Is this a new chapter in the history of relations between oil firms and poor countries?by Daniel Litvin / June 25, 2006 / Leave a comment
Published in June 2006 issue of Prospect Magazine
In nationalising his country’s gas industry, Evo Morales, Bolivia’s populist left-wing president, has joined Latin America’s other anti-capitalist leader, Hugo Chávez of Venezuela, in opening a new episode in the century-long relationship between big energy firms and developing countries—a global historical drama whose lessons appear today to have been partly forgotten by both sides.
The drama has so far run to four episodes. In the first, which ran from the early to mid-20th century, “big oil” was triumphant: the western firms, in alliance with the western imperial powers, established control over much of the oil resources of the developing world, also controlling governments in many regions. In the second episode, from roughly the 1950s to the 1970s, energy-rich developing countries hit back, booting out the western firms by means of nationalisation and expropriation, and also—through Opec, the oil producers’ cartel—hiking up oil prices. In the third episode, from roughly the 1980s to early 2000s, big oil was resurgent for a time again: a number of energy-rich countries, starved of investment and technology, invited the firms back in to help exploit their resources.
The fourth episode brings us to the present: emboldened by higher oil and gas prices, some of the energy states are once again hitting back. These include not just Venezuela and Bolivia; Ecuador and Russia, for example, have also recently increased state control over energy. Energy-rich states also have more bargaining power: western firms, such as Shell and Exxon, have to compete for access to reserves with Chinese and other developing-world energy multinationals.
So what might countries such as Venezuela and Bolivia learn from reviewing some of the previous episodes? It is not that the rationale for their actions is necessarily wrong. At times of high prices, it may make sense to claw back more profits from oil firms—after all, Gordon Brown has…