Crude Interruption: How the Proximity of Assets and People Shapes Political Conflict

Abstract

Do natural resources like oil and diamonds cause civil conflict? If so, why? In many developing countries, profits from natural resources dwarf the national budget. Yet instead of financing a path to prosperity, prominent cases of civil war from the Aceh conflict in Indonesia to the Biafran War in Nigeria have convinced policymakers and scholars that there is a link between resources and conflict. This view held sway over several decades, but recent theoretical scrutiny and new empirical analyses of the issue suggest that the observed correlation may be spurious.

I reconcile these two views and argue that oil does cause civil war, but only under a limited set of circumstances. I develop a theory of asset proximity that predicts that oil only causes civil wars over local demands such as fiscal autonomy or secession and only when it is discovered near populated areas. People living near natural resources can often interrupt resource extraction through protests, sabotage, and strikes. In doing so, they also interrupt state revenues, because the state owns, controls, or heavily taxes natural resource production around the world. As a result, by virtue of their location, people living near natural resources and other valuable assets often hold considerable leverage with the state. The state will often be forced to acquiesce to their demands to avoid further revenue losses. If these bargains break down, violent conflict may result.

I leverage a mixed-methods research design to test the implications of this theory. I combine detailed geographic data on the timing and location of oil discoveries around the world; individual-level survey data from the oil region in Nigeria; and qualitative evidence from Nigeria. I test the implications of the theory in two ways: first, I assess the predictions of the model, relying on the natural experiment of the essentially random occurrence of oil discovery in exploration wells. I then evaluate the mechanism connecting the proximity of people and oil infrastructure to violent conflict. To do this, I rely on evidence from oil production interruptions, state policy changes, and violent conflict in the Nigerian oil region in the last decade.