The Rise and Fall of Resource Nationalism

With sharply falling prices for oil and other commodities over the second half of 2008, the geostrategic and industrial implications of resource nationalism are rapidly changing. In geostrategic terms, several regimes that have pursued resource nationalistic policies, sometimes described as use of the ‘energy weapon’, will have to revisit these policies. With the global economy slowing and commodity demand falling, a sustained period of weaker prices will shift the advantage back to international companies and away from host governments, as international companies can now afford to be more selective about the fiscal terms and regulatory conditions they are willing to accept from host governments. Evidence of this is already clear for producers of base metals and natural gas, and higher-cost oil producers are also beginning to feel the effects. The rapid shift of leverage from producer states to international companies will likely have destabilising effects in several key countries and regions.