National oil companies and international oil companies in the Middle East: Under the shadow of government and the resource nationalism cycle

This paper considers the cyclical nature of resource nationalism. As the title suggests, the focus is on the oil production in the Middle East. The reason for the emphasis on the Middle East is obvious. It has always dominated the global oil reserves and has in recent years had more than its fair share of conflict. This issue matters because it determines the ability and willingness of the region to convert its geology into supplies of oil for the global oil market. Fig. 1 illustrates the importance of the Middle East exports in the global energy markets since 1951. The issue also matters because it affects the ability of the region to convert its resources into development meaning growth, employment creation and the alleviation of poverty for its own people. A key issue concerns how ‘resource nationalism’ is defined. Given the recent revival of interest, there are a multitude of different definitions and interpretations. The International Energy Forum has recently defined it ‘‘nations wanting to make the most of their endowment’’ (Middle East Economic Survey (MEES), 2006, 49, p 39). Bill Farren-Price of MEES described it as a situation where the ‘‘producer countries have moved to maximize revenue from present oil and gas production while altering the terms of investment for future output’’ (MEES, 2006, 49, p 37). Another version is that it is simply an expression of Ray Vernon’s ‘obsolescing bargain’ (Vernon, 1971) whereby once oil was 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 changing the terms of the original contract. Yet another alternative view is that it is simply a political antipathy to the USA (and by implications its oil companies) and/or economic globalization. In this paper, a simple definition is used. ‘Resource nationalism’ is assumed to have two components – limiting the operations of private international oil companies (IOCs) and asserting a greater national control over natural resource development. This