Increased oil revenue has done more damage than good in some regions, most notably in West Africa where money from petroleum exports help to arm local rebels instead of improving the region's public needs, according to analysts.

In their haste to secure energy sources, rapidly expanding countries such as China may not be taking into full account the political risk of doing business with some unstable regimes.

Some countries clearly have benefited from climbing energy prices. The International Monetary Fund pointed out last week that Gabon's economy has seen a boom largely due to its increased income from selling oil.

The IMF lauded Gabon for putting aside much of its oil gains to pay down government debt that can reduce "the weight of debt service on the public finances and the vulnerability of the economy to swings in oil prices."

Not all West African nations, however, are proving as prudent, analysts said. At a briefing on energy policy hosted by the Council on Foreign Relations Monday, a CFR fellow and economic analyst at the CIA, Helima Croft, said much of the region faces more corruption as wealth from oil continues to concentrate in the hands of a few.

"In Nigeria, 80 percent of its revenue comes from oil, but it suffers from irregular oil supply" and the general population continues to see virtually no benefit from the windfall in surging commodity prices in recent years, Croft said.

She noted some countries in the region actually saw their average living standards deteriorate even as their income increased, in large part due to more incentives for corrupt financial transactions amid greater wealth flowing in.

Such a phenomenon is not unique to West Africa. Oil has been described as the so-called black curse by energy analysts, who have found developing countries that largely rely on oil exports for income often have greater disparity in income and are more likely to come under authoritarian rule than other nations in similar economic conditions.

Yet, one government official said, on condition of anonymity, that greater oil income in countries like Nigeria was particularly worrisome, given the country would have more money to build up stores of weapons.

Earlier this month, the United Nations reported there are millions of light arms in Guinea Bissau and Ivory Coast, as well as Nigeria and the Niger Delta, as local rebellions have continued amid decades of poverty and neglect by governments.

The United Nations warned it would not be easy to get rid of the arms, especially if oil prices continue to rise, given that the rebels are financed with money made from the theft of crude oil, known as oil-bunkering.

As a result, while the Bush administration may be eager to diversify its oil supplies beyond the Middle East, and look to West Africa as well as Latin America as sources of energy, Croft cautioned there are considerable risks trying to secure energy in politically unstable countries.

Such considerations have not, however, kept China from seeking to boost ties with energy producers, as the country has stepped up efforts to secure energy links with some unstable nations, including Sudan and Syria.

"China has a different way of calculating political risk," said David Victor, director of the energy program at the Center for Environmental Science and Policy at Stanford University.

He said China has been pursuing a more aggressive policy to secure new energy sources, in part due to its more urgent need to keep its electric generators going so its economic engine runs at full force.

In addition, Victor said China was able to take on more risks because its government-driven capital system allowed it to be more aggressive and take a longer-term view compared to private companies or governments in industrialized nations that need to be more accountable.

At the same time, China has stepped up efforts to have more oil supply agreements with Saudi Arabia, which has been using them to its own benefit, according to Rachel Bronson, CFR's director of Middle East studies.

She said the Saudis were turning to the Chinese instead of the Japanese as their biggest Asian client, much to the chagrin of Japanese analysts.

At the same time, Bronson said, the Saudis were making sure the United States was well aware of the country's growing ties with China to emphasize the kingdom had other major clients outside of the United States.

"The Saudis are using China to signal to the (United States) that it is not constrained by bilateral ties (with the United States)," Bronson said, and added as China's economic power expands and its energy needs increase, the country could be equal to the United States as a lucrative client for the Saudi government.

Shihoko Goto is UPI Senior Correspondent.

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