How far will this trend? 9

[rhodie]

see link:

http://www.guardian.co.uk/russia/article/0,,1970064,00.html

With the context that this article provides, I assume things:

1. International Law doesn't address this sort of action.
2. Lack of pollution controls, wage differences, and tax shelters all become opportunties of leverage for parent nations to steal assets from host corporations.
3. China could do this to US manufacturing interests with no challenge.

Your thoughts are appreciated...

 

[civilperson]

Venzuela has been more blatant than Russia in nationalizing the oil companies facilities and deigns not to care about their international reputation. A full embargo would not work because some country will always break it to get energy products.

 

[DrillerNic]

It's just part of the geopolitical risk that's factored into a decision to invest in a particular project in the oil industry.

You do the economics, calculate the NPV and stuff, and then start looking at the risks: technical risks (is the oil really there?) market risks (who can we sell it to? At what price?) and then the geopolitical risks (how stable is the country? Will we have to evacuate our staff because of local unreat? Will the taxes suddenly go up? Will everything be nationalised if the government changes?).

I think things in Russia will settle down once all teh big deals that were signed with the Yeltsin government have been undone: then with Yukos or Gazprom or Sibneft as the major partner in any future JVs or PSAs, everyone's happy.

I doubt if China could do this type of thing to US manufacturing though: after all, I think most of the manufacturing in China is Chinees companies making stuff to sell to US corporations rather than manufacturing done by US corporations in China. And If China nationalised, say, Nike factories in China, they wouldn't be able to sell the stuff as Nike shoes... trademarks and so on.

 

[corus]

I'm not sure how the parent nation is stealing the assests from host corporations as the gas is the asset of that land that belongs to Russia. International law doesn't come into a nations assets as they belong to the nation, surely. If the US has corporations in China that is using their assets then I can't see why China can't decide to use those assets themselves. Shell has been recompensed for the reduction in what they can take so it seems a fair deal. If Venezuela nationalises their oil then they obviously prefer the profits to go the country rather then a corporation. Seems reasonable to me.

corus

 

[zdas04]

Corus,

The oil & gas is there. It is owned by some entity within that country. Nothing in the agreements between companies and resources-owners changes that. The agreement to develop will provide a portion of the resources that are made marketable to the company that takes the risks to get it to surface. The agreements typically take many years to recover the capital and to say that "Shell has been recompensed for the reduction in what they can take so it seems a fair deal" is just outrageous.

It cost a lot of money to turn that resource into a marketable commodity. In the case above, Shell entered into a contract to provide considerable expertise and capital to supply the infrastructure to make that resource marketable. The proposed nationalization does nothing to the ownership of the natural resources, it just steals Shell's contribution.

David

 

[Beggar]

And If China nationalised, say, Nike factories in China, they wouldn't be able to sell the stuff as Nike shoes... trademarks and so on.

Sure they could...and do. The Chinese courts are notoriously corrupt and have several times refused to enforce blatant trademark violations.

The Chinese government isn't going to nationalize manufacturing assets because the Chinese partners are already getting rich and the government officials are getting their cut.

--------------------
How much do YOU owe?

http://www.brillig.com/debt_clock/

--------------------

 

[epoisses]

Come on Corus, it's the other way around. Shell is not seizing Russia's gas. Russia is seizing Shell's investments.

In other words Russie confirms that it is not as politically and legally stable as some people have started to think. This is a pretty neat move to deter further foreign investment and to force the standard of living to remain at sub-1st world country level. You can imagine the Russian people will be thankful to their government for this brilliant move.

 

[epoisses]

PS the Chinese have too much business sense to make this kind of blunders.

 

[Dinosaur]

Zdas04,

I have thought this was a real possibility since Russia became "capitolist." Growing up, I recall being told that the Soviet Union was very good at producing the goods it needed but was unable to get the products to market in a timely manner. I figured the solution was a substantial investment in their transportation system; vehicles and infrastructure. But the fear is after it is built the Russians decide to nationalize it. I think we will see much more nationalizing over there. I regret it looks like they are going back to their old ways, and I fear much further back.

Corus

 

[rhodie]

China holds little regard for intellectual property and formal trade agreements. My fear is seeing a big weakness in current US manfacturing strategy /trade policy that is not being acknowledged, much less addressed formally.

I don't know who is "wrong" and who is "right" between Shell, BP, and the "nation" of Russia. But it reeks of thievery, corruption, and a bunch of elitists laying claim to something not theirs... and that unfortunately is not an exclusive trait to only this relationship.

 

[TheTick]

Sounds like a page right out of Atlas Shrugged.

 

[WGJ]

Is the nationalisation of Shell facilities also a blow to the parent Company? See

http://en.wikipedia.org/wiki/Royal_Dutch_Shell.

And BP stands for British Petroleum.

http://en.wikipedia.org/wiki/BP.

Bill

 

[epoisses]

Oh guys come oooooooooon!!

My neighbour has 25 cherry trees. Unfortunately the guy is 80 years old and he can't pick and sell them.

I happen to be 20 and I have a ladder. So I propose a deal: what if I come out to your garden with my ladder, pick your cherries, we'll sell them on the market and we'll share 50/50.

Great deal, neighbour seems happy. I put the ladder against the first tree and wait for the cherries to turn red.

Next day I come back. Ladder's gone. I go to see my neighbour and he goes: "Got you! The ladder's now mine and you can forget about the cherries!"

Just because Shell, BP, EM are big rich companies that doesn't mean that you can just steal from them, do your usual Castro speech and get away with it.

 

[zdas04]

Bill,
As the Wikipedia article says, "bp" hasn't stood for British Petroleum since 1998. Now it just stands for "bp".

David

 

[WGJ]

zdas04, your points accepted, no problem.
BP and Shell are, effectively, multinationals in every sense, so why would a US citizen be bothered by these issues?

I grant that the references to obesity and buffoons were a little sharp but that may be the picture from where Corus is standing. I can't say thay GWB impresses me, either.

Bill

 

[rhodie]

This sets a dangerous precendent for other countries to follow. I know this example isn't the first time a scenario like this has happened, but it is no less shocking. Especially when applied to other vulnerable assumptions of US economic policy.

 

[sms]

WGJ:

BP and Shell employ a lot of Americans, and supply and refine a huge amount of gasoline in the US, not to mention the implications for US companies operating in both Russia and around the world.

Why wouldn't a US citizen be bothered?

-The future's so bright I gotta wear shades!

 

[eric1037]

The Tick:

Who is John Galt?

 

[civilperson]

Ayn Rand vs. Ceasar Chavez. Ownership by the state for the benefit of the rulers vs. control by the multinationals for the benefit of the shareholders, (of which I am a micro-minority owner).

 

[zdas04]

Hey Tick, have you noticed how many products are being made with Soy Beans these days? We can't be far from John Galt's speech.

David