CIS: The Emerging Post-Soviet Petrostates

Energy-rich but democracy-poor former Soviet republics are wielding newfound clout in ways that pose difficult new challenges to the European Union and the wider community of democratic states. Drawing on massive energy windfalls, these post-Soviet petrostates -- first and foremost Azerbaijan, Kazakhstan, and Russia -- are becoming increasingly repressive at home.

With oil prices spiking in recent years, the petrostates' windfall is staggering, and this sort of wealth should be a godsend for impoverished, post-Soviet countries. However, a salutary impact is by no means a given when one is speaking of unaccountable governing systems where small groups of elites control a large part of the resources. With the exception of Norway, which enjoyed the advantage of having accountable institutions in place when it began to develop its hydrocarbon wealth, the track record of lands rich in energy resources is rather poor.

Defining The Petrostate

Much of the study concerning energy-rich states and democratic accountability has focused on the Middle East. However, the recent rise high oil prices have focused attention on the energy-rich lands of the former Soviet Union. Whether the post-Soviet petrostates can escape the poor development outcomes of the earlier generation of countries that relied on oil and gas as their principal economic engine remains a significant question.

No less important, and indeed directly linked to domestic-development issues, is how these countries choose to exert their growing international influence.

While there is no ironclad definition of a resource-based economy, one frame of reference is those for which natural resources account for more than 10 percent of GDP and 40 percent of exports. This threshold is easily met in the cases of Azerbaijan, Kazakhstan, and Russia. More than half of Azerbaijan's current GDP and 90 percent of its exports are accounted for by oil and gas. In the Kazakh case, GDP is 30 percent and nearly 60 percent of exports come from oil. Oil and gas exports account for about 60 percent of Russia's federal budget revenues and two-thirds of its exports.

The Root Of All Evil

The "resource curse" -- along with associated pathologies of energy-led development -- may in fact already be rearing its head. In each of these post-Soviet countries, there is an increasing dependence on energy as the chief economic driver, as well as a growth of the state bureaucracy and official corruption.

With so much money flowing into these countries, the stakes are raised for powerful elites who dominate these countries' politico-economic systems and control these formidable resources. To protect their positions, they limit scrutiny of their activities by silencing the press and intimidating political opposition, civil society, and other independent institutions.

The crackdown on the press in all three countries has been particularly systematic. Journalists' murders, increasing media takeovers by regime-friendly concerns, and the careful selection of broadcast news to control what ordinary citizens can and cannot see have become standard operating procedure. In 2006 in Azerbaijan, for example, there were a host of measures imposed by the authorities to exert greater control over the media. These included a decision by the National Television and Radio Council to require Azerbaijani broadcast companies to acquire a license to re-broadcast programs from such news sources as the BBC and RFE/RL, effectively taking them off the air as of January 1, 2007.

The Russian authorities too have targeted the local affiliates that broadcast programming from RFE/RL. Meanwhile, Gazprom-Media, a branch of the state-controlled gas conglomerate, has expanded its share of the Russian print-media market. The Internet is coming under greater scrutiny from the authorities.

The increasingly tight control of the information sector serves as a barometer of sorts for the entrenchment of the petrostate and the corruption that is one of its hallmarks. A recent paper produced by the Organization for Economic Cooperation and Development (OECD) emphasizes the point that in resource-based economies restricted press freedom is among the critical factors enabling corruption to flourish.

International Petro-Politics

The Kremlin, having already effectively muzzled independent organizations and voices at home, is now pursuing an international dimension to its anti-democratic campaign. Russia's leadership has apparently set its sights on limiting the ability of organizations such as the Council of Europe and the Organization for Security and Cooperation in Europe (OSCE) to scrutinize its conduct. In 2005, Russia launched a campaign to limit the election-monitoring capacity of the OSCE, whose Office of Democratic Institutions and Human Rights (ODIHR) has set the standard for evaluating the conduct of elections in Europe and the Eurasian region. That campaign may be aimed at limiting these organizations' ability effectively to monitor upcoming elections in Russia (in 2007 and 2008) and in Kremlin-friendly autocratic states.

In its immediate neighborhood, Russia has also played the energy card to exert pressure on countries that represent the critical test cases for democratic reform in the CIS -- Georgia and Ukraine -- as well as on supposed allies including Armenia and Belarus.

The energy stakes are particularly high for Europe. EU imports of Russian energy,for instance, are expected to grow from 50 percent to 70 percent over the next decade and a half. However, with these petrostates' coffers already swollen with cash and no significant declines in energy prices in sight, the West is likely to confront increasingly assertive petro-diplomacy for the foreseeable future. These factors suggest that the community of democratic states should devise a coordinated response to the challenge, including the pursuit of a serious policy of energy independence.

Meanwhile, Russia, Kazakhstan, and Azerbaijan all have ambitions to be more deeply integrated into the global economy, to expand business with the EU and the Western community, and to be accepted as "normal" countries. They seek the prestige and benefits of membership of Western, rules-based organizations, while typically offering up only the trappings of accountable democratic institutions.

All three countries belong to the OSCE, which Kazakhstan hopes to chair in 2009. Russia and Azerbaijan are members of the Council of Europe. Both Russia and Kazakhstan hope to join the WTO by the end of this year. Those aspirations suggest that these countries should at a minimum be required to live up to the commitments they have made to these rules-based organizations and adhere to their accepted standards both at home and internationally.