Why Energy-Dependent States Lose Wars

In 2015, Saudi Arabia launched Operation Decisive Storm, expecting to crush Yemen’s Houthi rebels in weeks. Crown Prince Mohammed bin Salman mobilized 150,000 troops, 170 strike aircraft, cutting-edge weapons, and the world’s fourth-largest defense budget against the rebels—a militia with no air force, only 30,000 fighters, and outdated gear. Victory seemed inevitable.

It wasn’t. The war dragged on for years, exposing deep dysfunction in Saudi Arabia’s military. Today, the Houthis effectively govern northern Yemen.

Most analysts chalk the Saudi failure up to culture or institutions. But what happened wasn’t an isolated occurrence. From Libya to Russia, modern states that are economically dependent on oil and natural gas have repeatedly failed to convert their wealth into battlefield effectiveness. In theory, their revenues should allow them to field massive, high-tech militaries that dominate poorer regional rivals. In practice, they often lose—or win only at enormous cost.

Why?

The Economic Roots of Military Failure

The answer lies in economics. Oil and natural gas profits, or rents, distort national economies, erode industrial bases, and undermine the capital and labor foundations of modern warfare.

My research, which analyzes over 200 battles fought globally between 1970 and 2020, shows a strong causal link between dependence on oil and natural gas rents and military failure. In the 48 percent of post-1969 battles that involved at least one rent-dependent combatant, energy-rich states have consistently suffered more casualties than their adversaries, even when they were wealthier and spent more per soldier on equipment and training.

Oil and gas rents cause “Dutch disease,” driving up wages, inflating currencies, and distorting investments. As a result, manufacturing becomes uncompetitive, and the economy tilts toward resource extraction.

This erosion of manufacturing has huge consequences for modern military effectiveness, accounting for at least 70 percent of the relationship between energy dependence and battlefield failure. Contemporary warfare demands robust logistics, secure supply chains, technical proficiency, and a reasonably skilled labor force. The manufacturing sector generates all these organically. When an economy tilts toward extraction and away from manufacturing, it thus weakens the foundations of modern military power.

The results can be serious. Rent-dependent states can purchase advanced weapons platforms, but they often struggle to crew and maintain them. In the 1990s, Saudi Arabia bought 315 Abrams tanks—then placed 200 in storage due to a lack of trained crews. In 1977, Libya fielded 1,200 modern tanks against Egypt but had only 600 trained tankers.

The problem is widespread, too, and goes beyond tanks and tankers. Many oil and gas-dependent states lack the technically skilled mechanics, technicians, and engineers needed to sustain military operations. Even when energy-rich states can import advanced weapons, they struggle to maintain or replace them under pressure. When sanctions hit Russia in 2022, its military-industrial base sputtered. Without a dynamic manufacturing sector, its rent-funded military supply chain grew brittle and, by 2025, had become a liability.

Why Deindustrialization Is Not a Death Sentence

Of course, many Western states are also deindustrializing. Why don’t they suffer the same fate as oil and gas-dependent states? Essentially, what replaces manufacturing matters. In Western economies, factory jobs often give way to high-skill service sectors, such as finance, software, logistics, and high-end engineering. These sectors are valuable to the developmental “tail” of military power. They also produce skilled labor pools from which the military can draw. In the modern era, this white-collar labor may be as useful to armies as blue-collar technical labor.

Rent-dependent economies may follow a similar path to Western states in deindustrializing, but they don’t replace industry with a knowledge economy. They replace it with energy extraction. The result is a stifling of technological innovation and a reduced manufacturing base that leaves their militaries brittle.

Strategic Consequences

The strategic implications of this finding extend beyond any single conflict. As global tensions rise, policymakers and scholars alike face a significant puzzle: why do some of the world’s most aggressive and well-funded states, such as Saudi Arabia, Russia, and Iran struggle on the battlefield, while smaller, less wealthy states like Chad, Ukraine, and Israel often outperform expectations? This research suggests that the answer lies not in weapons, doctrine, or strategy, but in the domestic economic structure of each state’s economy. When a state’s economy is overly reliant on energy, it erodes the industrial foundations of military power. When a state’s economy focuses on services or industry, its military can generate power more effectively.

This insight has practical relevance for defense planners, alliance architects, and analysts assessing military risk. For one, it suggests that national wealth and defense spending are poor predictors of wartime performance. Instead, more granular economic indicators, such as manufacturing capacity and labor market composition, are needed for defense planners to generate reliable inferences regarding the true wartime capabilities of other states.

Furthermore, as interstate competition intensifies across the Middle East, Europe, and Latin America, identifying the economic foundations of military effectiveness will be crucial for policymakers seeking to establish credible deterrence and resilient alliances. As new regions of contestation emerge, patterns of energy dependence and industrial capacity can help distinguish paper tigers from genuine threats. This research thus provides a grounded framework for anticipating military capabilities and designing durable security architectures as we enter a uniquely dangerous era of international politics.

Max Plithides is a 2024-2025 IGCC Dissertation Fellow. He holds a Ph.D. in Political Science from the University of California, Los Angeles. Starting in October 2025, he will be a Challenges of Democracy Postdoctoral Fellow and a Harry Bloomfield Postdoctoral Scholar at Tel Aviv University’s Edmond J. Safra Center for Ethics.

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