The curse of bad governance

Is oil a curse? Political scientists have debated this topic for more than five decades, with many arguing that countries with abundant natural resources are often fated to suffer poor developmental and political outcomes because of the economic distortions that arise due to large reserves of oil or natural gas. It is time to put this debate where it belongs: In the dustbin of history.

No, oil is not a curse. Bad governance is a curse. For the most glaring case in point, look at Venezuela. Today, some 96 percent of the population live below the poverty line, according to a national study released over the summer. Yes, 96 percent. 

What we are witnessing today in Venezuela is a slow-moving, painful and tragic implosion of a country that still sits atop the rankings of states with the world’s largest proven oil reserves, ahead of Saudi Arabia, Canada, Iran and Iraq. 

So, has oil been Venezuela’s curse? No, Venezuela has been cursed by bad governance for many years, but particularly the last two decades. When Hugo Chavez entered office in 1999, he stripped away the independence of Venezuela’s reasonably well-functioning national oil company, Petroleos de Venezuela, and began using it as a personal political patronage machine, while gradually booting out foreign energy companies that had the expertise and resources to keep the oil flowing.

What followed was one poor decision after another, in oil policy and beyond, creating a sort of negative compounding of interest effect that eventually blew the country up. By the time the US began ramping up existing sanctions on Venezuela in 2017, exacerbating the country’s economic woes, its leaders had already done plenty of damage of their own.

Today, Venezuela’s oil production is roughly a tenth of what it was two decades ago, according to a Wall Street Journal report this week, while some 5 million Venezuelans have fled the country. Even as he strode the world stage, lecturing his foes and winning plaudits from allies, the late Chavez was providing a case study in poor governance. This poor governance, not oil, has led to Venezuela’s current situation.

Lebanon, meanwhile, has few natural resources but does possess one of the most dynamic, educated and talented population bases in the world. When Lebanese go abroad, they tend to excel, so why have so many problems befallen Lebanon of late? Once again, it is the negative compounded interest of bad governance. 

The tragic explosion at Beirut’s port last month represents the epitome of bad governance.

Afshin Molavi

Mismanagement, corruption and venal, short-sighted politics will not immediately hit a country or people hard, but eventually you cannot escape the bad governance trap. The tragic explosion at Beirut’s port last month represents the epitome of bad governance. A threat — large amounts of ammonium nitrate stored at the port — was identified six years ago. This means that Lebanon’s authorities had six years to solve what should have been seen as a pressing problem. All the while, the “Paris of the Middle East” was suffering through a garbage collection crisis, an electricity crisis, a banking crisis, and multiple other crises largely of its leaders’ own making. 

When the ammonium nitrate exploded, what also exploded were the years of bad management, poor decisions and venal politics. Tragically, 190 lives were lost and some 6,500 people were injured. 

Can you imagine a store of ammonium nitrate of that magnitude simply lying around for six years in some of the best-run ports in the world, like Rotterdam, Singapore or Jebel Ali in Dubai? Of course not, and yet it sat in Beirut’s port, exposing her people to unimaginable danger while politicians fiddled.

Look further east and examine Iran’s oil and gas sector — yet another example of poor governance. In an extraordinary report published last year by the University of Utah and the non-profit Omid for Iran and entitled “Where Is My Oil?,” author Khosrow Semnani notes that years of corruption and mismanagement in Iran’s energy industry has cost Iranians more than $1 trillion. 

Instead of chanting, “Where is my vote?” as millions of Iranians did after the re-election of Mahmoud Ahmadinejad in 2009, which was widely considered fraudulent, the paper argues that Iranians should be asking: “Where is my oil?” It’s a fair question, given the multiple high-profile cases of corruption in Iran’s oil and gas sector.

In fact, Iran’s own presidents have raised the alarm multiple times. Ahmadinejad would often decry Iran’s “oil mafia” and current President Hassan Rouhani has explicitly asked about the whereabouts of $700 million in lost oil funds and another $2 billion corruption case. Rouhani calls what he sees in the industry as “billion-dollar corruption” to emphasize the scale of the problem.

Meanwhile, when young Arabs began taking to the streets in 2010-11 in defiance of their ruling establishments, an undercurrent of their anger was the mismanagement and corruption of political elites. Over the past 11 years, the extraordinary Arab Youth Survey, a wide-ranging compendium of young people’s views from across the region, has repeated a familiar theme: Many young Arabs are frustrated with their rulers, demand more accountability and transparency, seek better governance, and want to see an end to corruption.

The corruption scourge is not unique to one region, but one thing is clear: Years of bad political decisions eventually take their toll. The real curse is bad governance, not oil, and, although you can get away with poor decisions, mismanagement and corruption for a while, and even wash it away with oil receipts, it will eventually bite you. The tragedy is that the ones who feel the pain are usually the people on the receiving end of those decisions and not the decision-makers themselves.

• Afshin Molavi is a senior fellow at the Foreign Policy Institute of the Johns Hopkins University School of Advanced International Studies and editor and founder of the “New Silk Road Monitor.”