Why and How does the Presence of Natural Resources increase the risk of Civil War?

During the Cold War , the Two Superpowers , US and USSR were engaged in proxy and peripheral wars all around the World. The US were virtually supporting any kind of insurgent engaged against the USSR (e.g : the Talibans) and vice-versa. Their financial support often permitted the insurgents to make the war last longer […]

During the Cold War , the Two Superpowers , US and USSR were engaged in proxy and peripheral wars all around the World. The US were virtually supporting any kind of insurgent engaged against the USSR (e.g : the Talibans) and vice-versa. Their financial support often permitted the insurgents to make the war last longer , since they were able to receive a regular income.  After the end of the Cold War in 1991 , and the fall of USSR, the US stopped or reduced their support for insurgencies , since with the USSR’s downfall it was now irrelevant to support them . As a consequence , in the following years , many civil wars around the globe came to an end. However many other civil wars , especially in Africa, continued and even grew more severe, despite the end of the Cold War.

To understand this phenomenon , since the end of the Cold War , there has  been many research on the causes of civil war. One particularity of these findings was that the presence of natural resources –especially oil, minerals or illegal drugs –  plays  a key role in setting off and perpetuating the civil war.

 

This paper will examine and synthetize the findings of scholars about the correlation between natural resources and civil war,  and will attempt to explain in four points , why the presence of certain kind of natural resources is likely to increase the risk of civil war and  to make the civil war last  much more longer than in a country without these natural resources.

 

These paper will be divided in Four parts.

 

The first part will describe how the presence of natural resources harm the country economic growth.

The second part will describe how and why these resources makes the government weaker , making it particularly corrupted and not accountable to the citizens.

The third part will explain how these factors might  push the people living in the resources rich region to embrace separatism.

And finally the Fourth part , will explain how the presence of these natural resources will help the rebels and separatists movements to finance their actions.

 

All these points have been tested in different case studies and could explain the very high rate of civil war in the resources-rich regions in the Third World , especially in the Sub-Saharan Africa.

 

Introduction

 

Since the end of the Cold War in the early nineties , there has been many researches on what were the real causes of civil wars. Many findings pointed out that the presence of natural resources was playing a key role in starting off and prolonging conflicts. (Keen,1998; Collier and Hoeffler,2001 ; Fearon,2002)

The natural resources that are bringing these problems are mainly oil (and natural gas) and minerals such as gold , diamonds , coltan , and other gemstones..  Sometimes other types of resources also play a role such as timber for example. Drugs , which are a type of natural resource , are also playing a key role in several conflicts.

 

Since the end of the 20th century , many conflicts and Civil Wars have occurred in Resource-Rich Regions : In Sudan, an oil rich region , since 1983. The Civil Wars in Sierra Leone and Liberia between 1989 to 2000 , two countries with an unusually high quantity of diamonds, gold and other gemstones. In the province of Cabinda in Angola , an oil rich region. In the Katanga province in Congo , a  region rich of Copper , Diamonds, Gold , Cobalt. In Indonesia , in the region of Aceh (rich in natural gas and marijuana) and West Papua ( Rich in Gold) , In Peru , Afghanistan , Columbia and Burma for the control of drugs ( Opium, Coca, Marijuana , )..

 

This paper analyzed 17 recent conflicts that were linked to natural resources (please see table 1) . In 8 of these conflicts , it involved diamonds and other gemstones. In 6 conflicts , the resource involved was oil or natural gas. In 5 it involved illegal drugs , and in three case timber was involved.

This paper will show that , in most of the conflicts , whatever may have started the war , the presence of  valuables natural resources undoubtedly plays a key role in prolonging the conflict.

 

More than half of the conflicts we analyzed are located in Africa. The fact that many African states are highly-dependent on oil , gas and mineral exports, might explain partly why the African states are unusually prone to resource-related conflict.

The African Continent , is the richest region of the world in terms if minerals abundance. This factor might explain why a growing share of the world’s civil wars is taking place in Africa ;  even if it is not the only reason though ( another important reason for this trend is the persistence of poverty in Africa , and poverty is a factor that significantly raise the risk of civil war). (Ross,1999)

In most regions of the world , the end of the Cold war has led to a significant reduction of the number of civil wars , as the main superpowers , the US and the Soviet Union reduced or stopped their financial support for regional insurgencies. Just after the end of the Cold War (1991) to 2002 , the number of regional conflicts  located outside of Africa decreased by  fifty percent.(World Bank, 2002).

However in Africa , the number almost remained the same. More grave,  within Africa , Armed conflicts even became more severe. During the 1970’s and the 80’s , half of all intrastate conflicts in Africa could be classified as civil wars – meaning that they provoked at least one thousand battle-related deaths each year. In the 1990’s , two thirds of Africa’s intrastate conflicts were considered “civil wars” . Africa had seven civil wars in the 70’s , eight in the 80’s and fourteen in the 90’s. These UN statistics clearly shows that the conflicts are becoming more severe and more intense in Africa. (World Bank, 2002).

 

However , before going further , this paper before going further will emphasize two points.

 

The first point is that  natural resources are NEVER the ONLY source of a conflict. Any given conflict is brought about by a complex set of events ; often poverty , ethnic or religious strife ,and inefficient  governments also play major roles.

But even after these factors have been taken into account , the studies from previous scholars and this paper,  consistently found out that natural resources heighten the danger that a civil war will break out , and once it breaks out , that conflict will be more difficult to resolve since the war is more likely to last longer (than conflicts in countries without these natural resources ).

The Second point is that  natural resources dependence never makes conflict inevitable.  Resources wealth increase the risk of civil war , but findings shows that not every resource-rich country has suffered from violent conflict. There are many resource-rich regions in the world (Middle-East, Latin America, Asia, Russia..)  In average , for one resource conflict , two or three have been avoided. Full scale civil wars are still rare events , and outside Africa, they are even more rare. (Collier and Hoeffler,1998)

 

This paper aims to give an overview and describe the roles that the presence of  natural resources plays in civil wars.

This paper will discuss four sectors in which the presence of natural resources will have an impact. First the presence of natural resources has an impact on the economic performances of the country , second by their effects on governments , third by their effects on people living in these resources-rich and finally , by analyzing their effects on the rebel movements.  (Collier and Hoeffler,2001 ; Fearon,2002 😉 This paper will emphasize how the  Presence of certain kinds of natural resources has an impact on the Economic level , but also at the political level (weak government) , Sociological level ( Separatism emphasize the ethnic difference between populations living in resource-rich region and the rest of the population). And the Criminal level ( by increasing the insecurity and favoring the emergence of criminal practices) .

 

The dependence on natural resources affect the Economic Performance.

 

 

 

The dependence to only one or two natural resources appears to make the concerned states more susceptible to civil war . The reason is that this situation of resource-dependence often produce two economics mechanisms that affects the economy :  first it is often reducing the growth of the economy and as a consequence  it might  paradoxically increase poverty in the country , which is an important factor that increase the risk of civil war as we already mentioned.

 

a.     Economic Growth

 

The First point is Economic Growth.  Paradoxically multiple  findings (Leite and Weidmann, 2001 ; Ross,1999) shows , that a presence of certain natural resources , which are extremely valuable  such as oil , gold and other gemstones , instead of making the country richer , tends to provoke poor economic performance. Studies have shown that the economy of resource-dependent countries grows slower than economies of countries without natural resources. (Sachs and Warner,2001 ; Leite and Weidemann,1999). A recent report by the World Bank , for example , compared the  economic performance in the 1990s of States that had a large mining sectors  such as gold, diamonds and other gemstones, and it found  out that the  countries moderately dependent on these exports (between 6 and 15% of all exports) , saw their GDP per capita fell by 0.7 % per year over this period. Worst , the countries where minerals represents a high parts of their exports (between 15% and 50%) saw their GDP per capita dropped by an average of 1.1 % per year , while in countries totally dependent on these exports (more than 50%) , the GDP per capita fell by an incredible  2.3% per year. In Average these mining states in this period saw their GDP per capita decrease by almost 11%. (World Bank,2002)

More than solely an economics collapse , it also has consequences at the political level. Indeed, studies have shown that when a country economic growth tend to be negative for a certain time , tensions and possibly a civil war is more likely to emerge. (Collier and Hoeffler, 2001 ; Hegre 2002). For example , during the three years preceding the war in the Democratic Republic of Congo , GDP growth was around – 6% ; In the three years before the Congo Republic civil war , economic growth was around – 2%  and on the eve of Liberia’s civil war ,  the economic growth averaged – 1.5 %. (World Bank , 2001).

 

 

b.     Poverty

 

A second very important factor is poverty. In fact, a country which is dependent on non-fuel mineral exports such as gold or gemstones, and to a lesser extent oil, tends to create an unusually high amount of poverty. A key reason to explain this high rate of poverty is the inefficiency and unwillingness of the governments to provide a proper education or any services  that should be assumed by a sovereign  state to its citizens. A study by Collier and Hoeffler in 2001 , showed that there was a strong correlation between the dependence on mineral exports and high mortality rate for children. The Greater is the dependence , the greater would be the mortality rate for children. This factor is not only problematic from a Human Rights perspective, it is also a political problem because it provides ground and reason for a possible violent conflict.  In average , the more the country has poverty , the more it is likely to face a civil war.  (Collier and Hoeffler, 2001). Indeed , citizens of a country or a region will be willing to revolt against their government if despite the high amount of natural resources , the economy is collapsing (negative growth) and if their government- which is supposed to represent them-  is not providing any services to its citizens. Therefore rebels and separatists groups , hostile to the government , will found a fertile ground to recruit new members in this context of  widespread poverty and unemployment , since it makes the prospect of combat and looting much more attractive. (Fearon and Laitin ,2002)

A look at the world’s most oil dependent states , and most mineral dependent states , illustrates  these patterns : In the world ,  on the 20 most resource-dependent states on non-fuel mineral , five experienced a civil war since 1990 ( Sierra Leone , Liberia, Congo , Peru  and Angola). and 12 of them are considered “Highly indebted poor countries” , meaning that they are classified by the World Bank- despite earning large sums of foreign currencies from the sales of their natural resources- as  countries with “high levels of poverty and debt overhang”. ( Sierra Leone , Zambia, Mauritania , Liberia , Niger , Guinea , Democratic Republic of Congo , Bolivia , Togo , Central African Republic , Ghana  and Angola).

Oil dependent states are also affected (although it is to a lesser extent) by these patterns :  on the 20 most oil dependent states, once again , 5 experienced a civil war since 1990 ( Angola , Yemen ,Congo , Algeria and Iraq) and  among the top six states , three are classified as Highly Indebted Poor Country ( Angola , Yemen and Congo). (World Bank,2001).

These findings clearly shows that resource-dependent states have significantly higher chances to experience a Civil War and to be in an extremely precarious economic situation.

 

Resource Dependence and Governance

 

 

Natural resource dependence also has a strong impact on the political level , especially on governments. Some Recent studies showed that oil and mineral dependence was hurting the economic growth , mainly by damaging the institutions of governance. (Isham et al,2003). Indeed a strong and effective government should be able to resolve some of the economic and social problems caused by the resource dependence. But resource dependence tends to influence the governments themselves , making them more susceptible to conflict. This seems to occur through three mechanisms : corruption , state weakness , and reduced accountability.

 

a.     Governmental Corruption

 

The First mechanism is Government Corruption. Many studies showed that there is a strong correlation between resource-dependence and corruption. Indeed , in some cases , when a government gets most of its revenue from oil , minerals or timber , it is more likely to be corrupt. For example , Warner and Sachs , found that there was a strong correlation between resource dependence and a usually used measure of corruption. Marshal reports also found that there was an unusually high rates of corruption in the minerals sectors of many countries.  (Sachs and Warner,1999 ; Marshall,2001). One of the reasons is that the volume of the production and the sales of these natural resources produces an incredibly high amount of revenues and financial flows, and the governments , lacking a strong bureaucracy , are not able to absorb or effectively track all the money. Therefore because the money generated by the sales of these natural resources is often too much for a government , which cannot effectively manage and tracks all these amounts of cash flows because of the lack of organization. This lack of organization somewhat results in the will of governments officials to collect these resources revenues in ways that are very difficult for the citizens to track  – so  really easy for some corrupted governments officials to divert – therefore an important part of these revenues generated by the sales of these resources , often end up , in the pockets of governments officials , usually in a foreign bank in a fiscal heaven , and it is never heard of again.

Also another types of  problems derive from the volatility of resource revenues. Indeed , for the last century , the international prices for primary commodities  such as oil , gemstones and timber, have been more volatile than the prices for manufactured goods. (Grilli,1988). Since the 70’s , this volatility has developed and became worse. (Reinhart and Wickham,1994).  This means that these resource-dependent countries, which are usually reliant on a  the exportation of a single natural resource (oil, minerals..) , are becoming increasingly vulnerable to economic shocks . Case studies suggest that these important flows of revenues tends to submerge normal budgeting procedures mechanisms , and thus promote and favor corruption and patronage. This therefore , weaken the ability of Governmental agencies and companies to remain free from political interference.  For example , the oil booms of the 1970’s were generally associated with a high decline in the efficiency of public investments , which indicates , that corruption levels were rising .(Collier and Gunning,1999). Another study showed that the Malaysian , Indonesian and Philippines timber sectors reported that rising timber prices led to profound levels of corruption , and the breakup with institutions that had earlier protected the forest sector from illegal exploitation. (Ross,2001)

 

 

The nationalization of foreign oil and minerals firms in the 60’s and 70’s ,  provoked a backlash and made states more vulnerable to these kinds of revenue shocks. Before nationalization , foreign corporation in most of the cases captured and transferred to their homeland ,  a large parts of the resources rents , and were giving to the local government a regular and fixed source of income, even in the case of a resource shock.  The national resources being exploited  by foreign firms , and their revenue being divert to foreign lands , was much resented by the leaders and the population of these states. However what the governments of the resource-rich countries didn’t include in their calculation ,was that the rents and the revenues they were perceiving from these foreign companies,  was constant and not tied to the price of the commodity in the international market. Therefore they had the unintended benefit of insulating states institutions from the volatility of the international commodity markets.

This is why , after the nationalization and the expropriation of the foreign corporation – at a time (in the 70’s) where resources prices were becoming more and more variable- the governments , which then turned to be resource-exporting governments , became increasingly and suddenly exposed to large market shocks. (Ross,2003)

In theory , resource-rich countries have solutions to overcome temporary commodity- shocks ; Governments are able to insulate their economies against markets shocks by creating emergency stabilization funds , or savings funds. However , in the countries concerned , because of the high level of corruption , the creation and the management of these funds is often ineffective (or inexistent because it would indeed be ineffective because of corruption). (Ascher,1999).

To understand the extent of corruption mentioned in the case studies , it is important to have a look at what resource-linked corruption looks like. One of the most extreme case is Angola. According to an IMF report, more than one billion dollar disappeared from the Angolan governments accounts in 2001 alone due to corruption. Fiscal irregularities due to corruption over the several years could have represented as much as 23% of the Gross Domestic Product (GDP) of the country. Most of these losses were linked to the oil industry and the oil exportations revenues. Large parts of the sums the governments was supposed to receive from the national State oil company , Sonangol , disappeared, and the company was criticized by opponents for managing the country oil revenues through a “web of opaque offshore accounts” in total contradiction to the  Angolan Law, that requires that the funds be handled by the central bank. (GlobalWitness.org, 2002).

 

a.     Weak Governments

Natural resources revenue can , ironically weaken governments, making them less able to resolve social conflicts and provide public goods , like health care and education.

There are two ways in which this can happen. The first way is by retarding the efficiency of a state bureaucracy. Some researchers have found that when a government is funded through revenues from natural resources exclusively such as oil or minerals instead of taxes paid by the citizens , it is left with a weaker government. Why? Because much of a government “strength” comes from its capacity to extract taxes from the population – a process that often takes a very long time to develop. A government that fails to develop this process may also be, as a consequence, not able to establish the type of bureaucracy that would be needed to provide effective public goods such as Healthcare, Education, or Security, in order to avoid  social unrest, which results may be a heightened risk of violent outbreak which may then turn into a civil war ( Fearon and Laitin,2003).

 

The second way is by weakening the state’s territorial control. If a state has natural resources that are highly valuable , and can be extracted with little training or investment – such as gemstones , especially alluvial gemstones , tanzalite or coltan – it will be difficult for the government to provide law and order in the extractive region. The reason is that , these kinds of mineral deposits attract large numbers of artisanal miners to what are typically rural , “frontier” regions , where the government influence is traditionally weak. Land claims in these areas become valuable , however because of the weakness of the government, the lack of authority from the government on this region, makes it hard for claimants to enforce or protect their property rights through legal measures. As a result, they often resort to non-legal measures , including violence , to establish claims and resolves disputes over claims. The utility of violence created a demand for organizations such as criminal gangs , or paramilitary units ,  which in exchange of a certain sum of money would use extralegal means (usually violent) to enforce mineral claims. (Garkinkel and Skaperdas,1996). In addition , the high value to weight-ratio of these gemstones make them difficult to tax and easy to smuggle ; these qualities, inherent to minerals,  produce high corruption levels inside the government ,and large smuggling operations outside of it. The combination of weak , corrupt , government authority , and strong criminal organizations can facilitate the rise of rebels and separatists movements (Ross,2002).

The case of Sierra Leone illustrates how alluvial minerals , dispersed over a wide area ,  can reduce the control of the government over the resource-rich territory and lead to civil war. During the 20th century until the sixties ,  Sierra Leone used to have a solid economy , composed mainly of exportations of minerals such as gold , iron ore and beauxite , in addition to Diamonds. Concerning diamonds , Sierra Leone did possess two kinds of them : The Kimberlite Diamonds , which are located deep underground , and can only be extracted with heavy and modern equipment, and alluvial diamonds , which are extracted from the water of alluvial plains. These diamonds  contrary to the Kimberlite Diamonds , could be extracted without heavy equipment and particular training , and could be extracted by unskilled workers with no equipment.

Most of these resource were extracted by foreign companies or state-owned companies , that were sharing with the government a large part of their benefits. Providing the government with a regular income. However in the early eighties , Sierra Leone Kimberlite diamonds reserves were exhausted. As a consequence the unregulated mining of alluvial diamonds became by default, the country’s primary source of revenue. (Ross, 2002 ; Reno,1995)

 

The Government of Sierra Leone had always had difficulties in exercising its authority over the diamond fields region , which was populated with hundreds of thousands unlicensed miners , coupled with a network of private armies , paramilitaries , warlord and armed gangs, which were selling protection to the companies and the unlicensed miners.  Therefore ,the mining area was a site of social unrest (Reno,1995).  But the source of the problem with alluvial diamonds , lays even before civil war broke out in 1991. Indeed Sierra Leone growing dependence on alluvial diamonds was an issue for the governments : rather than generating extra-revenues for the governments , the extraction of alluvial diamonds was generating very important level of corruption. In 1988 , official diamond exports were only 22,000 dollars , while the illicit trade of diamond exports were estimated at approximately 250,000, 000 dollars. (Reno,1998).

Before the 80’s , the government was able to contain and manage corruption and security , because the rest of the national economy was in a solid shape , bringing a regular income, permitting to limit corruption and insecurity in the diamond fields. But in the 80’s , the country entered in an economic recession , because of the exhaustion of kimberlite diamonds coupled with other factors (high price of imported oil, exchaustion of iron ore and inefficient governmental policies). Therefore the government revenues diminished from 14.5 % of the GDP to 3.9%. The turning point was in 1985 , where the strong and skilled political leader Siaka Stevens , gave power to his less skilled and charismatic successor Joseph Momoh.  This change of leadership coupled with the others economics factors , led to the disintegration of government’s influence over the diamond-rich regions. And when a small army of rebels , crossed the borders from Liberia in 1991, the government of Sierra Leone was not enough strong to repel them , and the country fell in a civil war that lasted until 2001, provoking immense damages to the population and to the economy. (Ross, 2002 ; Reno,1998).

 

b.     Unaccountable Government

 

The third effect is a reduced government accountability. Governments that get their income from natural resources become less democratic – and hence , less accountable – than countries that rely on other revenue sources , such as taxation.

One reason for this pattern is that when governments have an abundance of revenues, they use a consequent part of their benefits to silent the opposing voices. Sometimes they do it through tax policies : resources-rich governments commonly use their revenues to reduce or eliminate taxes on their populations ; in the absence of taxes , people are less likely to ask accountability from their government. In different times they do it through spending : greater patronage can also slow down pressures for democratization. In some cases governments abuses of their power to prevent the formation of social organizations that might eventually demand political rights .Of course , all undemocratic rulers use their fiscal powers to reduce dissent , but the particularity of these governments( in resource-rich states) is that they tend to have extra revenues at their disposal. ((Ross,2003)

A second reason is that oil and mineral rich governments spend an unusually large part of their revenues on the military, which also helps them in silencing the opposition  and therefore keeping the government unaccountable (Ross,2003).  The unusually large parts of their military spending compared to their GDP is represented by calculating the average of the twenty most oil and mineral dependent country states , and the twenty least oil and mineral dependent states in the developing world between 1989 and 1999. Military spending is consistently between two and four time greater in the mineral rich states than in the other states without mineral resources. (World Bank Data,1989-1998).

 

There are also other ways in which the presence of an extractive industry can boost the influence of the armed forces.

Sometimes the industry is controlled by the military , which gives the military more independence from , and greater influence over , the civilian government.  In  Indonesia for example , the military has an important number of shares in many forests concessions ,and collects fees from oil , gas and mineral companies. Since this money goes directly  to the military, it does not pass through the central government’s normal budgeting procedures. This has the advantage to avoid the fund being diverted , but it means also that the legislature has no influence over how it will be spent. The result is that the extractive sector helps make the military less accountable to the civilian government, undermining the fragile democracy in Indonesia. (Ross,2003)

Once more , the harm that resource dependence does to democracy is mostly disastrous , and can also make states more vulnerable to civil war. Several studies have found a link between a government’s accountability and the plausibility that it will suffer from a civil war . (Hegre,2002). Governments that not democratic are less able to resolves the demands and needs  of their citizens , and as a consequence may be more prone to outbreaks of violence. It is easy to see how the effects of resource dependence on economies and governments can reinforce one another, creating a cycle. Economic volatility and low growth tend to destabilize governments . When the governments are unstable , they cannot manage their economies well and properly contain economic volatility and slow growth.  As a consequence ,  many countries such as Algeria, The Democratic Republic of Congo, Liberia and Sierra Leone , have fallen into these cycles of conflicts.

 

Resource Abundance and Secessionist Movements

 

 

Resource wealth tends to promote civil wars through a third mechanism :  by giving people who live in a resource-rich areas an economic incentive to form a separate state. (Collier and Hoeffler,2002). Our case studies will include nine secessionist civil wars in regions rich in mineral resources. The Cabinda Province in Angola , the Hill Tribes in Burma , The Katanga Region in the Democratic Republic of Congo, In Indonesia in Aceh and in the West Papua , In Morocco and the Western Sahara , in Nigeria in Biafra , in Papua New Guinea in Bougainville and in South Sudan (now an independent country).

These regions suffered from insurrection, strongly connected to the natural resources , have several elements that set them apart from similar , but non-rebellions regions. One is that before the natural  resources  were exploited , people in these areas had a distinct identity – whether ethnic , linguistic , or religious – that set them apart from the majority population. Another is that local people typically bore many of the costs of the extraction process itself – due to land expropriation, environmental damage , and the immigration of labor from other parts of the country. Finally there was commonly a widespread belief that the central government was unfairly appropriating the wealth that belonged to them , and that they would be richer if they were a separate state. Contrastingly, some studies have proved , that this belief is sometimes mistaken. (Collier and Hoeffler,2002)

The conflict in Aceh , in Indonesia , offers a good illustration . In many ways , Aceh – a province located in the North of the Sumatra Island – , was an unlikely place for a revolt , and much less for a separatist rebellion.  The People of Aceh played a vital role in throwing off the Dutch  and their colonial rule. Similarly they played an important role as well in the establishment of the Indonesian Republic . (Wieringa, 2010)  Although the people of Aceh consider themselves ethnically different from the rest of the Indonesian population , they have the same culture and share some identical values such as religion (Islam) and language ( Bahasa ). Aceh had the highest economic growth of all provinces in Indonesia in the 70’s and the 80’s , and in the late 90’s Aceh was one of the richest province with the one of the highest per capita income from all provinces. (Wieringa, 2010)

Still, a separatist organization was formed in Aceh in 1976 , just as an important natural gas facility was beginning its operation . The facility created resentment from the local inhabitants in at least four ways :  first , the site’s construction displaced hundreds of families , and several entire villages. Secondly ,  the development of the area brought a wave of immigration, that threatened to change the demography of Aceh, and as a consequence  caused an anti-immigrant backlash. Thirdly ,  the discharge of chemicals , and the cases of periodic gas leaks , caused health problems among the Acehnese. Then finally , the influx of revenues coupled with the large police and military presence , led to extremely high levels of corruption and violence. (Wieringa, 2010)

 

Stil, the most important source of discontent wasn’t these four points , it was the belief that the jobs and the revenues from the natural gas plant were not being fairly shared with the people of Aceh. This issue became the leitmotiv of the secessionist movement, popularly known as GAM (Gerakan Aceh Merdeka). GAM propaganda suggested that if they were independent, the Acehnese would become wealthy like the citizens of Brunei , the very small oil-rich sultanate on the neighboring island of Borneo. This claim was totally unrealistic; by at least an order of magnitude ; but it was widely believed , reflecting the low credibility of the Indonesian government. Although small at first , by the late nineties, the GAM’s movement won widespread support among the population , partly due to the brutality and inefficience of the government’s anti-insurgency campaign. (Ross,2003)

Another good example is the Civil War in Sudan.

The Civil war in the Sudan was also triggered , in part , by a dispute over how to divide the benefits of mineral wealth. In 1983 Sudanese President Numeiry took a certain number of  measures that modified the fragile equilibrium between the predominantly Muslim North and the heavily Christian and Animist south . One of the most important decision was his decision to place newly discovered oil in the country’s south under the jurisdiction of the north , and to build an oil refinery in the north rather than in the South. The Sudan People’s Liberation Army (SPLA) subsequently complained that the north was stealing the resource of the south, including oil , and demanded that work cease on a pipeline to take oil from the south to the refinery in the north , and in February 1984 , the SPLA attacked an oil exploration base , killing three foreign workers considerably slowed down the project. Instead of responding to the SPLA’s demands , however , the  Sudanese government (mainly controlled by Northern Sudanese)  waged a campaign of an astonishing brutality. To date , the conflict has killed an estimated 2.9 million people. (Anderson,1999)

These essential features – an ethnically distinct population that bears too many of the costs of resource extraction and enjoys too few of the benefits – are repeated in most of the other cases and have repeatedly led to long and harsh civil wars , according to the findings of Fearon , where he confirms that separatist insurgencies over natural resources tend to last longer than any other type of civil war. (Fearon,2002).

 

Rebel Financing

 

To assemble and sustain a fighting force of hundreds or thousands of soldiers ,a rebel group needs a regular source of income. (Collier and Hoeffler,2003). Before the end of the Cold War , successful rebel groups in the developing world were typically financed by foreign powers , most often the US , the Soviet Union, or to a lesser extent , France. Since the Cold War ended , insurgents groups have been forced to find other ways to bankroll themselves ; many have turned to the natural resources sector. (Keen,1998).

Why did they turn to the natural resources? There are two reasons for that. First, the extraction of natural resources can produce extremely high profits , large enough to cover the needs of an army , and these profits are usually rents , meaning they come without much effort and on a regular basis.  The second reason is that the production of natural resources is tied to a specific location and cannot be easily moved. These characteristics makes natural resource firms – particularly mineral firms – particularly  susceptible to looting , or extortion , on a regular basis. If rebels instead try to loot or extort money from manufacturing firms , the firms will move to a safer area , or be forced out of business. The advantage here , is that mining firms cannot move , and they often earn enough money to pay the rebels groups and to still makes commercial profits. These characteristics – plus the location of most resource industries in rural areas , far from government centers, where the influence of government is weaker – makes natural resources resources an ideal source of income for rebel groups.

 

There are three main ways that  rebels raise money from these natural resources : The first one is direct looting and sale of resources. The second one is through the sale of resources future. And the third one  through extortion and kidnapping.

 

 

a.     Direct resource looting :

 

There are many examples of rebel groups that have financed themselves by selling natural resources. In general these are resources that can be easily exploited by small numbers of workers with little training , and with little (or no) investment – such as gemstones , gold , diamonds , timber…- .

Since the last years of the Cold War  , there this paper has analyzed seven case studies.

 

The first Case study is Angola’s UNITA , which over the course of the nineties sold at least hundreds of millions , and possibly billions dollars worth of diamonds (Le Billon,1999).

Afghanistan Northern Alliance of Massud , in the 90’s financed itself through the sale of 60 millions dollars of gemstones( especially the lapis lazuli) every year. (Rubin,2000).

Different groups in Burma , which were affiliated with the ethnic groups  Kachin , Wa and Shan , sustained their paramilitary units in late 80’s and the early 90’s by selling a wide range of regional natural resources including minerals (jadeites , rubies , saphirs) , Drugs (Opium) , and Timber. (Lintner,1999).

The Cambodian Khmers Rouge , which at their peak in the early 90’s earned hundreds millions of  dollars  a year from the sale of gemstones (rubies) and timber. (Le Billon,2000).

A range of paramilitary units  in the Democratic Republic of Congo have systematically looted the country from the beginning of the current conflict , in 1998 , to the present , these include both foreign forces (particularly those from Rwanda , Uganda, and Zimbabwe) and domestic militias (notably the factions of the Rasemblement congolais pour la democratie (RCD ) , the Mai Mai , and the Mouvement de liberation congolais (MLC)). Among the looted goods have been diamonds , gold , coltan , timber and even coffee. (UN Panel of Experts, 2001).

In the early 90’s in Liberia , Charles Taylor National Patriotic Front of Liberation was thought to be earning some 75 millions a year from taxing the sale of diamonds , timber , rubber , cannabis and iron ore (Ibid).

In Sierra Leone , in the mid to late 90’s , the Revolutionary United Front (RUF) sustained itself largely by producing between 25 to 125 millions dollars in diamonds per year. (Ibid).

 

Some of the conflicts began during the Cold War but continued after it , the insurgents were forced to switch from foreign funding to natural resource funding.

 

In Angola for example , UNITA ( National Union for the Total Independence of Angola ) was financed by the United States and South Africa for most of the 70’s and the 80’s. In  the mid 80’s , however , UNITA set up bases in the diamond in the rich provinces of northeast Angola. At first it gained revenue by attacking mines and establishing protection rackets ; later it began to act more like a government , controlling and taxing both mines and artisanal miners. For a time , UNITA received income from both the diamond trade and its foreign sponsors , but the end of the Cold War , and the end of apartheid in South Africa , left UNITA with no foreign support.

Therefore after  a breakdown of a peace initiative in 1992 , UNITA launched a wide offensive that brought all of Angola’s diamond rich areas under UNITA’s control. Over the course of the 90’s UNITA raised hundreds of millions  – and possibly even billions- dollars from diamond sales. Even if vast sums of money were lost in the process because of corruption , the revenues also helped UNITA to sustain his strong military force (Le Billon,1999).

 

Khmer Rouge of Pol Pot in Cambodia went through a similar transition . From 1979 to the late 80’s , the Khmers Rouge – largely exiled in Thailand – were  financed by the Chinese Government . But at the end of the 80’s , the Chinese government cancelled its support , which forced the Khmer Rouge to Adopt a new financial strategy. In December 1988 , Khmer Rouge leader Pol Pot , explained the Strategy to his troops :

“We are spending Many tens of millions of batht (the local currency) to augment the assistance of our foreign friends , but that is still not enough and there are many shortages. It is thus imperative that we find ways to develop the natural resources that exist in our liberated and semi-liberated lands as assets to be utilized in the fight against the Vietnamese-backed Cambodian government”. (Thayer quoted in Le Billion,1999).

 

Shortly after this speech , the Khmer Rouge captured a strip of Cambodian territory that was rich in ruby and sapphire, and commercially  valuable timber. Then he gave mining and logging licenses to Thai companies. These arrangements produced a substantial income for the Khmers Rouges , which permitted them to continue their fight for years , until 1997 (Ibid).

b.     Sale of future Rights to War booty :

 

There is also a new and less common , but more dangerous , type of natural-resource transaction : the sale of future “exploitation rights” by a rebel group.

 

This paper mentioned above , in part III , examples of sales of resources already captured by the rebels. But , sometimes , the rebels are selling “exploitation rights” of natural resources , that are not yet under their control , but which they hopes to capture in a coming campaign.

These transactions , include the sale of future exploitation rights, therefore they can be called “booty futures”. They are similar to other type of commodity futures , such as the commodities traded in the Chicago Board of Trade, but they are not formal , regulated  and don’t have many buyers and sellers. This market , which happen in time of war , is different. It needs a strong amount of information , includes a relatively small number of actors , has no guarantees and fixed location , and operates only in Africa , at least for the moment.

 

The booty future Market permit the rebels to solve their financial problems , a problems that they often encounter , and will permit them to sustain themselves financially since they hopes to capture a resource-rich region. Therefore , a rebel group that has no financial capacities , but has an opportunity to capture valuable resources in combat , can sell off the future rights of exploitation to a foreign government or a foreign firm. Therefore , the rebels would receive funds which will permit them to become stronger (by purchasing arms and equipment) enough to capture and hold the resource-rich region. (Singer,2001)

 

This market for booty futures of natural resources exploitation’s rights is more devastator than the regular market for conflict diamonds and other wartimes commodities (opium,timber,gemstones..). The reason for that is that the booty futures market will be beneficial to the weakest group –usually the rebels-. Usually , when an actor in a civil war sells natural resources that are under its control , it indicates that he is in a relatively strong military position , since he has the control of a key territory. And at the contrary , if they must promises to sell the exploitation rights in the future , it implies that the actor is in a relatively weak position , since he doesn’t hold control yet of the key territory. This is why the sale of booty futures is considered as a tool of the weak against the strong. It has the advantage of helping to finance groups and organizations that are too poor or to weak to capture the valuable territory by themselves , and might otherwise be forced to surrender or to disband.

As a consequence the sales of booty futures  tends to encourage the triggering of civil wars that might otherwise never begin , or help lengthen wars that are on the verge of ending.

 

The sale of booty futures has also the particularity to be dangerous because it give potential strength to any given rebel group. Indeed if the rebel group would not be allowed or able to sell the future right to exploit the natural resource,  it would never have the funds to capture the resource itself because he is too weak. By selling the future right to the resource to a foreign actor, it makes the seizure possible. So without the future market , it is fair to assume that the Rebels offensive , and possibly the conflict itself would be less likely.

 

The trade of booty futures , helps not only to trigger and initiate conflicts , byt plays also a key role in lengthening pre-existing conflicts. When a side in a civil war is on the verge of defeat, and if it is fighting for control of a resource-rich territory , it has the possibility to find a foreign actor , and sell off the future rights to exploit the resources of the region in case of victory. The sale of the booty futures would permit them to receive financial or technical support that might enable them to become stronger and continue the fighting for the region ; so instead of being defeated or being forced to the negotiation table , the army is then able to continue the fighting , and thus prolonging the war.

The sale of booty future , is a phenomenan that appeared in the 60’s –altough to a less advanced extent- in the Katanga rebellion in the Democratic Republic of Congo. The leader of the rebellion was Moise Tshombe. His rebel groups was financed by  a Belgian mining firm : “Union Miniere du Haut Katanga”. In Exchange of their financial support , the firm was promised future mineral rights in the Katanga. (Gibbs,1991). Another example is during the Algerian War of independence , the Italian oil company ENI , supplied money and materials to the National Liberation Front (FLN) , in exchange for future rights(gently called “considerations”) over the natural gas fields. (Le Billion,2002)

 

But more recently and more explicit , the 1997 Civil war in Congo-Brazzaville , the private militia of former president Denis Sassou- Nguesso was funded , in part , by the sale of future exploitation rights of the Congo’s potential oil reserves. On the eve of the conflict , Sassou received generous assistance from a French oil company : Elf  (Now Total). Some reports suggested  that he received 150 million in cash (Johannesburg mail ,1997) ; others reports emphasized that Elf helped him purchase arms and military equipment (the Guardian,  1997). These funds permitted him to defeat the newly-elected president , Pascal Lisouba , following a war that lasted four months , and destroyed almost completely the capital Brazzaville , and killed 10,000 Congolese. (Ross,2003)

 

At two different moments , the sales of booty futures, this time by an official government , prolonged the war in Sierra Leone. In March 1995 , the rebel group RUF took control of the majority of the diamond fields , and marched to the capital , Freetown. The Rebels were at the gates of the capital , and the governmental forces were on the verge of defeat. To avoid defeat and save the government in place , the President offered future mining rights of the diamonds fields of the  Kono district, a diamond-rich region in the Eastern Province of Sierra Leone -far from the capital , and already in the rebel hands- to Branch Energy , a South African company. In exchange for this concession , the government received the services of a mercenary company from South Africa – closely tied to Energy Branch- called Executive Outcomes. This strategy was very effective for the government, only few months later,  Executive Outcomes permitted the government to put the rebels on the defensive and to reconquer the district of Kono (Rich in diamonds fields) , which was then given to Branch energy. (Hirsch,2001).

Two years Later , the Sierra Leone government repeatedly traded diamonds future rights of exploitations for military support. Once again the government was about the collapse : In may 1997 , the Government of President Ahmad Kabbah , was overthrown by a group of military officers and was forced to seek refuge in a neighboring country. To finance a counteroffensive , Kabbah decided to resort to the same tactics , and sold for 10 millions dollars , the future rights of exploitation of the diamonds fields of Kono to Rakesh Saxena , a banker from Thailand in December 1997. He then used the money to hire the services of Sandline , a mercenary firm from England. In the upcoming months , Sandline mercenary forces and the Nigerian forces ( who were sent by the Economic Community of West African States) started a military offensive that pushed the military officers out of power. In March 1998 , Kabbah came back to the Capital Freetown , and was reinstated as President (Africa Confidential, 1998).

 

These booty war exploitations future rights- which happened also in Congo Kinshasa , Liberia and Angola-  have in each case helped to initiate the war , or prolonged a war that was about to be ending (Ross,2002).

 

c.      Extortion and Kidnapping

 

In some cases and under certain circumstances , rebel have the ability to earn large sums by extorting money from local companies , and by the kidnapping of works of the different resources firms. Of course , extortion and kidnapping are things that happen in conflicts zones, however mining, oil and gas industries are particularly susceptible to experience it , first because the area in which they operate is often far from the capital , in remote areas , where the influence of the government is weak and where they cannot relocate to a safer area. Secondly the fact that they receive rents , make them more vulnerable , because the extortionists know that they will still makes profits even after paying them off.

Concerning the kidnapping , they are often performed by criminal organizations , paramilitary units and rogue police units (Collier and Banon,2003).

A good example would be the Colombian Civil war , where extortion and kidnapping are widely performed. Extorsion and kidnapping also played similar role (although to a smaller extent) in Sudan and the province of Aceh in Indonesia. In Colombia and Sudan , the targeted resource was oil –especially a long oil pipeline that was crossing a contested territory-. In Aceh , it was the natural gas facility that was targeted.

Coming back to Colombia, it is important to understand that oil must be transported to the coast from the unstable pipeline which is running through contested territories that are hundres of kilometrs long. In 2000 , the pipelines suffered 98 attacks. The rebels in Colombia have been using these kind of attacks to extort an estimated 140 millions dollars annually. This permitted to a rebel group , the National Liberation Army (ELN) to grew from few members (a dozens) to thousands of members (Dunning and Wirspa,2002).

 

Colombia’s rebel group also resorted to kidnapping  , and turned it into a major industry. Indeed , according to a government study , the period between 1991 and 1999 saw the rebels groups earn a huge sums of money thanks to kidnapping (close from 1.5 billion dollars) and the ransoms it is bringing. Most of the victims were workers of the oil industry ( Pax Christi,2001)

The problem of the kidnapping became intensified , ironically , with the growing use of kidnap insurance. These insurance were helping the individual in case of kidnappings , by paying the ransom. The backlash of these insurance , was that it encourage the growth of the kidnapping industry by facilitating the payment of the ransoms , and making the process swifter , easier and more professional. It also conduced to reduce the precaution that the workers and the potential victims would have normally exercise.

 

 

 

Conclusion :

 

This paper reviewed the role that resources play in conflict and emphasize that resource dependence can promote civil war through four types of effects : First, by harming a country economic performance, secondly by making its government weaker , more corrupt , and less accountable ; thirdly, by giving people who live in resource rich regions an incentive to form independent states ; and fourthly, by helping financing rebel movements.

 

An important number of the countries suffering from a resource-based conflict, are stuck in low level developments traps. In these countries – most of them located in Africa- poverty , weak governance and violent conflicts , all reinforce one another. This is a cycle , where the inhabitants of these countries would have to carry the burden and the cost , and ultimately impose substantial costs on the region or even on the International Community.

 

This paper intended to explain these problems. However the quest for finding solutions to these problems is much more complex. Still , from what this paper demonstrated ,  some partial remedies should include : push countries dependent on one resource export  to diversify their exportation , reducing the volatility of resource-revenues , increasing the transparency of the government over the revenues from the sales of the resources, using preventive diplomacy , forbid the sale of future rights of exploitations and commodities from a conflict-related region, and refrain from paying ransoms to the kidnappers.

 

Parts of these solutions have already been taken. For example , a major effort to forbid the sale of commodities from a conflict-related region , took place in May 200 with the conference of Kimberley in South Africa. The Kimberley Process intended to restrict the trade in “conflict diamonds”. It ended up on an agreement with the major representant of the diamond industry , to trade only with diamonds that can receive a label that they have been extracted in a conflict-free zone. (Le Billon,2002).

However , the Kimberley process only address one of the several conflict commodity , rubies, saphirs, lapis lazuli… and others are not concerned by the Kimberley process , despite being used for financing recent conflicts. All these resources are highly lootable, meaning that they could be extracted and sold without particular need of investment or skills. Furthermore their characteristics (small,easy to smuggle and hard to track) makes it more difficult to control by international regulations.

 

However this paper would conclude on a positive note. Even if it look to be difficult to prevent civil wars in resource-rich region , it has become easier in the last decade. Indeed , the sales of natural resources by rebels or governments to subsidize themselves to continue the fighting could , in principle be stopped by a coordinated actions of the International Community. While the funding that Rebels and Governments were receiving from the US and the USSR could not have been stopped.

On top of that , we live today in a new era, the era of Information Age. Since a decade we saw the development of Internet and the spread of information  enabled the possibility of a strong financial transparency. A strong Financial transparency might be helpful in order to reduce corruption and to refrain Foreign companies of funding rebels actors or rogue governments.

The conflicts in Angola and Cambodia were brought to an end , in part thanks to the efforts of International NGOs and the coordinated efforts of the United Nations to cut off natural resources funding. Therefore , if the International community decide to reduce the risk of civil war , especially in the African continent , the natural resource trade could play an important role.

 

 

 

 

 

Table 1 : case studies of conflicts linked to Resource Wealth (World Bank database)

 

States Length Resources
Afghanistan 1978-2001 Gems, opium
Angola 1975-2002 Oil, Diamonds
Angola (Cabinda) 1975-present Oil
Burma 1949-present Timber, opium and gems
Cambodia 1978-1997 Timber , gems
Colombia 1984-present Oil, Gold , Coca
Congo Brazzaville 1997-1998 Oil
Congo Kinshasa 1996-1997 Copper , diamonds , gold , cobalt
Congo Kinshasa 1998-present Copper , diamonds , gold , cobalt
Aceh Province (Indonesia) 1974-present Natural gas , marijuana
West Papua (Indonesia) 1968-present Copper ,  Gold
Liberia 1989-1996 Timber , diamonds , iron, gemstones
Morocco 1975-present Oil
Papua New Guinea 1988-present Gold , Copper
Peru 1980-1995 Coca
Sierra Leone 1991-2000 Diamonds , gemstones
 South Sudan (now Independant) 1983-present Oil

 

Table 2 : Independantists Rebellion and Mineral Resources (World Bank Database)

 

State Region Length Resources
Angola Cabinda 1975-present Oil
Burma Hill Tribes 1949-present Gems
Congo Kinshasa Katanga 1960-1965 Copper, gold , diamonds
Indonesia West Papua 1969-present Gold
Indonesia  Aceh 1975-present Natural gas
Morocco West Sahara 1975-1988 Oil
Nigeria Biafra 1967-1972 Oil
Papua New Guinea Bougainville 1988-present Gold
Sudan South 1983-present Oil

 

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1 comments

  1. raju 3 years ago

    most readable article….water resource may be the next cause of war…

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