The recent drop in oil and other commodity prices makes it almost a
certainty that some unstable commodity-exporting nations will reach a
crisis stage in the next few months. The only question is, which
countries are likely to erupt first?
The Middle East is always a safe bet for an explosion, but there is a very good chance the next eruption will be in Africa, with the most likely location being Congo, followed by Sudan.
In Latin America, Argentina is headed for another debt default and
financial meltdown, and Venezuela continues to rapidly deteriorate. And
there is Russia, which is likely to react poorly as its once booming
economy goes into to a sharp recession. Pressures will mount on the United States to become involved, particularly in Africa, as mass killings beginagain.
The high price of oil and other major commodities over the last few
years acted as a protective blanket over increased tensions within
major commodity-exporting nations. Now, as the high revenues from these
exports sharply drop, the fights over the shares of a smaller and
smaller pie will accelerate.
As the price of oil dropped in inflation-adjusted terms from almost
$100 per barrel in 1980 to only $16 per barrel in 1997, the United
States and most other oil-importing nations enjoyed rapid economic
growth. But as the real price of oil rose, it began to take its toll on
U.S. and European economic growth, particularly in the last year when
oil roughly doubled in price. The rapid oil price rise pricked the
property price bubble in the United States and Europe sooner than it
would have occurred with more stable oil prices.
The end of property-price bubble led to the financial crisis because
too many individuals and institutions were over-leveraged based on the
foolish belief that property prices would only increase. But the big
rise in oil prices and other commodities produced windfall revenues for
the producing states. Unlike Norway and many of the Middle Eastern oil
producers, most of the African producers of oil and other commodities,
plus countries such as Venezuela, spent almost every penny they
received and then some.
The old Belgian Congo,
now the Democratic Republic of the Congo, has been unstable for years.
It had a civil war in 1996-97 and another one in 1998-2003. The
violence never totally stopped despite having large numbers of U.N.
"peacekeepers." Congo suffers from many - perhaps 60 - different
regional and local rebel groups, and much of the country is not
effectively governed. Recently, there has been a major upsurge in
violence in the eastern provinces, and an increasing number of
conflicts with neighboring Rwandan units.
Legal and illegal mining accounts for a substantial portion of
Congo's income. As this income decreases due to the worldwide fall in
commodity prices, the incentives to steal from others will grow even
greater. Given both the increasing economic stresses and the various
ethnic and tribal hatreds, there is a real and immediate danger that
the accelerating violence could escalate into a cross-border regional
war with massive losses of life.
Sudan has been in more or less of a civil war almost since its
independence from the United Kingdom in 1956. It also has had a
continuing series of clashes with many of its neighbors. The government
of Sudan in Khartoum
is perhaps best known for its many years of ethnic cleansing in its
Darfur region. These actions have caused the International Criminal
Court to indict Sudanese President Omar al-Bashir, who now fears arrest.
Sudan has been controlled by an Arab minority in the north and
centered in Khartoum. The more numerous non-Arab population of southern
Sudan has been pushing for independence for decades, and there is now a
referendum scheduled for 2011. The battles over the years between the
Arab north and the non-Arab south have cost several million lives, far
more than have been lost in Darfur.
Southern Sudan has extensive oil reserves and production shipped
north for export. Most of the oil revenues stay in the north with the
Arab-dominated government. Sudan has enjoyed very high growth in recent
years, even though much of the country is impoverished. The northerners
have shared enough of the oil revenue with the south to buy a temporary
cease-fire, but both sides are arming. For instance, there is evidence
the Ukrainian ship, containing Soviet-era tanks and other military
material, recently seized by Somalian pirates, was destined for the
southern Sudanese (who had obtained the cooperation of neighboring
Kenya's army). Now, with the drop in oil prices, the question is, will
the government in Khartoum accept lower revenues in order to keep the
southerners from igniting another civil war? And even if they do, how
long can they keep the lid on?
High oil and commodity prices enabled not only real economic growth
in Africa over the last decade, but also allowed many different
political and militia groups to acquire and store arms, knowing that
the peace was unlikely to be permanent. Now with the prospect of
greatly reduced total oil and other commodity revenue for the
continent, many are likely to seek to maintain their own income by
taking it away from some other group. Renewed mass killings are likely.
The Western nations will be pressured to intervene, but trying to find
real white hats when most of the hats are various shades of gray or
black will be a challenge when trying to decide which faction to
support. Those who come to do good, like other well-meaning
interventions, may well find the goal becomes more and more costly and