Survival: Global Politics and Strategy, vol. 51, no. 2, April–May 2009, pp.
149–158
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Resource nationalism has been a catalyst for the rapid rise of prices for oil and other commodities over the last five years. It encompasses efforts by resource-rich nations to shift political and economic control of their energy and mining sectors from foreign and private interests to domestic and state-controlled companies. High-profile cases such as the quasi-nationalisation of heavy-oil assets in Venezuela and the re-consolidation of the Russian oil sector under giant state-owned energy firms have created upheaval for foreign investors. Moreover, these cases have elevated the importance of energy security in policy discourse in the major energy-consuming states, while embedding in oil markets a deep sense of pessimism about prospects for future supply growth.
With sharply falling prices for oil and other commodities over the second half of 2008, the geostrategic and industrial implications of resource nationalism are rapidly changing. In geostrategic terms, several regimes that have pursued externally oriented resource-nationalistic policies – sometimes described as use of the ‘energy weapon’ – will have to revisit these policies. The most prominent examples are Russia and Venezuela. With the global economy slowing and commodity demand falling, a sustained period of weaker prices will shift the advantage back to international companies and away from host governments, as international companies can now afford to be more selective about the fiscal terms and regulatory conditions they are willing to accept from host governments. Evidence of this is already clear for producers of base metals and natural gas, and higher-cost oil producers are beginning to feel the effects as well. The rapid shift of leverage from producer states to international companies will likely have destabilising effects on a number of regions, particularly sub-Saharan Africa, Central Asia and the Andes.
Beyond the headlines
Resource nationalism has been a mainstay of commodity-market headlines, but with little nuance. There are, in fact, at least four variants which differ in the factors motivating the policy and impact on industry and investment patterns.
The highest-profile, and most notorious, cases of resource nationalism in the current commodity-market cycle (2002 to the present) are Russia and Venezuela. Both exemplify revolutionary resource nationalism, which is linked to broader political and social upheaval, not merely directed at the natural-resource sector. In Russia, this encompasses the broader reconsolidation of state power under the Putin presidency beginning in 2000 and the larger rollback of privatisation in strategic sectors. In Venezuela, oil-resource nationalism was an important feature of the ‘Bolivarian Revolution’ in which political and economic power was transferred under the Chávez presidency from the technocratic business class (symbolised by the managment of state-run energy giant Petróleos de Venezuela (PDVSA) under former CEO Luis Giusti).
A second feature of revolutionary resource nationalism is its dangerous effect on international resource companies. Ownership of prized assets may be wrenched away through forced renegotiation of existing contracts, using perceived historical injustice or alleged environmental or contractual misdeeds by the companies as justification. These actions tend to be top-down, arbitrary and accompanied by little if any compensation or recourse.
Revolutionary resource nationalism is...
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Ian Bremmer is President of Eurasia Group, the world’s leading global political risk advisory and consulting firm. He is author of The J Curve: A New Way to Understand Why Nations Rise and Fall and, with coauthor and colleague Preston Keat, of The Fat Tail: The Power of Political Knowledge for Strategic Investing (2009). Robert Johnston is the Director of Eurasia Group’s Global Energy & Natural Resources practice. He specialises in oil, gas, power generation, metals and agriculture research as well as client relations. He received his PhD in international relations from American University in Washington DC.
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