The Future of Energy
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Put a Tyrant in Your Tank

You thought ExxonMobil was bad? Meet the new kings of crude.

Of course, the ills of nationalized oil extend well beyond U.S. energy policy. That much was apparent during a walk through the streets of Mandalay last spring. Burma's second-largest city felt tranquil at first glance. Crimson-robed monks padded through side alleys at dawn, begging for rice, while vendors stirred massive vats of bubbling oil and water to make thin rice noodles. But as the world recently witnessed, pent-up fury at Burma's military regime percolates just under the surface. "This government, it's nothing for us," one middle-aged resident told me. "We have nothing."

Those frustrations erupted last summer and fall after the government halted fuel subsidies, leading to a spike in food prices. Across the nation, monks swarmed into the streets to assail the policies of the ruling junta, which responded to the unrest with a violent crackdown. Subsequent sanctions imposed by the United States, the EU, and other democracies didn't seem to trouble Burma's leaders—they have "no major concerns," one head of Burma's national oil company told a trade publication in November, "as there are a lot of Indian, Chinese, Thai, and Malaysian companies operating in exploration and production."

The country has discovered some of Southeast Asia's largest natural gas deposits in recent years. Even as riot police beat and arrested protesters, India's oil minister was on hand to witness the signing of a $150 million contract for further gas exploration. A new pipeline is planned to carry Burma's gas to the southwestern Chinese province of Yunnan, raising the specter of brutality. "Areas of Burma that are subject to major development projects experience some of the most pervasive abuses," Human Rights Watch reported last year. The planned pipeline likely "will involve the use of forced labor, and result in illegal land confiscation, forced displacement, and unnecessary use of force against villagers," the group warned, and the sales windfall will further entrench the military regime.

But don't expect any action from the United Nations. In January 2007, China vetoed a Security Council resolution pressuring the Burmese junta to release political prisoners and ease its repression. Mere days after the veto, Burma granted China resource-exploration rights to three areas off its coast.

Burma is not an isolated example: Governments in Venezuela, Russia, and many other oil-rich countries have become increasingly authoritarian and corrupt. The D.C.-based monitoring group Freedom House cited a trend of international "freedom stagnation" in its 2007 "Freedom in the World" report and has deemed energy-rich countries "among the world's poorest performers in governance and democratic process." Russia, by the group's annual analyses, has declined from "partly free" in 2002 to "not free" last year. The Kremlin has become less responsive to American concerns, and it blocked Western election observers from monitoring Russia's parliamentary vote this past December.

The Dirty Dozen: U.S. Oil Imports 2007
Total: 10,010,000 barrels per day

U.S. Oil Imports 2007

Source: Energy Information Administration

Look Who's Got It: World Oil Reserves, January 2007
Total: 1,317 billion barrels

World Oil Reserves 2007

Source: Oil & Gas Journal

Freedom House ratings:
   =free,    =partly free,    =not free

For its part, oil-rich Kazakhstan, once considered a leading democratic light in Central Asia, has devolved into a thugocracy where a prominent opposition leader was brutally murdered and longtime president Nursultan Nazarbayev, along with his oil minister, was accused of accepting $78 million in bribes in exchange for oil deals.

In Venezuela, which ranks near the bottom of Transparency International's annual index of perceived corruption, Chávez uses his state oil company as a private purse to fund pet projects. Some, such as literacy programs, promote social improvement and allow Chávez to appear the good guy, while others, like oil-funded purchases of arms and helicopters, help consolidate his power domestically.

Chávez also wields his nation's oil for regional influence. He has spread subsidized petroleum to his allies, bought up billions' worth of Argentine bonds, and helped other countries build up their own national oil firms, thereby gaining the loyalties of leaders from Argentina to Cuba. He has even used it to gain public sympathy while thumbing his nose at the Bush administration: Since 2005, Citgo, the U.S. subsidiary of Venezuela's state petroleum company, has doled out tens of millions of gallons of heavily discounted heating oil to low-income Americans, touting the giveaways—and the recipients' gratitude—in splashy print and television ads.

Where Chávez has used the carrot, Russia has wielded the stick. In late 2005, a year after Ukraine's Orange Revolution swept a more democratic government into power, Gazprom jacked up the price of natural gas to its neighbor. During the dispute that followed, Gazprom briefly cut off gas supplies midwinter, forcing Ukraine to pay more. The following winter, the firm used the same strategy against Georgia, another neighbor that had elected pro-Western leaders. This February, Russia and Ukraine reached a settlement after Gazprom again threatened to cut off gas to Ukraine, where average winter temperatures in the capital are below freezing.

On the environmental front, state-run oil companies make Shell and ExxonMobil look like Greenpeace.

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