August 18, 2013 4:50 pm
Not all forms of resource nationalism are alike
Countries guarding ownership of their oil and gas can have various motives
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When Lázaro Cárdenas, Mexico’s most revered president, took the then revolutionary step of nationalising Mexico’s oil industry in 1938, not only Mexicans and Latin Americans, but poor nations everywhere rejoiced. At last, a poor country, long buffeted by predatory foreign powers, had exercised its right to own the wealth of its subsoil, seeing off rich countries that treated access to these resources at low cost as their right.
Mr Peña Nieto parsed every line of the hitherto sacrosanct Article 27 of the constitution that enshrines national and public ownership of hydrocarbons, insisting this reform followed “word for word” both the charter and Cárdenas’ intention. Like a theologian explaining how many angels could dance on the head of a pin, he averred that Cárdenas “affirmed Article 27 did not imply the nation would abandon the possibility of allowing the collaboration of private initiative”.
The laborious emphasis was not just the president observing the canons of corporatist rhetoric of the Institutional Revolutionary party, restored through him to power after ruling Mexico for most of the last century. While across Latin America and much of the emerging world, national oil companies have sought foreign technology and capital to help exploit difficult-to-access reserves, any change to national ownership of these resources can still be ticklish.
Mexico also needs cash and technology to exploit its oil wealth, particularly offshore. It has moved to the pragmatic side of resource nationalism, alongside Brazil, but with one proviso: Mexico intends to offer profit-sharing rather than production-sharing deals – which normally means investing companies cannot book ownership of reserves. The shadow of Cárdenas looms large but Mexico is hardly alone in this insistence that “the oil is ours”.
Resource nationalism, in sum, can be about nation-making and institution-building, or looting and dilapidating resources. The outcome is more likely to depend on how well a national oil company is regulated than ownership of resources. But it is hard to see why obsessing about owning the oil in the ground is an anachronism when articulated by a national company, but not by an international one.
For oil companies worried that Mexico’s profit-sharing model yields them no “bookable reserves”, they can surely find a banker who will convert, for a fee, future streams of shared profits into balance sheet assets as solid as any petroliferous rock.
“The oil is ours” was the slogan of the hour, by common consent the epic period of Mexico’s episodically Jacobin revolutionary journey, during which the country became a fully fledged sovereign state with a settled sense of nation. Now, 75 years on, Enrique Peña Nieto, today’s president, has announced plans to open Mexico’s oil and gas industry to foreign and private investment. It is a bold gambit, cautiously framed and freighted with the ideology of resource nationalism.
The laborious emphasis was not just the president observing the canons of corporatist rhetoric of the Institutional Revolutionary party, restored through him to power after ruling Mexico for most of the last century. While across Latin America and much of the emerging world, national oil companies have sought foreign technology and capital to help exploit difficult-to-access reserves, any change to national ownership of these resources can still be ticklish.
True, it is often hard to disentangle resource nationalist ideology from demagogy, or national interest from vested interests. Resource nationalism in Russia may reflect the wish of a ruling clique to project power and eliminate rivals as much as maximise rents. In Venezuela, the late Hugo Chávez grasped strategic assets to propagate his Bolivarian revolution. Bolivia and Ecuador followed his cue. But even there, the aim often seemed to be less outright takeover and more a bid to extract a bigger chunk of revenue.
Argentina, of course, last year expropriated YPF from Repsol, the Spanish oil company. Yet nobody would set their compass by Peronism, with its light-fingered approach not just to “sovereign” resources but every pot of gold from private pensions to central bank reserves. Buenos Aires, perennially strapped for cash to fund its populist policies, is now trying to entice Repsol back to its Patagonian shale gas riches – in a deal brokered by Pemex, Mexico’s state oil company.
Just how extraordinary Cárdenas’s feat was in 1938 would become apparent later in Iran, where Mohammad Mossadegh, a nationalist, was overthrown in an Anglo-American coup in 1953 for presuming to nationalise Iran’s oil industry – with the Anglo-Iranian oil company and its concession (the origin of BP) to the fore. The subsequent struggle for control of Iran’s oil industry is more than subliminally present in the current conflict between Iran and much of the world over its nuclear ambitions; the mullahs have manipulated the right to enrich uranium into a modern proxy of the sovereign right to own the country’s oil wealth. Yet talk to people in Iran’s state oil industry long enough and two things emerge: the oil is theirs; but they would really like tie-ups with foreign premier league oil companies. Saudi Arabia partially achieved that. Saudi Aramco was bought gradually from its mainly US owners in the 1970s, creating a national oil company with foreign co-operation rather than confrontation – at a cost of diverting factions within the royal family into a more clientilist oil company, Petromin, a decoy alongside it.
For oil companies worried that Mexico’s profit-sharing model yields them no “bookable reserves”, they can surely find a banker who will convert, for a fee, future streams of shared profits into balance sheet assets as solid as any petroliferous rock.
Copyright The Financial Times Limited 2013
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