This chapter covers the turbulent period of the de facto independent Chechnya in the 1990s, characterized by the resurgence of traditionalism and religion. The war that broke out between Moscow and Chechen separatists in 1994 reduced state capacity to rubble and made the ideology of political Islam dominant among Chechen politicians. After the end of the First Chechen War in 1996, the victorious separatist leaders enacted Sharia. This chapter contends that promotion of Sharia in independent Chechnya was not driven by ideology or demand by the population. It shows that this strategy was used by incumbents to increase their legitimacy by association with religion and tradition, through distance from the Kremlin, and with concessions to the powerful constituency of former rebels. At the same time, the incumbents were wary of strengthening the non-state forums too much, because they were afraid that powerful legal systems based on tradition and religion would become arenas of political contestation and ultimately be hijacked by the opposition. The rulers turned to promotion of Sharia and custom only when they were directly challenged and needed to reinforce political control regardless of the costs.

The book begins with three paradoxes of Libya, Venezuela, and Congo that juxtapose the profound importance of nationalization in the global natural resource economy with its economic risks and potential costs. The chapter then previews the answer to the puzzle of operational nationalization: when faced with the choice of nationalization, weak rulers discount the long-run costs of state intervention to seize its short-term gains; by contrast, strong leaders maintain the status quo of privately run operations to ensure long-term gains from private production. Next, the chapter illustrates the relevance of nationalization in a variety of research contexts: the effects of state intervention in the market; the roles of domestic leadership and international conditions in institutional choice; the significance of this choice during state formation; and the logic of the predatory state. After briefly introducing the theory of how, why, and when different operational nationalization pathways matter for politics, the chapter concludes by outlining how the remaining chapters of the book explain and test the operational nationalization theory.

How and why is nationalization central to the politics of resource-rich countries? This chapter opens with a review of current theories on natural resource wealth and nationalization in political science, economics, and public policy, and then describes why existing theories are unable to answer the questions this book seeks to answer. With these questions in mind, this chapter presents the book’s central theory of why leaders nationalize and how leader survival shapes and is shaped by the choice of nationalization. After describing empirical implications of the argument, the chapter offers initial evidence to support these claims in the form of exploratory case studies of Iran and Iraq. In Iran, the shocking collapse of the Shah in 1979 defied the West’s notion of the “island of stability” in the tumultuous Middle East. In Iraq, the fall of the Hashemite monarchy in 1958 ushered in a decade of instability until the unexpected Ba’athist consolidation in 1968, when Hassan al-Bakr established a 35-year single-party dictatorship. These are precisely the types of outcomes in which the book’s theory predicts nationalization should affect the rise and fall of dictatorships.

This chapter serves two purposes. The first purpose is to provide a theoretical explanation for why subordinate actors will surrender sovereignty to an external power and when they might choose to resist. The chapter lays out how high levels of rent-seeking and high levels of political contestation can create incentives for actors to give up sovereignty. I also show that actors’ choices are going to depend on their beliefs about the costs of formal, territorial expansion for the dominant state. If actors in subordinate states believe that territorial expansion is cheap, then they may support informal forms of hierarchy knowing that the dominant state can impose a more costly form of formal hierarchy even if they resist. The second purpose of the chapter is to show that dominant states prefer informal forms of hierarchy to formal forms of hierarchy such as colonialism or military occupation. This is done by building a theoretical argument regarding the higher costs associated with formal control. This theoretical argument is supplemented by a brief historical survey demonstrating that European powers almost always preferred informal arrangements to territorial expansion, even during periods when there were few constraints on territorial expansion and colonialism.

In the first chapter I provide a brief introduction to the manuscript and the questions it addresses. The concepts of hierarchy and surrendering sovereignty are defined, and the importance of hierarchy for the functioning of international politics is explained. The comparative historical case selection is justified, explaining that it is important to examine the issue of hierarchy in environments where the constraints on formal expansion vary, such as the nineteenth century and the contemporary era, to account for possible systemic causes.