In a preview of an upcoming USIP report, Tufts University’s Aditya Sarkar and Alex de Waal discuss how hydrocarbon revenue is used to maintain political stability in fragile oil-producing states, what traumatic decarbonization means for peace and conflict, and how policymakers, international organizations and civil society can mitigate its effects.

In what ways can the loss of hydrocarbon revenues affect patterns of peacemaking and conflict resolution in fragile oil-producing states?

de Waal: In weakly-institutionalized, conflict-affected countries, governing coalitions are often held together by money, with members of the political elite — almost all of them men — dividing up the national cake among themselves.

To be more precise, there’s a certain amount of discretionary cash that can be spent to grease political wheels. This “political finance” can be used to buy the loyalties of politicians or political services that make the system tick — no questions asked, no receipts needed. Among those who sell their allegiances are armed militia, vigilantes and security operatives.

Oil is one of the best sources of political finance. It’s plentiful and easily diverted. It provides the funds needed to keep a broad coalition together by offering otherwise-quarrelsome factions a share of the money.

This elite agreement is known as a “carbon compact.”

Carbon compacts are often used among coalitions to ensure stability; but they can also be used to expand coalitions in the form of peace deals — where rebels or other armed groups join the ruling coalition in exchange for a share. These carbon compacts keep many fragile fossil fuel producing states (FFFPs) ticking, but they begin to crack when oil revenues dry up.

Our research, based on an analysis of peace agreements in 54 oil-related conflicts , suggests that during periods of high oil-prices, peace processes produce fewer but broader agreements between the contesting parties — that is, the parties are more likely to make a comprehensive attempt to resolve conflicts and deal with a wider range of issues, such as governance, inclusion of different groups, human rights and equality, justice sector reform, etc.

A good example is the 2005 “Comprehensive Peace Agreement” between the Sudanese government and the Sudanese People's Liberation Army, which essentially amounted to an elite share-out of oil revenues between the two belligerents.

The loss of hydrocarbon revenue in FFFPs is destabilizing. Either the elites must find a new source of political money, or the bargaining turns violent. During these periods, peacemaking becomes focused on managing violence. Instead of comprehensive peace agreements, cease-fires become far more common. Paradoxically, there are more agreements when oil prices are low, but these are tools to manage violent bargaining in the short-term. These trends are only visible in oil-producing countries, and patterns of peacemaking tend to stay stable during fluctuations in oil prices in non-oil producers.  

What insights can be drawn from case studies of fragile oil-producing states such as South Sudan, Iraq and Venezuela regarding the relationship between unplanned decarbonization and political instability?

de Waal: Nearly one-third of the world’s oil reserves are in countries which are classified by the World Bank as experiencing conflict or fragility — meaning they are FFFPs — with around one-fifth of these reserves in Venezuela alone. These countries don’t plan for decarbonization because the elites know it spells political crisis. And because the decarbonization is unplanned, the process is traumatic and causes major political upheaval. According to our research, traumatic decarbonization involves four main things:

1. First, a collapse in oil prices sparks political crisis, but the trajectory of the crisis varies.

In Venezuela, when the loss of oil revenues threatened the ruling regime, the ruling party remained cohesive with hardliners controlling the military and coercive actors. The regime doubled down on repression and turned to mining other minerals and illicit smuggling to secure its political funds.

In South Sudan, on the other hand, leaders deliberately shut down their entire domestic production to avoid sharing revenue with Sudan, which received a cut based on transshipment to Port Sudan for export. Afterward, the carbon compact unraveled rapidly, and the army fragmented. In other cases, for example Yemen, merely the anticipation of lower oil revenues was enough to spark crisis.

2. When oil prices fall, politicians look for alternate sources of revenue, cut spending on public goods or try to make their money go further.

Elite bargaining intensifies. However, the fundamentals of the political systems in these countries don’t change — it’s ordinary people who suffer. New elites may come to power, but they play by the same rules.

Sudan illustrates this: After it lost most of its oil in 2011 following the secession of South Sudan, Sudanese rulers turned to artisanal gold mining and renting out mercenaries to make up the revenue shortfall. The militia which controlled the gold mining areas — the Rapid Support Forces (RSF) — gained money, and in due course, made a bid for power, as the RSF is now one of the belligerents of the ongoing war in Sudan.

3. The loss of oil revenues in FFFPs leads to the immiseration of the general populace.

This is partly because of the impact on governmental revenues, as governments impose austerity. It’s also partly because political elites steal more, sometimes by directly preying on the poor, to pay their way in the political marketplace.

4. And lastly, in almost every country, large scale protests break out during or after loss in oil revenues.

For example, huge numbers of ordinary Iraqis took to the streets in 2019 to denounce endemic corruption, economic decline and endless cycles of conflict. In Nigeria, the #EndSARS protests broke out in October 2020 — initially sparked by the extrajudicial killing of an unarmed civilian by a special police squad — but came to encompass public outrage over corruption and governmental abuse of power. Sudanese civilian protesters chanted “down with the rule of thieves” and staged nonviolent demonstrations and sit-ins that brought down the government in 2019.

All these protests were driven by material issues — such as the price of bread, unemployment or the lack of electricity during summer — but expanded to demand broader systemic change. Despite energy and idealism, however, protesters could rarely change the crude workings of the political system that relied on money and brute force. Hopes for peaceful civic revolution were dashed in Iraq, Sudan, Venezuela and Yemen.

What are the challenges and opportunities for policymakers in addressing decarbonization in fragile states? How can international organizations, policymakers and civil society collaborate to mitigate the adverse effects of traumatic decarbonization?

Sarkar: Policymakers looking to respond to decarbonization in FFFPs are stuck in silos. Those engaged in conflict resolution or peacebuilding do not consider the effects of the global energy transition to be within their realm of expertise. Equally, those working on global climate policies rarely focus on fragile countries — they think of them as outliers or hope that the governments will stabilize in due course.

But the rough politics of traumatic decarbonization means that these two groups of policymakers need to overcome current institutional structures and incentives and work together. Special care must be taken to ensure that transition pains in fragile carbon economies are not analyzed as security crises requiring militarized responses, which are likely to make things worse, not better. 

A related challenge is that the debates within climate policy tend to treat the impacts of energy transition in two ways: Either the debates focus on the job losses within communities dependent on fossil fuels or the focus on the challenges of providing finance for developing states reliant on oil revenues. Neither captures the situation of decarbonizing fragile states accurately.  

Existing policy conversations can also be analytically muddled. They tend to treat a number of trends — namely, the loss of government revenues in developing countries, the increasing demand for critical minerals, the need for development finance, the political effects of decarbonization, and the global investment in green energy — as a single phenomenon. This is not the case. Political elites in FFFPs have a discerning eye for risk and opportunity, and for insulating themselves from sacrifices. Good policy can only follow from accurate prognosis, and policymakers need to re-consider some of the categories through which they examine the issue of decarbonization, fragility and conflict.

There are no silver-bullet solutions for mitigating the destabilizing impact of a green energy transition on FFFPs. Rather than developing new policy tools, existing policy mechanisms may need to be strengthened. Four key steps stand out: 

• Stay engaged in oil-based peace processes: Peace agreements in FFFPs may fall apart during decarbonization. International organizations and external mediators need to stay engaged in oil-based peace processes beyond the signing of agreements so that they have influence, relationships and leverage if a peace process is threatened by decarbonization. The key is to develop alternate mechanisms within peace processes which do not rely on elite share-outs of oil revenue. At the same time, humanitarians should build decarbonization into their processes of scenario planning.
• Move away from global back-casting and toward participatory transition modeling: Instead of working backwards from decarbonization aims (such as net-zero by 2050), energy transition modeling needs to account for the views of national and subnational stakeholders. Including the diverse views of citizens could allow for the creation of coalitions which could hold leaders to account.
• Continued support for democracy activists: Additional support to local democratic activists in advance of decarbonization crises could help civic organizations make claims for democracy and accountability more forcefully. Above all, democracy and human rights activists in FFFPs need to have the right toolkit for political critique and policy formulation.
• Take advantage of the energy transition: One of the largest opportunities presented by the global transition to renewable energy is decentralized electricity production. Renewable energy sources do not require the same large-scale infrastructure. For communities that have never had access to electricity or have lacked consistent access, the energy transition could provide new modes of production and business opportunities. The expansion of local economic activity could in turn reduce dependence on patronage networks for daily survival.

Aditya Sarkar is a doctoral candidate at the Fletcher School of Law and Diplomacy at Tufts University.

Alex de Waal is a professor at the Fletcher School and executive director of the World Peace Foundation.

The article is based on USIP-commissioned research through an Environment, Conflict and Peacebuilding Grant. The research was conducted from 2020 to 2022.