law of Petrolpolitics states that, in petrolist states, the price of oil and the pace of freedom have inverse relationship; when the price of oil goes up, the premium placed on many ingredients of freedom, free speech, free press, free and fair elections, independent judiciary, rule of law and independent political parties goes down.
By the same token, the First Law of Petropolitics states that, the lower the price of oil, the more petrolist states are compelled to initiate economic and political reforms that increases the state’s capacity for tolerance to opposing opinions, for a more transparent society, for strengthening educational and legal institutions that will harness the citizen’s potentials, without bias to any gender, for attracting foreign direct investments and sensitivity to how the state is perceived by other states.
Petrolist states according to Friedman are countries with largely mono-economy, resting mainly on production and export of crude oil for sustenance, and have weak political institutions, coupled with brazen authoritarian government. They include countries like Nigeria, Egypt, Azerbaijan, Chad, Equatorial Guinea, Iran, Venezuela, Saudi Arabia, Angola, Kazakhstan, Uzbekistan, Russia, and Sudan.
States in the West, with strong democratic institutions, and diversified economies before they discovered oil, are not subject to the First Law of Petrolpolitics. Norway, the U.S. and Britain belong to this group of countries.
In petrolist states, it is not only democratic freedom that takes a downward turn as the price of oil goes up, also, the freedom to trade in the international market plummets, as nationalists-protectionism ideals, whipped up by the whiff of petrol dollar takes center stage.
In terms of extraction of resources, the First Law of Petrol Politics implies that the executive in petrolist states, and as in the case of Nigeria, the Executive President who sometimes doubles as the Minister of Petroleum, like was the case under President Olusegun Obasanjo and Muhammadu Buhari, “controls the tap”, determines who gets what share of the “national cake” and dictates the pace and manner of political and economic reforms. When price of oil is high ($40-60), these reforms are conducted in ways that are inimical to innovation, privatization, production, and diversification of the economy.
In Nigeria, the wholesome privatization of the telecommunication sector in 2001, when a barrel of crude oil was $23.1, ended the unhealthy, and inefficient monopoly of the national service provider, Nigerian Telecommunication Limited (NITEL), created hundreds of thousands of jobs, increased the teledensity from 1:281 in 2000, to 1:116.60, closer to the International Telecommunication Union’s (ITU) standard of 1:100, and contributed 16.06% to Nigeria’s GDP in the second quarter of 2023.
In comparison, the shoddy “privatization” of the power sector, when a barrel of crude oil was $105.8, only ended one unhealthy entity, the Power Holding Company of Nigeria (PHCN), which was replaced by six sickly power generation companies (GenCos), and 11 power distribution companies (DisCos), that merely appropriated state assets within themselves since the companies were sold to cronies of those in government as a form of patronage. This has resulted in loss of jobs, further depreciation of the power sector and continued subsidization of the power sector by the Nigerian government. The President of the Nigerian Labour Congress (NLC), Comrade Joe Ajaero, captured this in a breakfast economic session: “Nigeria has remained in the same spot where President Obasanjo left it, especially the power sector. We are still generating and distributing about 4000 megawatts by this time, this is not progress at all. The country is receding – – – we need reforms to achieve sustainable power supply.”
The First Law of Petrolpolitics and extraction of resources also has implication for taxation. Friedman, quoting Michael L. Ross, contends that there is the “taxation effect”. Petrolist states often use their income to “relieve social pressures that might otherwise lead to demands for greater accountability” from those in government. He further stated: “Oil-backed regimes that do not have to tax their people in order to survive, because they can simply drill an oil well, also do not have to listen to their people or represent their wishes.”
In Nigeria, “fuel subsidy” (subsidy paid by government on imported premium motor spirit(PMS)), for more than two decades, has become a permanent feature on contemporary Nigerian lexicon, mired in corruption, as amount claimed as subsidy paid by government does not correspond to amount of imported PMS consumed in Nigeria within the same period. This is another method devised by government to “settle” key stakeholders. The result is incessant strikes by the NLC between 1999 and 20011, as government continued to adjust the pump price of PMS upward in parity with the exchange rate of the Naira to U.S. Dollar. Why does an oil producing-state import PMS? The answer is lack of political will by government to privatize the downstream sector of the petroleum sector, crude oil is exported and the derivatives imported at prevailing U.S. Dollar exchange rate. The loss for Nigeria and Nigerians are multiple fold, loss of job and higher standards of living that could have accrued from having functional private refineries in Nigeria, increased revenue for government, lower PMS prices for Nigerians as competition drives the pump price of PMS downwards. But why should the government care if there are enough dollars to share, to keep those that matter happy? As it is with the power and petroleum sector, so it is with the education sector. According to Friedman’s account, Nigeria’s narrative is not dissimilar to other petrolist states.
The First Law of Petrolpolitics also has implication for social mobilization necessary for impactful economic and political reforms. Authoritarian governments in petrolist states awash with huge revenues from oil could afford to maintain a well-heeled security outfit, rich in loyalty to the government, not the constitution, the state, and the citizens, and quick to quench dissenting voices or opinion. Also, the government may choose to distribute patronage to key stakeholders in labor unions, media, civil society groups, political party stalwarts, past rulers, and others who have enough clout to mobilize citizens against government actions. This often achieves the desired result by government as the citizens are no longer able to speak with “one voice” on issues that affect them, ranging from democratic reforms, wholesome privatization to environmental degradation resulting from extraction of crude oil. In Nigeria, after the nation-wide strike in 2011, largely aided by the opposition Action Congress of Nigeria (ACN) and civil society groups, the NLC was rendered ineffective by government as a medium for mobilization of citizens against incessant increase in pump price of PMS and stagnant minimum wage. Since then, the government has managed to infiltrate the ranks of the NLC and the Trade Union Congress (TUC), reducing their calls for strike action to bark without bite and attention for “settlement” at the expense of the workers they represent. The Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) and civil society groups which played important roles in mobilizing the people against the annulment of the June 12, 1993 presidential election, and forced the military government of President Ibrahim Badamasi Babangida to “step aside” have lost their voice as democratic freedom and economic prosperity in Nigeria tumbles.
The gaps vacated by these structured organizations have been filled by Nigerian youths who are the major victims of lopsided economic policies and undemocratic principles of government. The Nigerian youths-powered #EndSars (popular uprising to end police brutality and lawlessness) protests that rocked the country in the last quarter of 2020, was organic in nature, with no leaders to bribe, throw into jail or kill. In a bid to stop the protests, rather than listen to demands of the citizens, what the Buhari-led administration did was to pay armed miscreants to infiltrate the ranks of the otherwise peaceful protesters, to give the protest a violent image and the government reason to move in with force to quell the protests. When this failed to produce the desired effect as the youths defended themselves against the armed invaders, government declared curfew in Lagos State late in the day, moved in with soldiers at night and opened fire on the protesters as they gathered at the Lekki toll gate.
Presently, the absence of any credible opposition party has been filled by Nigerian youths under the label “Obidients”. This is an organic movement formed by Nigerian youths in support of the presidential candidate of the Labour Party (LP), Peter Obi, whom many Nigerian youths feel represent their aspirations and yearning for a country built on merit not patronage. Peter Obi’s message of moving Nigeria from “consumption to production”, reverberated with the youths. In less than one year, Nigerian youths mobilized to carry Peter Obi’s message of “A New Nigeria is POssible” to every corner of the country and against popular belief, that it is impossible to win elections in Nigeria without party structure, Nigerian youths, without any existing party structure, gave Peter Obi more than six million votes according to the electoral umpire’s much disputed record (the EU report on the elections called the result “fraudulent” and Peter Obi has filed an appeal at the Supreme Court on the result of the election). It is important to note that Peter Obi won in all the pooling units in Nigeria where there are military formations. This points to the fact that in a petrolist state like Nigeria, mobilization for change, no matter how genuine and concerted, will be met with brutal force by the executive, who will stop at nothing to grab power and retain their hold on power.
Friedman makes a connection regarding the relationship between a country’s need for resources and its susceptibility to influence by actors who provide the resources. The need for economic or military aid by a country makes the recipient state more vulnerable to influence by actors who provide such aids, because, as a matter of principle, these grants are transactional deals infused with the demand or interests of the donor actors. Sometimes, these interests by donor actors are stated overtly, or covertly. The leaders of a petrolist state like Iran, buoyed by higher revenue from increased oil price, can afford to scrutinize the seemingly attractive offer of Turkcell and input sinister motives (might help foreigners to spy on Iran). In the absence of higher revenue from increased oil prices, the leaders of Iran would have been compelled to accept the offer from Turkcell, and open up their economy to attract other foreign investors, a measure that would create shared prosperity for their citizens.
By the same token, if the price of oil was $20 in 2006 and not $61, Venezuelan President, Hugo Chavez, would have been more susceptible to consider British Prime Minister, Tony Blair’s advice, that Venezuela should abide by the rules of the international community if it wanted to be respected by it. But as the price of oil was $61, President, Hugo Chavez, could afford to tell Prime Minister Tony Blair to “go right to hell,” and damn the consequences.
What likely hypothesis can we generate regarding the connection between a country’s need for resources and its susceptibility to influence by the actors who provide those resources? The case of the U.S. – Pakistan relationship shows that aid, whether military, economic or humanitarian is more effective in producing the desired influence in the recipient state, if it is tied to particular projects, within particular time frames, properly monitored, and impact evaluated to determine continuity, adjustments or discontinuation. The civilian economic aid programs which were “demand driven”, with funds disbursed by American specialists and monitored by grantees who had stakes in the projects were successful. Perhaps this was the reason Pakistan’s economy was described by Lawrence Wright as “exemplar” in the 1960s. The bogus economic and military aids to Pakistan, largely policies of over-reaction, over several decades were not monitored, so they were diverted for hyper-nationalists causes that were injurious to American interests. The aids achieved the antithesis of desired influence by the U.S.
Also, economic policies, whether in the form of aids or trade liberalization directed at the citizens, properly monitored, implemented, and evaluated are more likely to produce the desired influence than gargantuan amount thrown at the ruling elites. Perhaps, the U.S. should implement the “trade not aids” request of Pakistanis.
References:
Englama, A; and Bamidele, A. (2002). Telecommunication and Nigeria’s Economic Development: Challenges, Prospects, and Policy Suggestions. Central Bank of Nigeria Economic and Financial Review Vol40, No1.
Friedman, T. L. (2006). The First Law of Petrolpolitics. Foreign Policy 28-37.
Jeffery, S.; and Agencies. (2006). Chavez tells Blair to go to hell. The Guardian.
Chávez tells Blair to go to hell | Venezuela | The Guardian
Wright, L. (2011). The Unintended Consequences of American funding in Pakistan. The Double Game. The New Yorker.
Paper written by Soni Gold in October 2023
