Tuesday, August 20, 2013

Resource nationalism and sustainable development

Resource nationalism and sustainable development

Resource nationalism lies at the opposite end of a ‘host state influence versus investor influence’ spectrum to ‘resource privatism


Resource nationalism as the flip side of resource privatism

Resource privatism

Resource nationalism

Three ëresource nationalismsí

Producer country resource nationalism

Consumer country resource nationalism

Investment target country resource nationalism

The definitional dilemmas of resource nationalism


Economic nationalism


The vital importance of context

Energy trade conflict strategies


Resource nationalism

in global context

Features of the contemporary context

Comparisons with the 1970s

Scenario planning for sustainable futures

The legal context for resource nationalism

Enter sustainable development

Tensions between investment law and sustainable development

Bridging the gap: resource

nationalism as a response?

What motivates resource nationalism

Sustainable development ñ but at what level?








Resource nationalism is characterised by the tendency

for states to take (or seek to take) direct and

increasing control of economic activity in natu

ral resource sectors. Practitioners of resource

nationalism can be found in countries from Russia to Venezuela and Guinea and many in between.

Increasingly, resource nationalism encompasses not only producer countries but also a variety of

approaches adopted by consuming countries seeking to increase their access to natural resources in

other countries. Additionally, worries about the st

rategies behind investments by sovereign wealth

funds that are built on natural resource revenues ar

e giving rise to defensive reactions from some

investment target countries. These may mark the emergence of a third kind of ëresource

nationalismí that is only indirectly linked to the

exploitation of natural re

sources (and the revenues

generated by them) elsewhere.

Traditionally understood as an effect of upward commodity price curves, or a symptom of

developing country backlash against former coloni

al masters, todayís resource nationalism seems

surprisingly resistant to the commodity pric

e collapse of the second half of 2008.

In reality, as this paper shows, resource nationalism

is driven by a far more complex and varied set of

factors than price alone. Todayís resource nationalism, unlike that of the 1970s, needs to be

understood in the context of global concern for resource security, climate change, sustainable

development and poverty reduction. All are inter


The aim of this paper is to place sustainable development at the centre of an analysis of resource

nationalism. This is not a subject that has been explored in any detail to date, and as such this paper

simply offers a primer on some of the key issues

in the relationship betw

een resource nationalism

and sustainable development, and areas for further analysis.

The underlying idea of sustainable development is as resonant today as when it was first

encapsulated in the report of

the World Commission on Environment and Development in 1987.

Then, sustainable development was described as: ì

Development that meets the needs of the present

without compromising the ability of

future generations to meet their own needs. It contains within it

two key concepts: the concept of 'needs', in partic

ular the essential needs of the world's poor, to

which overriding priority should be given; and the idea of limitations imposed by the state of

technology and social organizations on the environm

ent's ability to meet present and future needs.



Many obstacles continue to hamper efforts to purs

ue sustainable development. Four in particular

stand out:

Dominant economic grow

th models. Too often it is thes

e models which are considered

inviolable, not peoplesí rights and welfare, or environmental processes and limits

Environmental costs and benefits of human activity are ëexternalisedí (i.e. the environmental

impacts of transactions of various kinds are no

t reflected in market prices, so they tend not

to be taken account of in decision


Poor people are marginalized, and inequities entrenched

Governance regimes are inadequately designed in terms of internalising environmental

factors, ironing out social inequities, and developing better economic models.


Resource nationalism can be variously a symptom, a cause and a result of each of these obstacles to

sustainable development. A key question then is this: what contributions, positive and negative, do

various kinds of resource nationalism make to sustainable development? There are difficult framing

issues involved in answering this question; both be

cause resource nationalism is difficult clearly to

define, and because unlike foreign direct investment or

privatisation, it has not yet been assessed in

terms of its impacts on sustainable development.


Resource nationalism can be found in a variety of

natural resource sectors, including food and

agriculture, fisheries, mining and minerals and oil and gas. However, the current visibility of energy

security and climate change considerations on the global stage has meant that it is the oil and gas

sector that dominates much contemporary analysis of resource nationalism. In this paper, the

detailed investigation needed effectively to ana

lyse resource nationalism across all the sectors

where it has been practised is beyond the scope of the paper ñ oil and gas dominates in this paper

too ñ but where possible examples are drawn from a wider range of sectors.

The paper positions resource nationalism in its con

temporary global context. It highlights a range of

definitional approaches to resource nationalism and their pluses and minuses in terms of

ësustainable development policy analysisí, and the range of motivations for resource nationalism.

Throughout, avenues for further exploration are high

lighted, as well as a number of conceptual and

practical implications of efforts to assess the

sustainable development implications of resource


Resource nationalism as the flip

side of ëresource privatismí

Resource privatism

Resource nationalism and economic liberalisation are uneasy bedfellows. So it is helpful to explore

some of the ways in which resource nationalism is linked to other kinds of backlash against

economic liberalisati

on ñ including critiques of the perceived power of multinational corporations in

the global economy. For these pu

rposes, resource nationalism can usefully be positioned as a

counterpoint to what might usefully be termed ëresource privatismí.


Resource nationalism lies at

the opposite end of a ëhost state influence vers

us investor influenceí spectrum to ëresource


Multinational corporations and non

governmental organisations that work on corporate and

corporate accountability are familiar with the accusation that businesses exercise behind the scenes

political influence in order to secure the best

investment deals for themselves. Sometimes these

accusations acquire precision beyond conjecture,

for example when they

are mirrored in Foreign

Corrupt Practices Act proceedings in the United States which uncover corrupt payments from

companies working in the natural resources sector to officials (see

Box 1

below for an example).

Almost all analysts would agree that transactions based on these kinds of underhand tactics not only

deprive countries of legitimate revenues, but

that they also harm equitable development and

threaten to unseat companies that play fair in their efforts to win long

term investment projects.

In natural resources sectors, ëresource privatismí might be coined as a shortcut for describing a

situation in which the interests of private enterp

rises so dominate negotiations with host country

governments over access to or management of na

tural resources, or the

way in which deals are

done, that the public interest of the nation endowe

d with the resources is squeezed into a corner.

ëResource privatismí, defined in this way, is closely linked to another kind of abuse of power; when

companies use their economic might in untransparent ways to secure political goals that are aligned

with their commercial interests

or to destabilise democratic processes. Among the most extreme

examples of this kind of ëprivatismí, since it involv

ed both lack of transparen

cy and opposition to the

outcomes of a democratic process (though not a natu

ral resource sector), were allegations that US

conglomerate ITT Corporation had provided financial support for opponents of Salvador Allendeís

socialist government in the period le

ading to the military coup of 1973.

In the 1970s, concerns about corporate abuses of their economic power fed into broader developing

country calls for a ëNew International Economic Orderí. The New International Economic Order

(NIEO) was an idea promoted by post

colonial newly independent states and developing countries. It


was also reflected in a number of internationally agreed (though controversial) United Nations

documents adopted during the 1970s. Essentially,

the NIEO reflected a set of economic policy

concerns and approaches held in common by a number of developing countries, many of which

faced considerable ongoing economic influenc

e from their former colonial masters.

The overall dynamics of the NIEO debate were characterised by a positional North

South dividing

line on economic development concerns related to issues such as commodities trade, debt,

industrial development and technology transfer. Rather than interdependent cooperation among

nations, a key priority was enshrining the right to the full and independent expression of territorial

sovereignty. So too was the right of developing countries to control fully the activities of

multinational corporations in their territories.

These underlying NIEO era concerns about corporate abuse of power resonate in contemporary civil

society demands that companies ñ particularly la

rge multinational corporations ñ be transparent

about their lobbying.


Resource nationalism

This paper centres not on ëresource privatismí bu

t on the other end of the spectrum of investor

versus host country influence: ëresource nationalis

mí. Like resource privatism, resource nationalism

is often associated with accusations and complaints

of foul play. Here though, the central accusation

is that the governments of natural resource

rich countries insist on governing natural resources, or

doing deals, in a way that places national interests ñ or national political interests ñ significantly

Box 1: ëResource privatismí in action: Baker Hughes Services International in Kazakhstan

In April 2007, the US Securiti

es and Exchange Commiss

ion (SEC) filed a ësettled actioní against

Baker Hughes Incorporated, a major contractor pr

oviding oil products an

d equipment worldwide.

The SECís civil charges were laid in connection with allegations of major bribery and kickback

payments (involving some $5.2 mln). In parallel, the US Department of Justice filed criminal

charges against Baker Hughes Incorporated and a Kazakhstan

based subsidiary on grounds of

violating the Foreign Corrupt Practices Act in relation to activities in Kazakhstan.

In one case an agent retained

to influence officials of state

owned oil companies was allegedly

paid a total of $4.1 mln in order to ensure secu

ring contracts for provision of services to the

Karachaganak consortium in Kazakhstan after a major tender process had closed. The approval of

the state oil company, Kazakhoil, was sought by

the consortium at various stages of the tender

process for the award of a very substantial oil serv

ices drilling contract. Af

ter retaining the agent,

Baker Hughes was awarded an oil services contract worth $219.9 mln in gross revenues over the

period 2001

6. In a second set of facts in the SEC case, the SEC alleged that from 1998


payments to an agent of nearly $1.1mln were made ëat the direction of a high

ranking executive of


In the SEC case, Baker Hughes agreed to disgorge a total of $23 million ëill

gotten gainsí, in any

event without admitting or denying allegations in

the complaint. In the criminal FCPA case, the

company pleaded guilty and paid $11 mln in criminal fines, whilst agreeing to retain a monitor to

review and assess the companyís compliance and implementation program in accordance with

new internal policies.







above established good practice norms for doing business with investors in a partially liberalised

global economy.

In this paper, the initial analytical scope of ëresource nationalismí is drawn by observable, publicly

accessible suggestions that this term is relevant

in understanding a particular government action. In

this sense, it is self

defining, though the paper also offers

thoughts on definitional issues.

In contrast to ëresource privatismí, the principal

complainants in cases of ëresource nationalismí tend

to be foreign investors or consuming countries, not

ideologues or civil society campaigners. Typically

resource nationalism has been analyzed, almost always critically, from an economic or investor

perspective. To borrow from Andreas Pi

ckelís analysis of economic nationalism,




discourse treats economic nationalism as a pernicious doctrine, and its proponents as the political


ì. Serious analysis in favour of enhanced ër

esource nationalismí is

thin on the ground ñ

perhaps because at national level such analysis might tend instead to be couched in terms of

ënationalismí plain and simple.


Three resource nationalisms

It is perhaps helpful to think of three distinct

resource nationalisms: the

resource nationalism of

producer countries (which is the focus of the bulk of the analysis in this paper ñ in which producer

countries increase control of economic activity in

their natural resource sectors); consumer country

resource nationalism (in which consumer countries seek to gain greater control or increased access

to natural resources in other countries), and a relatively new form of ëresource nationalismí, namely

the nationalism of investment target countries wh

ose territories are a target for investment by

sovereign wealth funds derived from natural resource

revenues. Each is cons

idered briefly in turn

below. In practice, producer country resource na

tionalism has tended to be more widely analysed

than the resource nationalism practices of cons

umer countries or (mor

e recently) the ëtarget

countriesí of natural resource

derived sovereign wealth funds.

Producer country resource nationalism

Much of this report focuses on producer country

resource nationalism. This introductory section is

intended to show the breadth of the policy

tools associated with the phenomenon.

The most far

reaching instances of ëresource nationalismí such as Bolivia or Venezuelaís partial

ënationalisationsí of their oil and gas sectors, mining contract renegotiation in the Democratic

Republic of Congo, or Shellís forced

sale of its stake in the Sakhalin

II project are widely reported in

the mainstream press. But there are many more exampl

es of policy initiatives or tools that might be

dubbed ëresource nationalismí around the world. It is important that extremes do not define

approaches or policy responses to what is in real

ity a relatively every day phenomenon. The tools of

producer country resource nationalism are extremely wide

ranging. A brief run

down of some of the

available tools shows how diverse the range of approaches has been:

renegotiation or cancellation of existing natu

ral resource contracts (as in the Democratic

Republic of Congo or Guinea (see

Boxes 10




rejection of particular kinds of governance frameworks (such as production sharing

contracts) considered less favourable to producer countries (as in Russia, Kazakhstan and

popular sentiment in Iraq)

nationalisation (as in Bolivia (see

Box 19

below) and Venezuela);

outright prohibition on international oil company production (Saudi Arabia) or increasingly

stringent demands for national shares in natural resource joint ventures (as in Kazakhstan,

Algeria or Russia) or for regulatory scrutiny and prior approval of commercial disposals or

acquisitions in the natural resource sectors (as in Kazakhstan);






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