Consider the situation. Faced with growing fiscal stress, the government of an energy exporting country decides to cut generous subsidies, doubling the fuel price overnight.
Protestors are out on the streets, clashing violently with security forces called in to maintain law and order. They vent their frustration not only with rising fuel prices but also with living costs, lack of social services, crumbling infrastructure, corruption and political repression.
Faced with the prospect of a popular uprising, the government backtracks on reforms and re-institutes subsidies, postponing the hard decisions for a later date.
This is Kazakhstan in 2022. It is also Ecuador in 2019, Nigeria in 2012, Bolivia in 2010, Indonesia in 2005 and several other energy exporters which have tried to end, or at least reduce, fuel subsidies over the last two decades.
The list will grow significantly if we include importers who are more exposed to the vagaries of international energy prices. What is interesting is that the story plays out in almost exactly the same way, and the consequences of both action – and inaction – are very similar as well.
