- Buoyed by the natural resources(mostly oil but also minerals in case of African nations), a small ruling elite clings on to power with large military spending. Concessions are doled out to keep the influential forces in line(like say Pakistan/Indonesia where military has many business interest).
- The population either is suppressed(like Nigeria) or has a broad social compact(Gulf nations) where they get a welfare state(subsidized food, education, healthcare etc).
- Macroeconomic price movements(lower energy rates/higher food prices) adversely affect the economy leading to breakdown of above equilibrium. Dissatisfaction soars
- Viral marketing(internet, mobiles, press) rapidly spreads this dissatisfaction( or as claimed by some affected nations, there is an opportunistic attempt to stage a coup with support from abroad).
- As the movement spreads to civil society, defections happen and civil war breaks out. At this stage, the West freezes sovereign assets 'to keep them in trust for the state'. This cuts off the source of funds for the incumbent Government. Note that this happens only selectively, where the West(USA/UK/Germany etc) support a regime change. For example, this was done in Egypt/Libya and not for Yemen(with worse human rights violations).
- The regime falls or reaches a compromise, at which stage the funds are unfrozen.
So which assets fit the bill? Certainly not currencies, stocks, bonds etc(whose ownership can be traced thanks to anti money laundering laws-even in 'offshore banking jurisdictions'). Commodities like gold, platinum and silver would fit the bill quite well being easy to store. But another commodity easy to store is narcotics, which would achieve both convenience(storage/availability) and retribution(flood the markets of the nations which attacked you).
So what actions can we expect in the medium term(1-3 yrs) from natural resource rich countries with little political freedom?
- Stock piling precious metals. This may boost mining stocks.
- Building strategic stocks of food grains, and increased social spending. Food stocks should zoom.
- Subject to sanctions-purchasing arms/faster push for nukes to achieve Pakistan type immunity
- Increased action in the drug trade.
- Exodus of money from financial markets, to fund the above. This may hurt banks.