Welcome back. Today, we will discuss the issue of development of energy resource-rich countries, those countries whose economy is highly dependent on oil, gas, coal production. If in the future or the proximate future, demand for fossil fuels start declining rapidly, countries that have large reserves of these fossil fuels will be negatively affected. We need to ask, what might be the geopolitical implications of such development? We need to ask also, to what extent these countries will be willing to espouse the necessary effort to achieve decarbonization and avoid global warming? Because for them, it may constitute a serious problem. The question does not affect only the major oil producers, the members of OPEC, like Saudi Arabia, Venezuela, Kuwait, Iraq, Iran, it affects also countries such as Russia, certainly, but also Canada, the United States, all of these countries are major producers of fossil fuels, and they have very large reserves, which constitute an important share of the economy, and in some cases also, an overwhelming share of their exports. In economic literature, many authors have argued that the abundance of resources is a curse. That is, that it has a negative impact on a country's speed of growth, of economic growth, and on its development prospects. There are many cases of resource-rich countries that have not been doing well at all and therefore, support this view that resources are a curse. But there are also some cases that demonstrate that it is possible to achieve fast development, thanks to the availability of important natural resources and notably, fossil fuels. So there are several reasons to justify the fact that many countries, perhaps a majority of countries, have rather had a negative impact from the availability of natural resources. The strongest argument which has been proposed in the literature is based on what we call the Dutch disease. The Dutch are very healthy people, and the Dutch disease is a name that originates out of the fact that in the 1950s, a major gas field was discovered in the Netherlands, the groaning and gas field, and the Netherlands went from being an energy importing countries to being an energy exporting gas towards the rest of Europe. This worried the Dutch authorities and created the fear that this would bring about revaluation of the Dutch currency, which at that time was a guilder, and make Dutch industry less competitive relative to the rest of European industry. So the idea was that the development of exports of natural resources would create conditions of non-competitiveness for the industrial sector in the country. So the Dutch disease consists in natural resources displacing or preventing the development of industrial activities in a country due to the impact of exports of these national resources on the national currency. The Dutch disease, as I mentioned, is probably the most important argument to justify the fact that natural resources can be a curse or rather than an asset for economic development. But there are other reasons, other causes of failure, of which are not economic, but which are more political or social, of which experience proves that too are especially important. First, the tendency to engage in armed conflict. Many natural resource-rich countries have ended up engaging in wars. Sometimes civil wars, sometimes international wars. It is clear that if a country ends up engaging in war and has access to natural resources, which mean that they have the resources to carry on the war for very long time, then it is highly likely that the country will be rather destroyed then developed, and that is what we see in a range of countries going from Iraq and Iran, which engaged in an eight years very destructive long war, going to Libya that has been involved in a civil war for some years now, going in the past to countries like Nigeria or Angola, which have endured very extended civil wars, leading to significant disruption. Even if the civil war in Nigeria belongs to, by now, a very fairly distant past, it is not clear that the negative effect of that war have ever been fully overcomed. The second main cause of failure is corruption. Because if you have an abundant resource base and if exports of natural resources are an important part of your economy, it is easy for whoever is in power to seek personal gain and to exploit the opportunity in order to enrich himself and this proximate, and that is also a major source of problems that has prevented the proper development of many resource-rich countries. But not all, there have been countries that have abstained from engaging in conflict, and have been able to, I don't say avoid corruption entirely, but manage the benefits of natural resource exports sufficiently well, that they have delivered some cases very significant economic development. There are certain strategies that can be adopted for avoiding failure. This is primarily using the proceeds of natural resource exports for investment in infrastructure, using the money to diversify the economy, invest in other sectors, not just in the natural resources sector, invests in education of your people so that you have a more educated workforce. All of these are valid strategies to pursue development in resource-rich country. You can, specifically in the case of an oil producing country, add value and branch out in proximate sectors, for example, in petrochemicals or in sectors that serve the oil industry, and you can branch out in other energy intensive industries, and all of these are strategies that may allow an oil economy to progressively change and become less dependent on the pure production of oil. There is also the potential for carbon capture and sequestration, which is higher in countries producing oil and gas, and can lead to producing decarbonized "oil or gas" or in any case, producing goods out of CO2 and rather than emitting it into the atmosphere. Finally, many of the resource-rich countries also have significant potential for exploiting and expanding the role of renewable energy sources. So these are all strategies which the oil and gas producing countries that are today entirely dependent on exports of oil and gas can pursue in order to reduce their specific dependence. Thus, the idea of a resource curse is not to be understood as an immutable destiny, something that you cannot avoid. Hydrocarbon exporting countries will have time to transform their economies, but they need to pursue this goal systematically and incoherently. So it is not impossible to have them as active members of a global coalition aiming at decarbonisation and avoiding global warming, but it is something that requires careful strategy in policy-making in order to make sure that their economies can survive to this shift away from fossil fuels.
