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VIEW: Resource nationalism —Majed Akhter

It is said, often casually, that the most recent war on Iraq is an oil war. While it is uncertain what precisely that means, what is not uncertain is how the upstream Iraqi oil sector is being transformed

“Resource nationalism” is back with a vengeance — though with a difference. Venezuela, Bolivia, Ecuador, Russia, and more recently Kazakhstan, Algeria and Argentina have all made headlines by the seemingly capricious way they have handled foreign energy investment, forcing multinationals to cede share-holdings to state-owned companies.

How does one explain a phenomenon that reflects an assertion of sovereignty?

Interestingly, an examination of resource nationalism through a theoretical analogue shows that, far from being irresponsible, it may be a feature of the underlying structure of global economy.

The transition from feudalism to capitalism in Europe comprises a rich chapter in economic history. Studying this transition yields insights into the nature of capitalism. One insight stands out: land and labour must be commodified.

This means that land must be privatised, and people should only be compensated for wage-labour. In the feudal system, where a network of community relations, obligations, and rights controlled the use and control of both land and labour, this was definitely not the case.

The institutional innovation that achieved both was private property. Private property allowed land to be consolidated under one owner and simultaneously stripped peasants of hereditary and traditional means of subsistence.

But how does this help us understand resource nationalism? Land and oil can be treated as analogous because they are both finite natural resources — i.e., ownership of the resource confers power to earn economic rents. We tweak the above description of transformation to take account of some observable facts in the global oil and gas industry.

The state is the landlord. The process by which this came to be is long and complicated, and this is not the occasion to delve into it. Suffice to say for all the countries of the world except the United States, rights to subsurface wealth are nationalised.

The multinational oil companies are the tenants.

Although this cut-and-paste method is crude, it allows us certain insights.

First, it is unlikely that the institutional innovation that transformed the landlord of yore into a capitalist will play the same role today in the oil and gas industry. Ownership and control over land and location are crucial values that enter into the idea of national sovereignty. The ideal that the sovereignty of each independent nation must be maintained, as well as the responsibility that postcolonial states feel to lead economic development, serve as the justification for nationalised subsurface rights. These are not timid ideas; they actually provide the formal building blocks of the modern world-system.

Despite the cries of futurists who believe that the role of the state is over, capital still relies on the nation-state system to provide it with the institutional moorings to operate. This is one of the many “internal contradictions” of capitalism. The oil companies would like the nation-state/landlord to sacrifice a portion of their sovereignty so that they can make the most of the subsurface wealth. But doing so might result in the nation-state not being able to provide the institutional foundations (rule of law, security, private property enforcement, etc) that capital requires to operate.

Second, the surge of resource nationalism that we are seeing today is about more than high oil prices. Oil prices are merely the trigger for resource nationalism — the contradiction itself is buried in the international economic system. Territorially fixed landlords and globally mobile agents of capital are trying to maximise their respective portions of the resource rent. Encouraged partly by global capital’s need to have an institutional environment in which it can operate, and in part by anti-imperialist nationalism fanned by home-grown capitalists, nation-states around the world began to demand their sovereignty in the middle of the last century. It is characteristic of global capitalism to find limits to its growth from sources that have nourished its expansion in other ways.

And finally, this simple framework allows us to speculate about the future. Global capital will either have to accept its limits, in the form of nationalised subsurface rights that allow landlords to exert extra-economic pressure, or transcend them.

If the limits are accepted, we will see more of what we have already seen until oil runs out. High prices will lead to resource-rich countries raking in the rents and bullying global capital, and low prices will lead to countries playing nice and tempting international capital to invest.

The more interesting question is one of transcendence. One possible mechanism — the national oil company (NOC), is already making its presence felt. China’s National Offshore Oil Corporation and Sinopec, and India’s Oil and Natural Gas Corporation are aggressive new entrants on the global oil and gas scene. These and other NOCs are investing billions in the African upstream sector, in countries like Nigeria, Sudan, Angola and Gabon.

Indian oil firms have struck deals involving foreign acquisitions worth $16 billion dollars in just the first half of this year. Given that most of the world’s reserves are in the hands of national oil companies, and that these oil companies are increasingly acting like a new breed of international capital, the shape that the capital-landlord tug-of-war takes could be very intriguing.

The struggle between international capital and resource landlord is not always abstract and theoretical. It can be sudden and bloody. It is said, often casually, that the most recent war on Iraq is an oil war. While it is uncertain what precisely that means, what is not uncertain is how the upstream Iraqi oil sector is being transformed.

A leaked draft of the Iraq Oil Law, being formulated under military occupation, privatises most of the country’s oil fields and may even allow for foreign oil company personnel to sit on the Iraqi Federal Oil and Law Council! Also, sub-national units could award exploration and production rights without approval from the central government, which would have consequences for the stability of the nation.

Natural resources play a vital role in global geo-politics. It is easy to forget this in an age of microprocessors and biotechnology, supposedly the vanguard of a “new economy”. The fact is that one of the most basic building blocks of the international economic order is yet to be fully transformed into a capitalist relation.

The glaring contradiction between landlord and capitalist, who need yet restrict each other, must be resolved at some point for productive power to grow. The resolution could be gradual and go unnoticed, or it could be violent and disruptive. It would be a worthwhile effort to conduct a thorough and comprehensive study of the economic geography of oil and gas, if it could help avoid the latter.

Majed Akhter is a Karachi-based petroleum economist

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