Remember a few years ago when Russia was having fun talking about a natural-gas OPEC? It was largely derided at the time considering wildly different nature of the trade of this commodity (not the same spot market as oil), and then wholly forgotten when the shale boom crashed prices.
But it would be a mistake to think that resource nationalism isn’t coming back in a big way. According to an extensive and fascinating new report published by Chatham House, a number of factors are contributing to an intensifying emphasis on resource nationalism, expropriation, and a likely increase in disputes between governments, companies, and trade partners over diminishing resources of all kinds, from hydrocarbons to wheat and iron ore.
Below is an excerpt from the Financial Times covering the release of the report:
“The market signals are not right for investment in these long-term projects,” says Ms Lee.
There has also been an increase in expropriations and investment disputes over resource assets in emerging economies. Chatham House warns that “escalating trade wars over resources could overwhelm the dispute settlement regime at the World Trade Organisation”.
The report highlights how the rise of emerging economies has reshaped resource trade and created new interdependencies, notably oil from the Middle East to China, but also wheat from Russia and Ukraine to the Middle East, and palm oil from Malaysia and Indonesia to China and India.
Soyabean exports from the US and Brazil to China are now the largest agricultural trade relationships in the world. Flows to China of iron ore from Australia and copper from Chile are the largest in metals.
Chatham House points to the concentration of some resources in a few countries.
“The question is not whether Opec will continue to exist, but whether it will be joined by new international cartels in other resource markets,” it says.