CRUDE CHOICE: THE CENTRALITY OF LEARNING AND EMULATION IN THE DEVELOPING WORLD'S TRANSFORMATION OF OIL REGIMES A Dissertation Presented to the Faculty of the Graduate School of Cornell University In Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy by Nicole Louise Weygandt August 2017 © 2017 Nicole Louise Weygandt CRUDE CHOICE: THE CENTRALITY OF LEARNING AND EMULATION IN THE DEVELOPING WORLD'S TRANSFORMATION OF OIL REGIMES Nicole Louise Weygandt, Ph. D. Cornell University 2017 Oil regimes have undergone a momentous transformation over the past 50 years. While the Arab OPEC nationalizations captured the world’s attention, the parallel introduction of Indonesia’s production sharing agreement (PSA) has produced a shift in ownership and control of oil in nearly half of the world. Contrary to popular narratives about the oil industry that privilege the coercive power of home countries and international oil companies, I argue that the transformation of oil regimes has been led by the developing world. Lacking significant power asymmetries and perceiving similarities of interests, the states of the South have learned from each other’s experiences. As prominent developing countries have joined the ranks of PSA-users, prestige-seeking emulation has supplemented learning in driving diffusion. This argument is developed through a two-level theoretical model. At the international level, it assesses how the distribution of power and peer groups affect the relative influence of coercion, competition, learning, and emulation. At the domestic level, it incorporates elite orientation to determine a state’s receptiveness to diffusion by different means and sources. Applying this model to the diffusion of oil regimes, I argue that the success of the PSA, as an innovation of the South, is driven primarily by learning and emulation. I test this argument using a multi-method research design that combines quantitative analysis of an original dataset of petroleum regimes with qualitative evidence from U.S. government archives and interviews with senior industry experts. The diffusion of the PSA is not just substantively but theoretically significant. The PSA has not only been widely adopted in the developing world, but is an innovation of the South, making it a true case of South-South diffusion. Given the Northern bias of the diffusion literature, the finding that this form of diffusion can be highly successful in an area of strategic significance to the rest of the world is indicative of the need to expand research on South-South diffusion. The argument advancing the centrality of learning and emulation is also significant to the oil literature, which has traditionally placed coercion at the center of policy-making. BIOGRAPHICAL SKETCH Nicole Weygandt received her Ph.D. in Political Science from Cornell University’s Department of Government in 2017. She holds an M.A. in Political Science from Cornell University, an M.S. in Foreign Service from Georgetown University, and a B.A. in Political Science and Economics from the University of Chicago. Prior to her graduate studies, she worked as an analyst and later head of research at Taylor-DeJongh, a financial advisory firm specializing in energy and infrastructure project finance. iii To My Parents (and Colonel Drake) iv ACKNOWLEDGMENTS I am deeply grateful to everyone who has had a hand in this dissertation and my graduate studies. Above all, I would thank my advisor, Peter Katzenstein for his unwavering encouragement, kindness, and insightful comments over the past seven years. Not only has his feedback improved all aspects of this dissertation but I suspect it will continue to shape my thinking on issues ranging from mechanisms to prediction for the rest of my career. His generosity has exceeded anything I might have expected when I began this journey and I am grateful to have him as my own source of learning and emulation. I would also like to thank all of the members of my committee. I especially appreciate Jonathan Kirshner’s willingness to play devil’s advocate and his skepticism about my treatment of coercion, Muna Ndulo’s help in exploring the legal implications of my research, and David Strang’s willingness to share his methodological expertise and deep knowledge of diffusion. Their support, whether in the form of challenging questions or willingness to read through multiple drafts of this work, have been invaluable. I am also grateful to Christopher Way for his advice on framing and future directions for this project, as well as his encouragement and involvement in early stages of this research. Special thanks also go to the National Science Foundation, which provided financial support under Grant Number SES-1422027. Any opinions, findings, and conclusions or recommendations expressed in this material are my own and do not necessarily reflect the views of the National Science Foundation. I would also like to thank Bridging the Gap for its financial support of this research through its Summer Fellowship program, as well as Jeff Colgan’s generous mentorship. v I am also appreciative of the many comments and kind words from conference participants at APSA, MPSA, LSA, and ISA. Special thanks go to participants in the Global Political Economy Dissertation Workshop at the Balsillie School of International Affairs and the New Era Foreign Policy Conference. I am grateful to everyone at Cornell University who has played a part in the development of this work. Thank you also to Rawi Abdelal for taking the time to meet with me about my research on multiple occasions. This dissertation would not have been possible without the contribution of all those who volunteered their time to participate in interviews. Their generosity with their time and enthusiasm in sharing their insights has been humbling and inspiring. Each interview reminded me of why I began this project, and I sincerely hope that I can one day help others in the same way. I would also like to thank Terry Newendorp and my former colleagues at Taylor- DeJongh for sharing their passion for oil & gas and starting me on my path towards this research. Although he was not able to witness this milestone, I would also like to thank my first professional mentor, Stephen Everhart. You are sorely missed. Finally, none of this would have been possible without the support of my family. My parents, especially, have demonstrated unending patience and encouragement throughout a process that has taken longer than they ever anticipated. Many others have played a role in the development of this dissertation, and a failure to mention names in no way detracts from my gratitude for their support. Their voices have improved this research while all mistakes, of course, are my own. vi Table of Contents Chapter 1: Introduction ................................................................................................................... 1 1 Transforming the World’s Oil Regime .......................................................................... 2 2 Three Models for the Control of Oil .............................................................................. 4 2.1 Typology of Petroleum Regimes ......................................................................... 4 2.2 The Consequences of Regime Choice ................................................................. 7 3 Three Stages in the Transformation of Oil Regimes .................................................... 12 3.1 The Era of Foreign Control ................................................................................ 14 3.2 The Control Revolution of the 1970s................................................................. 15 3.3 Accommodation and New Status Quo ............................................................... 18 4 Dissertation Methodology ............................................................................................ 20 5 Research Implications .................................................................................................. 23 Chapter 2: A Two-Level Diffusion Framework ........................................................................... 25 1 The Concept of Diffusion ............................................................................................. 26 2 Three Petroleum Regimes ............................................................................................ 30 2.1 Concessions........................................................................................................ 31 2.2 Production Sharing Agreements ........................................................................ 34 2.3 Service Contracts ............................................................................................... 37 2.4 Comparing Petroleum Regimes ......................................................................... 38 3 The Standard Case of Diffusion ................................................................................... 41 vii 4 Causal Mechanisms ...................................................................................................... 44 4.1 Coercion ............................................................................................................. 45 4.2 Competition........................................................................................................ 49 4.3 Learning ............................................................................................................. 51 4.4 Emulation ..........................................................................................................