The United States and its Group of Seven allies are contemplating imposing sanctions on Russia to punish it for invading Ukraine and de facto annexing the Crimean peninsula. It's a tricky situation.
Russia, along with Saudi Arabia, is one of the world's largest oil exporters, pumping an estimated 13% of the world's oil production. Russia also imports some $500 billion of goods and services. There is a danger of disrupting international oil markets, punishing U.S. and European companies and undermining a fragile recovery in the world economy.
But they should also contemplate a larger question that has bedeviled the civilized world over the past four decades–what to do about oil producing nations.
Oil exporters have traditionally been troubled countries, responsible for more than their share of global instability. During the 1980s, two OPEC members, Iran and Iraq, fought a bloody war. In the 1990s, various other OPEC members were in the news, too. Algeria was convulsed by the civil war, Iraq invaded Kuwait and had to be expelled by a U.S.-led coalition, Indonesia suffered severe political and economic damage from the 1997 "Asian flu" crisis.
But in 1999, oil prices began to rise, eventually hitting records. You'd expect oil producers, earning petrodollars hand over fist, to become stable and peaceful, but exactly the opposite has been the case.
The terrorist attacks on September 11, 2001 were masterminded and carried out by Saudis; Iraq's Saddam Hussein, even though he was not developing weapons of mass destruction, went on fomenting trouble around the Middle East; Sudan carried out genocidal policies in its southern regions. Perhaps to prove that turbulent oil producers were not concentrated in the Middle East, Venezuela's Hugo Chavez spent his petrodollars on various dubious causes abroad while also building socialism and ruining the economy at home. Ecuador, another Latin American OPEC member, also voted for a populist and socialist, electing Rafael Correa president.
During the Arab Spring two years ago, the country that went through the worst turmoil was OPEC member Libya. Meanwhile, Iran has kept the world on edge, threatening to acquire nuclear weapons.
Russia's Recent Past
And then there is Russia. During the 1990s, Russia was poor, but it tried to build democratic institutions and restructure its economy. It had no censorship, and its private television channels and newspapers conducted a lively political debate.
For the first time ever it had no political prisoners or exiles. After the 1998 ruble devaluation, Soviet-era industry was on the mend. Russia was going through the same reform process that eventually took Poland, Hungary and other Eastern European countries into NATO and the European Union.
