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Exploiting Energy and Mineral Resources in Central Asia, Azerbaijan and Mongolia

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  • Richard Pomfret

    () (School of Economics, University of Adelaide)

Abstract

Recent literature has focussed on institutional degradation and revenue volatility as major sources of a resource curse. Formerly centrally planned countries may be especially vulnerable due to their mutating institutions and macropolicy inexperience. This paper examines these issues through case studies of six former Soviet republics and Mongolia. The principal focus is on the methods of involving foreign partners in exploration and exploitation of natural resources and, to a lesser extent, on the use of revenues during resource booms. The consequences of alternative resource ownership patterns are difficult to model due to path dependency and the significance of the conjuncture of circumstances. Kazakhstan in the 1990s was a prime example of rent-seeking institutional degradation, but an exceptionally positive conjuncture in the 2000s (soaring oil prices, large oil and gas discoveries, and new pipelines) triggered institutional and policy evolution. Uzbekistan, by contrast, had less resource-rent-driven institutional degradation in the 1990s, but stagnated in the 2000s. Turkmenistan and Mongolia highlight the missed opportunities from not involving foreign partners, while Azerbaijan and the Kyrgyz Republic illustrate the less predictable outcomes following quick deals with foreign investors. Institutions matter, but the case studies suggest more complex relationships than revealed by simple correlations between indicators of institutional quality or of ownership patterns.

Suggested Citation

  • Richard Pomfret, 2010. "Exploiting Energy and Mineral Resources in Central Asia, Azerbaijan and Mongolia," School of Economics Working Papers 2010-16, University of Adelaide, School of Economics.
  • Handle: RePEc:adl:wpaper:2010-16
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    File URL: http://www.economics.adelaide.edu.au/research/papers/doc/wp2010-16.pdf
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    References listed on IDEAS

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    1. Christa N. Brunnschweiler, 2009. "Oil and Growth in Transition Countries," CER-ETH Economics working paper series 09/108, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    2. Geir Asheim & Wolfgang Buchholz & Cees Withagen, 2003. "The Hartwick Rule: Myths and Facts," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 25(2), pages 129-150, June.
    3. Richard Pomfret, 2009. "Using Energy Resources to Diversify the Economy: Agricultural Price Distortions in Kazakhstan," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 51(2), pages 181-212, June.
    4. Hartwick, John M, 1977. "Intergenerational Equity and the Investing of Rents from Exhaustible Resources," American Economic Review, American Economic Association, vol. 67(5), pages 972-974, December.
    5. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2006. "Institutions and the Resource Curse," Economic Journal, Royal Economic Society, vol. 116(508), pages 1-20, January.
    6. Kalyuzhnova, Yelena & Nygaard, Christian, 2008. "State governance evolution in resource-rich transition economies: An application to Russia and Kazakhstan," Energy Policy, Elsevier, vol. 36(6), pages 1829-1842, June.
    7. Bulte, Erwin H. & Damania, Richard & Deacon, Robert T., 2005. "Resource intensity, institutions, and development," World Development, Elsevier, vol. 33(7), pages 1029-1044, July.
    8. Boris Najman & Richard Pomfret & Gael Raballand, 2007. "The Economics and Politics of Oil in the Caspian Basin," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00266724, HAL.
    9. Pomfret, Richard, 2004. "Resource Abundance, Governance And Economic Performance In Turkmenistan And Uzbekistan," Discussion Papers 18735, University of Bonn, Center for Development Research (ZEF).
    10. Marc Gronwald & Johannes Mayr & Sultan Orazbayev, 2009. "Estimating the effects of oil price shocks on the Kazakh economy," ifo Working Paper Series 81, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
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    Citations

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    Cited by:

    1. Annageldy Arazmuradov, 2012. "Foreign Aid, Foreign Direct Investment, and Domestic Investment Nexus in Landlocked Economies of Central Asia," Economic Research Guardian, Weissberg Publishing, vol. 2(1), pages 129-151, May.
    2. Karen, Smith Stegen, 2011. "Deconstructing the "energy weapon": Russia's threat to Europe as case study," Energy Policy, Elsevier, vol. 39(10), pages 6505-6513, October.
    3. repec:gam:jecomi:v:5:y:2017:i:2:p:19-:d:101264 is not listed on IDEAS
    4. Arman Mazhikeyev & T.Huw Edwards & Marian Rizov, 2014. "Openness and Isolation: the comparative trade performance of the Former Soviet Central Asian countries," Discussion Paper Series 2014_02, Department of Economics, Loughborough University, revised Feb 2014.
    5. repec:pal:compes:v:59:y:2017:i:3:d:10.1057_s41294-017-0028-2 is not listed on IDEAS
    6. Mazhikeyev, Arman & Edwards, T. Huw & Rizov, Marian, 2015. "Openness and isolation: The trade performance of the former Soviet Central Asian countries," International Business Review, Elsevier, vol. 24(6), pages 935-947.
    7. repec:eee:jrpoli:v:53:y:2017:i:c:p:1-11 is not listed on IDEAS
    8. Horváth, Roman & Zeynalov, Ayaz, 2016. "Natural resources, manufacturing and institutions in post-Soviet countries," Resources Policy, Elsevier, vol. 50(C), pages 141-148.
    9. Pomfret, Richard, 2012. "Resource management and transition in Central Asia, Azerbaijan and Mongolia," Journal of Asian Economics, Elsevier, vol. 23(2), pages 146-156.

    More about this item

    Keywords

    oil; gas; minerals; Central Asia; resource curse;

    JEL classification:

    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • P35 - Economic Systems - - Socialist Institutions and Their Transitions - - - Public Finance
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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