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Uncovering the DOI: 10.1177/0022002716673702
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Mechanisms
Chia-yi Lee1

Abstract
Is there an association between oil and terrorism? If so, how are they linked to each
other? While there are literature and anecdotes about oil money financing terror-
ism, this article identifies three mechanisms through which oil is linked to terrorism:
funding, targeting, and motivating. Oil-producing countries are prone to terrorism
because they are important targets of terrorists who may attack oil facilities to cause
greater impact and to harm powerful countries overseas interests and also because
oil often generates grievances or greed among local people who may in turn engage
in terrorist activities. Using data on terrorist incidents and oil income, this article
finds a strong, positive relationship between oil and terrorism. To test the
mechanisms, this article uses both large-N and small-N data analyses, and the findings
suggest that while all three mechanisms appear to explain the oilterrorism linkage,
the targeting and motivating mechanisms are more likely than the funding
mechanism. Oil-producing countries have a higher tendency to sponsor terrorism,
but no direct evidence indicates oil money flowing to terrorists except for money
from kidnapping or extorting oil workers.

Keywords
terrorism, oil, resource curse, counterterrorism

1
Centre for Multilateralism Studies, S. Rajaratnam School of International Studies, Nanyang Technological
University, Singapore

Corresponding Author:
Chia-yi Lee, Centre for Multilateralism Studies, S. Rajaratnam School of International Studies, Nanyang
Technological University, Block S4, Level B4, 50 Nanyang Avenue, 639798, Singapore.
Email: iscylee@ntu.edu.sg
2 Journal of Conflict Resolution

The existing literature shows that oil and energy play an impeding role to political
stability: oil is a potential cause of interstate wars and may induce civil conflicts as
well (Collier and Hoeffler 1998; Ross 2004b; Fearon 2005; Humphreys 2005;
Colgan 2013). In recent decades, terrorism has posed a significant and increasing
threat to the human society. As a specific form of political violence, is terrorism also
linked to oil? While it remains a belief among some journalists, policy analysts, and
politicians that oil money is flowing to terrorists, whether there is a positive rela-
tionship between oil and terrorism is never empirically tested. Given the importance
of oil in the political science and international relations literature, there is surpris-
ingly little scholarly discussion of the role oil plays in explaining terrorism.
This article fills this gap by examining the effect of oil on terrorism, specif-
ically discussing the reasons why oil-producing countries may be prone to ter-
rorism. I identify three mechanisms (which are not mutually exclusive):
financing, targeting, and motivating. First, oil wealth may be used to fund ter-
rorism and thus oil-producing countries may be terrorism sponsors or producers.
Second, oil-producing countries are salient terrorist targets not only because
terrorists often attack oil facilities but also because of their strategic importance
to powerful countries, particularly the United States. Third, oil may motivate
separatists or local residents who are resentful of the government to resort to
terrorist acts.
To explore the effect of oil on terrorism, I use country-level data on oil income
and terrorist incidents and perform a negative binomial model. The results indicate a
positive association between oil and terrorism, consistent with the theoretical expec-
tation. To test the mechanisms, I examine whether oil income leads to state sponsor-
ship of terrorism, a higher proportion of terrorist incidents in which oil facilities are
the targets, and more domestic terrorism. I also examine the interactive effect
between oil income and US alliance ties. The results show that oil has a positive
effect on state sponsorship of terrorism, oil-related terrorism, and domestic terror-
ism. I also find partial evidence that oil producers who are the US allies are more
vulnerable to terrorist attacks. Moreover, I use small-N data on terrorist groups to
explore the linkage of oil and terrorist activities and find that these three mechanisms
intertwine with one another: terrorist groups often target oil facilities, especially
when the oil wealth does not benefit the local population, and they sometimes rely
on kidnapping or extorting employees of oil companies to get funding. Both large-N
and small-N data analyses suggest that oil induces terrorism mainly through the
targeting mechanism and the motivating mechanism, and occasionally through the
financing mechanism.
The rest of this article is organized as follows. The next section reviews the
resource curse literature and argues that particular attention should be paid to terror-
ism. The section that follows discusses three mechanisms through which oil-
producing countries are prone to terrorism. The third section presents the large-N
statistical analyses. The fourth section is the small-N analysis of twenty-six terrorist
groups. The final section concludes the article.
Lee 3

The Resource Curse and Terrorism


A country rich in oil is naturally blessed because oil production can generate
enormous revenues. The resource curse literature, however, shows that oil abun-
dance may produce some adverse effects, including a lower level of democracy
(Ross 2001; Jensen and Wantchekon 2004; Morrison 2009; Aslaksen 2010; Ramsay
2011), slow economic growth (Sachs and Warner 1995; Ross 1999), and frequent
civil conflicts (Collier and Hoeffler 1998; Ross 2004b; Fearon 2005; Humphreys
2005). As Ross (2004a) nicely summarizes, oil may induce civil violence because of
its lootability, because of the grievances it generates, because of the potential separa-
tist movements in oil rich regions, and/or because of the weak state capacity result-
ing from over dependence on oil revenues.
While the relationship between oil and civil conflicts is well explored in the
resource curse literature, that between oil and terrorism is not. As a specific form
of political violence, terrorism differs from civil conflicts in two significant respects.
First, civil conflicts generally occur within a countrys border, but terrorism some-
times transcends the national boundary. The distinction between transnational ter-
rorism and domestic terrorism is important when we are concerned with the causes
of terrorism. Oil may cause or intensify civil conflicts primarily because of the
domestic consequences it generates, but terrorism may be induced by external fac-
tors. Second, unlike insurgents or guerrillas, terrorists generally are not armed and
usually target civilians rather than military forces, although some terrorist groups are
also described as militias (Hoffman 2006, 35). Terrorists have their specific motiva-
tions, tactics, and goals, which can be very different from those of rebel groups in a
civil conflict. Due to its distinctiveness, we cannot simply apply the resource curse
theory to examining the linkage between oil and terrorism.
Terrorism is a form of political violence which aims to terrify the audience
beyond the immediate victims, and it emerges due to various reasons. In the terror-
ism literature, scholars find that economic circumstances largely shape the pattern of
terrorist activities, but their arguments and findings on the relationship between
economic conditions and terrorism are mixed. Many scholars believe that poor
economic conditions are the root of terrorism, and economic development helps
eliminate terrorism (Ehrlich and Liu 2002; Li and Schaub 2004; Piazza 2011;
Benmelech, Berrebi, and Klor 2012). Some scholars, contrarily, argue that wealthy
countries are more prone to terrorism because of the feasibility; that is, richer
countries offer an environment in which terrorists can carry out terrorist attacks
more easily (Crenshaw 1981; Blomberg, Hess, and Weerapana, 2004; Freytag
et al. 2011). Still others find no significant impact of economic development on
terrorism (Krueger and Maleckova 2003; Piazza 2006; Abadie 2006).
In addition to the economic determinants, terrorism may be affected by political
or nonmaterial factors. Political regime, particularly, can shape the environment in
which terrorists act and change their incentives. In the literature that examines the
political determinants of terrorism, the majority finds that democratic countries are
4 Journal of Conflict Resolution

more prone to terrorist attacks due to a variety of reasons, such as active foreign
policies, a higher level of political competition, and a higher level of civil liberties
(Eubank and Weinberg 1994, 2001; Weinberg and Eubank 1998; Savun and Phillips
2009; Chenoweth 2010; Lee 2013). In other words, a countrys economic and
political conditions may substantially influence the level of its vulnerability to
terrorism.
As indicated by the resource curse literature, oil has negative political and eco-
nomic effects, so the existence of oil may be channeled into political or economic
circumstances that are (un)favorable to terrorists. For example, if oil-producing
countries tend to be authoritarian regimes (which are less susceptible to terrorism
than democratic regimes), they may be less likely to suffer from terrorist attacks. If,
however, oil production tends to cause economic stagnation or income inequality
(which would produce grievances and incentivize terrorism), oil-producing coun-
tries may be more likely to become the targets of terrorist attacks. Ultimately, this is
an empirical question that can be answered by observational data, and this article
undertakes this task by systematically examining the relationship between oil and
terrorism and the mechanisms linking them.

Oil and Terrorism: Association and Mechanisms


Is there a positive relationship between oil and terrorism? I argue that there is, and
identify three causal mechanisms through which oil may be linked to terrorism. The
first is the funding mechanism: oil money is likely to bankroll terrorist operations.
The second is the targeting mechanism: terrorists tend to target oil infrastructures
or oil-producing countries because of the strategic or economic importance. The
third is the motivating mechanism: oil may cause grievances or greed which will
be translated into terrorist activities. These three mechanisms are essentially differ-
ent from one another: the first is about the means of terrorist groups that make them
function, the second is about terrorist strategies, and the third is about the root causes
of terrorism. These three, however, are not mutually exclusive and can exist simul-
taneously in a single case, as the small-N study section will show.

Oil Wealth Funding Terrorism


First, oil money may flow to terrorist organizations and finance terrorist operations.
While terrorist attacks can be launched at low cost, terrorist groups need large
amounts of money to support themselves (Freeman 2011). Their money may be
spent in a variety of ways, such as recruiting and training new members, developing
weapons and tactics, and carrying out terrorist attacks. Some major terrorist attacks
are expensive. For example, the 9/11 attacks are estimated to cost half million
dollars, and the 2002 Bali bombings are believed to have cost around US$50,000
(Kaplan 2006). Terrorist groups have various sources of financing, including state
sponsorship, donations, illegal activities (such as kidnapping), and profits from their
Lee 5

own businesses (Raphaeli 2003; Kaplan 2006; Freeman 2011), all of which can
possibly involve oil money. Oil production generates huge profits, and in some
oil-producing countries, oil is controlled by or enriches traditional elites who may
support terrorism due to ideological or religious identification. So compared to other
sources, oil revenues may be more likely to flow to terrorist groups coffers, either
through personal donations or state sponsorship.
In addition to high profitability, one character of the oil money is its secrecy: the
amount of oil revenues and how they are spent by the government are usually
unknown to the public, particularly in nondemocratic oil-producing countries (Ross
2012, 59). So governments inclined to sponsor terrorism may more likely use this
easily concealed money. For example, some oil exporting countries including Iran
and Saudi Arabia are believed to be the funders of Islamic fundamentalism or
terrorist groups such as Hezbollah and Hamas (Crane et al. 2009, 56-57). Suspicion
especially exists that the Saudi oil money has contributed to the financing of Al
Qaeda (Le Billon and El Khatib 2004; Yetiv 2011, 118), as most of Al Qaedas
funding is actually raised from Saudi Arabia (Gunaratna 2002, 144).1
Many policy analysts and politicians believe that oil wealth funds terrorism. On
July 11, 2008, the US President Obama raised the concern of over dependency on
foreign oil fueling terrorist activities (Gavrilovic 2008). He said, [t]he nearly $700
million a day we send to unstable or hostile nations also funds both sides of the war
on terror, paying for everything from the madrassas that plant the seeds of terror in
young minds to the bombs that go off in Baghdad and Kabul. The former Director
of Central Intelligence James Woolsey also mentioned that wealth transfers from
oil have been used, and continue to be used, to fund terrorism and its ideological
support (Woolsey 2005). Aware of this, the US government has engaged in
research and measures on tracking terrorist funding. The US Department of the
Treasury, for instance, has run the Terrorist Finance Tracking Program since the
9/11 attacks to track the flows of terrorist money and to assist other government
agencies to uncover terrorist networks. Basile (2004), however, argues that organi-
zational barriers have prevented the Treasury from taking the leading role and
achieving full success.
In addition to state sponsorship or personal donations directly from oil revenues,
oil money may finance terrorism in another passive way, that is, through oil theft or
extortion of oil companies by terrorists. Some terrorist groups inhabiting oil rich
communities sustain themselves by stealing oil from pipelines, extorting oil com-
panies, or kidnapping oil workers. This is similar to the looting mechanism that
links oil and civil wars identified by Ross (2004b). For instance, the National
Liberation Army (ELN) in Colombia and the Front for the Liberation of the Cabinda
Enclave (FLEC) in Angola rely on kidnapping and extorting foreign oil companies
workers as their main income source. Terrorist groups of this kind generally
emerged due to oil-related grievances, and thus they will be discussed in more detail
in the motivating mechanism below. Also, while terrorists normally do not claim
sovereignty or exercise governance over a population (Hoffman 2006, 35), there are
6 Journal of Conflict Resolution

cases in which terrorist groups occupy or control territory with oil fields and profit
from oil sales. The notorious Islamic State, for example, has become the richest
terrorist group in history partly by selling smuggled oil at a price lower than the
market level (CNBC 2014).

Oil as a Terrorist Target


Besides oil money financing terrorism, oil-producing countries may be prone to
terrorism because they are important terrorist targets. Terrorists may target oil facil-
ities or oil companies in order to shock the national or world economy, to seek
ransom to fund their operations, to express their hatred toward foreign oil extraction,
or to damage their enemy countries geopolitical interests (Adams 2003; Luft and
Korin 2004). Terrorists have various tactics and strategies, and their target may
change depending on the goals they want to achieve. Compared to other industries,
the oil industry has the characteristics of low mobility, high specificity, and high
concentration of employment, which make it an easy and vulnerable target for
terrorist attacks. In 2012 alone, for example, there were at least thirty-five terror
attacks that targeted oil or gas pipelines, tankers, refineries, and fields (Taylor 2012).
Sabotaging oil facilities and thus a disruption of oil supplies may also harm the
global or regional economy, as many industrialized countries are heavily dependent
on oil imports. A series of terrorist attacks in Saudi Arabia in May 2004, for exam-
ple, caused oil prices to rise to the highest point since 1990 (Luft and Korin 2004).2
Terrorists may also target oil companies in order to raise money, and this is
related to the funding mechanism discussed above. Although some governments
have the no-concession principle in dealing with hostage-taking terrorists, the oil
industry has increasingly become a significant target for terrorists who kidnap for
ransom (Chaskin and Paul 2011). This is so for at least two reasons. First, in
developing oil rich countries, exploration and production of oil is usually done by
joint ventures or multinationals that have huge assets and are supported by strong
home governments. In the face of kidnapping or extortion, these multinational oil
companies may be more able to and willing to pay ransom or compensation. Second,
oil fields are typically located in remote areas and isolated from the society, which
makes physical protection more difficult and increases the security risks (Steinhaus-
ler et al. 2008). As a result, oil companies represent an attractive target for terrorists
who seek funds. The Movement for the Emancipation of the Niger Delta (MEND),
for example, asked Shell to pay 1.5 billion to compensate for the environmental
degradation in the Niger Delta in 2006 (Omotola 2009). In this situation, terrorists
may not directly attack oil infrastructures or facilities, but they may threaten to do so.
The salience of oil not only comes from the massive profits it produces but also
the geopolitical importance it generates to oil-producing countries. Due to the over
dependence on oil in the developed world and the oligopoly of the oil market, oil-
producing countries generally have strategic values to powerful countries, for
instance, the importance of Saudi Arabia to the United States. The terrorism
Lee 7

literature shows that powerful countries are more likely to become terrorist targets
because of their active foreign involvements (e.g., Pape 2003; Savun and Phillips
2009). When attacking these countries directly is not an option, terrorists may turn to
attacking their interests overseas. So the other reason why oil-producing countries
may be more likely to suffer from terrorist attacks is because targeting these coun-
tries that are powerful countries strategic assets may be more cost effective for
terrorists.
Toft, Duero, and Bieliauskas (2010) find that terrorist events in which energy
transmission infrastructures are the targets are relatively few because terrorists do
not have strong incentives to attack energy supply facilities. It should be noted,
however, that the targeting mechanism discussed here is not restricted to cases only
in which oil facilities are the targets. As long as terrorists choose their targets based
on considerations that are related to oil, oil is linked to terrorism through the target-
ing mechanism. It could be that terrorists target oil companies and demand for
money without carrying out any real attacks. It could also be that terrorists aim at
oil-producing countries and attack other targets such as civilians or businesses rather
than oil infrastructures. The key is that terrorists tactics or strategies are influenced
by the existence of oil and thus their choice of targets.

Oil-motivating Terrorism
The last mechanism linking oil and terrorism is that oil may motivate greedy or
dissatisfied people to engage in terrorist acts. The resource curse literature shows
that the presence of oil may induce disputes and conflicts. Terrorism is one form of
political violence and is particularly likely to be used by people who are disadvan-
taged and want to express their dissatisfaction (Piazza 2006, 2011). If oil exploration
does not benefit the local communities but only generates social and economic
deprivation, environmental degradation, or political and income inequality, those
who suffer may resort to terrorism to reflect their frustration and grievances. This is
especially the case when oil is foreign extracted, which may be accompanied by
foreign military deployment or the presence of foreign security agents. Resentment
toward these foreign actors and a sentiment of oil nationalism may be translated into
terrorist attacks. This is similar to the oil industry grievance mechanism that
Colgan (2013, 159) identifies as one of the pathways linking oil to interstate
conflicts.
The MEND, for example, is a terrorist group that is antiforeign oil companies in
Niger Delta, where foreign operation does not reduce poverty but exacerbates
inequality and causes environmental and health problems. Due to frequent oil spills
and the resultant environmental dislocations, the local Niger Deltans have been
denied sources of living including farming and fishing (Omotola 2009). The MEND,
formed in 2005, demanded the liberation of Niger Delta and has engaged in
repeated terrorist activities that target oil companies, including attacking oil instal-
lations and abducting oil workers.
8 Journal of Conflict Resolution

The abundance of oil may not only motivate discontented people to engage in
terrorist activities, but it may also induce separatist terrorism. Oil increases the
incentives of residents in oil rich regions to seek separation from the state, for
example, the cases of Indonesias Aceh province and South Sudan (Ross 2004a).
Terrorism is an often seen means to draw attention by separatist groups, especially
before the 1980s (Crenshaw 1981; Hoffman 2006, 16-17). So the mere existence of
oil may trigger terrorism by motivating separatist movements, whether resulting
from grievances or greed. The vulnerability of oil-producing countries to terrorism
can even be worsened because oil revenues may weaken state capacity and adversely
affect the prospect of good governance (Fearon 2005). Oil-producing countries,
therefore, may be less capable of fighting terrorism and more susceptible to terrorist
attacks.3
Angolas Cabinda province is the second largest oil-producing region in Africa,
after the Niger Delta. Like the MEND, the FLEC arose due to anger over the unfair
distribution of oil wealth and the devastation of the living environment (Barnes
2005). The FLEC, furthermore, pursues the independence of Cabinda, where the
oil production accounts for 60 percent of Angolas total oil production. Since its
founding in 1963, the FLEC has fought against Cabindas incorporation into Angola
and was involved in the Angolan Civil War between 1975 and 2002. Despite a cease-
fire with the government in 2006, one faction of the FLEC has continued the struggle
for independence (Denhez 2009).
In sum, oil-producing countries may be prone to terrorism for a variety of reasons.
If oil finances or induces terrorist activities and attracts terrorists, we will see more
frequent terrorist attacks in oil-producing countries than in other countries. There-
fore, the first general hypothesis that can be tested empirically is:

Hypothesis 1: The more oil a country has, the more likely that this country
will suffer from terrorist attacks.

If the relationship between oil and terrorism is established, the next question is
how they are linked to each other. Although this article introduces three mechan-
isms that arguably can encompass almost all the cases, not all of them are empiri-
cally testable. Whether oil money really flows to terrorist groups, for example,
may not be detected by large-N data. One testable hypothesis, nevertheless, is that
oil-producing countries are more likely to sponsor terrorism because of the secrecy
of oil revenues:

Hypothesis 2: The more oil wealth a country has, the more likely that this
country will sponsor terrorist activities.

Also, oil-producing countries may encounter more terrorist attacks because oil
facilities are important terrorist targets and because of their geopolitical importance.
This leads to two testable hypotheses. First, if terrorists target oil-producing coun-
tries with the purpose of vandalizing oil installations, we will see more frequent
Lee 9

terrorist attacks on oil facilities in oil-producing countries. Second, if terrorists


attack oil-producing countries with the purpose of hurting powerful countries geo-
political interests, we will expect that terrorist attacks are more likely in oil-
producing countries that are powerful countries strategic friends. The United States
is the most powerful country in the world as well as a primary terrorist target. While
Savun and Phillips (2009) find that the US allies are more susceptible to terrorism,
this article expects that oil-producing countries who are the US governments friends
are even more likely to become terrorist targets. So the next two testable hypotheses
are:

Hypothesis 3: The more oil a country has, the more likely that this country
will suffer from terrorist attacks that target oil facilities.
Hypothesis 4: The more oil a country has, and the closer this country is to the
United States, the more likely that this country will become a terrorist target.

Lastly, oil-producing countries may be prone to terrorism because the presence of


oil and an uneven distribution of oil wealth may cause hatred and dissatisfaction
toward the government which may be channeled into terrorist activities or may
encourage separatist terrorism. This basically means that oil incentivizes a certain
group of citizens to engage in terrorist acts that target their governments, whether to
respond to their grievances or to seek independence. Terrorism of this kind in which
terrorists are homegrown and the attacks are locally executed is domestic terrorism.
So if the motivating mechanism is true, oil-producing countries will experience
more domestic terrorism than other countries, which is the final hypothesis to be
tested:

Hypothesis 5: The more oil a country has, the more likely that this country
will suffer from domestic terrorism.

It should be noted that oil may not only cause grievances toward the state,
but it may also generate resentment toward foreign governments and help the
propaganda or operations of global terrorist organizations. Al Qaeda, for exam-
ple, has used the perceived threat of US control over Persian Gulf oil to insti-
gate anti-American sentiment and recruit followers (Yetiv 2011, 3). It is also
claimed by analysts that the Islamic State has taken advantage of anti-Western
sentiment in Middle East (which is caused by Western interference to secure
access to oil) to expand (e.g., Leech 2016). In other words, the motivating
mechanism may link oil not only to domestic terrorism but to transnational
terrorism as well. The question as to how oil abundance may lead to terrorist
attacks against foreign countries, however, is beyond the scope of this article, as
the focus of this article is the connection between terrorism and oil-producing
countries themselves.
10 Journal of Conflict Resolution

Large-N Studies
This section proposes a research design to test the above hypotheses. I first discuss
the data and variables and then introduce the statistical model. The results of the
statistical analyses are presented afterward.

Outcome Variable
To test the first hypothesis and examine the effect of oil on terrorism, the outcome
variable is the number of terrorist attacks a country experienced in a given year. I use
data from two sources. The first source is the International Terrorism: Attributes of
Terrorist Events (ITERATE) database, which is the most widely used terrorism data
set by academics and contains only transnational terrorist events (Mickolus et al.
2010). The ITERATE has two variables to denote the locations where an incident
started and where it ended, and most of the incidents started and ended in the same
country. I use the ending location to calculate the number of terrorist events that
happened in a country in a given year, but the results remain unchanged if the
starting location is used. The second source is the Global Terrorism Database
(GTD), which is produced by the National Consortium for the Study of Terrorism
and Responses to Terrorism (START 2016) and includes both transnational and
domestic terrorist events. One flaw of the GTD is that the data for 1993 are missing,
and thus I use the data interpolated by Enders, Sandler, and Gaibulloev (2011).

Explanatory Variables
The main explanatory variable is oil wealth or abundance. While there are various
measures of oil wealth, I use a measure constructed by Ross (2012)total oil and
gas income (in million dollars). Ross argues that this measure is superior to the
conventional measures of oil wealth such as oil export as a percentage of gross
domestic product (GDP) because it does not exclude domestic consumption of oil
and is not biased upward in poor countries.4 This variable is log transformed to
remove the skewness and is lagged one year behind the outcome variable. Because
terrorism may be incentivized by the mere existence of oil rather than by oil rev-
enues, I also use data on oil reserves (in million barrels) which are used by numerous
scholars to measure oil abundance (e.g., Humphreys 2005; Jensen and Johnston
2011; Ramsay 2011). The data on oil reserves are from the US Energy Information
Administration5 and are also log transformed.6 While these two variables represent
different concepts, the correlation for these two oil measures is a high of .94.
Figure 1 presents the average numbers of terrorist events across years for coun-
tries with oil and without oil.7 The left panel presents the ITERATE data, which only
include transnational terrorist incidents. As can be seen, there has been a decline in
transnational terrorist events since the end of the Cold War. But countries with oil
have consistently suffered from more terrorist attacks than countries without oil. The
Lee 11

ITERATE data GTD data

45
Countries with oil Countries with oil
7

Countries without oil Countries without oil

40
Average number of terrorist attacks
6

35
5

30
25
4

20
3

15
2

10
1

5
0

0
1970 1975 1980 1985 1990 1995 2000 2005 1970 1975 1980 1985 1990 1995 2000 2005
Year Year

Figure 1. Average numbers of terrorist incidents in oil-producing countries and nonoil-


producing countries.

right panel presents the GTD data, which include domestic terrorist incidents that
outnumber transnational terrorist incidents. Similarly, it shows that oil-producing
countries in general witnessed more terrorist events. Overall, Figure 1 provides
preliminary evidence that oil-producing countries are more susceptible to terrorism.

Testing the Mechanisms


In addition to examining the effect of oil on terrorism, the key is to explore the
mechanisms. As I previously discuss, oil may be linked to terrorism through three
channels: financing terrorist groups, increasing a countrys probability of being
terrorist targets, and motivating people to engage in terrorist activities. Because of
the secrecy of the financial sources of terrorists, the first mechanism is actually the
most difficult to test. As an alternative, I test whether oil-producing countries are
more likely to be terrorism sponsors. If the argument that the money Western
countries spend in purchasing oil from the Middle East and Persian Gulf is used
to fund terrorism is true, we will expect that these oil-producing countries are more
likely to sponsor terrorist activities. I create a variable terrorism sponsor to denote
the countries that are designated as State Sponsors of Terrorism by the US Depart-
ment of State. Eight countries have appeared in the list: Cuba (1982-2015), Iran
(from 1984), Iraq (1979-1982; 1990-2004), Libya (1979-2006), North Korea (1988-
2008), South Yemen (1979-1990), Sudan (from 1993), and Syria (from 1979), and
all of them are oil producers except for North Korea.8
The second is the targeting mechanism, which includes two plausible explana-
tions: salience and geopolitics. Salience means that oil facilities may be a salient
12 Journal of Conflict Resolution

target that terrorists tend to attack. Geopolitics refers to the strategic importance of
oil-producing countries that makes them more likely to become the target of terror-
ists who want to harm powerful countries overseas interests. To examine whether
oil-producing countries are more vulnerable because terrorists tend to attack oil
facilities, I use data from the GTD database which contains information about the
target of each incident. The database includes twenty-two target types, and one of
them is utilities, which, according the GTD codebook, pertains to facilities for
the transmission or generation of energy. For example, power lines, oil pipelines,
electrical transformers, high tension lines, gas and electric substations, are all
included in this value. I create a variable oil-related/all terrorism representing the
percentage of terrorist attacks in which the targets are utilities.9
To test the geopolitics mechanism, I use data on the US allies, which are from the
Alliance Treaty Obligations and Provisions data set (Leeds et al. 2002). US ally is
equal to 1 if a country has alliance ties with the United States in a given year and 0
otherwise. This variable not only enters the model solely to predict the number of
terrorist events but also interacts with the oil variable to examine whether there is an
interactive effect. The theoretical expectation is that oil-producing countries who are
the United States strategic friends are more likely to become terrorist targets.
Lastly, to test the motivating mechanism, I examine whether oil wealth leads to
more domestic terrorism. While the GTD does not distinguish between transnational
and domestic terrorism, Enders, Sandler, and Gaibulloev (2011) nicely partition the
GTD data into transnational and domestic terrorist incidents. I use their data on
domestic terrorism and create a variable domestic terrorism to denote the number
of domestic terrorist events happening in a country-year.

Control Variables
I include a battery of control variables. First, the logarithm of per capita GDP,
economic growth, and trade openness measure a countrys economic conditions.
The data are from the World Banks World Development Indicators. Durability is
the number of years since the last regime change, and democracy is the standard
twenty-one-point Polity score, both of which are from the Polity database (Marshall,
Gurr, and Jaggers 2009).
Terrorism may be related to other types of political violence, so I include a variable
internal conflicts to measure the number of internal wars in a country-year. The data
are taken from the Uppsala Conflict Data Program/Peace Research Institute Oslo
Armed Conflict Data Set (Gleditsch et al. 2002; Themner and Wallensteen 2012).
A number of studies show that the presence of foreign troops provokes transnational
terrorism, particularly suicide attacks (Braithwaite 2015; Choi and Piazza 2015;
Collard-Wexler, Pischedda, and Smith 2014; Pape 2003, 2005), so I include a variable
military intervention, which is coded 1 for country-years that experience foreign
military interventions. The data are from the International Military Intervention Data
Set (Pearson and Baumann 1993; Kisangani and Pickering 2008).
Lee 13

Middle East and Muslim population (in percentage) also enter the model to
examine whether oils effect on terrorism is distinguishable from the religious effect
or the regional effect. The data on Muslim population are from the World Religion
Data (v1.1; Maoz and Henderson 2013).10 Finally, I include a variable postCold
War to denote years after 1991 because terrorism may be a strategy major powers
used to challenge each other during the Cold War.

Statistical Models
The outcome variable is the number of terrorist events in a country-year. An over-
dispersion test indicates that the data are overdispersed, so I use a negative binomial
model, which is suitable for count data with overdispersion. The data structure is
time series cross-sectional, and I include country and year fixed effects to control for
country heterogeneity and contemporaneous shocks. The panel data are unbalanced
because not all countries have the same starting year and because of missing values.
There are 126 countries included in the sample, and a list of these countries can be
seen in the Online Appendix.11 The time periods under investigation vary by data
sources (which are reported in the regression tables), but all are within 1968-2006.
In the model in which terrorism sponsor is the outcome variable, because only
eight countries are designated terrorism sponsors, I use a rare event logistic regres-
sion model which is suited for dichotomous outcome variables with very few ones
(Imai, King, and Lau 2016) and include year fixed effects.12 The US government
began the list of State Sponsors of Terrorism in December 1979, and thus the time
period in this model starts from 1980. In the model in which oil-related/all terrorism
is the outcome variable, I use a logistic regression model with country and year fixed
effects. All the explanatory and control variables are lagged one year behind the
outcome variable to avoid reverse causality or simultaneity.13 Descriptive statistics
of all of the variables used can be seen in the Online Appendix.

Results
The results of the statistical analyses are presented in Table 1. The first column
reports the result of a model in which ITERATE data are used as the outcome
variable and oil income is the main explanatory variable. As can be seen, oil income
has a positive effect on terrorism, although it does not achieve statistical signifi-
cance. In model 2, I use oil reserves instead to measure oil abundance. It shows that
the level of oil reserves has a positive and statistically significant effect on the
number of terrorist incidents. Other things being equal, one-unit increase in the oil
reserves variable leads to a 17 percent increase in terrorist activities.
In model 3, I use the GTD data to calculate the number of terrorist events. The
results show that oil income has a positive and statistically significant effect on
terrorist attacks, providing support for the first hypothesis. Model 4 includes oil
reserves as the explanatory variable, and the result remains unchanged that oil is
14
Table 1. Effects of Oil Wealth and Abundance on Terrorist Incidents.

Model 1 Model 2 Model 3 Model 4 Model 5 Model 6


Outcome variable: no.
of terrorist events (ITERATE) (GTD pooled) (GTD transnational)

Oil income 0.022 (0.026) 0.054* (0.030) 0.066** (0.031)


Oil reserves 0.158*** (0.050) 0.167*** (0.062) 0.208*** (0.063)
GDP per capita 0.388** (0.160) 0.923*** (0.227) 0.155 (0.166) 0.318 (0.211) 0.076 (0.183) 0.308 (0.235)
Growth 0.017*** (0.005) 0.009 (0.006) 0.013* (0.006) 0.012** (0.006) 0.018*** (0.006) 0.015** (0.007)
Trade openness 0.001 (0.002) 0.001 (0.002) 0.004* (0.002) 0.005** (0.002) 0.003 (0.002) 0.003 (0.003)
Political regime 0.002 (0.008) 0.012 (0.010) 0.008 (0.008) 0.033*** (0.010) 0.006 (0.009) 0.002 (0.010)
Regime durability 0.014*** (0.003) 0.021*** (0.005) 0.014*** (0.003) 0.025*** (0.005) 0.015*** (0.004) 0.028*** (0.005)
Internal conflicts 0.346*** (0.055) 0.458*** (0.068) 0.964*** (0.060) 1.073*** (0.070) 0.702*** (0.061) 0.756*** (0.070)
Military intervention 0.322*** (0.090) 0.275*** (0.097) 0.227** (0.098) 0.235** (0.101) 0.098 (0.102) 0.010 (0.105)
Muslim population 0.045*** (0.015) 0.012 (0.017) 0.074*** (0.015) 0.033** (0.016) 0.082*** (0.017) 0.041** (0.019)
Middle East 0.217 (0.951) 0.128 (0.099) 2.156** (1.011) 1.585 (0.998) 1.895* (1.053) 1.258 (1.076)
Postcold war 0.555* (0.307) 1.565*** (0.261) 0.983*** (0.289) 0.415* (0.237) 0.280 (0.297) 0.643** (0.253)
No. of observations 3,993 2,768 3,805 2,768 3,805 2,768
No. of countries 126 123 125 123 125 123
Years covered 1968-2006 1980-2006 1970-2006 1980-2006 1970-2006 1980-2006
Log likelihood 5,656 3,791 8,042 6,264 4,886 3,630
AIC 11,660 7,900 16,426 12,846 10,114 7,579
BIC 12,755 8,842 17,497 13,788 11,182 8,521
Note: Standard errors are in parentheses. ITERATE International Terrorism: Attributes of Terrorist Events; GDP gross domestic product; GTD Global Terrorism
Database; AIC Akaike information criterion; BIC Bayesian information criterion.
*p < .1.
**p < .05.
***p < .01.
Lee 15

positively associated with terrorism. Because the GTD contains both transnational
and domestic terrorism, to make it comparable to the ITERATE database that
includes only transnational terrorism, I use data on transnational terrorism parti-
tioned from the GTD by Enders, Sandler, and Gaibulloev (2011) to be the outcome
variable. Models 5 and 6 present the results. As shown, oil income or abundance has
a positive and statistically significant effect on transnational terrorism. According to
model 5, other things being equal, one-unit increase in the oil income variable leads
to a 6.8 percent increase in transnational terrorist events. Except for model 1, all the
results in Table 1 indicate a positive association between oil and terrorism.
In addition to oil, the results in Table 1 show that terrorism is influenced by both
economic and political factors. Economic growth and trade openness help reduce
terrorism. More durable regimes are more immune from terrorism. Countries pla-
gued with internal conflicts or countries experiencing foreign military interventions
are more susceptible to terrorism. Moreover, terrorist attacks are more likely to
occur in countries with larger Muslim population. Middle East, contrarily, is nega-
tively related to terrorist incidents in the GTD models.14 Finally, while models 1, 2,
4, and 6 show that there has been a decrease in terrorist incidents after the end of the
Cold War, model 3 indicates an increase. This is probably because the sample used
in model 3 includes domestic terrorism which is more prevalent after the end of the
Cold War and also because the time period under investigation in model 3 is longer.
After showing that oil has a positive effect on terrorism, I move on to testing the
mechanisms and present the results in Table 2. In model 1, the outcome variable is
whether a country is designated as a state sponsor of terrorism in a given year. As can
be seen, the coefficient for oil income is positive and statistically significant at the 1
percent level, suggesting that oil-producing countries are more likely to sponsor
terrorism, suggesting that oil producing countries are more likely to be terrorism
sponsors. While this finding cannot be treated as direct evidence of oil money
financing terrorist activities, it indicates a higher tendency of oil rich governments
to support terrorism, very likely using oil revenues. In addition to oil income, model
1 shows that GDP per capita and Muslim population have positive effects on state
sponsorship of terrorism. More democratic countries, countries with a more durable
regime, and countries that are more open to trade, contrarily, are less likely to be
terrorism sponsors. Regarding the temporal effect, the postCold War era witnesses
an increase in state sponsorship of terrorism.
In model 2, I test the relationship between oil income and terrorist attacks in
which oil facilities are the target. It shows that oil income has a positive and
statistically significant effect on the percentage of oil-related terrorism over all
terrorism, suggesting that oil-producing countries are more likely to suffer from
terrorist attacks on their utilities. While utilities may also be the terrorist target in
nonoil-producing countries, oil-producing countries face a higher risk.
In models 3 and 4, I include US ally and its interaction term with oil income to
predict the number of transnational terrorist events. In model 3, I use the ITERATE
data, and the results show that both oil income and US alliance ties have a positive
16
Table 2. The Effect of Oil on Terrorism: Testing the Mechanisms.

Model 1 Model 2 Model 3 Model 4 Model 5


Outcome variable State sponsor Oil-related/all terrorism ITERATE GTD transnational GTD domestic

Oil income 0.207*** (0.049) 0.450*** (0.061) 0.001 (0.036) 0.082* (0.044) 0.093*** (0.037)
US ally 0.048 (0.265) 0.938*** (0.342)
US ally  oil 0.002 (0.037) 0.213*** (0.047)
GDP per capita 0.305*** (0.154) 0.595*** (0.213) 0.381** (0.164) 0.088 (0.190) 0.026 (0.200)
Growth 0.008 (0.025) 0.019*** (0.005) 0.017*** (0.005) 0.016*** (0.006) 0.010* (0.007)
Trade openness 0.044*** (0.008) 0.020*** (0.003) 0.001 (0.002) 0.005* (0.003) 0.004 (0.002)
Political regime 0.341*** (0.050) 0.012 (0.008) 0.002 (0.008) 0.010 (0.009) 0.016 (0.009)
Regime durability 0.028*** (0.009) 0.012*** (0.004) 0.012*** (0.003) 0.013*** (0.004) 0.011* (0.004)
Internal conflicts 0.188 (0.288) 0.317*** (0.057) 0.332*** (0.056) 0.689*** (0.062) 0.956*** (0.068)
Military intervention 0.060 (0.416) 0.229*** (0.062) 0.288*** (0.091) 0.049 (0.104) 0.226*** (0.113)
Muslim population 0.007** (0.004) 0.038 (0.054) 0.041*** (0.016) 0.058*** (0.019) 0.056*** (0.019)
Middle East 0.479 (0.993) 0.516 (1.150) 1.741 (1.201)
Postcold war 3.170** (1.283) 0.262 (0.398) 0.037 (0.282) 1.123*** (0.312) 1.786*** (0.365)
No. of observations 2,970 3,695 3,747 3,561 3,805
No. of countries 126 125 126 125 125
Years covered 1980-2006 1970-2006 1968-2004 1970-2004 1970-2006
Log likelihood 1,703 5,488 4,646 6,585
AIC 540 3,740 11,325 9,633 13,511
BIC 4,778 12,409 10,690 14,579
Note: Standard errors are in parentheses. ITERATE International Terrorism: Attributes of Terrorist Events; GDP gross domestic product; GTD Global
Terrorism Database; AIC Akaike information criterion; BIC Bayesian information criterion.
*p < .1.
**p < .05.
***p < .01.
Lee 17

effect on transnational terrorism, although neither is statistically significant. Their


interaction term is also positive and statistically insignificant. In model 4, I use the
GTD transnational terrorism data. As the results show, the sole effects of oil income
and US alliance ties are negative and statistically significant.15 The interaction term
between oil income and US ally, moreover, has a positive and statistically significant
coefficient. This means that oil and US alliance ties jointly affect terrorist activities.
US allies may be less susceptible to terrorism, but their tendency to suffer from
terrorist attacks increases as the level of oil income rises.
Finally, to test the motivating mechanism, I use the number of domestic terrorist
events to be the outcome variable. Domestic terrorism refers to terrorist activities in
which the targets, victims, venues, and perpetrators are all from the same country.
Indeed, domestic terrorism may emerge due to various reasons, but mostly it is
carried out by politically marginal actors who have demands on or grievances
against the government (Piazza 2011). So, whether the oil-motivated terrorism is
separatist terrorism or terrorism that expresses anger or hatred, it should be home-
grown terrorism. Model 5 in Table 2 displays the results when domestic terrorism is
used as the outcome variable. As it shows, oil income has a positive and statistically
significant effect on domestic terrorism, suggesting that oil-producing countries
experience more domestic terrorist attacks. Compared to the effect of oil income
on transnational terrorism shown in model 5 in Table 1, the effect on domestic
terrorism is stronger. One-unit increase in oil income leads to a 9.7 percent increase
in domestic terrorist incidents. Therefore, while oil may drive terrorism through
other channels, oil-motivating terrorism is a strong explanation of the prevalence
of terrorism in oil-producing countries.
In short, oil may induce terrorism through different mechanisms. I find strong
evidence of the link between oil and state sponsorship of terrorism, and some
evidence of the targeting and motivating mechanisms. Oil-producing countries are
more likely to suffer from terrorism because oil facilities are salient targets, because
they tend to be the US allies, and because oil motivates domestic terrorism.

Small-N Studies
In addition to the large-N, cross-national analysis, I use small-N data on terrorist
groups to explore the significance of these three mechanisms. The data on terrorist
groups are from the Terrorist Organization Profiles, provided by the START.16 This
database contains 856 terrorist groups through March 2008 and includes information
about each terrorist group such as their financial sources, founding philosophy, and
goals. Using a key word search, I find twenty-six terrorist groups are directly related
to oil and analyze the role oil plays in these groups. It should be noted that oil may
facilitate or induce terrorism through other indirect mechanisms, for example, oil
weakening state capacity. So while 26 of the 856 seem to be a small portion, these
cases may not represent the whole universe. The primary goal of this analysis,
18 Journal of Conflict Resolution

Table 3. Oil-related Terrorist Groups and Three Mechanisms.

Terrorist groups Funding Motivating Targeting

al-Ahwaz Arab Peoples Democratic Front P


Arab Struggle Movement for the Liberation of Ahvaz P
Arbav Martyrs of Khuzestan P
Bodo Liberation Tigers (BLT) P
Front for the Liberation of the Cabinda Enclave (FLEC)- P P P
Renewed
FLEC P P P
Peoples Defense Forces (HPG) P
Iduwini Youths P P
Iraqi Liberation Army P
Islamic Glory Brigades in the Land of the Nile P
Jund al-Sham P
Khaibar Brigades P
Lashkar-e-Jhangvi (LeJ) P
Movement for the Emancipation of the Niger Delta (MEND) P P
National Liberation Army (Colombia) P P P
Peoples Revolutionary Front (Philippines) P
Rebel Armed Forces P
Southern Sudan Independence Movement (SSIM) P
Sudan Peoples Liberation Army P P
The National Anti-corruption Front P P
Tupac Katari Guerrilla Army (EGTK) P
Tupamaro Revolutionary MovementJanuary 23 P
Ummah Liberation Army P
United Arab Revolution P P
United Revolutionary Front P
World Islamic Jihad Group P

instead, is to examine the plausible causal mechanisms that link oil to terrorism
using group-level data.
Table 3 displays these twenty-six terrorist groups and the mechanisms through
which they are related to oil. As can be seen, most of these groups are linked to oil
because they mainly target or have a record of attacking oil facilities. For instance,
the Iraqi Liberation Army blew up a Turkish oil pipeline in 1980; the Peoples
Defense Forces, a Kurdish terrorist group, primarily targets oil pipelines and military
bases; the Peoples Revolutionary Front claimed they bombed the headquarters of
two US oil companies in Manila in 1971, which aimed to hurt the US interests in
Philippines. These cases show that targeting is a major mechanism, and both the
salience and the geopolitics explanations exist in these terrorist groups activities.
Moreover, many of these terrorist groups are located in oil rich regions. They
emerged primarily because the oil wealth is not distributed equally, especially when
oil is extracted by foreign investors and/or because of a separatist agitation. This is
Lee 19

classified into the motivating mechanism. The al-Ahwaz Arab Peoples Democratic
Front, for example, pursues the independence of Khuzestan, which is an oil rich prov-
ince in southwest Iran where local Arabians are denied the benefits of oil. Oil may also
motivate terrorist activities because of the unpopular oil policy. The United Revolu-
tionary Front in Venezuela, for instance, was against the former President Rafael
Calderas oil privatization and mainly protested against the Caldera Administration.
Some of these groups are related to oil through both the motivating and targeting
mechanisms, such as the ELN, the MEND, and the Iduwini Youths. These groups
generally originated from an oil rich region where the local people are discriminated
and the oil wealth mostly accrues to the foreign companies. They not only advocate a
better treatment for these local people or the independence of this region but also
target foreign oil companies. For instance, the National Anti-corruption Front in
Bolivia, which carried out a bombing event at the headquarter of a Brazilian oil
company in 2005, is a strong antiprivatization terrorist group. In these cases, oil
companies become the target not because of the geopolitics of oil but due to a
nationalist, antiforeign oil sentiment.
Of these twenty-six groups, only three are linked to oil through the funding
mechanismthe FLEC, the FLEC-Renewed, and the ELN. All of these three groups
depend on kidnapping or extorting the employees of foreign oil companies as their
primary financial source. The ELN in 1998 alone, for instance, was estimated to
receive 84 million dollars from ransom and 255 million dollars from extortion.
Notice that the other two mechanisms also apply to these three groups, which means
they demand money from oil companies because oil companies are easy targets and
also because they are essentially antiforeign oil. Indeed, this analysis only reveals
cases in which oil money is used to fund terrorist groups through visible means, such
as hostage taking and extortion. If terrorist groups are truly sponsored by states or oil
tycoons, how this oil money flows to terrorist groups and how it is spent are usually
clandestine and cannot be detected by the data. The available evidence, however,
indicates that the funding mechanism is not unlikely but appears less frequently than
the targeting and motivating mechanisms.
One plausible explanation as to why the funding mechanism is rare is that oil
(particularly offshore oil) is hard to be exploited by outsiders. This nonlootability
makes it less likely to directly finance terrorists or less likely to be observed if the
revenues flow to terrorist groups. The resource curse literature shows that more
lootable natural resources, such as diamonds (especially alluvial diamonds) and
timber, have lower entry barriers and are more likely to finance civil conflicts
(Lujala, Gleditsch, and Gilmore 2005; Ross 2004b; Snyder and Bhavnani 2005).
This may also be true for terrorist groups. For example, the database indicates that
one terrorist group, the Revolutionary United Front based on Liberia and Sierra
Leone, used profits from selling diamonds to fund its activities, but no terrorist
groups financial source is directly from oil proceeds. One significant exception
may be todays Islamic State, who occupies Iraqi and Syrian territory with oil fields
and generates revenues from oil sales.
20 Journal of Conflict Resolution

In addition, the evidence provided by the small-N study is basically consistent


with the large-N analysis. Oil is associated with terrorism because terrorists tend to
target oil facilities, either to harm the US interests abroad or simply to generate
larger impact, and because oil induces dissatisfied or greedy people to resort to
terrorism. While oil rich countries are more likely to be terrorism sponsors, there
seems to be less evidence of oil money directly funding terrorism, except for money
from kidnapping or extorting the employees of oil companies.

Conclusion
Oil has mixed effects on the economic and political developments in a country. On
the one hand, it generates huge revenues and can help a countrys economy to take
off or to prosper. The resource curse theory, on the other hand, indicates that oil may
hinder economic growth, impede democratic governance, and induce civil conflicts.
At the international level, oil is also a major cause of wars and has significant
geopolitical impact (Colgan 2013). Is terrorism as a form of political violence also
affected by oil? This article tests the relationship between oil and terrorism and
identifies three mechanisms through which they are associated: funding, targeting,
and motivating. These three mechanisms can appear independently, but oftentimes
they are interrelated.
The findings of the large-N and small-N analyses in this article suggest that all
three mechanisms appear to be valid. Oil-producing countries have a higher ten-
dency to sponsor terrorism, and terrorists often attack oil facilities which can cause
greater impact and/or can hurt powerful countries overseas interests. Oil-producing
countries are prone to terrorism also because local people hardly enjoy the oil
wealth, particularly when the oil is foreign extracted, which in turn creates dissa-
tisfaction or a separatist sentiment that is channeled into terrorist activities. The
results of the statistical analyses show that oil income has a positive effect on state
sponsorship of terrorism, on domestic terrorism, and on the proportion of terrorist
incidents in which the targets are oil facilities. The effect is especially stronger for
oil-producing countries who are the US allies.
The findings provide potential implications to policy makers who initiate coun-
terterrorism measures. While tracking and cutting off terrorist financing are impor-
tant, efforts should also be made to protect energy facilities and to eliminate the
grievances in oil rich communities. Oil companies, for example, should take cor-
porate social responsibility and engage in the community relations. If oil produc-
tion is no longer a cause of grievances, oil-motivated terrorism will be largely
reduced.

Acknowledgments
The author would like to thank Pascal Vennesson, Mohammed Sinan Siyech, H. Richard
Friman, the JCR editors, and two anonymous reviewers for their helpful comments.
Lee 21

Declaration of Conflicting Interests


The author(s) declared no potential conflicts of interest with respect to the research, author-
ship, and/or publication of this article.

Funding
The author(s) received no financial support for the research, authorship, and/or publication of
this article.

Notes
1. Al Qaeda has long preferred to use Saudi charities, including those funded by high-
ranking Saudis elites, as a channel for their financing because of the lack of monitor
mechanisms due to no income tax in Saudi Arabia (Basile 2004; Gunning 2008).
2. However, Saudi Arabia has not faced many attacks since then. Thanks to an anonymous
reviewer for pointing out this.
3. Arguably, the weak state could be another mechanism indirectly linking oil and terrorism.
This article, however, focuses on mechanisms that directly involve oil issues. So indirect
mechanisms are not discussed here.
4. Ross (2012), however, divides the oil and gas income variable by population, which is not
done in this article because the focus here is the overall oil wealth in a country instead of
the per capita wealth.
5. Available at http://www.eia.gov/petroleum/data.cfm. The data start from 1980, so the
time period under investigation is shorter when the oil reserves variable is used.
6. There are a few negative values after the log transformation, so I use log(oil reserves 1)
to make all values greater than or equal to 0.
7. I define a country as having oil as long as the oil income is greater than zero. The pattern
remains unchanged when I use oil reserves greater than zero to identify countries with oil.
8. Admittedly, the list could be biased and only reflects the US foreign policy preferences.
To the best of the authors knowledge, unfortunately, there is no other data source or
measure for state sponsorship of terrorism. Alternatively, I add two countries that are
often accused of sponsoring terrorismSaudi Arabia and Pakistanin the list as a
robustness check. The results (reported in the Online Appendix) remain unchanged after
these two countries are added.
9. Of the twenty-two target types, utilities are the seventh largest target type, after private
citizens and property, business, military, government (general), police, and transportation.
While this measure includes not only oil but other energy facilities, using this measure is
still conservative because the Global Terrorism Database codebook notes that [a]ttacks on
officers, employees or facilities of utility companies . . . are coded as business.
10. The World Religion Data contain data for every half decade from 1945 to 2010. I
supplement the data for the following four years using data for 1945, 1950, . . , and 2010.
11. Due to missing data for some variables, however, not all models include all these 126
countries. The number of countries included in each model is reported in the regression
tables.
22 Journal of Conflict Resolution

12. Country fixed effects are not included in this model because the outcome variable terror-
ism sponsor is invariant or rarely changing over time, which makes the model fail to
converge with country fixed effects. A logit model with country random effects produces
similar results.
13. The variable oil reserves, however, are not lagged because oil reserves are naturally
present on the ground and thus should be exogenous.
14. When I restrict the sample to only Middle Eastern countries, oil remains to have a positive
effect on terrorism.
15. The coefficient for oil income becomes negative and statistically significant probably
because of its collinearity with US ally. In fact, oil-producing countries are more likely to
have alliance ties with the United States. Of 1,889 observations (country-years) in the
sample that are US allies, there is a high of 67 percent that have oil (oil income > 0). Of
2,669 country-years that have no alliance ties with the United States, 55 percent do not
have any oil. When I drop the interaction term between oil income and US ally, the
coefficient for oil income turns positive.
16. The database has been modified and renamed to the Big, Allied and Dangerous database,
which is available at http://www.start.umd.edu/baad/database.

Supplemental Material
The online supplements are available at http://jcr.sagepub.com/supplemental.

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