Global Arms Trade and Oil Dependence

Abstract

We investigate how oil dependence affects the trade of weapons between countries. We argue that oil-dependent economies have incentives to transfer arms to oil-rich countries to reduce their risk of instability and, as a result, the chances of disruption in the oil industry. We employ gravity models of the arms trade and estimate the effect of both a local as well as a global oil dependence. Two key results emerge. First, the volume of arms transfers to a specific country is affected by the degree of dependence on its supply of oil. Second, global oil dependence motivates arms export to oil-rich countries even in absence of a direct bilateral oil-for-weapons exchange. Our results point consistently toward the conclusion that the arms trade is an effective foreign policy tool to securing and maintaining access to oil.