China's Export Growth Slows, Easing Pressure on Yuan (Update4)

May 9 (Bloomberg) -- China's export growth cooled in April and the trade surplus was little changed as economies around the world weakened, giving the government room to maintain a slower pace of yuan gains.

Overseas sales rose about 21.8 percent from a year earlier, after gaining 30.6 percent in March, according to figures derived from Ministry of Commerce data. The trade surplus was about $16.8 billion compared with $16.7 billion a year earlier.

Central bank Governor Zhou Xiaochuan said on May 4 that weaker export growth has been a factor in the yuan's failure to appreciate versus the dollar after a 4.2 percent jump in the first quarter. Smaller gains in shipments reduce the risk that inflows of cash from overseas sales will fuel 11-year high inflation and overheat the world's fastest-growing major economy.

``Exports will slow further in the second half as the weaker demand in the U.S. and other markets becomes more pronounced,'' said Liao Qun, chief economist at Citic Ka Wah Bank in Hong Kong. ``China won't want the yuan to appreciate too fast for this reason.''

The trade surplus was more than the $15.5 billion median forecast of 19 economists in a Bloomberg News survey. Economists expected exports to rise 20.3 percent. The gain in overseas shipments compares with the 21.4 percent pace in the first quarter and the 26 percent increase for all of last year.

Import Growth

Imports grew about 26.1 percent in April from a year earlier after gaining 24.6 in March, the calculations showed. The increase partly reflects rising commodity prices.

The yuan gained 0.2 percent to 6.9918 as of the 5:30 p.m. close of trading in Shanghai.

The world's fourth-biggest economy expanded 10.6 percent in the first quarter from a year earlier and inflation accelerated to 8 percent, the fastest pace since 1996. The yuan had its biggest gain since a fixed-exchange rate ended in 2005.

China's currency has climbed 18 percent versus the dollar since the peg to the U.S. currency was scrapped, making the nation's products more expensive in overseas markets and cutting import costs. Since April, it has gained only 0.3 percent.

U.S. Treasury Undersecretary David McCormick urged China to maintain an ``accelerated'' pace of yuan appreciation in a speech today in Shanghai.

Global Slowdown

Growth in shipments from China to the U.S. has cooled this year as a housing slump threatens to trigger a recession in the world's biggest economy. A weaker global expansion has dimmed the outlook for the rest of the year.

Export growth ``will continue to trend down in months to come as the global economic downturn unfolds,'' said Sun Mingchun, an economist at Lehman Brothers Holdings Inc. in Hong Kong. ``It could even fall below 10 percent in the fourth quarter.''

Inflation, driven by food costs, climbed to an 11-year high of 8.7 percent in February, more than the central bank's target for the year of 4.8 percent. Consumer prices rose 8.2 percent in April, according to a Bloomberg News survey of economists. That number will be released on May 12.

Producer prices rose 8.1 percent in April, the fastest pace in more than three years, the statistics bureau said today.

China will maintain a tight monetary policy to prevent economic overheating, Vice Premier Wang Qishan told a financial conference in Shanghai today.

`Facing Challenges'

``China's economy is still facing challenges this year including high inflation, investment growth that hasn't yet come down to a normal level and the global economic slowdown,'' Wang said.

The Ministry of Commerce released data for shipments of mechanical and electrical products for the first four months on a ministry Web site today. It gave the value of exports of those products, $251.3 billion, and said they represented 59.2 percent of total exports. It also gave the value for imports, $173.3 billion, said they were 47.3 percent of total imports.

The April trade figures were derived by calculating the total export and import figures for the first four months and subtracting the amounts previously announced for the first quarter.

Oil Climbs Above $126 to Record as Dollar Weakens Against Euro

May 9 (Bloomberg) -- Crude oil rose above $126 a barrel in New York to a record as the dollar weakened against the euro, prompting investors to buy commodities as a hedge against the currency's decline.

For a fifth day oil climbed to all-time highs as the euro strengthened on signs the European Central Bank will keep rates at a six-year high to cut inflation. Nigerian output fell to the lowest this decade in April because of a strike and attacks on oil installations.

``Oil is a safe haven because of the weak dollar and how badly the financial sector has been doing,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``There are also geopolitical concerns about places like Nigeria and Venezuela that are propping prices up.''

Crude oil for June delivery rose $2.27, or 1.8 percent, to a record closing price of $125.96 a barrel at 2:55 p.m. on the New York Mercantile Exchange. The contract surged to $126.27 today, the highest since futures began trading in 1983. Prices are up 8.3 percent this week, the biggest weekly gain in more than a year. Futures have more than doubled in the past year.

Brent crude oil for June settlement climbed $2.56, or 2.1 percent, to close at a record $125.40 a barrel on London's ICE Futures Europe exchange. The contract touched $125.90 today, the highest since trading began in 1988.

Oil at $200 is ``possible if we have a continuing devaluation of the dollar with respect to other currencies,'' OPEC President Chakib Khelil said yesterday at a press conference in Washington.

The dollar fell 9.6 percent since Sept. 18, when the Federal Reserve began cutting rates to ease financial-market strains and stave off a recession. The U.S. central bank cut rates seven times while the ECB has left rates unchanged. The dollar fell 0.6 percent to $1.5483 per euro at 3:27 p.m. in New York.

Fed Policy

``Fed policy is accommodating the rise in energy prices,'' said Bill O'Grady, director of fundamental futures research at Wachovia Securities in St. Louis. ``The Fed and federal government are putting more liquidity in people's pockets, which is being spent on expensive oil.''

The U.S. government started sending $117 billion in tax rebate checks last week as part of its fiscal stimulus plan.

Goldman Sachs analyst Arjun N. Murti wrote in a report on May 6 that ``the possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months.'' Murti first wrote of a ``super spike'' in March 2005, predicting crude may trade between $50 and $105 a barrel through 2009.

``There's been a paradox, prices have surged over the last week while we've had bearish headlines,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``Clearly there's been a lot of fund buying on the back of Goldman's super-spike repot. They were right on the nose last time.''

OPEC Meeting

The Organization of Petroleum Exporting Countries, the producer of more than 40 percent of the world's oil, may meet before September to consider increasing output in an attempt to rein in record crude-oil prices, Libya's Shokri Ghanem said.

``We would consider among other options the possibility of increasing output as a way to ensure market stability,'' Ghanem, who is the chairman of Libya's National Oil Corp., said in a telephone interview today from Tripoli.

Nigerian Petroleum Minister of State H. Odein Ajumogobia said today that there are no plans for an additional OPEC meeting because oil supplies are adequate.

OPEC kept its production target unchanged at its past three meetings. The group last increased its target on Nov. 1.

``OPEC loves high oil prices, but they also value an orderly market,'' said Adam Sieminski, Deutsche Bank's chief energy economist, in Washington. ``It would not surprise me if they meet soon to discuss these issues.''

Lebanese Unrest

Gun battles raged across western and southern Beirut, leaving 10 people dead, as fighters from the Shiite group Hezbollah pressed their party's challenge to Lebanon's pro- Western government. Oil surged to a record $78.40 on July 14, 2006, on concern fighting in Lebanon between Israel and Hezbollah would spread through the Middle East.

``The unrest in Lebanon could be very important,'' O'Grady said. ``This could be an early indication of further violence in coming months.''

Gasoline and heating oil also touched records in New York on forecasts for increased fuel demand. An Energy Department report on May 7 showed that U.S. inventories of distillate fuel, a category that includes heating oil and diesel, fell last week.

Record Fuel Prices

Heating oil for June delivery climbed 12.62 cents, or 3.6 percent, to close at a record $3.636 a gallon in New York. The contract reached $3.6524 today, an all-time high. Some traders use heating-oil futures to hedge their diesel and jet-fuel purchases.

Gasoline futures for June delivery rose 6.34 cents, or 2 percent, to $3.2012 a gallon in New York after reaching a record $3.2038 today.

U.S. pump prices followed futures higher. Regular gasoline, averaged nationwide, rose 2.6 cents to a record $3.671 a gallon, AAA, the nation's largest motorist organization, said today.

Asia Stocks Post Weekly Drop on Record Oil, Growth Concern

May 10 (Bloomberg) -- Asian stocks fell this week, snapping a two-week rally, led by banks and oil refiners on concern earnings at banks and automakers will slow with record oil prices and a slowing U.S. economy.

Kookmin Bank, South Korea's biggest bank, had its biggest weekly fall this year after first-quarter profit fell by almost half. China Petroleum & Chemical Corp. and PetroChina Co., the country's two largest refiners, declined as oil prices touched a record. Samsung Electronics Co., South Korea's largest exporter, and Honda Motor Co. retreated after reports showed U.S. home sales fell and consumer debt rose.

``We're only just starting to see the impact of the credit crunch on the real economy and there're still a lot of risks in the market,'' said Christopher Wong, a Singapore-based fund manager at Aberdeen Asset Management, which oversees more than $40 billion of investments. ``High commodity prices means inflationary pressures seem to be here to stay.''

The MSCI Asia Pacific Index lost 1.8 percent to 148.92 this week, its first weekly decline in three weeks. A measure of financial companies had the biggest decline among the 10 industry groups on the benchmark.

Japan's Nikkei 225 Stock Average fell 2.8 percent to 13,655.34, while the broader Topix Index declined 2.6 percent. Japan's markets were closed Monday and Tuesday.

Kookmin Bank dropped 8.8 percent to 65,200 won, saying May 2 that its first-quarter net income dropped 47 percent from a year earlier to 631.5 billion won ($625.5 million).

`Market is Worried'

Banks also fell after U.S. regulators told investment banks to disclose capital and liquidity levels, on concern the new rules will reveal further credit losses. Sumitomo Mitsui Financial Group Inc., Japan's second-largest bank by market value, fell 7.2 percent to 845,000 yen.

``The market is worried about additional impairment losses,'' said Soichiro Kono, a fund manager in Tokyo at Norinchukin Zenkyoren Asset Management Co., which manages about $10 billion in assets. ``The U.S. economy is getting worse. Simply put, it's in a recession.''

China Petroleum, the nation's biggest refiner, retreated 12.4 percent to HK$7.61 in Hong Kong. PetroChina, the second- largest, fell 9.3 percent to HK$10.96. The stock also retreated after JPMorgan Chase & Co. cut its rating to ``underweight'' from ``neutral.''

Record Oil

The Chinese government maintains price caps for refined oil products in an attempt to restrain inflation. Crude oil topped $125 a barrel to a record in New York this week on concern supplies of diesel and gasoline may be insufficient to meet demand during the U.S. summer driving season.

Inpex Holdings Inc., Japan's largest oil explorer, gained 9.7 percent to 1.24 million yen. Woodside Petroleum Ltd., Australia's second-largest producer, advanced 4.3 percent to A$59.43.

Samsung Electronics, the world's biggest chipmaker, sank 3 percent to 709,000 won. Honda Motor, which gets more than half its sales from North America, dropped 6.4 percent to 3,210 yen.

An index of pending U.S. home resales fell 1 percent in March, following a 2.8 percent drop in February that was larger than previously reported, the National Association of Realtors said May 7.

Additionally, U.S. consumer debt surged at double the pace forecast in March as restrictions on home equity loans forced Americans to borrow using their credit cards. That raised concern spending may slow in the world's biggest economy should consumers reach a limit on borrowing.

Why Oil Wealth Fuels Conflict

By Michael Ross

Note: This piece appeared first in the May/June 2008 edition of Foreign Affairs.

The world is far more peaceful today than it was 15 years ago. There were 17 major civil wars -- with "major" meaning the kind that kill more than a thousand people a year -- going on at the end of the Cold War; by 2006, there were just five. During that period, the number of smaller conflicts also fell, from 33 to 27.

Despite this trend, there has been no drop in the number of wars in countries that produce oil. The main reason is that oil wealth often wreaks havoc on a country's economy and politics, makes it easier for insurgents to fund their rebellions, and aggravates ethnic grievances. Today, with violence falling in general, oil-producing states make up a growing fraction of the world's conflict-ridden countries. They now host about a third of the world's civil wars, both large and small, up from one-fifth in 1992. According to some, the U.S.-led invasion of Iraq shows that oil breeds conflict between countries, but the more widespread problem is that it breeds conflict within them.

The number of oil-producer-based conflicts is likely to grow in the future as stratospheric prices of crude oil push more countries in the developing world to produce oil and gas. In 2001, the Bush administration's energy task force hailed the emergence of new producers as a chance for the United States to diversify the sources of its energy imports and reduce its reliance on oil from the Persian Gulf. More than a dozen countries in Africa, the Caspian basin, and Southeast Asia have recently become, or will soon become, significant oil and gas exporters. Some of these countries, including Chad, East Timor, and Myanmar, have already suffered internal strife. Most of the rest are poor, undemocratic, and badly governed, which means that they are likely to experience violence as well. On top of that, record oil prices will yield the kind of economic windfalls that typically produce further unrest.

Oil is not unique; diamonds and other minerals produce similar problems. But as the world's most sought-after commodity, and with more countries dependent on it than on gold, copper, or any other resource, oil has an impact more pronounced and more widespread.

THE CURSE

The oil booms of the 1970s brought great wealth -- and later great anguish -- to many petroleum-rich countries in the developing world. In the 1970s, oil-producing states enjoyed fast economic growth. But in the following three decades, many suffered crushing debt, high unemployment, and sluggish or declining economies. At least half of the members of OPEC (the Organization of Petroleum Exporting Countries) were poorer in 2005 than they had been 30 years earlier. Oil-rich countries that once held great promise, such as Algeria and Nigeria, have unraveled as a result of decades of internal conflict.

These states were plagued by the so-called oil curse. One aspect of the problem is an economic syndrome known as Dutch disease, named after the troubles that beset the Netherlands in the 1960s after it discovered natural gas in the North Sea. The affliction hits when a country becomes a significant producer and exporter of natural resources. Rising resource exports push up the value of the country's currency, which makes its other exports, such as manufactured and agricultural goods, less competitive abroad. Export figures for those products then decline, depriving the country of the benefits of dynamic manufacturing and agricultural bases and leaving it dependent on its resource sector and so at the mercy of often volatile international markets. In Nigeria, for example, the oil boom of the early 1970s caused agricultural exports to drop from 11.2 percent of GDP in 1968 to 2.8 percent of GDP in 1972; the country has yet to recover.

Another facet of the oil curse is the sudden glut of revenues. Few oil-rich countries have the fiscal discipline to invest the windfalls prudently; most squander them on wasteful projects. The governments of Kazakhstan and Nigeria, for example, have spent their petroleum incomes on building new capital cities while failing to bring running water to the many villages throughout their countries that lack it. Well-governed states with highly educated populations and diverse economies, such as Canada and Norway, have avoided these ill effects. But many more oil-rich countries have low incomes and less effective governments and so are more susceptible to the oil curse.

Oil wealth also has political downsides, and those are often worse than the economic ones. Oil revenues tend to increase corruption, strengthen the hands of dictators, and weaken new democracies. The more money the governments of Iran, Russia, and Venezuela have received from oil and gas exports, the less accountable they have become to their own citizens -- and the easier it has been for them to shut up or buy off their opponents. A major boom in oil prices, such as the one that took the price of a barrel from less than $10 in February 1999 to over $100 in March 2008, only heightens the danger.

OIL ON FIRE

For new oil and gas producers, the gravest danger is the possibility of armed conflict. Among developing countries, an oil-producing country is twice as likely to suffer internal rebellion as a non-oil-producing one. The conflicts range in magnitude from low-level secessionist struggles, such as those occurring in the Niger Delta and southern Thailand, to full-blown civil wars, such as in Algeria, Colombia, Sudan, and, of course, Iraq.

Oil wealth can trigger conflict in three ways. First, it can cause economic instability, which then leads to political instability. When people lose their jobs, they become more frustrated with their government and more vulnerable to being recruited by rebel armies that challenge the cash-starved government. A sudden drop in income can result in internal strife in any country, but because oil prices are unusually volatile, oil-producing countries tend to be battered by cycles of booms and busts. And the more dependent a government is on its oil revenues, the more likely it is to face turmoil when prices go south.

Second, oil wealth often helps support insurgencies. Rebellions in many countries fail when their instigators run out of funds. But raising money in petroleum-rich countries is relatively easy: insurgents can steal oil and sell it on the black market (as has happened in Iraq and Nigeria), extort money from oil companies working in remote areas (as in Colombia and Sudan), or find business partners to fund them in exchange for future consideration in the event they seize power (as in Equatorial Guinea and the Republic of the Congo).

Third, oil wealth encourages separatism. Oil and gas are usually produced in self-contained economic enclaves that yield a lot of revenue for the central government but provide few jobs for locals -- who also often bear the costs of petroleum development, such as lost property rights and environmental damage. To reverse the imbalance, some locals seek autonomy from the central government, as have the people in the petroleum-rich regions of Bolivia, Indonesia, Iran, Iraq, Nigeria, and Sudan.

This is not to say that petroleum is the only source of such conflicts or that it inevitably breeds violence. In fact, almost half of all the states that have produced oil since 1970 have been conflict-free. Oil alone cannot create conflict, but it both exacerbates latent tensions and gives governments and their more militant opponents the means to fight them out. Governments that limit corruption and put their windfalls to good use rarely face unrest. Unfortunately, oil production is now rising precisely in those countries where wise leadership is often in short supply. Most of the new energy-rich states are in Africa (Chad, Côte d'Ivoire, Mauritania, Namibia, and São Tomé and Príncipe), the Caspian basin (Azerbaijan, Kazakhstan, and Turkmenistan), or Southeast Asia (Cambodia, East Timor, Myanmar, and Vietnam). Almost all are undemocratic. The majority are very poor and ill equipped to manage a sudden and large influx of revenues. And many also have limited petroleum reserves -- just enough to yield large revenues for a decade or two -- which means that if they succumb to civil war, they will squander whatever chance they had of using their oil windfalls to escape from poverty.

DIAMONDS IN THE ROUGH

Since the early 1990s, the international community has developed an effective set of tools for ending insurrections. These include cutting off foreign aid to rebel groups, using diplomatic and economic sanctions to bring governments to the negotiating table, and deploying peacekeeping forces to monitor any agreements that might result from the pressure. Combined with the demise of the Soviet Union, such methods helped reduce the number of civil wars in non-oil-producing countries by over 85 percent between 1992 and 2006.

They have also been effective against insurgencies fueled by diamond wealth. In 2000, six diamond-producing states in Africa were trapped in civil wars; by 2006, none was. Much of this success is the result of sanctions that the UN Security Council started to impose in 1998 against so-called conflict diamonds -- diamonds sold by African insurgents or their intermediaries -- and the adoption in 2002 of the Kimberley Process, an agreement by an unusual coalition of governments, nongovernmental organizations, and major diamond traders to certify the clean origins of the diamonds they trade. After these measures were taken, rebels in Angola, Liberia, and Sierra Leone lost a key source of funding, and within a few years they were either defeated in battle or forced to sign peace agreements. In the mid-1990s, conflict diamonds made up as much as 15 percent of the world's diamond trade. By 2006, the proportion had fallen to one percent.

SEE-THROUGH

Curtailing rebellions in oil-producing states will be harder. The world's thirst for oil immunizes petroleum-rich governments from the kind of pressures that might otherwise force them to the bargaining table. Since these governments' coffers are already overflowing, aid means little to them. They can readily buy friends in powerful places and therefore have little fear of sanctions from the UN Security Council. In any event, the growing appetite of oil-importing countries for new supplies makes it easy for exporters to bypass such restrictions. The government of President Omar al-Bashir has used Sudan's oil sales to China to deflect diplomatic pressure from Western states asking it to stop the killings in Darfur. Myanmar's military government is following the same strategy: in exchange for Myanmar's selling its natural gas to China, Beijing is blocking tougher sanctions against the junta in the UN Security Council.

The best solution would be for rich countries to sharply reduce their consumption of oil and gas and help poor countries find a more sustainable path out of poverty than oil production. But the Western economies are so dependent on fossil fuels and the demand for oil and gas imports in China and India is growing so quickly that even the most aggressive push for alternatives would take decades to have any effect. In the meantime, a different approach is needed.

No single initiative will undo the oil curse and bring peace to oil-producing states, but four measures can help. The first would be to cut off funding to insurgents who profit from the oil trade. Oil-importing states could contribute by refusing to buy oil that comes from concessions sold by insurgents. Both the insurrection in the Republic of the Congo in 1997 and the 2004 coup attempt in Equatorial Guinea were financed by investors hoping to win oil contracts from the rebels once they controlled the government. A ban on oil stemming from these transactions, much like the ban on conflict diamonds, could help prevent such rebellions in the future.

A second way to limit the effects of the oil curse would be to encourage the governments of resource-rich states to be more transparent. Their national budgets are unusually opaque; this facilitates corruption and reduces public confidence in the state, two conditions that tend to breed conflict. The Extractive Industries Transparency Initiative, an effort launched by nongovernmental organizations in 2002 and expanded by former British Prime Minister Tony Blair, encourages oil and mining companies to "publish what they pay" and governments to "disclose what they receive." This is a good idea, but it is not enough. Adherence to the EITI's reporting standards is voluntary, and although 24 countries have pledged to adopt them, none has fully complied yet. It is important that they do and that the effort to promote transparency be expanded. Oil-importing states, such as the United States, should insist, for example, that energy companies also "publish what they pump" -- that is, disclose from which countries their petroleum originates. This would give consumers the power to reward the most responsible companies. And that, in turn, would give companies an incentive to improve the conditions in oil-producing regions.

Another problem with the current standards is that even though exporting governments are pressured to disclose the revenues they collect, they are not expected to reveal how they spend the money. Oil revenues often vanish into the nooks of state-owned oil companies or into governments' off-budget accounts. According to the International Monetary Fund, between 1997 and 2002, the Angolan government accrued at least $4.2 billion in oil receipts that it could not account for; at the time, Angola had the fifth-highest infant mortality rate in the world.

One possible remedy would be for the EITI (or a similar effort) to develop guidelines for the transparent allocation of all revenues from extractive industries. In his recent book The Bottom Billion, the economist Paul Collier suggests creating a "natural resources charter" that would set international standards for the governance of natural-resource revenues. The charter would help citizens figure out if their governments are properly managing the wealth. International credit-rating agencies could also use it to assess governments' creditworthiness, which would give governments a financial incentive to abide by the charter.

A third way to help oil-exporting states cast off the oil curse would be to help them better manage the flow of their oil revenues. Since the earliest days of the oil business in the mid-nineteenth century, oil prices have alternately soared and crashed. There is no reason to think this will change. But nor is there any reason to assume that because oil prices are volatile a government's oil revenues must be too. In a typical oil contract, the oil company is guaranteed a steady income and the government gets to keep most of the profits but also must bear most of the risk of fluctuating prices. This setup is exactly backward. International oil companies are skilled at smoothing out their income flows -- putting money aside in fat years to spend in lean ones -- whereas governments are terrible at it. The terms of these contracts should be changed so that the oil companies bear more of the price risk than they do now and governments bear less.

Even with greater transparency and steadier revenues, many low-income countries simply lack the capacity to translate oil wealth into roads, schools, and health clinics. For these, the best way to steer clear of the oil curse may be not to sell oil for cash at all but to trade it directly for the goods and services their people need. The governments of Angola and Nigeria are now experimenting with this type of barter: they have awarded oil contracts to Chinese companies in exchange for the construction of infrastructure. Western oil companies have been reluctant to make similar deals, pointing out that they know little about building railroads and have trouble competing against state-owned enterprises in this arena, such as the Chinese oil companies. But they could easily team up with reputable companies that could carry out the work. And why stop at infrastructure? By forming partnerships with experienced service providers, oil companies could pay back host countries by, say, conducting antimalaria campaigns or building schools, irrigation projects, or microfinancing facilities. As more companies bid for such "oil-for-development" contracts, the terms of the contracts would become better for the governments. If inexperienced governments need help carrying out these auctions, the World Bank, or other international organizations, could provide technical assistance.

THE POWER OF PRESSURE

One obstacle, of course, is that some leaders have little interest in better governance: they are too busy profiting from corruption and crushing their opponents. In order to buffer the people of these countries from the mismanagement of oil wealth by their leaders, a fourth set of measures is called for. Laggard governments should be pressed to respect human rights and negotiate with rebels who have legitimate grievances. The U.S. Congress recently urged the State Department to consider withholding visas from corrupt officials who profit from the exploitation of their countries' natural resources. A visa ban might well be an effective tool: soon after Congress' call, the Cambodian government -- one of the world's most corrupt, according to Transparency International -- issued a bitter protest. The State Department should adopt the measure and enforce it broadly against leaders who are corrupt or ignore international human rights standards. And European governments should be encouraged to follow suit.

To avoid constraining measures from the West, some oil-producing governments have turned to national oil companies from China, India, and other developing states that do not concern themselves with their hosts' human rights practices. But pressure could also work against these companies, as many of them are publicly listed. Last January, the Dutch pension fund PGGM withdrew its $54 million investment from the Chinese oil company PetroChina to protest the operations of PetroChina's parent company in Sudan; it is now considering a similar move against the Indian oil and natural gas company ONGC. Other investors should follow this lead until even companies that have not cared about such issues in the past agree to push for transparency and better human rights standards in the countries where they operate.

Helping oil-rich countries avoid violent conflicts and, more broadly, escape the oil curse will not be easy. Many of their governments are indifferent to the incentives offered by diplomats and development specialists. On the other hand, if the main stakeholders -- oil producers and energy companies, as well as international organizations, oil importers, and consumers -- do not find better remedies, a whole new set of countries will suffer the same tragic fate as Angola, Nigeria, Sudan, and, yes, even Iraq.