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Classification of natural resources

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 Classification of Natural Resources

by

Päivi Lujala
Department of Economics
Norwegian University of Science and Technology, Dragvoll
NO-7491 Trondheim, Norway
Paivi.Lujala@svt.ntnu.no

March 2003

Abstract
Recent research has identified natural resource abundance as a factor that may significantly
increase the risk of conflict onset. However, at present there are no clear guidelines for
classifying resources to assess precisely how the economic incentives and opportunities for
violent conflict and rent seeking differ for various natural resources. The inadequate
classification of resource types, as well as a lack of resource data itself, has impeded statistical
research that links risk of conflict onset and conflict type, location and duration with type of
natural resources. This paper develops a classification scheme for minerals to be used in
conflict research. The classification is based on the different aspects of resource exploitation
from exploration to the end markets. The classification scheme could also be used to assess
how the type of natural resource affects economic growth.

Paper prepared for presentation at the 2003 ECPR Joint Session of Workshops, Edinburgh,
UK 28.3 – 2.4.

Scheduled for the session 16.00-17.30, Monday, 31 March.

Work in progress – Comments are appreciated

 INTRODUCTION
Several recent empirical studies on causes of conflict onset have showed that abundant natural

resources, especially minerals, may increase the risk of conflict. The results are, however,

inconclusive, and while some find positive relation between risk of conflict and extent of

natural resource dependency (Collier & Hoeffler 2002a, 2002b) and abundant mineral stocks

(de Soysa 2002), others found this relationship insignificant, very weak (Elbadawi &

Sambanis 2002) or only confined to oil dependency (Fearon & Laitin 2001). These

inconsistent findings may be due to the aggregated variables commonly employed as a proxy

for natural resources (e.g. primary commodity exports to GDP ratio). There is substantial

evidence to suggest that the specific characteristics of different natural resources can have a

significant impact on conflict.

Economists have also investigated the influence of natural resources on economic

performance. Recent empirical studies show a negative correlation between abundant natural

resources and economic growth (see for example Gylfason, Herbertsson & Zoega 1998; Sachs

& Warner 1995, 1999). While these researchers acknowledge that the impact of agricultural

production on growth might differ from that of mineral production, they have not assessed the

possibility that different mineral resources may also vary in their impact on growth depending

on their characteristics.

This paper begins by discussing why there is need to classify natural resources

according to their characteristics. The paper then presents how natural resources have been

classified in recent studies and gives some reasons why these classifications are not sufficient.

Finally, the paper presents a classification scheme that encompasses mineral resources from

the exploration stage to the end markets. Of specific interest is the extent to which minerals

2
 are lootable and to what extent revenue flows from these resources can be controlled by

central government/elite in the country.

WHY NATURAL RESOURCES NEED TO BE CLASSIFIED

Recent research has shown that abundant natural resources raise the risk of conflict onset (see,

for example, Collier & Hoeffler 2002a, 2002b) and may prolong conflict duration (Fearon

2002). It is, however, not sufficient to simply state that natural resources cause and fuel

conflicts as this leaves little hope for resolving current conflicts and possibly preventing

others. It is essential to study why, how and to what extent natural resources affect conflict

propensity and duration.

To achieve this goal, it is important to recognize that not all resources share the same

characteristics. For example, wheat production differs considerably from the extraction of

precious gemstones even though both would be classified as primary products in export

statistics. Similarly, minerals differ from each other and a relevant difference between mineral

resources might be the ease of exploitation. Some resources require relatively minimal

investment on extraction equipment and they can be exploited under conflict conditions by a

small band of people or by individuals (for example, extraction of placer gemstones in Sierra

Leone and Myanmar to finance rebel movements). Other resources may require extensive

investment in production technology and a stable investment environment to encourage the

necessary investment and expertise from large multinational companies. Resources in the

second category are better extracted during peaceful conditions, even though the presence of

valuable resource may motivate fighting over the control of resource and the associated

revenues (for example oil in Aceh, Indonesia, in Cabina, Angola and in Southern Sudan).

3
 The different types of natural resources and their impact on conflict require different

policy responses to prevent and settle conflicts. For example, resources that provide revenue

flows to rebel forces during a conflict may be curbed by placing sanctions on the commodities

exported by the rebels. However, sanctions and embargoes might not be the right measure or

even feasible when addressing natural resources that require a more stable political and

investment environment for exploitation, but could prompt conflict aimed at controlling these

resource. To prevent such a conflict, policy measures that address unequal distribution of

existing natural resource revenues, provide compensation to those who suffer due to

environmental damage of resource extraction, and promote the transparency of financial flows

may prove to be more effective. To settle such a conflict, these same issues, addressed in a

credible manner, could comprise part of a successful peace settlement. The nature of natural

resource is also likely to affect the international community’s leverage on fighting groups; for

example, if the commodity flows can be subject to sanctions, the outside powers may have

greater influence on the side holding access to the resource.

In addition, if resources are not properly grouped, we risk diluting the results of any

analysis since the different natural resources may affect the dependent variable (risk of

conflict, duration, economic growth etc.) differently and even to opposite directions. For

example, it is conceivable that some natural resources may actually shorten the duration of a

conflict while others may prolong them. Similarly, some resources may raise the risk of

conflict onset while others may do not have such an effect on the risk of conflict.

Research on civil war is not the only domain that is interested in natural resources;

economics would also benefit from a better classification structure for natural resources.

4
 Economists are interested to define to which extent resource abundance affect economic

growth and have sought to explain so called “resource curse”1.

Common to both the conflict and economic growth research is that they have not

seriously attempted to determine which natural resources are most likely to increase the risk of

conflict or which have most effect on adverse economic growth. In general, most studies fail

to consider if it is a particular sub-set of resources with certain economic and geographical

characteristics such as low mining costs and high value-to-weight ratio that explain the

perceived relation between natural resources, armed conflict and economic growth.

However, characteristics defining resource’s impact on risk, duration and type of

conflict may differ from those that influence the rate of economic growth. Therefore, there

might not exist one classification scheme that is good for both economic research and civil

war, although as far as poor economic growth has been implicated as a cause of conflict, there

may be some crossover.

RESOURCE CLASSIFICATION IN CONFLICT LITERATURE2

Recent empirical studies on civil conflict have used different approximations for natural

resource abundance or dependency. Most studies use primary product exports ratio to GDP as

1
In the mid-90s, it became clear that countries with high dependency on primary product exports perform worse
than countries that are less dependent on natural resource exports. One plausible explanation for the poor
economic performance is so-called Dutch disease, while another argues that abundant resources provide easily
accruable rents that can sustain harmful political and institutional structures that would not persist without the
resources. (For Dutch disease and other explanations, see for example, Sachs & Warner 1995, 2001; Auty & Gelb
2001; Robinson, Torvik & Verdier 2002; Ross 1999)
2
In the recent empirical studies, natural resource and primary commodity have been used interchangeably. The
two terms, however, do not mean the same thing. A primary commodity is a good that has not been manufactured
or refined while natural resources are inputs provided by nature, such as oceans, land and mineral deposits that
are used to create income. Thus, forest and agricultural products are primary commodities but not natural
resources (soil is the actual natural resource; cultivation just a mean to exploit it).

5
 a measure of dependency (Collier & Hoeffler 2002a, 2002b; Elbadawi & Sambanis 2002;

Fearon & Laitin 2001). Some, as for example, Collier & Hoeffler (2001) use export structure

to define the main resource type exported1 and likewise Fearon & Laitin (2001) use the export

structure to define a dummy variable for significant oil exporters. de Soysa (2002) employs an

alternative method to assess the availability of natural resources. He measures abundance by

taking the absolute value of stock of resource per capita for renewable resources (agricultural

and forest products) and mineral assets.

These aggregate and export structure types of measures for natural resource availability

are inevitably coarse. In these measures, resources that are very different from one another are

lumped together, and minimal attention is given to the fact that minerals differ greatly from

one to another. For example, while placer diamonds are easily exploited, kimberlite diamonds

require intensive technology to be extracted. There are, however, limited examples in

theoretical and case studies of attempts to divide natural resources into more precise groups.

Conflict literature has so far tried to classify resources according to their rate of regeneration,

concentration and lootability.

Natural resources are frequently classified as renewable or non-renewable. Researchers

who claim that conflict outbreaks are related to resource scarcity often argue that renewable

natural resources are the conflict generating resource type (Homer-Dixon & Blitt 1998;

Brander & Taylor 1998). Renewable resources are defined as resources that are regenerated on

a human time scale. Examples of renewable resources are water, fisheries and forests. These

types of resources are often connected in ecological systems; for example, water is necessary

1
Collier & Hoeffler (2002a) classify primary commodity exports into food, non-food agricultural, oil, other raw
materials and ‘mixed’ categories.

6
 for forest growth and fisheries. By contrast, non-renewable resources are less likely to

participate in the circular flows of the ecosystem, and exploitation of one resource typically

does not affect the availability of the other resources (as long as the extraction does not

destroy the other resource). Non-renewable resources can be considered as a stock that has a

regeneration rate of zero over a relatively long period.1

Another approach to classification is to define natural resources according to their

geographic concentration – in other words, is the availability of the resource restricted to

geographically small areas or does it spans larger areas? For example, forests cover wide areas

and are therefore considered to be diffuse resources. Point resources are highly concentrated

and do not have a significant areal extent on a map. For example, many minerals occur in

small areas, and on a map, these deposits are represented as points.2 Some empirical studies

have used the point-diffuse distinction to assess natural resources affect on conflict. For

example, to assess the scope of conflict Buhaug & Gates (2002) define activities such as oil

drilling and pit mining as point resources while timber, drug cultivation and alluvial diamonds

are considered to be “more widely available”.

Figure 1 shows how it is possible to combine the two classifications of natural

resources – geographical concentration and regeneration rate. Based on literature, the scarcity

approach can be understood as mostly concerned with the resources located in the upper left

corner of the figure (renewable diffuse resources) while abundance oriented conflict literature

1
For example, peat’s regeneration rate is not zero since peat forms slowly in the swamps. However, on any
practical time horizon, the regeneration rate is almost zero, and thus peat is often considered to be a non-
renewable resource.
2
Point resources are commonly associated with higher rents than diffuse resources and thus provide incentives
for rent seeking. In the literature, abundant point resources are often associated with higher risk of conflict (see
for example, Addison et al. 2001; Addison & Murshed 2001).

7
 tends to blame resources located in the lower right corner (non-renewable point resources)

for conflict propensity. This may mean that the two approaches – one claiming scarcity of

natural resources is causing conflicts and the other one accusing abundance – do not need to

be incompatible.

Renewable Non-renewable

• Vegetation, soil, forest, corps • Peat

Diffuse • Animals • Some substances found in
• Water Earth’s crust like gravel
and sand
• Some crops/animals that
Point require very specific • Many ores, like gold
conditions
Figure 1. Natural resource classification by the resource’s regeneration rate and its geographical concentration.

Le Billon (2001) considers the difference between point and diffuse resources in his

typology of conflict types. Besides dividing resources into point and diffuse resources, he also

assesses the relative location of resource area in relation to state capital used as a proxy for

state control. He argues that point resources near the capital are associated with coup d’état

attempts while point resources located in the periphery motivate violent secession conflicts.

Diffuse resources in turn are associated with riots when located near the capital and, when

farther away, with wardlordism as several armed groups may violently claim their share of

natural riches.

The division of natural resources into point and diffuse resources faces several

challenges. First, not all resources are clearly point or diffuse but rather fall between the two

extremes. For example, while kimberlite diamonds clearly are point resources, placer

diamonds are more spread out and can be considered (semi-)diffuse. On a global scale,

however, placer diamonds can still be considered as point resources since these areas are

relatively small and limited to few regions in the world. Likewise, oil deposits are often

8
 classified as point resources, although an oil field can in fact be quite extensive. The fact

oilrigs are point extraction sites does not change the reality that an oil field on a geographical

scale might be as much semi-diffuse as a placer diamond deposit. Moreover, it is not clear that

all resources in either the “point” or “diffuse” categories have same characteristics and same

impact on conflict.

Ross (2002) distinguishes natural resources according their lootability, obstructability

and legality and forms hypotheses how these three resource characteristics affect civil war.

Ross defines lootability as the ease of resource extraction and transportation. As examples of

lootable resources, he identifies alluvial gemstones, agricultural products and timber. By

contrast, he categorizes deep-shaft minerals and gemstones, oil and natural gas as non-lootable

resources. Ross also differentiates between the ease of transportation of the natural resource

product and how easily the available mode of transportation is blocked (i.e., its

obstructability). For example, diamonds or drugs that are flown from the production area are

not obstructable while resources that are transported by trains or trucks are moderately

obstructable. Resource transported by pipelines, like gas and oil, are the most obstructable.

Ross’ (2002) method of classifying the resource’s lootability may better capture the

potential value of a resource for a rebel group, and it may also assess when the resource is

valuable to the rebels– either during conflict or after peace is restored. It can be argued that the

point-diffuse categories may be one element of lootability since point resources may be easier

for government to control than resources that are spread over larger areas. All other things

being equal, rebel forces would find diffuse resources easier to loot than point resources.

However, to account for lootability, one has to consider the different aspects of

resource exploitation from exploring to end markets for all minerals. In general, based on case

9
 studies, resources such as alluvial diamonds and drug production have been considered as

lootable resources. There may be many more resources that could potentially be classified as

lootable. Since there are no agreed criteria for lootability and therefore, no systematic effort to

find natural resources that might be lootable, these other resources are not accounted for in

empirical conflict studies. Until now, resources defined as lootable have been identified from

case studies that show that resource revenues were used to finance the conflict. (Examples

include precious stones in Sierra Leone, Angola, Zaire and Myanmar and coca cultivation in

Columbia and Peru).

Although the geographical concentration of a resource may be relevant, other natural

resource characteristics should also be considered. Lootability is probably one of the most

important ones. The value of a resource for a rebel group is based on its lootability during a

conflict and is defined among other things by the easiness of extraction and transportation

(Ross 2002).

To mine many natural resources, such as kimberlite diamonds, significant investment

in sophisticated technology and skilled labor is required that are often available only during

peacetime when large companies are willing to establish mining activities. During a conflict,

future revenues from such a resource are likely to have a relatively high discount value and are

associated with significant uncertainty since the revenues only occur after victorious rebellion

and the reestablishment of peace. Therefore, a non-lootable resource may be less likely to

increase the risk of conflict onset than the availability of lootable resources. In the case of

lootable resources that only are available to the rebels during a conflict, the duration of

conflict is likely to increase since the conflict situation boosts rebel income and finances the

warfare. Therefore, the lootability of resources is probably significant in assessing the conflict

onset, its duration and other characteristics.

10
 RESOURCE CLASSIFICATION IN ECONOMIC GROWTH LITERATURE
Examples of classifications of natural resources can also be drawn from economic

research. In their influential empirical study on resource abundance and growth, Sachs &

Warner (1995) find that natural resource abundance is detrimental to growth. While Sachs &

Warner are not interested to estimate whether different resource types have different affect on

growth, they do test separately the affect of mineral resource production on growth – as a part

for their robustness checking.

Others, like Auty & Gelb (2001), Isham et al. (2002) and Murshed & Perälä (2001),

argue that revenues from point resources are likely to be captured by the government and elite.

They maintain that the substantial revenues generated by these point resources alienate the

government/elite from the population as they not require the population’s support to derive

funds through a taxation system. It is implicit in these arguments that government/elite that are

not directly responsible to the general population will use resource rents to their own, short-

sight benefit and uses the revenues inefficiently due to corruption and poor policy decisions.

By contrast, diffuse resources such agriculture benefits growth, since the revenues are less

likely to be capture by the elite and the government is more dependent on the population to

which it is linked through taxation.

Some empirical studies on resource abundance and economic growth have sought to

differentiate between point and diffuse resources. Isham et al. (2002) divide countries to four

categories according to their export structure and define countries that mainly export diffuse,

point, coca and coffee, and manufactured products. As point resources, they define resources

such as oil, diamonds and plantation crops and as diffuse agricultural products such as wheat,

rice and animals. They place coffee and cocoa in a separate category since they can be

cultivated either by small-scale farmers or on plantations. Murshed & Perälä (2002) appear to

11
 use a dummy variable to separate countries with point resource from those with diffuse

resources.

In economic literature, there also seems to be little effort to examine whether some

sub-set of natural resources are more adversely related to growth. However, as long as all

natural resources are considered detrimental to growth, there seems to be little room for policy

suggestions – countries would be better of leaving their natural resource base unexploited. If

we knew which resources potentially have most adverse affect on growth and under which

circumstances, it would be a lot easier to design measures to reduce adverse effect of resource

abundance and to target them correctly

EXPLOITATION OF NATURAL RESOURCES: DIFFERENT ASPECTS FROM

EXPLORING TO END MARKETS

To classify natural resources according to their characteristics and to assess the degree of

lootability of different resources, several aspects of “mining chain” have to be considered.

These include not only the ease of extraction and transportation but also exploration, and

refining and storage before transportation. Things like availability of substitutes and rareness

may also affect the profitability of resources. In this chapter, the aspects of mineral resource

exploitation are considered from two angles: lootability of the resource from the rebels’ point

of view and controllability of revenue flows by the government/elite. The first aspect accounts

for rebel financing during a conflict, the second the extent to which the revenue flows can be

12
 controlled by government.1 Figure 2 shows different aspects that may have to be considered

to define a resource’s degree lootability.

Easy to explore Easy to mine

Diffuse
 Unskilled labor
High price-to-weight ratio  Simple technology

Lootable Natural Resource

Strategic mineral

No need to refine the product

Easy to transport/smuggle Easy to store before transport/export

Figure 2. The figure drafts aspects that may make a resource lootable.

Point and diffuse resources

It can be that extremely concentrated resources may be less lootable for rebel groups since the

government is better able to control and defend the site. This is base on the belief that the

government has superior military force and thus can defend the resource site against rebel

forces: rebels, on the other hand, do not have same capabilities to seize and defend such a

place. Rebel groups in turn may profit more from diffuse resources that are spread out and are

much more difficult for the government to defend. Likewise, the state has a better ability to

control revenue flows from point than diffuse resources regardless of whether the country is

experiencing conflict or peace.

1
The next phase of this work is to apply these criteria to all minerals in order to define most lootable resources as
well as those that are most likely to be under government control.

13
 Exploration

Exploration is an integral part of natural resource exploitation. Some resources occur on the

Earth’s surface and they can be spotted with minimal effort. These resources exist in

secondary deposits that have been formed after primary deposits have been exposed to

weathering (water, wind etc.) and now occur, for example, in stream gravels. While

identifying regions with prospects of secondary deposits may require extensive knowledge of

earth sciences and geology, secondary deposits are often found by accident.

Most mineral resources are buried under topsoil or they occur in deep rock formations.

Exploration of these resources requires considerable investment in human capital (skills to

explore promising prospect areas) and investment in exploring technology (e.g. test drilling

etc.). Often the exploration stage is associated with a high risk of failure and high levels of

uncertainty since the deposit may not exist at all, is smaller than expected or the extraction site

proves to be more demanding than originally thought (i.e., complex rock formation, resource

located deeper than expected, ground water leaking in the mine)1.

Therefore, exploration of a mineral resource may require a presence of large

multinational companies that possess the required skills and can bear the cost of the

uncertainty. These types of resources are less lootable, at least at this stage, due to the high

initial costs. This may also hold true in cases where resource is known to exists but the mining

has not yet been undertaken. It is possible that in same cases, resources with high initial

exploration costs may be extracted easily once located. This would imply that an established

mine is lootable, but the raw prospect is not in the absence of considerable investment.

1
Sometimes the site may be located in difficult place such as in the periphery of a country without roads,
electricity etc. or under water (sea bottom) or in permafrost environment. This, however, cannot be accounted for
in a classification scheme, but it can be assessed in an analysis if the location of the resource deposit is known.

14
 Because of the high exploring costs and capital outlay, large multinational companies

with capital and risk bearing capacity will likely require that the state is involved/or can be

involve in mining activities. Multinational companies generally require assurances that the

political and economic environment is stable. In addition, most states also require some form

of approval for registering mineral concessions and projects, as well as they often have

financing and ownership rules. These conditions result in that the state probably has a greater

control of the resources and can gather considerable fees for granting exploration rights.

Mining

Labor:
Depending on the mineral resource and deposit type, the labor requirement varies. Sometimes

mining is labor intensive but frequently; it does not require a skilled workforce. This could

imply that local labor can be used (and rebels may even use forced labor). The mining of other

deposits, however, require highly skilled workforce, which may not be available locally or

even nationally. Thus, mining may require a presence of large company that can bring in

experts.

Technology:
If moderate or high level technology is required for mining, there is an increased likelihood

that a large multinational company will be doing the mining since it has access to required

technology and the capital to finance it.

Together, the requirements for labor and technology define if the mining can be

accomplished with workforce/technology available locally or if there is a need to import these

means to exploit the site. Resources that can be exploited with unskilled workers are more

15
 lootable that resources that require skilled workforce. Likewise, lower technology and

equipment requirements render a resource more lootable.

Similarly, to the exploitation stage, the higher the requirements for skilled workforce

and/or technology more likely it is that a large company is involved in mining. This again

makes it more likely that the government/elite is involved, or at least is informed of activity

and its value, and therefore, has possibility to acquire and direct the revenue flows.

Refining before transport

In some cases, it is necessary to refine extracted minerals before they are transported/exported.

Sometimes the minerals co-exist with other minerals and must be separated from each other.

Additionally, the mineral may have a low concentration level in the extracted ore and

concentration techniques are necessary. Refining can be relatively easy, for example, if it is

sufficient to use running water to separate the mineral from the associated rock. The refining,

however, may be complicated, especially if the mineral co-exists with another substance in a

chemical compound requiring skills, equipment and chemicals to be separated.

Minerals that require refining beyond simple methods and locally available products

are less lootable for a rebel force. In contrast, these resources may require the presence of

large companies, which again increases the probability that government is able to influence the

revenue flows.

Storage

Products that do not require a special storage place are more lootable since the rebel forces do

not need to have the skill, technology or buildings to store the looted products. The most

lootable products are those that will not perish if left outside for periods. Some products with

16
 extremely high value (such as diamonds) may not take much place for storage but require a

secure place to be hidden before they can be transported/sold1.

Transport

Natural resource products may be transported by different means. Some of them may require

pipelines, special containers, deep-water harbors or trains. Some are suitable for road

transport, and some can even be transported by airplanes or by an individual (for example

diamonds and drugs).

Natural resources that do not require special infrastructure to be transported are more

lootable. Additionally, natural resources can also be looted during the transport. If the product

requires heavy infrastructure to be transported (e.g. pipeline), the looting group probably faces

prohibiting problems in transporting the product to the markets. Therefore, while some oil

pipelines are vulnerable to attacks, the rebel forces are not likely to finance their fighting by

looting oil form pipelines2.

Natural resources that are suitable for different modes of transportation and that are

easily transported are more lootable since the looted product can be easily delivered to a

potential buyer. If the resource must be transported through a “choke point” such as a deep-

water harbor or by train, the state is more able to control resource flows. Resources that are

transported via air or by trucks may be more difficult for the government to control.

1 Some minerals such as tantalum (coltan) often co-exist with naturally radioactive minerals (e.g. thorium and
uranium). For proper storage, thorium and uranium (and their decay products) would be stored in a thick lead
container.
2
Although pipelines on the land can be disturbed, pipelines on the sea bottom are unlike to be targets for a rebel
group.

17
 End markets

Rareness (strategic mineral):

If the resource is globally rare and the deposits are located in a few countries, the international

community may be reluctant to pose and/or enforce sanctions on those resources. This is

especially true if there are no compatible substitutes for the resource product and the product

is used in such industries as defense, transport (airplanes) or communication (mobile phones).

Markets:
If the international markets for the natural resource product are well established, transparent

and function effectively, it is more difficult to export resource products without disclosing

information on price and volumes and without leaving a traceable record on product and

revenue flows.

Resources that are strategic and confined to a handful of countries may be more

“lootable” since sanctions are less likely and enforcement may be more difficult. If the

markets for the product are characterized by secrecy, this may make the natural resource

production and exportation easier for the rebel forces since the buying companies can hide the

real source of product and avoid being blamed for questionable trade.

Government /elite’s capacity to control revenues from strategic mineral exploitation

probably does not differ from other resources. The secrecy of markets should not affect that

either. However, countries with strategic resource may be held less accountable for how

resource revenues are used or if they are reported in state budgets.

18
 Price per ton (value-to-weight ratio):
Price per ton reflects many aspects of resource exploitation: the availability of resource, its

transpiration costs, substitutes, world mining capacity, the industry and refinery needs and

capability.

Resources that have high value-to-weight ration are more lootable since they are easy

to transport (smuggle). A critical question is, to what extent price information could be used to

assess the lootability of a product.

To assess the impact on economic growth, the price per ton per se may not be so

important, but the total value of mineral exploitation (that is price multiplied by the volume).

Stability of price:

Price volatility at the international markets. Resource products that have stable value, give

more expected revenues.

CHALLENGES
The classification scheme introduced above obviously faces several challenges. One of the

difficulties of applying it is that many minerals occur in different deposit types and thus the

exploitation requires different type and amount of technology, skilled labor and refining. All

this affects mining costs, and the quality of deposit and mineral may directly influence the

selling price. Sometimes these differences are so clear, like in the case when a mineral occurs

both in primary and secondary deposits, that it is possible to classify one mineral to sub-

groups depending its deposit type.

Another challenge is to classify non-mineral natural resources such as agricultural and

forest products. The classification scheme may be adapted to these resources as well, but

19
 substantial changes may have to be made. It is also questionable if there is need to classify all

different products. It may be sufficient to differentiate between food products such as wheat,

vegetables and fruits, “pleasure” products such as tea, coffee and tobacco, fishing and etc.

Another possibility to is to divide production according its end use; are the products meant to

be consumed locally (firewood), or are most of them exported (valuable timber).

CONCLUSION
This paper has sought to show that although there are some guidelines how natural resources

could be divided to point and diffuse resources, or assessed according to their lootability, until

now most empirical testing has applied the primary product exports to GDP or to total export

ratios as measures for abundance, without accounting for the differences between different

natural resources. At best, the resource base/exports have been divided to fuels, other minerals

and agricultural products. Additionally, theoretical attempts to differentiate between resource

types have not yet provided a coherent method to assess resources’ different characteristics.

This paper develops classification scheme that sets a criteria against which minerals

can be classified. It is clear, however, that the research on abundance-induced conflicts

requires a somewhat different resource classification than the research on abundance-related

slow growth. Specifically, for the latter, it is important to define the resource with rents that

the state (or the elite) can control easily. For this purpose, the classification into point and

diffuse resources will be of use, since in the case of point resources, the production is

concentrated and location specific, and thus taxation is more easily arranged and controlled.

For the former, lootability of resources during a conflict will also be significant.

20
 References:
Addison, Tony; Philippe Le Billon & S. Mansoob Murshed, 2001. ‘Conflict in Africa: The Cost of
Peaceful Behaviour’, Wider Discussion Paper, No. 2001/51. World Institute for Development
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