High-value Natural Resources: A Blessing or a Curse for Peace?

Author:Päivi Lujala - Siri Aas Rustad
Position:Associate professor of geography at the Norwegian University of Science and Technology ('NTNU') - Researcher at CSCW, PRIO, and a Ph.D. candidate in political science at NTNU
Pages:19-22
 
CONTENT
19FALL 2011
HIGH-VALUE NATURAL RESOURCES:
A BLESSING OR A CURSE FOR PEACE?
by Päivi Lujala and Siri Aas Rustad*
INTRODUCTION
High-value natural resources have the potential to
promote and consolidate peace. Too often, however,
they make the path to sustainable peace long and haz-
ardous. Valuable resources can help to jump-start development,
secure sustainable growth, raise living standards, and increase
economic equality. 1 They are also an important source of for-
eign currency for cash-strapped governments, can reduce depen-
dence on international aid, and can support compensation and
post-conflict relief for war-affected populations.2 But the prom-
ise of a brighter and more peaceful future is often spoiled by
deep-rooted corruption and patronage, which confer benefits on
small groups rather than on the population as a whole, and by
shortsighted management of the resources and the revenues they
generate.3 In addition, the mere presence of high-value resources
can jeopardize peace if the resources become the focus of vio-
lent disputes or provide financing for groups that seek to ignite
(or resume) armed conflict.
In many post-conflict countries, revenues from high-value
natural resources— such as oil, natural gas, minerals, gemstones,
and timber—are an integral (and even dominant) part of the
national economy and state budget.4 In post-conflict Algeria,
Angola, and Sudan, for example, oil and gas account for more
than sixty percent of government revenues and over ninety percent
of all export revenues.5 See Figure 1. In Sierra Leone, following
a brutal civil war that ended in 2002, when diamonds accounted
for ninety-six percent of all exports.6 And in Chad, Iraq, Libya,
and Nigeria—all of which were affected by armed conflict during
the early years of the twenty-first century—oil and gas account for
as much as seventy percent of gross domestic product and more
than eighty percent of government revenues.7 In Niger, uranium
and gold are important revenue sources,8 as are oil, cocoa, and
coffee in Côte d’Ivoire,9 and diamonds and timber in the Central
African Republic.10 In Burma, gas exports made up one-quarter
of all exports, while forest products and gemstones were other
important exports between 2008 and 2010.11
When peace comes, the revenues from high-value natural
resources—when managed well—can help finance reconstruc-
tion and other vital peace-related needs.13 When mismanaged,
however, resource revenues can undermine both economic per-
formance and the quality of governance, and thereby increase
the risk of renewed violence.14
Recent high-profile reports
by the U.N. Secretary-General, the
World Bank, the U.N. Environment
Programme, and the United Nations
have highlighted the need to more
effectively harness high-value natural
resources for development and peace-
building.15 If managed effectively,
high-value natural resources constitute
substantial assets that national and
international actors can use to sup-
port core peace building objectives,
including macroeconomic recovery,
generation and support of livelihood,
the reform of governance and political
processes, and security improvement.16
The fact that so many resource-
rich countries are unable to achieve
long-term peace, however, raises some
difficult questions about how high-
value resources should be managed
in post-conflict settings. For example,
* Päivi Lujala is an associate professor of geography at the Norwegian
University of Science and Technology (“NTNU”) and a senior researcher at
the Department of Economics, NTNU, and the Centre for the Study of Civil War
(“CSCW”) at the Peace Research Institute Oslo (“PRIO”). Siri Aas Rustad is
a researcher at CSCW, PRIO, and a Ph.D. candidate in political science at
NTNU.
Figure 1. The Economic Role of the Extractive Sector in Selected
Post-Conflict and Conflict-Affected Countries12
20 SUSTAINABLE DEVELOPMENT LAW & POLICY
how can the environmental effects of resource extraction be
minimized? How can illegal extraction be curtailed without
damaging livelihoods? How can one ensure that revenues are
used to advance long-term development objectives? The goal
of our analysis here is to provide insight into these and similar
questions — for the benefit of national and local governments,
national and transnational civil society organizations, extractive
industries, and the international community. To this end, policy
makers, field researchers, practitioners, and scholars—all of
whom have close knowledge of the issues at hand—have been
asked to share their views on the challenges associated with
the management of high-value resources in post-conflict and
conflict-affected countries.
FROM POTENTIAL PROSPERITY TO CONFLICT:
WHAT GOES WRONG?
High-value natural resources have been associated with
dozens of armed conflicts, millions of deaths, and the collapse
of several peace processes; case study and statistical evidence
confirms that such resources play a role in sparking and fuel-
ing armed civil conflict.17 According to
data gathered by Siri Aas Rustad and Helga
Malmin Binningsbø, between 1970 and
2008 the portion of armed civil conflicts
that were in some way related to high-value
natural resources ranged from twenty-nine
to fifty-seven percent.18 See Figure 2.
Why is peace so difficult to achieve
and sustain in the presence of these
resources?19 High-value natural resources
increase the risk of conflict in a number of
ways. The risk of conflict can be directly
increased when access to revenues moti-
vates or finances belligerent movements, or
when grievances are created (1) by unmet
expectations or inequalities in the distribu-
tion of revenues, jobs, and other benefits, or
(2) by the negative side effects of resource
exploitation.20 The risk of conflict can be
indirectly increased when resource sectors
undermine a nation’s economic perfor-
mance and the quality of its institutions.21
Thus, the three main avenues that lead
from natural resources to armed conflict
are resource capture, resource related grievances, and adverse
effects on the economy and institutions.22
Paul Collier, Anke Hoeffler, and Päivi Lujala suggest that
the capture of resources for personal or regional enrichment is a
possible motivation for rebel uprisings and violent secessionist
movements.23 Although resource capture can be one of the goals
of armed rebellion, it is rarely, if ever, the sole motivation.24
Even in Sierra Leone, where the Revolutionary United Front has
been represented as the classic example of a predatory, greed-
driven movement, the reality is far more complex.25 More often,
resource capture is a means of financing warfare and attracting
supporters.26 For example, the Revolutionary Armed Forces of
Colombia (Fuerzas Armadas Revolucionarias de Colombia, or
“FARC”) has for decades relied on kidnapping and the produc-
tion and selling drugs to finance its insurgency.27 As efforts to
curtail FARC’s access to income from these activities have met
with some success, FARC has turned to gold mining to support
its violent campaign against the government.28
Grievances can motivate armed conflict, particularly when
the parties to a resource related dispute are divided along
ethnic, religious, or other lines.29 Among the events that may
spark violent uprisings are land appropriation, environmental
degradation, population displacement, large inflows of migrants,
and frustration over unfulfilled economic expectations.30 Exam-
ples of grievance-based conflicts include Aceh, in Indonesia;
Bougainville, in Papua New Guinea; Kurdistan, in Iraq; northern
Niger; and southern Sudan.31 Grievances do not necessarily arise
in the context of potential regional autonomy, as was the case in
Aceh and South Sudan.32 They may also occur in response to the
abuse of power by local elites, as was the case in Sierra Leone.33
With respect to economic growth and developmental out-
comes, many resource-rich countries perform poorly in compari-
son to their less resource-rich counterparts.35 This phenomenon,
often referred to as the resource curse or the paradox of plenty,36
is exemplified in countries such as Algeria, the Democratic
Republic of the Congo, Iraq, and Nigeria.37 The resource curse
has a number of potential causes, including the following:
•฀ A government that is able to finance its budget through nat-
ural resource revenues rather than public taxation can easily
become detached from, and therefore less accountable to,
the populace.38
Figure 2. Armed Civil Conflicts Involving High-value Natural Resources, 1970
–200834
21FALL 2011
•฀ Resource revenues often fuel patronage, corruption, and
rent seeking, all of which may promote the interests of a
small and predatory elite.39 In Nigeria, for example, it is
estimated that one percent of the population enjoys eighty
percent of the oil revenues.40
•฀ When the group in power focuses on short-term gains
(sometimes in an effort to meet popular demands), the
results may include overspending, poor investment deci-
sions, and ill-conceived economic policies.41
•฀In countries whose economies depend on a few valuable
resources, the weakness of political and economic institu-
tions may be compounded by exposure to price shocks,
which occur when rapid shifts in raw material prices lead to
abrupt fluctuations in resource revenues.42
Political and economic underperformance is endemic in
many resource-rich countries—which, according to empirical
studies, renders them vulnerable
to conflict.43 Several studies have
documented that armed civil
conflict is more likely to occur in
poor countries than in rich ones.44
Research also shows that dysfunc-
tional institutions and low state
capacity are positively correlated
with an increased likelihood of
conflict.45
Supporting the case study
evidence, several statistical studies
document strong and signifi-
cant relationships between par-
ticular natural resources and
conflict, but few have been able to
disentangle the possible mecha-
nisms behind the relationships.46
James Fearon and David Laitin,
for example, have found that oil
increases the likelihood of conflict—a finding that has been
confirmed by the work of Indra de Soysa and Eric Neumayer,
Macartan Humphreys, and Päivi Lujala.47 Lujala has also found
that when oil and gas are located in the conflict area, conflicts
tend to be longer and more severe.48 Taken together, Lujala shows
that (1) oil-producing countries are 1.5 to 2 times more likely to
experience armed civil conflict than nonproducers, and that (2)
when internal conflict occurs in a region that has oil reserves,
it lasts twice as long as conflicts that occur in areas without oil
reserves, and combatant deaths are twice as high.49 Collier and
Hoeffler’s 2006 study of conflict types links oil to higher risk of
secessionist conflict, and Lujala shows that secessionist conflicts
in regions with oil reserves tend to be more severe than any other
conflicts.50
Diamonds and other gemstones have also been subject
to statistical studies.51 Fearon and Lujala have shown that gem-
stones have effects similar to those of oil—namely, conflict is
more likely and tends to last longer.52 The role of timber, opium,
and other high-value crops is less clear.53 There is some evidence
that opium cultivation makes conflicts last longer, but little
systematic evidence links timber production to civil war.54
RESOURCES FOR CONFLICT
Because natural resources have varying characteristics, they
are not equally relevant to conflict—and those that are relevant
may be so for different reasons.55 High-value resources, for
example, may be either renewable or nonrenewable, although
most— such as oil, gas, rutile, coltan, cobalt, diamonds, and
gold—are nonrenewable, and tend to be located in geographi-
cally limited areas.56 What all high-value resources have in com-
mon, however, is the potential to yield substantial revenue.57
Some high-value resources are limited to confined areas
and depend on sophisticated and expensive extraction methods
or require special types of transportation (e.g., pipelines).58
Because such resources are difficult to loot and are generally
securely controlled by the govern-
ment during periods of both peace
and war, they provide fewer oppor-
tunities for conflict financing.59
Thus, the revenues from resources
such as oil, natural gas, kimberlite
diamonds, copper, and rutile are
likely to accrue to the central gov-
ernment and those who control it.60
Such resources may nevertheless
play a role in conflict: rebel move-
ments may seek to oust the govern-
ment to gain control of them, and
if the resources are located in more
remote areas, they may play a role
in secessionist uprisings.61 Rebels
may also loot existing stockpiles
of commodities or may attempt to
bring extraction or transportation
to a halt, in order to cut off the
central government from its revenue source.62 Finally, the large
revenues derived from high-value resources may increase the
risk of conflict through adverse effects on political and economic
institutions.63
Some high-value resources are linked to conflict because
of their financing potential.64 However deep grievances may be,
rebellion is unlikely to begin or to be sustained without financ-
ing opportunities.65 Since the end of the Cold War, financing
from the superpowers has declined and revenues from valuable
natural resources have gained importance as a source of conflict
financing.66 The resources most suitable for wartime looting
have extremely high value-to-weight ratio and can be easily
extracted, concealed, smuggled, and sold.67 Easy extraction is a
particular advantage: a resource that can be extracted by indi-
viduals or small groups using simple tools (that is, through arti-
sanal mining techniques) can be readily exploited by rebels who
either undertake the mining themselves or use forced labor.68
Among the commodities with high price-to-weight ratios that
can be artisanally mined are alluvial gold, alluvial diamonds, and
…when internal conflict
occurs in a region that
has oil reserves, it lasts
twice as long as conflicts
that occur in areas
without oil reserves,
and combatant deaths
are twice as high.
22 SUSTAINABLE DEVELOPMENT LAW & POLICY
gemstones such as rubies and sapphires.69 Rebels do not need to
rely on extraction directly; they also engage in illegal taxation
of trade and export routes.70 In some cases, including Colombia
and Nigeria, rebels have succeeded in obtaining ransoms from
extractive firms by threatening to blow up oil pipelines or by
kidnapping personnel working on installations.71
When it comes to conflict financing, many natural resources
have another advantage: they are generic, which means that their
origins cannot be traced as easily as those of manufactured prod-
ucts.72 Because generic illegal commodities can be readily inte-
grated into legal trade channels, they are a particularly lucrative
form of contraband, with trade prices that differ only marginally
from those of their legal counterparts.73 Another advantage of
some high-value resources is their scarcity.74 Some occur in only
a small number of countries and have few substitutes, and are,
therefore, of strategic importance.75 Demand for such resources
may sometimes override other considerations, such as the legal-
ity of the exploitation, the behavior of the government that has
granted exploitation rights, and the role of the commodities in
financing warfare.76
Of course, resources other than high-value minerals may
play a role in conflict or have adverse effects on economic
and political institutions.77 Most notable are coca and opium,
which have been linked to conflicts in Latin America and Asia,
respectively, and timber, which has been connected to a number
of conflicts in Africa and Southeast Asia.78 Fisheries have also
been used to finance conflict; in Somalia, for example, some
warring groups have sold false fishing licenses for offshore tuna
reserves.79
CONCLUSION
When conflict ends, many of the original causes often
remain unresolved—whether they relate to resources or not—
and may even have been aggravated by the grievances and eco-
nomic and political havoc associated with the conflict itself.80
Post-conflict countries thus face daunting challenges when it
comes to building peace, reducing poverty, and managing natural
resources—particularly when poor resource management may
be undermining both peacebuilding and poverty reduction.81
It is clear that many resource-rich post-conflict countries are
unable to sustain peace.82 This observation has been confirmed
by empirical studies: for example, Rustad and Binningsbø’s
analysis of 285 episodes of armed civil conflict shows that when
natural resources play a role, the period of post-conflict peace is
forty percent shorter than when they do not.83
The difficulty of sustaining peace when high-value natural
resources are involved has two key implications: (1) the conflicts
involving such resources are generally harder to resolve; and (2)
thus far, the measures that have been used to manage natural
resources and their associated revenues are generally unsatis-
factory.84 Thus, improved management of high-value natural
resources and the associated revenues is fundamental to peace
building.
Endnotes: High-value Natural Resources: A Blessing or a Curse for Peace?
1 See generally Shahid Yusuf, World Bank, Economics through the Critical
Look at Thirty Years of the World Development Report (2008) (discussing the
successes and failures of the World Bank and global development).
2 See generally U.N. Env’t Programme, From Conflict to Peacebuilding: The
Role of Natural Resources and the Environment, (Feb. 2009), http://www.unep.
org/pdf/pcdmb_policy_01.pdf.
3 See Philippe Le Billon, The Political Ecology of War: Natural Resources
and Armed Conflict, 20 Pol. GEOGRAPHY 561, 566-67, 578 (2001) (asserting that
although many patronage systems are corrupt, the phenomenon of patronage is
distinct from that of corruption).
continued on page 56
This article is an edited version of the first chapter
of a volume entitled High-Value Natural Resources and
Post-Conflict Peacebuilding, which addresses a full range
of challenges associated with high-value resources in post-
conflict settings. This volume reflects the perspectives of
forty-one contributors and considers the experiences of
eighteen countries with analyses of additional countries.
The volume’s chapters are grouped into five sections
that examine specific challenges and opportunities within
each stage of the resource chain:
1. The ways in which host governments, extractive indus-
tries, and the international community can strengthen
the management of extraction to promote peace.
2. The instruments used to track commodities and
revenues.
3. The pros and cons of various options for revenue
distribution, including whether producing regions
should receive preferential treatment in revenue distri-
bution, as well as measures for stemming corruption.
4. The role of revenue allocation and institution building,
including several in-depth case studies on various
approaches.
5. The impor tance of taking local livelihoods and econo-
mies into account in the design and implementation of
approaches to managing high-value natural resources.
Taken together, the chapters in the volume offer a consistent
message: proper management of high-value natural resources
is crucial in the aftermath of armed conflict. Effective manage-
ment of these key assets can support a range of peacebuilding
objectives—from livelihood and macroeconomic recovery,
to good governance and inclusive political processes, to
improved security. The volume also demonstrates that there is
no single, universally applicable approach to natural resource
management in post-conflict settings.