The Duck of Minerva

The Duck Quacks at Twilight

A new rentier state is born?

May 2, 2006

Bolivia’s government just seized the country’s natual gas industry.

The measure is expected to affect about 20 foreign oil companies, including Spain’s Repsol, Petrobras of Brazil, Britain’s BP and British Gas, US-based ExxonMobil and French group Total.

Although the move was expected to have little impact on global energy supplies, financial markets reacted by pushing prices higher.

“It’s part of a trend of governments taking strident action to protect either national resources or to nationalize formerly privately owned oil resources amid the environment of very high oil prices,” said Bill Farren-Price, deputy editor of the Cyprus-based Middle East Economic Survey.

“High oil prices have emboldened resource-rich governments to act in the same way that we have seen Iran challenging the West over its nuclear program and Venezuela’s President Hugo Chavez carrying out a very similar maneuver regarding international oil companies there. It’s part of the same trend.”

I’m entirely sympathetic to arguments to the effect that “all the citizens of countries with vast energy deposits should reap real benefits from them,” but the impact of nationalized energy resources in developing states over the long-haul is not encouraging. Analysis of rentier states–whether they derive their profits from foreign companies or state-owned ones–suggests that windfall natural-resource profits paralyze state building and lead to political troubles down the road. I imagine (in the “I’m not a political economist” way) that state-owned gas and petroleum production makes things worse–it makes energy reserves that much more of an apparently endless “slush fund” for state subsidies and payoffs to interest groups.


UPDATES: I’ve cleaned up my use of the terms “gas,” “oil,” and “petrolem.” Interesting discussion and good linkage can be found at Ciao!. You can also go there for a better explanation of rentier states (I need to learn to be less elliptical in my use of academic jargon).

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Daniel H. Nexon is a Professor at Georgetown University, with a joint appointment in the Department of Government and the School of Foreign Service. His academic work focuses on international-relations theory, power politics, empires and hegemony, and international order. He has also written on the relationship between popular culture and world politics.