Monday, March 9, 2015

Resource Nationalism and Sustainable Development: a primer and key issues

Resource nationalism and sustainable development:  
a primer and key issues 

Resource nationalism is characterised by the tendency for states to take (or seek to take) direct and
increasing control of economic activity in natural 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 strategies behind investments by sovereign wealth
funds that are built on natural resource revenues are 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 resources (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 colonial masters, todayís resource nationalism seems
surprisingly resistant to the commodity price 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‐related.
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 between 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: ìDevelopment 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 particular 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 environment's ability to meet present and future needs."
Many obstacles continue to hamper efforts to pursue sustainable development. Four in particular
stand out:
• Dominant economic growth models. Too often it is these 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 not reflected in market prices, so they tend not
to be taken account of in decision‐making)
• 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 because 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 analyse 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 contemporary 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 highlighted, 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 liberalisation ñ including critiques of the perceived power of multinational corporations in
the global economy. For these purposes, 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 versus investor influenceí spectrum to resource privatismí.
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 enterprises so dominate negotiations with host country
governments  over  access  to  or  management  of  natural resources, or the  way in which deals are
done, that the public interest of the nation endowed 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 involved both lack of transparency and opposition to the
outcomes of a democratic process (though not a natural resource sector), were allegations that US
conglomerate ITT Corporation had provided financial support for opponents of Salvador Allendeís
socialist government in the period leading 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 7
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 influence 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 large multinational corporations ñ be transparent
about their lobbying

Resource nationalism 
This paper centres not on ëresource privatismí but on the other end of the spectrum of investor
versus host country influence: ëresource nationalismí. 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 Securities and Exchange Commission (SEC) filed a ësettled actioní against
Baker Hughes Incorporated, a major contractor providing oil products and 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 securing 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 services drilling contract. After 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 1998‐1999
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.
=2, 8
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 Pickelís analysis of economic nationalism,
discourse treats economic nationalism as a pernicious doctrine, and its proponents as the political
enemyì. Serious analysis in favour of enhanced ëresource 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 whose territories are a target for investment by
sovereign wealth funds derived from natural resource revenues. Each is considered briefly in turn
below. In practice, producer country resource nationalism has tended to be more widely analysed
than the resource nationalism practices of consumer countries or (more 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 examples 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 reality 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 natural resource contracts (as in the Democratic
Republic of Congo or Guinea (see Boxes 10 and 18 below));
• 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);  9
• rapid increases in taxes payable by natural resource companies in times of high commodity
prices (as in Bolivia and Venezuela);
• stringent and mandatory regulation of local content (as in Nigeria and many other
• restrictions on exports of natural resource products (as in Argentinaís 2006 ban on beef
 and Vietnamese,  Indian, Egyptian and Cambodian restrictions on rice exports
linked to rapidly rising food prices
• reservation of specified quantities of natural resources on grounds of national security or
food or energy security (as in Western Australia (see Box 4 below));  
• measures for ëdomesticationí of key sectors (as in the Pacific Islands tuna industry ñ see Box
2 below).
• Requirements for investors to make increasing  contributions to direct social spending by
executing infrastructure projects, or investing in a variety of social investment projects in
localities, or at the national level where they invest (as in Kazakhstan and proposed in
Producer country resource nationalism is not inherently linked to any particular national resource ñ
though it is most often heard of in connection with oil and gas and mineral resources. But other
sectors are also implicated. One example concerns the evolution of policy measures governing
access to Pacific tuna resources, highlighted in Box 2 below.

Not all government changes in operating regimes applicable to natural resource projects should be
associated with resource nationalism. However, some kinds of policy changes that lead to significant
changes in financial modelling and cash flow of individual projects without breaching host country
commitments to producers have sometimes been dubbed ëresource nationalismí ñ or even ëbenign
resource nationalismí. In essence these, like other forms of resource nationalism, represent efforts
by governments to capture greater benefits from  natural resource exploitation in ways that are
unpopular with enterprises. The UK windfall tax on North Sea oil and gas profits is one example (see
Box 3 below).  Western Australiaís reservation of gas for domestic consumption (see Box 4 below)
has also been labelled ënationalismí by at least one commentator, but it may equally be a cost‐
effective way of meeting domestic energy security concerns.

Consumer country resource nationalism 
Countries that consume natural resources may display ëconsumer country resource nationalismí
when they take aggressive steps to maintain security of supply to consumers ñ whether through
regulatory or broader advocacy or political means (as with the European response to the Russia‐
Ukraine gas supply dispute of winter 2008).

 Resource competition among consuming countries, it is
suggested, is the ëreverse of the resource nationalism coiní.
 In the most extreme cases, consumer
country resource nationalism may lead directly to armed conflict. Some would argue that the
invasion of Iraq can be understood in this way.
Surging interest in the role of biofuels in the overall energy mix and rapidly expanding investment in
the sector has also been associated with ënationalistí advocacy on the part of consuming nations
worried about energy security. One blog
 describes this as a worrying manifestation of
ëenvironmental nationalismí, in which consuming countries aggressively seek more environmentally
benign raw materials ñ even at the expense of negative social outcomes in other countries.
In the case of the biofuels sector, the association between biofuels expansion and rising food prices
has in turn triggered producer country ëresource nationalismí movements as citizens have taken to
the streets to protest at rising food costs. The current financial crisis and its associated deflationary
pressures may to some extent ease the pressure on food prices as well as energy demand. But the
overall contours of the links between biofuels expansion, consumer country resource nationalism
advocacy and exporting country grassroots resource nationalism movements are likely to remain.
Home countries of multinational corporations affected by resource nationalism abroad face choices
about whether and if so how, actively to support their economic interests. Those interests become
the direct interests of the home country when  the multinationals concerned are directly state‐
owned or controlled.
The strategic use of state‐owned enterprises to pursue natural resources in other countries is
another manifestation of producer country resource nationalism. For example, in October 2007,
Algerian Energy and Mining Ministry and the state‐owned oil company Sonatrach presented 10 new
exploration blocks. Later industry reporting suggested that Algeria's Energy and Mines Minister
Chakib Khelil said: "We will favour partners who will give us, in return, access to reserves... We are
going to use this bid to boost Sonatrach's presence abroad".
Chinaís rapidly growing need for resources fuelled by rapid economic growth at home has also led
the countryís enterprises to build increasingly visible presences in resource‐rich countries. Particular
interest has been raised by Chinaís rapidly growing presence in Africa ñ sometimes dubbed the new
Silk Road.
 Interestingly, Chinaís 2006 African policy  identifies sustainable  development in host
countries as one of the goals of economic engagement:
The Chinese government encourages and supports competent Chinese enterprises to
cooperate with African nations in various ways on the basis of the principle of mutual benefit
and common development to develop and exploit rationally their resources, with a view to
helping African countries to translate their advantages in resources to competitive strength,
and realise sustainable development in their own countries and the continent as a whole.
In the oil and gas sector alone, Chinese companies Sinopec, China National Offshore Oil Corporation
(CNOOC) and China National Petroleum Corporation (CNPC) have interests in Nigeria, Angola, Sudan,
Equatorial Guinea, Gabon and Chad. Significant minerals sector investments have also been made ñ
for example in Zambia and the Democratic Republic of Congo.

In a variation on consumer country resource nationalism, nationalist fears have on occasion been
raised in some countries ñ including the US and Kazakhstan ñ about Chinese acquisitions in strategic
sectors (see Box 5 below). This might be dubbed ëdouble resource nationalismí on the part of both
producing and consuming countries simultaneously: it involves consuming country resource
nationalism in the form of pursuit, through national natural resource companies, of access to
resources in other countries; and a nationalistic  protective response on the part of the target
country concerned.  
Alongside directly nationalist fears, worries have also been expressed about the possibility that
Chinese investors will have less respect for human rights or corporate responsibility than Western oil
companies. This was for example the case when Chinese company Sinopec and CNPC entered the
Sudan after the departure of Canadian Talisman Oil. Talisman had been pressured into divestment
by NGO campaign pressure based on human rights concerns that ultimately depressed the
companyís share price.
As ever, the story is not straightforward. The Chinese approach to negotiating investment deals
appears to be one of the countryís many successes. As Sanusha Naidu and Martyn Davies note,
Chinese approach to diplomacy in Africa offers marked differences from Western neo‐colonialism
and political conditions, with China according Africa equal diplomatic status with ëthe dominant
powersí in its political engagement. Second, China is able to pursue ëcoalition investmentí strategies
in which a recipient African economy is engaged ëin a way that can include tying energy acquisitions
to funding for infrastructure developmentí. Third, Beijing is able to extend development assistance
and cooperation to African governments  as part of its overall commercial engagement.  They go
further, suggesting that the apparently commercially illogical deals entered into by Chinese
companies may be explained by Chinaís strategy of disengagement from global market mechanisms
in an effort to develop an alternative mechanism.
Paul Collier, in a piece for the Extractive Industries Transparency Initiative,
 hints that Chinese
investors may simply be better at giving host countries what they want. China, he suggests, has
ëdeveloped a distinctive model of doing business for resource extraction deals in which resource
extraction rights are bartered directly for the construction of infrastructure. The package includes a
component of Chinese aid, although since the packages are not individually priced the value of the
aid is uncertainí. Professor Collier advises introduction of competition from other countries into
Chinaís ëpackaged dealí approach by encouraging other countries to do so too, with significant
implications for the donor agencies of ëhomeí states.
Box 5: ëDouble resource nationalismí: Chinese acquisitions in the US, Canada and Kazakhstan
In the US, a 2005 CNOOC unsolicited cash bid for Unocal caused consternation and was vetoed
by Congress. CNOOC ultimately withdrew its offer. In Chinaís neighbour Kazakhstan,President
Nazarbayev gave his consent in 2005 to CNPCís acquisition of Canadian registered
Petrokazakhstan on condition that CNPC transferred a third of the company to the Kazakhstani
national oil company, KazMunaiGas (KMG), with payment to be made out of future oil
revenues. Early in 2007, Chinese CITIC Group bought the Kazakhstani oil assets of Canadian
Nations Energy. The condition was that CITIC granted an option on a 50 percent interest to
bin/article.cgi?f=/c/a/2007/01/04/BUGDBNCBR41.DTL&hw=kazakhstan&sn=001&sc=1000  13
The examples of Sonatrach and of the Chinese overseas investment model show consumer country
resource nationalism with potential to trigger entirely new models of doing business; models that
inherently lean towards a greater role for public sector actors. Helping to shape the terms of the
competition that is likely to follow is a key task for advocates of sustainable development.
Investment target country resource nationalism
A different set of concerns associated with ëconsumer country resource nationalismí ñ or, rather,
ëinvestment target country nationalismí arises out of the strategic uses of Sovereign Wealth Funds
around the world. 2007 saw a rise of discussion on the ethics of investment decision‐making
associated with state‐owned sovereign wealth funds. Some, like the State Oil Fund of the Republic of
Azerbaijan or the Norwegian Oil Fund, are earmarked for earnings from rich natural resource
endowments. Others, less relevant to this paper, simply reflect large foreign exchange reserves.
Either way, the total stock of sovereign wealth funds, currently put at USD2‐3trillion is set to rise: a
Morgan Stanley research report (published before the current financial crisis) estimates that
Sovereign Wealth Funds will have USD12trilliion under management by 2015.
Sovereign wealth funds are often considered a policy tool for combating the risk of ëDutch diseaseí
(in which manufacturing may decline and inflation increase as a result of increases in natural
resource revenues exerting a knock‐on effect on exchange rates).
 In countries with rich natural
resource endowments, economic and social instability can result from rapid acceleration in spending
at national level that is fuelled by exploitation of natural resources. In extreme cases, this may be
dubbed the ënatural resource curseí.
 Smooth economic and social development and the needs of
future generations can be managed more effectively, the thinking goes, when natural resource
revenues are accumulated in funds earmarked for long‐term spending (as in the case of the
Norwegian Oil Fund) or specific social goals  (as with the hypothecated fund established in
connection with the Chad‐Cameroon pipeline).
Concerned ëconsumer countryí commentary on the rise of sovereign wealth funds has been fuelled
by increased awareness of the scale of the rapid rise in the economic influence of emerging markets
ñ led by China ñ and worries over the considerations that might govern these ëemerging playersí
decisions in their search for effective return on their investment. Concerns have been expressed
over the use of sovereign wealth funds to pursue economic or non‐economic foreign policy goals
(effectively a form of resource nationalism).
An untransparent, well‐capitalised and strategically wielded sovereign wealth fund offers added
political power to its government; power which may be applied to  create alliances or to threaten
opposing interests. But, as Blackburn  et al point out,
 there may also be some costs in political
wielding of sovereign wealth funds, including increasing interest in target states in imposing
restrictions on sovereign wealth fund investments, limited voting rights and liability to be targeted
by defensive legislation allowing governments to prevent acquisitions on national security grounds.
Lack of transparency in the governance of some funds is also a real concern. For example the Abu
Dhabi Investment Authority has never revealed the value of its assets. Lack of transparency in the
governance of the fund, in turn, may lead to protectionist responses to investments on the part of
target states.
In October 2008, a 23 member‐country Working Group of Sovereign Wealth Funds convened by the
International Monetary Fund agreed to new investment practices and voluntary principles, dubbed
the Santiago Principles.
Among other issues, these address a number of the key concerns over
transparency of sovereign wealth fund objectives, governance and decision‐making. 14
In any event, sovereign wealth funds including Chinaís China Investment Corporation look set to
become increasingly scrutinised players in the  international economy. Commentators have wryly
begun to note that Chinese state controlled entities could at this point, with a little organisation,
effectively buy up Wall Street.
 Whether the Chinese would wish to exercise their much‐debated
clout this way is a different question.
Certainly, China seems prepared to make strategic use of her sovereign wealth. Officials of the China
Development Bank expressed concern over the proposed Rio Tinto‐BHP merger in the iron ore
industry on grounds that consolidation would mean higher prices for Chinese firms and citizens. The
Sovereign Wealth Fund was also reported to have funded an unsolicited bid by Chinaís state‐owned
mining corporation Chinalco, acting jointly with US firm Alcoa, to acquire a 12% stake in Rio Tinto in
a move many considered was an attempt to block the planned merger,
 (itself subsequently
dropped in November 2008 on the back of falling commodity prices).
 In February 2009 the
Financial Times reported that Chinalco was set to acquire a total stake of 18% in Rio Tinto, up from
an existing 9%, by means of a purchase of minority stakes in a number of Rio Tinto assets. Existing
major investors were said to respond with ëfuryí.
 Whilst consolidation would not confer monopoly
power, the psychic impacts of Chinaís initial move alone appear to have  been sufficient to stoke
fears over politically motivated uses of sovereign wealth funds.
As with consumer country resource nationalism, there is a significant task for sustainable
development advocates to help shape the emerging governance context for sovereign wealth funds.
Principles associated with transparency have long been part of the sustainable development
armoury, but it is important that in a time of global financial crisis and widespread recession,
protectionist fears should not be allowed to dominate rational policy analysis. Understanding the
worries of target country governments (at least in relation to natural resource‐based sovereign
wealth spending) as part of the spectrum of resource nationalism can help to break down barriers
between ëproducerí and ëconsumerí perspectives to allow instead a focus on wider approaches ñ or
scenarios ñ for global governance.
The definitional dilemmas of resource nationalism
There is no single definition of resource nationalism, much less any sustainable development
typology of resource nationalism. However, the core elements in a sample collection of definitions
(see  Box 6  below)  seem  to  lie  with  government  efforts to maximise revenues from and exercise
greater state control over the exploitation of natural resources.
For a broader perspective on the term, it is worth looking at the link between ëresource nationalismí
and other related terms ñ including ënationalismí, ëeconomic nationalismí and ëprotectionismí since
these are also terms that are associated with uses of ëresource nationalismí. Each has something to
offer to consideration of resource nationalism in the context of sustainable development.
First, nationalism. In one sense, nationalism can be taken to refer to struggles that aim for
congruence between political and national units; between ëthe nationí (redefined in line with the
goals of the movement or group concerned), and the government of ëthe stateí.
 Producer country
resource nationalism is more often than not external‐facing, in that its targets, de facto or expressly,
are foreign multinational companies, and in this sense it is less easy to connect to the kinds of
struggles that mainstream definitions of ënationalismí have in mind. But resource nationalism may
also be linked to intranational struggles when it expresses the outcome of internal struggles for
control of resources or for decentralisation so that resource‐rich regions can control the revenues
from natural resource exploitation. The Scottish nationalist movement could to some extent be
understood in this way at the height of the UKís North Sea oil and gas revenues.  15
This kind of ëinward‐facingí resource nationalism tends to be described only as a concomitant effect
of resource nationalism, not a distinctive sub‐ type of ëresource nationalismí.  Instead, issues
surrounding the struggle of local communities to  receive a fair share of the benefits of natural
resource development are more often considered under the heading ëcommunity developmentí.
This points to the insight that resource nationalism cannot be understood simply by looking to the
policy tools to which this label has been attached by external commentators. For example, it is
increasingly common for international donors (the World Bank Group in particular) to support
efforts to build public policy frameworks to address the community development impacts of mining
 These kinds of approaches minimise the likelihood that even a ënationalistí resources
policy could lead to negative outcomes in terms of internal social unrest or inequitable
development. Indeed in post‐conflict contexts, effective policies on extractive industries and
sustainable development have potential to support efforts to build a sense of ënationí as ethically
mixed and congruent with statehood.
John Breuilly suggests a slightly different approach to understanding nationalism when he argues
"A nationalist argument is a political doctrine built upon three basic assertions:
a) There exists a nation with an explicit and peculiar character.
b) The interests and values of this nation take priority over all other interests and values.
c) The nation must be as independent as possible. This usually requires at least the attainment
of political sovereignity.
The elements of independence (from the legal and economic pressures exerted by foreign investors
or  from the investment legacy of previous administrations) and of pre‐eminence (if not absolute
dominance) of national interests and values can be found in most contemporary examples of
resource nationalism. But views would likely differ on the extent to which resource nationalist
policies and tools reflect the idea that ëthe interests and values of this nation take priority over all
other interests and values.í
It has been suggested that ënationalismí works to generate a ëpsychicí benefit on the part of citizens
which may be entirely decoupled from material benefits.
 This is also a characteristic of much
resource nationalism. For example, Russian resource nationalism, in the form of increasing state
control of oil and gas assets, is strongly supported by a majority of the population who are weary of
Russiaís privatisation processes allowing criminals or foreign oil companies to plunder the countryís
natural resource heritage. Equally, the resource nationalism of President Putin may have played an
important role in rebuilding the national sense of pride and kinship after the insecure years and fear
that followed the 1998 collapse of the rouble. To the extent that such ëpsychic benefitsí help to form
social capital at the national level, they may be considered broadly supportive of sustainable
development; but unless such benefits are  integrated with wider economic, social and
environmental policy concerns, any sustainable development benefits must be incidental. 16
Box 6: Definitions of resource nationalism
A. Producer country resource nationalism
Nations wanting to make the most of their endowment
Middle East Economic Survey (MEES), 25 September 2006
A situation where producer countries have moved to maximize revenue from present oil and gas
production while altering the terms of investment for future output
Bill Farren Price, MEES, 11 September 2006
It generally refers to a set of policies as well as the justifications given to policies that increase
government intervention in resource development.
Nordine Ait‐Laoussine,  Middle East Economic Survey,  3 November 2008,‐5OD01.htm
An expression of [the].. ëobsolescing bargainí ..  whereby once  oil has been discovered and the
investment  sunk  in  development,  relative  bargaining  power  switches  in    favour  of  the  host
government, which then tries to increase its fiscal take by unilaterally changing the terms of the
original contract.
Paul Stevens, National oil companies and international oil companies in the Middle East: Under the
shadow of government and the resource nationalism cycle, JWELB 2008, Volume 1 No 1
An expression of political antipathy to the United States (and by implication its oil companies), wider
Western interests, and/or economic globalization
Paul Stevens, The Coming Oil Supply Crunch, Chatham House, 2008
It has two components: limiting the operations of private international oil companies, and asserting
greater national control over natural resource development
Adapted from Paul Stevens, National oil companies and international oil companies in the Middle
East: Under the shadow of government and the resource nationalism cycle, JWELB 2008, Volume 1
No 1
An increasingly dominant national oil company, sudden and unilateral changes in upstream
ownership and operating regime and barriers to, or higher costs for, upstream entry characterise
resource nationalism in its more extreme form
International Energy Agency, Medium Term Oil Market Report, July 2007,
Governments deny private companies access to new oil fields and nationalise the fields that the
private companies have started to develop.
Sergei Guriev, Anton Kolotilin, Konstantin Sonin  High Oil Prices and the Return of ìResource
Nationalismî (
The increasing use of control of natural resources to advance policy goalsóboth economic and
foreign policies
Joseph Stanislaw, Power Play: Resource Nationalism, the Global Scramble for Energy and the Need
for Mutual Interdependence , Deloitte US, 2008
B. Consumer country nationalism
ìResource nationalism involves governments attempting to take control of sources of raw materials
outside their borders in an attempt to prevent monopoly or collusionî.
John Blackburn et al, Sovereign Wealth Funds: Do sovereign wealth funds best serve the interests of
their respective citizens? 17
Economic nationalism
Resource nationalism needs in turn to be distinguished from two other terms ñ economic
nationalism, and protectionism.
US conservative Pat Buchananís view of economic nationalism is broad: ìI am an economic
nationalist. To me, the country comes before the economy; and the economy exists for the people. I
believe in free markets, but I do not worship them. In the proper hierarchy of things, it is the market
that must be harnessed to work for man ‐ and not the other way around.
î This comes close to John
Breuillyís characterisation of nationalism, but expressed through economic policy tools.
More narrowly, economic nationalism, it has been suggested, ìis a term used to describe policies
which are guided by the idea of protecting domestic consumption, labo[u]r and capital.
î The
resource nationalism of Pacific Islands seeking to  protect their tuna industries through policies of
domestication is of this sort, but the wider political goals of many resource nationalists suggest that
economic nationalism is too narrow a term to encompass the full range of resource nationalist tools
and practices.
Protectionism is generally expressed through the use of trade policy tools (covering both trade in
goods and trade in services) to protect a nationís producers or enterprises from competition. Note
the emphasis on protection of a nationís enterprises ñ not its people. Resource nationalism generally
makes more use of investment policy than trade  policy; but there is no inherent exclusion of
ëprotectionistí trade policy tools from the scope of possible resource nationalist policies. On the
other hand, it is difficult to dub measures restricting exports of rice on food security grounds
ëprotectionistí ñ on the contrary, such measures are often deeply unpopular with domestic
producers (as in the case of Argentinaís 2006 restrictions on exports of beef and subsequent
disputes with farmers).
 In other words, some resource nationalism is protectionist, but not all
protectionism in natural resource sectors is a reflection of resource nationalism.
The vital importance of context
The terms ënationalismí, ëeconomic nationalismí and ëprotectionismí are, thus far, of limited value in
arriving at more precise understanding of resource nationalism, but they do at least point to three
‐ The potential value of understanding resource  nationalism in the context of a variety of
intranational struggles for control of natural resources, and the importance of taking such an
enquiry beyond the direct terminological field of ëresource nationalismí to consider areas
such as community development
‐ The distinction between ëprotectionistí and ënon‐protectionistí resource nationalism (in the
trade policy sense of ëprotectionistí), and
‐ The (so far) loose fit between economic nationalism and resource nationalism ñ but the
limited explanatory force of the term ëeconomic nationalismí for building understanding of
resource nationalism.  
In an important paper on ëeconomic nationalismí, Andreas Pickel
 offers a number of insights that
are of more direct value to an enquiry into the links between resource nationalism and sustainable
development. He suggests that ìthe economic dimensions of specific nationalisms make sense only in
the context of a particular national discourse, rather than in the context of general debates on
economic theory and policyî. Economic nationalism cannot be adequately explained, he suggests, ìin
strictly economic terms without taking into account historical, political, cultural or social factorsî.  18
The examples of resource nationalism in Russia and Bolivia respectively ñ quite different in
underlying characteristics and historical context  ñ clearly demonstrate this. Economic culture is
another important contextual component. For example, Central Asians can often be heard
complaining with resignation that corruption is part of their culture. This may help to explain why it
is so difficult to combat economic policy approaches that facilitate corruption, including in particular
lack of transparency in investment decision‐making.
Energy trade conflict strategies
A piece by Paul Williams in Third World Quarterly identifies six distinct categories of ëenergy trade
conflict strategiesí which have some overlap with resource nationalism.
 Each is based on specific
strategic rent‐seeking actions that place the interests of Northern consumer countries and their
corporate in opposition to those of Southern exporters. He distinguishes between strategies based
on whether they are initiated by Southern exporters or Northern interests; whether the action takes
effect in buyerís or sellerís markets, and related  to this, whether the action can be classified as
ëdefensiveí or ëoffensiveí
The typology is readily understandable given its conflict focus, but is less readily adaptable to
sustainable development considerations since it provides no mechanism for revealing or evaluating
the underlying development contribution of the measure concerned. Neither is a distinction
between ëNortherní and ëSoutherní countries entirely well suited to resource nationalism given the
significance of countries that are not readily classified as either (e.g. Former Soviet Union countries,
or Middle East exporters). Yet there is potentially a valuable role to be played here ñ both to point to
the ëordinarinessí of resource nationalism in its many guises, and to counter the one‐size‐fits‐all
pejorative nature of the term.
In conclusion, there is potentially value in arriving at a more detailed sustainable development‐
driven conceptualisation of resource nationalism that can (at least):
‐ Account for the distinctions between producer and consumer country resource nationalisms
‐ Take account of intra‐national dimensions of resource nationalism (including approaches to
ensuring community development and fair and equitable sharing of benefits from natural
resource exploitation)
‐ Account for the particular historical, cultural, socio‐economic and environmental
characteristics of ëresource nationalistí countries and the tools adopted.
 It is beyond the scope of this paper to develop such a conceptual framework in detail, but the
promise that it holds is to break resource nationalism out of its current largely negative narrative to
drive enquiry in directions that can actively build understanding on new or refined combinations of
tools and wider governance settings for pursuit of sustainable development.
Resource nationalism in global context
Features of the contemporary context
The concept of resource nationalism can be readily linked to a wide variety of contemporary global
concerns, including discussion on ëthe resource  curseí; increasing OECD country concern over the
economic significance of sovereign wealth funds, ëgood governanceí in middle and low income
countries; trends in political risk management; practical endeavours to design methodologies for
measurement of socio‐economic development contributions of extractive sectors, and wider issues
about the ëenabling environmentí for responsible business practice.
The context in which resource nationalism is practised includes high food prices coupled with
increasing pressure on productive land from intensification of biofuels production; a rise in
economic (and hence political) significance of national oil companies; increasing concerns for energy 19
and natural resource security; and recent rapid increases in economic growth and domestic
consumption in a series of rapidly developing middle income countries, including notably India and
Comparisons with the 1970s
The tendency to resource nationalism is far from  new: Mexico nationalised its oil industry in the
1930s, and OPEC, the producersí cartel, was formed  in 1960. The last intense wave of analysis of
ëresource nationalismí, however, was seen in the 1970s (though to be sure, resource nationalism has
not been absent since ñ as in the case of expropriations in Peru during the mid‐1980s).
 In 1973,
Saudi Arabiaís embargo on exports of oil to the West in retaliation for Western support for the Yom
Kippur war had led to a quadrupling of oil prices. This marked the first of a series of oil shocks and
nationalisations of previously private enterprises in sectors considered strategically important to the
governments of many newly independent countries. Even then, however, just 28 governments
accounted for some 62 percent of all expropriations in the period from 1960‐1985.
Todayís context is both similar and different to that of the 1970s. The table below makes
comparisons based on a collection of existing writings ñ largely from the oil and gas sector.
Table 1: Taking Stock: Comparing Resource Nationalism in the 1970s and 2000s
1970s  2000s
Sweeping nationalisations  Limited nationalisations
Collective international economic policy activism  Limited activism? (with the possible exceptions
of Russian calls for a new gas producersí
organisation; ALBA in Latin America)
Newly independent states seeking to ëoverturn
an old orderí
No old order to overturn
Ideologically driven by newly independent
countries in the post‐colonial period‐ stressing
need for independence, self‐determination and
control of the national patrimony
Less widespread ideologically driven resource
nationalism? Pragmatic approaches prevail
driven mostly by perceived immediate national
Exceptions in Latin America in particular (ìThe
leaders of Venezuela and Bolivia use the rhetoric
of the past, but mostly for the benefit of their
domestic and regional audiencesî ñ PIW; cf
ìVenezuelaís efforts to spread its leftist political
ideology throughout Latin Americaî (Ait‐
Laoussine and Gault)
Russiaís officially stated goals for its gas industry
include ësecuring Russiaís political interests in
Europe and neighbouring states, as well as in the
Asia‐Pacific regionî
Russia/USSR not a focal point  Russia a focal point ñ ìRussian resource
nationalism is essentially power politics applied
to energyî (Petroleum Intelligence Weekly)
Resource nationalism almost entirely practised
by producer countries
Rise of consumer country resource nationalism?
(e.g. through support for national oil company
investments abroad; invasion of resource‐rich
countries whose governments are considered a
threat to resource security); Rise of ëeconomic 20
patriotismí? (e.g. US Congress blocking of
CNOOCís bid to acquire Unocal)
Energy  policy  driven  by  security  of  supply
considerations (especially after the oil supply
embargo of 1973)
Energy security a major driver of energy policy,
together with climate change
Little analysis of the ëresource curseí  ëResource curseí phenomenon fuels perception
that resource‐rich countries are associated with
poor governance, corruption and poverty
Government intervention in the economy
regarded as the norm and necessary to pursuit
of development up to the 1970s
Washington Consensus advocating minimal state
intervention in the market pursued throughout
the 1980s through privatisation, deregulation
and liberalisation and upheld as dominant view.
2000ís sees revival of view that state should play
a greater role in the economy.
Sustainable development does not exist as a
driver of government policy
Sustainable development accepted as a policy
goal by a majority of governments around the
Sources: Paul Stevens, National oil companies and international oil companies in the Middle East:
Under the shadow of government and the resource nationalism cycle, JWELB 2008, Volume 1 No 1;
Paul Stevens, The Coming Oil Supply Crunch, Chatham House, 2008; Petroleum Intelligence Weekly,
Petroleum Comment: Resource Nationalism: Then and Now, January 8  2007; Nordine Ait‐Laoussine
and John Gault,  Petroleum Comment: the Multiple Faces of Resource Nationalism, Petroleum
International Weekly, February 5 2007
Some of these comparisons are less useful than others in terms of building a robust conceptual
understanding of resource nationalism. For example, the claim that resource nationalism is ëless
ideologicalí today than in the 1970s may simply reflect the absence of a coherent international
movement akin to the New International Economic Order. Equally the suggestion that Russian
resource nationalism is not ideologically motivated is readily contested given its role in asserting and
rebuilding a national identity after the collapse of the rouble in 1998. The resource nationalism of
countries like Russia and Kazakhstan has played a significant role, it might be argued, in rebuilding
the ëpsychicí well‐being of the two nations.
A further key contextual difference as between the 1970s and today in the energy sector concerns
the rise of national oil companies. Governments often consider that national oil companies serve
national interests better than private companies. One oft‐quoted figure is that as at 2005, national
oil companies controlled 77% of proven world oil reserves with no equity participation by foreign oil
 Consequently, the pressure on these companies to develop capacity to supply the
rapid predicted increases in global demand for oil and gas is very significant.
In the future, private oil companies will need carefully to consider how best to add value in a world
where opportunities to access new resources are  increasingly scarce. Evidence suggests that
corporate (i.e. non‐state) ownership of oil assets is increasingly ëlimited to marginal assets in low risk
non‐OPEC countriesí. This is coupled with a ëstrong negative interaction between state ownership
and the technical complexity of the fieldí and the fact that ëstate ownership increases with country
 The result is that international oil companies will need increasingly to emphasise their
technological capacities in difficult environments. If they are to win new acreage they will
increasingly need, too, to develop new capabilities to partner with state‐controlled oil companies in
countries with high levels of sovereign risk.
This will place real strains on established approaches to 21
corporate responsibility, which struggle to work well in difficult governance environments where
innovation and high standards are not rewarded.
The concerns and priorities of corporate responsibility are in principle as relevant to national oil
companies as to their international counterparts; but the differential exposure of national oil
companies to the market drivers of corporate responsibility can have a negative effect on their
investment in this area of management and operational practice. A Baker Institute study notes that
ëthe fact that the Chinese and Indian National Oil Companies are not active participants [in corporate
citizenship initiatives] is especially problematicí.
The situation for service companies ñ contractors  ñ has also changed. Many of these companies
were previously housed inside major international oil companies. As the number of international oil
companies diminished through the mergers of the 1990s, service sector companies began to grow.
The international oil and gas service sector companies present a pool of knowledge and expertise
that is readily available to national oil companies.
 Home country attitudes to their protection and
promotion in a global climate of  increased resource security concerns may therefore shift within
overall consumer country energy security strategies.
Crucially for understanding the consequences of extreme resource nationalism that favours national
oil companies, national oil companies have non‐commercial objectives. The 2007 outcomes of a
major Baker Institute study of national oil companies identify six distinct non‐commercial
: ìa) oil wealth redistribution to society at large; b) foreign and strategic policy and
alliance building; c) energy security, including assurance of domestic fuel supply and security of
demand for producing countries, d) wealth creation for the nation, e) participation in national‐level
politics, and f) industrialisation and economic development.î
Mixing of commercial and non‐commercial objectives has caused internal management difficulties
and inefficiency in a number of national oil companies. And there are wide differences in the ability
of national oil companies to support sustainable development in their home countries. Often,
national oil companies may be tapped for investment (for example in schools or construction) to
support domestic development priorities, or to  promote the wider geopolitical goals of their
governments. For example, Venezuelan PDVSAís political role is said to include ëprotecting President
Chavez and his Bolivarian revolutioní.
Scenario planning for sustainable futures
Scenario planning offers a useful approach to understanding some of the policy choices that
crystallise in the tools of resource nationalism. Scenarios planning typically describes and considers a
variety of external contextual variables and internal factors and their implications, in different
combinations, for a given problem area. Global energy company Shell has for many years been
making use of this planning process in a series of published scenarios reports.
Shellís 2008 scenarios report is especially helpful for purposes of this paper, since it focuses on
energy to 2050.
 Three hard truths about energy supply and demand can no longer be avoided, says
the report: consumption of energy is set to intensify as developing countries enter their most
energy‐intensive phase of economic growth; supply will struggle to keep pace with these new
demands; and environmental stresses are increasing:  even if it were possible for fossil fuels to
maintain their current share of the energy mix  and respond to increased demand, emissions of
carbon dioxide would, in the oil companyís words, ìthen be on a pathway that could severely
threaten human well‐beingî.
The International Energy Agencyís 2008 World Energy Outlook ëreference scenarioí to 2030 (in which
futures are modelled on the assumption that policies remain embodied as at mid 2008) suggests 22
that world primary energy demand will grow by 45% between 2006‐2030, with China and India
accounting for half of incremental energy demand (and the Middle East a further 11%). Already, new
coal‐fired power stations are opening in China at the rate of one a week.
 National oil companies
would account for 80% of total incremental oil production over the period 2007‐2030, assuming the
necessary investments are made.
 This is a significant assumption, since in countries whose
governments have earmarked natural resource revenues for major social spending programmes,
there may be significant political pressure on national oil companies to maximise revenues and
hence squeeze investment in development of new production capacity. Equally, there may be a
perception in resource rich countries that with finite reserves and the potential for ëpeak oilí to drive
major increases in oil prices, there is long‐term value in keeping reserves in the ground for longer.
Policy turbulence is likely to continue for some time if for no other reason than the lack of consensus
over prioritisation as between the goals associated with Shellís three ëhard truthsí. As Jan Horst
Keppler puts it in the European context, there is a ìlack of a sustainable policy trade‐off between the
competing objectives of energy supply, competitiveness and environmental protection.î
From a
swing towards environmental protection over 2007‐8 with global increase in concern over climate
change, a volley of articles and reports have more recently argued for rebalancing in policy efforts so
as to accord greater priority to energy security or peak oil. For example, in 2008 the UK Industry
Taskforce on Peak Oil and Energy Security issued a report which argued, with some sophistication,
that ì..[P]eak oil is more of an immediate threat to the economy and peopleís lives than climate
change. The Taskforce is not saying that climate change is less important but that the impacts of a
decline in easily and cheaply available oil will hit us before the worst impacts of climate change. The
Government needs urgently to reflect this threat in their analysis and planning.î
Shellís two 2008 scenarios ñ Scramble and Blueprint  (see Boxes 7 and 8 below) ‐ provide a useful
approach to understanding some of the policy choices that crystallise in the tools of resource
nationalism. Which scenario will prevail,  if any, is by no means clear; though  Blueprint,  with its
emphasis on multistakeholder cooperation and its prioritisation of environmental concerns offers a
more globally comfortable transition to sustainable development.
Scramble represents a world in which national energy security concerns dominate, initially at least,
and in which nations play out their concerns in a competitive, zero‐sum game. Resource nationalism
in this scenario might be a producer country response to deals that favour consuming countriesí
investors over producing country revenues, an effort on the part of consuming countries to secure
additional access to reserves, or producer country concern to maximise revenues from control of
increasingly scarce resources. In a Blueprint scenario, resource nationalism is likely still to exist ñ but
is more likely to be driven by concerns for equitable division of the benefits of natural resource
exploitation, and characterised by cooperative efforts to get the best sustainable development
outcomes from investors. Both forms of resource nationalism can currently be seen, and each
Many of the negotiating approaches associated with resource nationalism are at odds with the kinds
of cooperative approaches that underpin Shellís  Blueprints scenario ñ even when they genuinely
respond to the concerns of citizens from the bottom up. Intuitively, the resource nationalism of
Russia, however misunderstood it may be, is more at home in a Scramble scenario.
The challenge from a sustainable development perspective for consumer states and their electorates
is to take advantage of the incentive offered by resource nationalism to accelerate learning and
innovation in responsible direct investment, alternative economic and partnership models of direct
investment (learning, perhaps, from the example of Chinaís investments in Africa), 23
 energy efficiency and renewable energy and strategic alliances for technology
Producer countries need to be more active in  shaping the terms of discussion about resource
nationalism, so that the focus of critique goes beyond charges of rent‐seeking to examining more
deeply whether individual approaches make sense in terms of sustainable development. Indeed, the
relative absence of producer country non‐industry voices from the debate makes it largely one‐
Box 7: Scramble ñ overview at a glance
Scramble reflects a focus on national energy security. Immediate pressures drive decision‐
makers, especially the need to secure energy supplies in the near future for themselves and their
allies. National government attention naturally falls on the supply‐side levers readily to hand,
including the negotiation of bilateral agreements and incentives for resource development.
Growth in coal and biofuels becomes particularly important.
Despite increasing rhetoric, action to address climate change and encourage energy efficiency is
pushed into the future. Demand‐side policy is not pursued meaningfully until supply limitations
are acute. Likewise, environmental policy is not seriously addressed until major climate events
stimulate political responses. Events drive late, but severe, responses to emerging pressures.
Although the rate of growth of atmospheric CO2 has been moderated by the end of the period,
the concentration is on a path to a long‐term level well above 550ppm. An increasing fraction of
economic activity and innovation is ultimately directed towards preparing for the impact of
climate change.
In Scramble, major resource holders are increasingly the rule makers rather than the rule takers.
They use their growing prominence in the world to influence international policies, particularly
when it comes to matters they insist are internal such as human rights and democratic
governance. Nations who have hammered out ëfavourableí deals with oil‐producing nations do
not want to rock the energy boat they have just managed to board, resulting in a world in which
international relations are mainly a race to ensure continuing prosperity, not the building of a
more sustainable international community. 24
The legal context for resource nationalism
Sustainable development and its relationship with international law
Changes in the international legal order over the past thirty years ñ and their ability to support
sustainable development outcomes from direct investment and resource nationalism ñ are a distinct
and important part of the context for understanding the most recent wave of resource nationalism.
In the period before the oil shocks of the 1970s, the great economic globalisation endeavours of
trade and investment liberalisation had not gathered pace. Whilst a number of bilateral investment
treaties had been signed, they were relatively few in number. But the period from 1970 to 1999 saw
a fifteen‐fold increase in the number of bilateral investment treaties.
  The same period also saw
the creation of a powerful new organisation to oversee the rules of trade liberalisation: the World
Trade Organization (WTO) was created in 1994 as the successor to the Secretariat to the General
Agreement on Tariffs and Trade.
Since the 1970s, sustainable development has also risen in importance as a normative framework at
international level. In its 1992 report, the Sustainable Development Committee of the influential
International Law Association (ILA) noted: ìsustainable development has become an established
objective of the international community and a concept with some degree of normative status in
international law. This is not to say that its contents are clear.î
  In the same year, the 1992 Rio
Declaration on Environment and Development was adopted at the UN Conference on Environment
and Development. Its 27 Principles encapsulate  the core notions of sustainable development as
agreed by state participants in UNCED.
Respect for state sovereignty over natural resources is a widely if not universally accepted principle
both of international environmental  and investment law and of sustainable development.
Box 8: Blueprints ñ overview at a glance
Blueprints describes the dynamics behind new coalitions of interests. These do not necessarily
reflect uniform objectives, but build on a combination of supply concerns, environmental
interests, and associated entrepreneurial opportunities. It is a world where broader fears about
life style and economic prospects forge new alliances that promote action in both developed and
developing nations.
This is not driven by global altruism. Initiatives first take root locally as individual cities or regions
take the lead. These become progressively linked as national governments are forced to
harmonise resulting patchworks of measures and take advantage of the opportunities offered by
these emerging political initiatives. Indeed, even the prospect of a patchwork of different policies
drives business to lobby for regulatory clarity.
As a result, effective market‐driven demand‐side efficiency measures emerge more quickly and
market‐drive CO2 management practices spread. Carbon trading markets become more efficient,
and CO2 prices strengthen early. Energy efficiency improvements and the emergence of mass‐
market electric vehicles are accelerated. The rate of growth of atmospheric CO2 is constrained
leading to a more sustainable environmental pathway.
At the political level, there is increased synergy between national policies and those undertaken
at the sub‐national and international levels... International organisations ñ concerned with the
environment, global economic health and energy ñ increasingly agree on what works and what
At first glance, the tools of resource nationalism complement this approach since at the simplest
level, ëtaking controlí of natural resources amounts to a simple expression of stat esovereignty over
natural resources. As the late Professor Thomas Waelde puts it, ì[p]olitical demands, often dressed
in legal concepts, that were last heard of in the NIEO period of the 1970s, are now again the common
currency of resource nationalismî.
Tension, from an international legal perspective, comes from elsewhere within the international
legal order. Since the early 1970s two overarching sets of international legal frameworks that are
particularly relevant to this paper have evolved to temper and constrain the exercise of territorial
sovereignty. The first is the law of international investment. The second is the international law
relating to sustainable development. The former has evolved ñ particularly through growth in
bilateral investment treaties ‐ largely to secure protection for the rights of foreign investors, backed
by well‐developed dispute resolution mechanisms which often centre on the use of commercial
arbitration. The latter has evolved to offer normative frameworks for pursuit, at the state and
international levels, of integrated approaches to environmental protection, economic development
and social development (including through poverty reduction). Whilst many treaties and
declarations address the subject matter of sustainable development (most particularly the body of
international environmental law) they have typically not been associated with the stronger
compliance mechanisms (or ëteethí) of international trade and investment law.
However, sustainable development offers a more nuanced, cooperative, and hence in some respects
constrained, vision for the exercise of the right of state sovereignty over natural resources than its
expression during the New International Economic Order debate. In particular, Principle 2 of the
1992 Rio Declaration on Environment and Development tempers the exercise of state sovereignty
over natural resources ìpursuant to their own environmental and developmental policiesî with a
responsibility to ensure that activities within their jurisdiction or control do not cause damange to
the environment of other States or of areas beyond the limits of national jurisdiction.
In practice, international law relating to sustainable development has had little direct impact on
international investment law. Indeed for some  commentators, international investment law is
almost entirely one‐sided: Professor Sornorajah dubs it ëthe Law of Greedí, ìbecause of the fact that
it is built on accentuating only one side of the  picture of foreign investment so as to benefit the
interests of multinational corporations which exist to seek profits for their shareholdersî.
Whether or not one agrees with this strongly expressed view, the ëinternational investment law of
sustainable developmentí is rudimentary, with the possible exception of the more sophisticated
regional frameworks such as the North American Free Trade Agreement, NAFTA, which incorporates
both environmental and investment provisions. Some limited steps have been taken to incorporate
concern for labour or ëcorporate stewardshipí in bilateral investment agreements
 ñ but these are
at a relatively early stage of development for the time being.  
Tensions between investment law and sustainable development
In the event that a legal dispute arises out of the adoption of ëresource nationalismí tools by host
states ñ for example an unexpected increase in the tax burden on an investment project, or the
unilateral cancellation of an investment contract ‐ there are three sets of legal rights that may come
into play to protect the investor: the national law of the host state, the contractually negotiated
rules that were initially agreed between the investor and the host state in relation to the investment
in question, and the provisions of any state‐to‐state bilateral or regional investment treaty or
agreement applicable to the investment in question.
We may assume that in many if not most cases of determined ëresource nationalismí, national law
offers limited options for protection unless the investor is prepared to bring a constitutional law 26
challenge to the host governmentís actions. So it is to the safer territory of contractually negotiated
rules applicable to the investment project and to bilateral or regional investment agreements that
most investors will turn should they seek legal support for protection of their rights.
The lack of real integration of international investment law and sustainable development raises a
particular problem since it provides no mechanism for weighing most resource nationalism against
affected investor rights in terms of the sustainable development objectives of the host state or the
sustainable development performance of the investor. For example, investment law does not
contain any principle of ëproportionalityí that could allow consideration of the extent to which the
intrusion of a ëresource nationalistí measure into an investorís property interests was proportionate
to sustainable development dimensions of the public policy goals being pursued. Indeed, crafting
such a balancing exercise faces the obvious obstacle that the notion of  proportionality would be
difficult to apply to, say, an increase in the tax burden on an investment projects in  prima facie
breach of an investment contract.
This kind of host state measure may serve to increase host state revenues but cannot be concluded
per se to complement sustainable development without investigation of the policy goals to which
the additional revenues might be applied, and consideration of the sustainable development impacts
of the project itself.  Asking investment tribunals to permit (or rather, not to sanction) ëresource
nationalismí based on its net contribution to sustainable development would be a radical departure.
Given that (historical, cultural and political) context is everything to understanding of resource
nationalism, it is clear that protecting the contractual or treaty‐based expectations and rights of an
investor is much simpler than engaging in second‐guessing evaluation of host country policy
priorities. Neither would it be appropriate for investment law to incorporate such second‐guessing
principles unless they were to be applied by tribunals effectively equipped ñ both legally and by
reason of training ñ to carry out such an evaluation.
Particular concerns have been expressed ñ by NGOs and others ñ over the potential for key
principles and approaches of international investment law to undermine host state efforts to pursue
sustainable development at national level. Lorenzo Cotula has outlined some of the key areas of
concern in a series of IIED briefing papers for civil society organisations.
  They include:
‐ The use of a range of legal devices to stabilise the legal framework applicable to an
investment project to facilitate the investorís management of non‐commercial (i.e. fiscal,
regulatory or political) risk. ëStabilisationí or ëequilibriumí clauses can work in ways that can
constrain the host countryís ability to improve human rights or environmental standards ñ
because they require payment of compensation to investors.
‐ The interpretation of certain principles of investment law in ways that have potential to
undermine progressive development of public policy related to sustainable development.
The ëregulatory takingí doctrine is particularly worrisome. International law sets limits on the
legality of expropriation of foreign investorsí assets: in essence, foreign investors may only
be deprived of property rights a) for public purpose, b) in a non‐discriminatory  way,  c)  if
compensation is paid, and d) based on due process. In practice, expropriation has been
defined very broadly, and some cases have suggested that where a regulation affects an
investment project very significantly, it may be treated  de facto as an expropriation ñ
triggering an obligation to  pay compensation. This has come to be known as ëregulatory
takingí ñ or ëindirect expropriationí, with potentially significant negative effects on the
political acceptability of some kinds of environmental protection measures.
‐ Lack of transparency in the processes by which contracts between foreign investors and host
states are negotiated and implemented. In many cases even the terms of the contract once
it has been concluded, let alone the processes by which it has been agreed, may be 27
considered secret ñ and when public consultations about aspects of investment projects
take place, they too often happen after key  decisions have already been taken. A further
significant problem of transparency concerns the lack of transparency in the resolution of
most investment disputes. Dispute settlement away from the public gaze can also facilitate
bribery. As Professor Waelde puts it, ìThere should be little doubt that the settlement of not
overly politicized disputes with new governments is facilitated by bribery and patronage in
favour of people with influence in the new government.î
‐ The role of international commercial arbitration in resolution of disputes between investors
and host states. Particular issues relate to a) the expertise of arbitrators in relation to non‐
commercial public policy issues; b) the tendency (indeed, sometimes requirements) to treat
investor‐state disputes as arising out of the law  applicable to the investment project in
isolation from wider public policy or human rights goals, or the interests and legal
expectations of third parties; c) problems of potentially unregulated conflicts of interest
where arbitrators whose commercial practice is built on advising investors are called upon to
adjudicate in disputes involving host states, d) (as mentioned above), lack of transparency in
the conduct of arbitration proceedings; arbitral awards are often confidential, and even the
fact that a dispute is under way may not be a matter of public knowledge. Some Latin
American countries have become so concerned that international commercial arbitration
does not serve their interests that they have withdrawn, or threatened to withdraw, from
some of the international commercial arbitration frameworks that they had previously
signed up to (see Box 9 below). In practice, this tactic has been so closely associated with
resource nationalism that it may legitimately be understood, itself, as a tool of resource
Box 9: Withdrawal from international arbitration as a tool of resource nationalism
An emerging tool of resource nationalism is host state withdrawal from international arbitration
frameworks considered unfavourable.  Bolivia formally denounced the World Bank Group
International Centre for the Settlement of Investment Disputes (ICSID) in 2007, with President
Evo Morales quoted as saying ì(We) emphatically reject the legal, media and diplomatic pressure
of some multinationals that ... resist the sovereign rulings of countries, making threats and
initiating suits in international arbitration". Venezuela Nicaragua and Ecuador have also
indicated that they would like to do so.
In  May 2008, energy ministers from the 11 South American nations met for the first time as the
Energy Council for South America to discuss a  regional Energy Security Treaty. Venezuelan
energy minister Rafael RamÌrez was reported to have announced at the conclusion of the
meeting that the Council had approved working  groups whose task is to design a legal
mechanism to settle investor‐state disputes related to the energy sector; a mechanism that
would eventually replace those of ICSID as the preferred means to settle disputes between
foreign energy companies and governments of Latin America. The Energy Council has given itself
six months to finalize the Energy Security Treaty.
Sources:‐554233‐558781 ;‐american‐
Concern for transparency in processes of contract negotiation has been a direct focus of campaign
pressure linked to renegotiation of mining contracts in the Democratic Republic of Congo (DRC).
Consequently, rather more information than is usual is in the public domain about the process of
mining contract review in the DRC. The 2007 decision of the Democratic Republic of Congo to review
its mining contracts (see Box 10 below) became a focal point for international civil society calls for
investment contract transparency. The targets were not only the contracts themselves, but also the
review process, with civil society actors seeking input into the initial review process. Subsequently,
not only did civil society actors call for the renegotiation process itself to be transparent, but for the
renegotiations to be ëfairí. Throughout, NGOs commented on the composition of relevant review
processes, the timescale, and the practices of the companies under review. The countryís former
colonial ruler, Belgium, was also active in the  process. As the contract renegotiation process was
about to get under way, the Belgian government issued a press release calling, rather ambiguously
for outsiders, for the process of renegotiations to proceed in an open manner, and emphasizing that
there should be ìno taboosî.
There is a risk that the permissibility of a pro‐sustainable development policy tool attracting the
pejorative ëresource nationalismí label may fall to be determined by investment law requirements
that are blind to the  sustainable development‐related public policy objectives of the state in
question.. On the other hand, as concerns for environmental security mount around the world it is
increasingly likely that environmental nationalism will become part of the resource nationalistís
toolkit.  There will be increasing expectations on arbitrators and tribunals to adjust their reasoning
by incorporating respect for environmental imperatives at the same time as acquiring an ability to
distinguish between actions driven by genuine environmental concerns and those driven by other
motives ñ such as maximisation of rents  ‐ in which environmental arguments simply offer a
convenient pretext.
Experience to date is mixed. In a 2008 article for the Journal of World Energy Law and Business,
renowned international investment  law expert Professor Sornarajah
 cites the 2003 treaty‐based
case Compania del Desarrollo de Santa Elena v Costa Rica (2003) by way of example. In this case,
Costa Ricaís concern to protect the habitat of  the black panther had led  it to expropriate land
Box 10: Mining contract review in the Democratic Republic of Congo
In 2007 the Democratic Republic of Congo, the government announced a review of 61 mining
contracts and charged an Interministerial Commission with the task. Most of the contracts
concerned had been concluded during the 1998‐2003 civil war. The Commission completed its
review in October 2007. A summary of its reported was leaked to the press, but was not made
public initially. Following Congolese and international civil society pressure, the government
published the final report of the interministerial commission in March 2008. At a major mining
conference in South Africa in February 2008, vice minister of mines announced that all of the
contracts that had been considered needed some degree of modification. As the subsequent
renegotiation of contracts drew to a close, much delayed, in December 2008, six companies had
pulled out of talks with the remainder of the negotiations concluded. An extension of 45 days
was announced by the government to allow negotiations to resume between Ministers and
First Quantum, Banro, AngloGold Ashanti , Gold Fields, Mwana Africa, and Freeport
Sources:;;  29
intended for a tourism and residential site for conservation purposes. The project proponent
remained in possession, but could not develop the land as planned, and the land had no significant
resale value.  The arbitrators ruled that the environmental public purpose was not relevant for
purposes of determining compensation payable in relation to the expropriation.
In the NAFTA Methanex tribunal
 ñ a case concerning Californian legislation banning the use of a
chemical substance manufactured by Canadian company Methanex on environmental grounds  ‐
ruled that this interference in investment interests was a regulatory measure which need not be
compensated. The tribunal in the case stated that ìAs a matter of general international law, a non‐
discriminatory regulation for a public purpose, which is enacted in accordance with due process and
which affects, inter alios, a foreign investor or investment is not deemed expropriatory and
compensable unless specific commitments had been given by the regulating government to the then
putative foreign investor contemplating investment that the government would refrain from such
regulationî (para. IV.D.7).

No general conclusion can be drawn that resource nationalism is good or bad for sustainable
development, since there are so many co‐dependent variables at stake. Sustainable development
outcomes are all dependent ñ no matter what the policy tools applied ñ on how resource
nationalism is combined with other policy tools and institutional governance structures. Only at a
macro level in terms of the most general links  between security and climate change is general
hypothesising fruitful if the whole range of ëresource nationalismí is taken as a central focus.
There is however a strong likelihood that some kinds of resource nationalism (those that are driven
by power‐grabbing pure and simple, or revenge unconnected to citizen sentiments or concerns) may
harm both sustainable development and investor interests.
The problem with resource nationalism from a sustainable development perspective tends not to be
so much the economic ideology(ies) that underpin it as the lack of transparency or equitable
participation in distributive mechanisms associated with revenue generation and management.
Sustainable development itself is agnostic on the question of ownership models for exploitation of
natural resources. A further problem is the lack of any effective mechanism at the international level
for ensuring that sustainable development considerations are integrated into the legal consideration
of ëresource nationalismí disputes between investors and host states.
If generalisations about the impacts of resource nationalism on sustainable development are
unlikely to be fruitful, it might nonetheless be possible, with appropriate on‐the‐ground verification
of insights, to identify key variables and link resource nationalist tools ñ in their individual country
and geopolitical contexts ñ to sustainable development.  There is real scope here for methodological
innovation, drawing on existing research in a wide variety of fields, including the impacts of
privatisation, nationalisations and foreign direct investment, as well as ongoing efforts to assess the
socio‐economic impacts of mining projects. 51
There remains some value in attempting to reflect on the contribution of resource nationalism to
sustainable development, since it entails a process of reflection that is useful in responding to a use
of rhetoric that is both highly politicised and largely the tool of defenders of a neoliberal perspective
on the global economy that may rapidly be becoming outmoded as both reality and prescription.
The real world fact is that globalisation, nationalism and resource nationalism co‐exist. Resource
nationalism exists as a phenomenon through which the global and the national space and their
relationship with one another are tested and refined.
Businesses and their advisers have begun to think through the kinds of approaches that might serve
them best in an investment climate where a range of potential  ëresource nationalismsí create a
variety of non‐commercial risks. For example, mining company CEO Cynthia Carroll of
AngloAmerican said at the annual conference of Business for Social Responsibility in 2007:
ìresources businesses must contribute to sustainable development if we are to continue to have
access to resources.
î Such existing advice as exists for investors on how best to navigate a
ëresource nationalistí landscape already hints in this direction. The emphasis, in the words of a
Deloitte thinkpiece, is on ëbuilding mutual trust and interdependence.í
Oil and gas adviser Robert Amsterdam has developed a ëresource nationalism checklistí for
 He argues that ìInvestors often bring in major  new technologies and capital
improvements which can develop strong local allies. This is part of ìbecoming invaluableî. If an
investor can structure operations in such a way as to be either economically or politically invaluable
to the host government, that may buy considerable protection. Particularly in the extractive energy
fields, local talent may not be able to operate without foreign know‐how and technology. If able to
provide such services through the investment, far better protection will result. Lastly, investors and
major corporations must move toward transparency and best practices in their global conduct as a
protective measureî
From a sustainable development perspective, the checklist resonates more of risk management
rather than proactive creation of value through ethical and responsible business practices. Even so,
there is some overlap. Mr Amsterdam cautions against corruption, and counsels effective
community liaison since: ìIn many resource exporting nations from Africa to Latin America, a process
of decentralization is occurring whereby local ethnic or community groups are gaining increasing
influence over the capitol, and are in many cases mounting their own independent campaigns
against foreign investors working in the region. Effective liaisons can be established within these
communities to promote the companyís image, inform on activities, and notify of problems before
relations become problematic.î Even in authoritarian countries with resource nationalist tendencies
there is real value for foreign investors in establishing strong and positive links with communities,
developing strong positive employee relations strategies, respecting the  imperative to maximise
local content and build capacity of both suppliers and workers. Equally, there are few examples of
environmental  enforcement measures that are without any foundation and a strong environmental
management system to ëhome countryí management standards should be a feature of any modern
For investors faced with the very real possibility that a natural resource deal struck during the low
part of a commodity price cycle may be a target for ëresource nationalismí, one clear risk
management approach is to ëindigeniseí to the greatest extent possible. That means maximising
employment of nationals and use of local content in supply chain management; building capacity of
host country nationals, and adopting approaches to corporate responsibility that are tailored to the
reality of the host state.
Another approach is suggested by Miguel Schloss.
 He supports a new understanding of the goal of
resource nationalism as ërealí nationalism ñ in which the focus of enquiry for resource nationalists is 52
not so much how to control extractive industries through public sector fiat, but rather how to create
ëenabling environmentsí to promote private investment at the same time as ensuring use of
revenues to deliver against the nationís wider public needs. In this model, he suggests, the private
sectorís role would be to concentrate on productive extractive industry activities, with the
government focusing on unlocking natural resource wealth and reinvesting it in the countryís human
resources and basic needs. In some respects, Mr Schlossís suggested approach restates the problem:
this paperís brief consideration of the range of drivers and motivating factors behind resource
nationalism, and the dilemmas involved in reconciling its outcomes with sustainable development at
different levels, tend to suggest that it is precisely the pros and cons of this model as it has been
practised to date that have generated controversy, with a variety of resource nationalisms among
the responses.
Today, sustainable development is de facto wedded to the dominant economic ideology of market‐
based capitalism. It is this ideology that has framed most intergovernmental meetings on sustainable
development, and sustainable development is in fact currently pursued within it in most of the
worldís countries.  But an important insight from Andreas Pickelís work is that ëeconomic
nationalismí should not properly be understood as the opposite of economic liberalism: in some
cases the ënationalising mechanismí may not be at odds with economic liberalism. This helpful
insight is useful in building understanding of how ëresource nationalismí may be practised by
countries ñ such as the UK, the US, Canada or Australia ñ that are at once committed to economic
liberalism. In the context of the current economic crisis, a swathe of countries have (rhetorically at
least) pursued a commitment to liberalisation of markets
 at the same time as acquiring control
interests in a number of banks.
This fact, with its potential to stimulate new thinking on the balance between state and market, as
well as the range of equity‐based motivations for resource nationalism, mean that analysts should
be alive to the possibility that there might be other ways of harnessing economic activity to
sustainable development than those that were part of the trickle‐down approaches of the so‐called
ëWashington consensusí.
In an era of resource scarcity, rising demand for natural resources, and global concern for climate
change, there is today as never before a strong case for exploring the potential positive role of ënon
zero‐sum resource nationalismí in the overall mix  of approaches to bridging balancing these
competing policy imperatives. The end goal must be to ensure that what emerges, to borrow from
Shellís 2008 scenarios, is a cooperative ëblueprintí in service of sustainable development not a lose‐
lose ëscrambleí for access to natural resources.  
Some implications for IIED
The overview of resource nationalism offered in this paper underscores the idea that the tools are so
varied that they point to a variety of enquiries from a sustainable development perspective.  The
paper has pointed to a number of that might be fruitful. They include:
‐ Linking work on sovereign wealth funds  to wider efforts to build comprehensive
understanding of appropriate frameworks for ëgovernance of natural resource investment
for sustainable developmentí
‐ Building understanding of implications of Chinese models of foreign investment in natural
resource sectors for public sector actors in OECD countries, and possible new approaches to
ëbundledí approaches to private sector investment, development assistance and
infrastructure development
‐ Development of tools to assist decision‐making on design of natural resource revenue‐
sharing mechanisms as between national, regional and local levels in a variety of 53
governance contexts, and understanding on the kinds of participatory processes that can
facilitate public sector choices on the necessary balances
‐ Descriptive approaches bringing to light the extent and tools associated with ëresource
nationalismí (loosely defined in the sense in which it has been used in this paper) in a
variety of sectors that have not so far received attention in these terms ñ including for
example agriculture, forestry, water and electricity.
‐ Legal approaches to integration of sustainable development considerations into investment
law in cases of ëresource nationalistí disputes between investors and host states
In countries whose governments are pursuing coherent policies of enhancing state control over
national resource exploitation, there may also be scope to work closely with citizen groups or, as
appropriate, public sector actors, to identify optimal approaches to achievement of sustainable
development outcomes.
It is questionable whether advice for governments on how to implement ëresource nationalism for
sustainable developmentí could really help transform some of the political agendas at play in
countries that have adopted policies described as ëresource nationalistí. However, the key would be
not to take an approach in which ëresource nationalismí was viewed as inherently tarred by virtue of
its antagonism to established thinking on the  balance between state and market in a liberalised
economy. As the paper has suggested, producer country voices from middle and low‐income
countries are sorely lacking in the current debate over resource nationalism. IIED could help to bring
these voices into the international debate to bring greater diversity into analysis and understanding.
There are other more general insights, too. First, it is important ñ in the oil and gas sector at least ñ
that IIED engage more with national, as opposed to multinational, oil companies. Given the wide‐
ranging motivations of resource nationalism, even sustained commercially successful leadership in
responsible business practices from international oil companies cannot be expected to drive a ërace
to the topí in a sector that is dominated by national oil companies working to a different set of
drivers and political expectations. If IIED wants to engage with the mainstream of the international
oil and gas sector, it will need increasingly to seek engagement with national oil companies, and to
build an understanding of their strategies and practices into its project planning and partnerships.
Second, the greatest task that this paperís focus  on resource nationalism has identified at global
level is to sharpen understanding of the different combinations of policy tools that might come
together in different ëglobal sustainable developmentí scenarios. The 2008 Shell energy scenarios tell
two powerful underlying stories that can help to shape decision‐making and strategic and tactical
policy approaches to addressing global environmental and resource security challenges.
Squaring the circle between energy security, potentially peak oil, and climate change is the big
picture challenge so far as resource nationalism  in the energy sector is concerned. For IIED, the
single biggest challenge is to ensure that long‐term thinking for sustainable development outcomes
sufficiently informs decision‐making at a time of near‐global recession and heightened natural
resource security worry. Resource nationalism will almost certainly be part of the mix for the
foreseeable future. The task is to ensure that it does not distract the global community from its
commitments to sustainable development, and that it is pursued in ways that are not destructive of
wider commitments to intra and intergenerational equity and international cooperation. That may
be a tall order ñ but it is eminently a task to which IIED is suited.

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