Geopolitical Risk Implications for Natural Resource Governance and Conflict Resolution
Publisher: Resources Policy
Author(s): Mohammad Ali Nasir and Wissal Ben Arfi
Date: 2024
Topics: Conflict Causes, Dispute Resolution/Mediation, Governance
Against the backdrop of global development, geopolitical shifts frequently affect the distribution and utilization of natural resources. These geopolitical risks (GPRs) can result in indiscriminate exploitation and excessive consumption of resources, thereby inflicting irreparable harm to the environment. Moreover, the scramble for resources often serves as a flashpoint for conflict. GPRs further amplify these conflicts, endangering regional stability. With respect to conflict resolution, GPRs complicate negotiations and consultations, potentially prolonging and escalating conflicts. Therefore, to address these challenges, nations must reinforce international co-operation, resolve differences through political diplomacy, and collaborate to establish a just and efficient natural resource governance mechanism. This will facilitate the sustainable utilization of resources and contribute to regional peace and stability.The opening paper by Gu et al. (2023a) explored the economic effects of the European Union's carbon tariff policy on China, India, Brazil and South Africa. It shows that carbon tariffs are detrimental to economic development, residents' welfare, trade levels, and the output of energy-intensive industries in the expropriated country. Abid et al. (2023) delineated a novel approach to analyze the dynamic effects of a GPR shock on five types of commodities, where a Markov switching model with a t-distribution for errors was the most suitable for analyzing the impact of GPR shocks on commodity markets. Wang et al. (2023a) examined the impact of trade protection on renewable energy, economic growth, and carbon emissions. The findings demonstrate an inverse effect and a trade openness threshold for the impact of renewable energy consumption and economic growth. Hu et al. (2023) employed the TVP-SV-VAR model to investigate the time-varying impacts of economic policy uncertainty (EPU) and China's geopolitical risk (GPRC) on China's commodity prices (CCPI). Our study shows that the CCPI can be collectively influenced by EPU and GPRC shocks. Sezer et al. (2024) analyzed the factors affecting the territorial competitiveness index in Izmir and found that the Gross Domestic Product growth rate, renewable energy production, and technological innovation index increased rapidly. Muğaloğlu et al. (2023) explored the dynamic effects of GPR and economic policy uncertainties on oil and natural gas prices in the slightly and highly volatile regimes of the United States (US) market. Their empirical results demonstrate that a positive shock to the GPR of the US causes an increase in the growth rate of WTI prices during periods of high volatility. Ding et al. (2023a) revealed that the US GPR has a stronger impact on energy market prices than other market prices, which became stronger after the Russia-Ukraine conflict. Khurshid et al. (2023) investigated the impact of the Russia-Ukraine War on critical metal prices and the extent to which it affected them. Their results show that the Russia-Ukraine conflict drove the critical metal prices. Safi et al. (2023) examined the influence of GPR, natural resource rent, and key economic factors on consumption-based carbon emissions in G7 countries. Their findings indicate a direct positive relationship between geopolitical uncertainties and carbon emissions.Ferreira et al. (2023) studied the influences of global governance indicators on natural resource rents in Sub-Saharan Africa (SSA) and Middle East and North Africa (MENA). Their finding reveals that in both MENA and SSA economies, there is a negative perception of the quality of governance. Li et al. (2023a) explored the impact of land used for cereal production and natural resources on environmental sustainability in the United States between 1970 and 2018. Their results show that land under cereal production, insurance, financial services, and economic growth are positively correlated with the ecological footprint, whereas natural resources have a negative relationship with the environmental footprint. Niu et al. (2024) investigated the direct and heterogeneous impacts of carbon emission trades (CETS) on enterprise market value (EMV). Their results show that a CETS can significantly enhance the EMV of covered enterprises, indicating that China's CETS supports Porter's hypothesis. Zhou et al. (2023a) found that economic growth, natural resource availability, and nonrenewable energy sources contribute to increased CO2 emissions, leading to environmental degradation in RCEP (Regional Comprehensive Economic Partnership) nations; however, the use of renewable energy and economic globalization enables RCEP nations to reduce their CO2 emissions. Mandaci et al. (2023) examined the impact of global GPR on connectedness among major natural resource commodities. They found high connectedness under both extraordinarily high- and low-return conditions. Liu and Tian (2023) evaluated the link between natural resource rents in the USA, and they suggest that natural resource rents impose a resource curse on technological innovation. Chen and Guo (2023) examined the influence of economic growth (GDP), the human capital index (HCI), globalization (KOFG), political risk (PRI), and natural resource rent (TNRNTS) on the number of international tourists arriving (TRSM) in the Next-11 economies. The outcomes reveal that GDP, HCI, and KOFG significantly boost tourism, whereas higher political risk discourages international tourists' arrivals in Next-11 economies. Through the application of DOLS and FMOLS, Wenjuan et al. (2023) found that the volatility of natural resources and financial innovations has a substantial effect on the financial and economic development of Asian countries. Halkos and Aslanidis (2023) compared the total factor productivity (TFP) of G20 economies, divided into G7, BRICS (Brazil, Russia, India, China and South Africa), and other G20 countries, excluding the European Union, and found that, on average, BRICS has achieved higher TFP than G7.Li et al. (2023b) investigated the correlation between prices of rare earth metals, GPR, and global economic activity and found that when the rare earth markets encounter supply shocks, the prices cause a positive GPR index. Żuk et al. (2023) investigated how dependence on natural resources and energy infrastructure−dating back to the Cold War period-affects the position of the V4 countries in a risky situation and a new geopolitical order created after the outbreak of the war in Ukraine. Zhao et al. (2023) considered 14 energy security policies issued by the Chinese government as research objects, designed an evaluation index system for energy security policies, and used the Policy Modeling Consistency index model to evaluate energy security policies. Chi and Ping (2024) examined the influence of natural resource components on the financial system sustainability in resource-abundant economies. They found that mineral rents play a progressive role in developing the financial system, whereas forest, oil, and natural gas rents significantly harm financial development. Bashir et al. (2023) found that energy transition and banking developments ensure environmental sustainability, natural resource consumption, GPR, and economic growth, causing environmental degradation. Feng et al. (2023) investigated the disparities between resource-rich and resource-scarce countries and their profound implications for sustainable development. Yu et al. (2023a) found that the structural resilience of the nickel trade network has improved over the period 2001–2021, but the network will be paralyzed if 10%–20% of the nodes are attacked. Jiang and Gao (2023) investigated the impact of export restrictions on commercial services on the natural resources of OECD (Organization for Economic Co-operation and Development) countries. They found that natural resources are positively associated with the export of goods and services, and renewable energy consumption is negatively associated with urbanization and economic growth. Yuan et al. (2023) investigated the impact of natural resources on renewable energy consumption in N-11 countries and its role to moderate economic growth, stock market capitalization, and technology.Zhang and Teng (2023) examined the influence of natural resources on a country's financial investment while considering the roles of economic growth, technological innovation, and renewable energy. Jiang and Chen (2024) used the Diebold-Yilmaz (2012) method, Baruník and Krehlík's (2018) method, and a novel quantile connectedness method to examine dynamic and directional risk connectedness under different time frequencies and market conditions. Zhang et al. (2023a) used coal resource utilization efficiency as an example to construct a spatial Durbin model to test the impact of the coordinated development of two-way foreign direct investment on coal resource utilization efficiency and its spatial spillover. Liu et al. (2023a) evaluated the environmental effects of the BGVSP in terms of energy consumption, carbon emissions, human toxic potential, global warming potential, acidification potential, air quality potential, and photochemical ozone creation potential. Khan et al. (2023) employed panel bootstrap Granger causality to investigate the relationship between GPR and economic security in Central and Eastern European countries. The findings reveal that GPR has a consequential impact on the economic security of several countries, such as the Czech Republic, Hungary, Latvia, Lithuania, Poland, and Slovakia. Wu et al. (2023a) explored the influence of energy price shocks on energy security. They used a long-run method of the moment quantile regression test, and it showed that energy price shocks decrease energy security. Similarly, Xiang et al. (2023) investigated the interconnection between the natural resources and economic progress of the aforementioned Central and Eastern European countries over a specified timeframe and found that mineral rents improve economic growth in the long term, which acts in favor of future economies. Zheng et al. (2023a) evaluated the effects of natural resources and economic expansion in a different setting, with a focus on the role of tourism and renewable energy resources in the BRICS economies. They found that tourism and foreign investment have substantially progressive effects on economic expansion across quantiles.Ai et al. (2023) estimated the causal effects of a Resource-Exhausted City Promotion program on carbon emissions, using a difference-in-differences design. They found that this supportive policy leads to a significant reduction in carbon emissions in resource-exhausted cities relative to other cities. Bui et al. (2023) assessed a natural resource management model and its relationship to governance conflicts in Vietnam. Wu et al. (2023b) used single-factor and two-factor GARCH-MIDAS-GPR models to examine the influence of GPR on oil prices and its internal mechanisms. Foglia et al. (2023) demonstrated that: (1) GPR transmission varies with country and often depends on geographical proximity, (2) GPR appears to affect the energy sector more than metals and food, and (3) the effects of shocks tend to be absorbed within a year. Wu et al. (2023c) analyzed the asymmetric impact of natural resources on the economic performance of four natural-resource-dependent economies over the last three decades and explored the important roles of globalization, foreign direct investment, and renewable energy consumption in economic performance. Zhang and Chen (2023) explored the influence of green finance on China's ecological footprint. The results assert that economic growth and natural resource exploitation increase environmental pollution. Zhang et al. (2023b) examined the impact of coal, mineral, and oil rents on human capital while considering the importance of economic growth and globalization. Cheng et al. (2023) developed an interaction model to investigate waste separation behavior that accounts for convenience and informational tools. The model results indicate that convenience tools can induce residents to separate their waste. Li et al. (2023c) examined the stability of the lead-lag relationship between GPR and crude oil prices. They found that the relationship was complex and time-varying, with asymmetry.Zhang et al. (2023c) studied the interrelationship among resource finance, energy efficiency, and economic growth, covering OECD economies from 1984 to 2021. The study revealed that economic growth has a significant and positive influence on financial development, whereas energy efficiency has an unfavorable effect. Wan et al. (2024) leveraged various time-series methods, including the ADF-GLS stationary analysis, to govern the stationary sequence and the Bayer-Hanck cointegration test for long-term cointegration. The study evaluated the long-lasting and debatable issue of the resource-growth nexus, which ascertained whether natural resources are a curse or boon for economic growth. Liao et al. (2023) employed several time-series methods to derive several policy implications, indicating that globalization and economic growth must be encouraged to enhance natural resource rents and industrial expansion. Pan et al. (2023) analyzed the impact of disaggregated natural resources and GDP growth on Russia's GPR. This study suggests policies related to promoting economic diversification, addressing income inequality, sustainable forest management practices, and ensuring equitable distribution of benefits that can help reduce social and economic inequality, which may decrease geopolitical risk. Wang et al. (2023b) examined the influence of geopolitical risks on energy transition. It revealed that GPR exerts a promotional influence on energy transitions, including energy consumption and energy production transitions. Aloui et al. (2023a) investigated the effects of geopolitical risk (GPR) on commodity future returns by computing the conditional value-at-risk (CoVaR) and delta CoVaR using time-varying and static bivariate copula models. Aysan et al. (2023) aimed to identify the nexus between natural resources and governance conflicts while assessing the role of governance in natural resource management. They identified three significant categories of governance challenges (associated with capacity, connectivity, and knowledge) and three domains of good governance (effectiveness, involvement, and efficiency). Wang et al. (2023c) investigated the impact of natural resources, GPR, and trade on financial inclusion in China from 1992 to 2022. The results suggest that policymakers and scholars should work on understanding how the GPR affects increase at the national and global levels, as well as how to manage geopolitical events to create a healthy and sustainable environment.Zhang et al. (2023d) used an extended dataset from 1985 to 2021 and employed advanced time-series estimation approaches. The study suggests further increases in renewable energy production and consumption, efficient utilization of natural resources, and reduced GPR to improve energy transition. Due to conflicting evidence regarding the role of natural resources in economic development and the absence of an empirical assessment of GPR, Wang and Liu (2023) examined the nexus between these variables in the world's largest economies. This study suggests the efficient extraction and utilization of natural resources, improved financial sector, and reduced GPR to accelerate economic performance and growth. Cao et al. (2023) evaluated the influence of natural resources, GPR, and financial development on the economic growth of the BRICS economies; moreover, it suggests efficient extraction and use of natural resources, further reduction of the GPR, and improvement in the financial sector to attain sustainable development and secure economic growth. Li et al. (2023d) evaluated the role of GPR, green finance, and natural resources in China's economic growth, and included trade as a controlling variable. Shen et al. (2023) assessed green productivity in 38 Organization for Economic Co-operation and Development (OECD) nations from 2000 to 2019 using the by-production model and the Luenberger-Hicks-Moorsteen productivity indicator. The empirical findings demonstrate that green production increased in the OECD nations between 2000 and 2019. Ding et al. (2023b) explored the effect of GPR on CO2 emissions in OECD nations from the perspective of mineral resource extraction. Three primary conclusions were obtained using the panel fixed-effects (FE) model and panel quantile models. First, GPR increases CO2 emissions in OECD nations. Second, the positive impact of GPR was heterogeneous. Third, the positive impact on CO2 emissions occurs mainly because of the exacerbated risks posed by mineral resources. Yao and Li (2023) employed panel data to examine if and how resource dependency threatens entrepreneurship. They reveal that resource reliance severely hampers entrepreneurship, implying the existence of a ‘resource curse’ in the process of encouraging entrepreneurship.Chen et al. (2023a) examined the impact of natural resource rents and economic growth on the gross fixed capital formation of low- and middle-income aggregate groups. The study suggests policy for the efficient and sustainable use of natural resources to generate sufficient revenue for gross fixed capital formation. Guo et al. (2024) assessed the impact of sustainable consumption behavior (SCB) on natural resource conservation (NRC) in China, exploring the moderating roles of government environmental policy (GEP), environmental consciousness, and alignment with Sustainable Development Goals (SDGs). Guo et al. (2024) examined the influence of GPR, political risk, natural resources, and exports on China's economic development. Similarly, Wang et al. (2023d) used a novel method of movement quantile regression, and found that GPR, mineral rents, and exports have a positive effect, while political risk and oil rents harm China's economic growth. Pang et al. (2023) explored the often-overlooked impact of GPR and natural resource utilization on China's economic performance, challenging existing literature predominantly focused on the ‘resource curse’ and its implications on economic growth. Contrastingly, our results demonstrate an inverse relationship between China's economic performance and both GPR and natural resource utilization, providing empirical evidence of a ‘resource curse’ in China. Chen et al. (2023b) examined the disaggregated impact of natural resource rents, including natural gas, forests, and oil rents, on China's economic performance. We also investigate the interactive relationship between GPR and research and development (R&D) expenditures. From a boom-bust cycle perspective, Wang et al. (2023e) examined the existence of periodic bubble behaviors in nickel prices using the Generalized Supremum Augmented Dickey-Fuller method. They found that four boom-bust cycles in nickel prices were detected from 1990 to 2022, which are accompanied by extreme market volatility. Zhang and Shi (2023) evaluated the impact of geopolitical risk on the financial development of the BRICS economies from 1990 to 2022, along with other major control factors, such as natural resources, energy use, and R&D expenditures. Wu and Li. (2023) examined the influence of natural resources, renewable energy consumption, financial risk, and economic development on carbon emissions in the US between 1989 and 2021. This study uses the unique approach of moment quantile regression to determine that economic growth is the biggest impediment to meeting the COP27 objectives.Shi and Li. (2023- this issue) showed that various natural resources rents have a negative and significant impact on financial expansion, exhibiting the resource curse hypothesis in China, while natural gas exhibits improved financial development in China. By evaluating data from 1990 to 2021, Tang et al. (2023) observed the validity of long-run cointegration between variables. Owing to the non-normal data distribution, this study employed a non-parametric estimator and concluded that natural resources have an asymmetric influence on a region's economic performance. Wang and Liao (2023) suggested that China's new energy vehicle industrial policy should return to the fundamental goals of energy conservation and emission reduction, avoid the government's choice to replace the market mechanism and build a new industrial policy operation structure with the co-operation of the government, market, and third-party professional institutions. Sokhanvar et al. (2023) adopted the DS-ARDL and Cross-Quantilogram approaches to examine the effect of higher energy prices on commodity currencies during the war in Ukraine. Our findings, based on 4-h timeframe data between January and November 2022, indicate a significant positive effect of energy price hikes on the value of the Australian dollar relative to the Japanese yen, Euro, and British pound. In a study, Aloui et al. (2023b) analyzed the potential impact of GPR on various natural resources, such as oil, coal, copper, and zinc, from January 2005 to September 2022. Our results indicate the significant impact of the ongoing Russia-Ukraine conflict on energy commodity markets. Aziz et al. (2023) examined the role of the technology industry and natural resources on the environmental footprint. They found that forests were insignificant in controlling environmental damage, which contradicts the literature. The technology industry and renewable energy are useful for minimizing the environmental footprint. To provide a systematic analysis of the literature on this topic, Yu et al. (2023b) used a bibliometric approach and network analysis. Our findings illustrate that the issue of” geopolitical risks–natural resources governance’ is a cross-disciplinary research area that has received wide-ranging attention from legal, political, economic, geographic, and military disciplines. Wang et al. (2023f) explored the nexus between green investment, geopolitical risk, financial uncertainty, and oil price volatility. The study applied an extreme quantile analysis methodology, and the results showed a negative long-term relationship between the major explanatory factors and green investment.Wang et al. (2023g) discussed the relationship between geopolitical risk and green finance. The empirical results show that the GPR negatively affects GBs in the three different sub-periods. Zhang et al. (2023e) investigated the impact of geopolitical risks on energy security in China using a panel VAR model and provincial panel data from 1994 to 2021. The findings revealed that the relationship between GPR and energy security is dynamic and inconsistently negative. Lau et al. (2023) focused on carbon emission prices, crude oil prices, natural gas prices, and GPR in the BRICS economies. We utilize the DY volatility spillover approach within the variational-mode decomposition-based copula method. The dependence structure across the GPR and oil prices is positive in different periods and quantiles. Zheng et al. (2023b) studied the impact of geopolitical risk on the price volatility of coal, copper, crude oil, gold, and iron ore in the Chinese futures market. Estimates from the TVP-VAR-SV model reveal that the short-term impact of GPR shocks on the volatility of each commodity futures price is large and of long duration, and the response of commodity futures volatility to the same level of geopolitical risk shocks increases when major geopolitical events occur, such as the Paris Terrorist Attack, USA/Iran Tension Escalation, Syria Missile Attack, and Russian-Ukraine War. Li et al. (2023e) examined the impact of natural resource rents on economic growth in the BRICS countries. Energy efficiency, financial risk, and technological innovation are included as control variables. The resource curse hypothesis of the BRICS countries was tested using the CS-ARSL method. Financial risk promote economic growth in the BRICS countries. In the long term, energy efficiency and technological innovation do not affect economic growth. Zhou et al. (2023b) constructed a multidimensional energy poverty index based on energy availability, cleanliness, and infrastructure to characterize the use of natural energy. This index shows that China's energy poverty index declined gradually from 2008 to 2018, and natural resource use efficiency increased. Soni et al. (2023) used a comprehensive list of factors (criteria). To explore the macroeconomic impact of the energy interruption caused by the Russo-Ukrainian War, a global multi-regional, multi-sector computable general equilibrium model was used for empirical analysis.Cui et al. (2023) found that trade interruptions alone significantly impacted the Ukrainian economy, causing its real GDP to decrease by 4.18%. Liu et al. (2023b) proposed the meta-frontier Malmquist (MML) index to analyze China's regional ERE by considering regional heterogeneity. The empirical results show that the ERE of the entire country and each region increased annually from 2014 to 2018. Gu et al. (2023b) showed that the previous literature covers several regions regarding the influence of natural resources and risks on economic growth, using incomplete specifications and conventional estimators. Li et al. (2023f) explored the time-varying effects of geopolitical risks on the prices of various natural resources and the spillover effects of risks. GPR is heterogeneous in terms of natural resource volatility. Geopolitical risks seriously affect market stability and aggravate risk spillovers in natural resource markets. Song et al. (2023) used the TVP-SV-VAR model and the variance decomposition approach to analyze nonlinear time-varying and asymmetric effects. A significant asymmetrical two-way spillover effect exists between the GPR and trade policy uncertainty, and external uncertainty has a strong short-term impact on China's crude oil import prices. Shettima et al. (2023) investigated the nexus between political conflict and energy poverty in Sub-Saharan African (SSA). This study achieves this by controlling factors such as GDP, trade, oil rents, exchange rates, electricity losses, and institutional quality. The fixed-effects quantile regression analysis also revealed a disparate impact of conflict fatalities on electricity consumption and production depending on a country's energy poverty level. Qin et al. (2023) explored the relationship between the geopolitical situation in Russia and the international gold market and investigated whether Russian geopolitics can stimulate the gold market. We perform the bootstrap subsample method to obtain the Granger causal relationship between Russian geopolitical risk (RGR) and gold price (GP). The empirical conclusions show that RGR has both positive and adverse impacts on GP.In the current context of globalization, the impact of GPRs is more prominent, such as increased threats to the free movement of capital and goods. GPRs are generally caused by geopolitical factors and involves international political risks caused by the exploitation, shaping, competition or control of specific geographical Spaces overseas by state or non-state actors. These risks include, but are not limited to, inter-state wars, diplomatic disputes, sanctions, and competition for international influence. The significance of the study of GPRs is that it helps to understand the sources of change and uncertainty in international politics and international relations, thus providing policy makers with theoretical guidance and practical strategies to deal with possible risks and challenges. The study of GPRs also poses a threat to the global economy and markets, which can destabilize the global economy and markets. The purpose of studying GPRs is to better understand and manage these risks in order to promote global and regional peace, stability and development. This is extremely important for policymakers, businesses and the international community, as it directly affects the stability of the global economy and markets, as well as the direction of international relations.