Resource nationalism and sustainable development:
a primer and key issues
Introduction
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."
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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.
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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
nationalism.
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.
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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
KazTransOil.
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.
Sources: http://www.sec.gov/litigation/litreleases/2007/lr20094.htm
http://www.reuters.com/article/governmentFilingsNews/idUSN2728075120070827?pageNumber
=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,
5
ìneoliberal
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.
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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
countries);
• restrictions on exports of natural resource products (as in Argentinaís 2006 ban on beef
exports
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and Vietnamese, Indian, Egyptian and Cambodian restrictions on rice exports
linked to rapidly rising food prices
8
);
• 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
Nigeria).
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).
