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Putin Breaks First Law of Petropolitics

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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Five years ago, Thomas L. Friedman famously formulated "The First Law of Petropolitics," drawing on research showing that oil-producing countries tend to grow more repressive and aggressive when oil prices are high. Russia's descent into authoritarianism and virulent nationalism over the past decade appears to bear out the theory. It's far from certain, however, that the law will work in both directions: there's plenty of skepticism in Russia that the ongoing drop in oil prices will reverse the swing of the country's political pendulum.

Friedman described the First Law as follows:

The First Law of Petropolitics posits the following: The price of oil and the pace of freedom always move in opposite directions in oil-rich petrolist states. According to the First Law of Petropolitics, the higher the average global crude oil price rises, the more free speech, free press, free and fair elections, an independent judiciary, the rule of law, and independent political parties are eroded. And these negative trends are reinforced by the fact that the higher the price goes, the less petrolist leaders are sensitive to what the world thinks or says about them. Conversely, according to the First Law of Petropolitics, the lower the price of oil, the more petrolist countries are forced to move toward a political system and a society that is more transparent, more sensitive to opposition voices, and more focused on building the legal and educational structures that will maximize their people’s ability, both men’s and women’s, to compete, start new companies, and attract investments from abroad. The lower the price of crude oil falls, the more petrolist leaders are sensitive to what outside forces think of them.

Friedman was perhaps the most eloquent but far from the first proponent of the theory. Back in 2001, Michael L. Ross of the University of California at Los Angeles, provided robust proof that oil revenues were inversely related to the strength of democratic institutions. His explanation was based on oil states' financial independence from the lives and, therefore, the wishes of the majority of their populations. Government spending tends to be focused on patronage -- and on preventing the emergence of active social classes that want to shape their own destiny.

Had Ross's work been more widely known in Russia, liberals there would have known to prepare for President Vladimir Putin's governing style to become steadily more authoritarian starting in the mid-2000s, as oil prices started a decade-long rise. 

A corollary of the First Law of Petropolitics is the tendency of petro-states to act aggressively abroad. In July, Cullen S. Hendrix, of the University of Denver, published a working paper  which showed that "above $70 per barrel, oil states are significantly more dispute-prone than non-oil states." Hendrix argued that oil states tend to spend a lot on security to protect their scarce resource -- and then use their strong militaries to attack others because they feel a sense of impunity.

In a recent column for the Washington Post, Hendrix used his findings, and those of his predecessors, to explain the swaggering of Russia, Iran, and Venezuela when oil prices were high -- and to warn that a steep drop in oil prices may not make the world more peaceful because the resulting uncertainty in oil states will make them vulnerable to rogue forces such as the Islamic State -- or in the case of Russia, local separatists and Islamist groups. "Is it too much to ask for a happy medium?" Hendrix asked.

Conditions for a "happy medium" appear to exist right now. Oil is slightly below $70 per barrel -- not so low, in other words, as to plunge Russia, and most of the other big oil-producing states with the possible exception of Venezuela, into unmanageable chaos. If the petropolitics theory -- backed up by decades of real data -- has any predictive power, Russia should soon start leaning toward more liberal domestic policies and tempering its external aggression.

So far, Putin has turned to patriotism to forestall such a course correction, calling on Russians to stoically tighten their belts so the Motherland can hold on to its geopolitical ambitions. Insiders to whom I have spoken in Moscow present this gambit as a bet on oil prices: Putin and his inner circle are hoping they will go up within the next year or two, allowing Russia to strengthen its currency, bring patronage spending back to previous levels and continue lavishing money the military and police of every stripe. "If we are in a low price cycle that will last for five to seven years, Putin and his system will be wiped out," a top adviser to former president Dmitry Medvedev's administration told me. "I don't know by what means, but in the long run, people will refuse to tighten their belts because the ideology Putin proposes does not have enough appeal."

That would be consistent with the theory according to which cheap oil encourages democracy and deters aggression; after all, that's what happened into the Soviet Union after just a few years of low oil prices. If oil stays cheap, Putin's ultimate test will come in 2016. If his combination of repression and nationalist rhetoric keeps him relatively popular -- or feared, because poll respondents' motivations are impossible to read -- the First Law of Petropolitics may need to be revised for a special case: a cornered dictator who can still hold his own.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor on this story:
Cameron Abadi at cabadi2@bloomberg.net