Academic journal article Global Governance

Introduction: The Global and Local Governance of Extractive Resources

Academic journal article Global Governance

Introduction: The Global and Local Governance of Extractive Resources

Article excerpt

The global governance of extractive resources has largely been shaped by the energy-security agenda of industrialized countries. It is patchy and does not properly address the specific concerns of producer, consumer, and transit countries. Rising demand coincides with a looming peak of oil production and climate change. This requires urgent and resolute collective action, which is hampered by a disconnect between geological and political temporality and realities. Extractive industries, investors, civil society, international organizations, and consumer countries can jointly provide significant political and market incentives to avert the resource curse in resource-rich, but weak states. This calls for an appropriate institutionalization of voluntary multistakeholder initiatives with greater engagement on the part of emerging economies. Keywords: energy security, extractive resources, multistakeholder initiatives, resource curse, energy governance, China.

The governance of extractive resources means different things to different people, depending on where they sit. Obviously, the interests of net importing and net exporting countries do not coincide. But virtually everyone agrees that the governance of oil, gas, and minerals is patchy and piecemeal at best. Much is simply left to the market or to unilateral and bilateral initiatives, despite a few multilateral institutions that have been set up over the past four decades with the prime objective to enhance the security of energy supplies of consumer countries. The international arena in the extractive sector resembles a Hobbesian world where net importing countries do not hesitate to support deals with fragile or pariah producer states to reduce energy security risks, as illustrated by the recent liquefied natural gas deal of the German energy giant E.ON with Equatorial Guinea (1) or the gas deal between the Swiss firm EGL and the Islamic Republic of Iran. (2)

Oil, gas, and mineral prices dramatically increased over the past decade as a result of a booming demand from emerging economies in the face of limited supply. Energy security ranks once again among the top priorities in the global policy agenda. (3) For industrialized countries, the governance of extractive resources refers first and foremost to the web of bilateral and multilateral agreements and institutions that contribute to securing their energy supplies. More recently, environmental considerations have come to the fore with increasing concern over climate change, peak oil, environmental degradation, and incidents such as the 2010 oil spill in the Gulf of Mexico. Large emerging economies like China or India have also turned into net importers of extractive resources and, thus, share similar concerns about energy security. They are further wary of securing the supply of minerals and metals to sustain their rapid industrialization. The so-called transit countries located along major energy and pipeline routes (e.g., Kyrgyzstan and Ukraine) seek to extract substantial benefits from their geopolitical location; in particular, abundant and cheap energy inputs.

The issues at stake are somehow more complex for net exporting nations, in particular for resource-rich countries in the developing world. They face the risk of falling prey to the resource trap or so-called resource curse, which refers to the fact that many resource-rich developing countries suffer from lower economic performance, more fragile state institutions, and more violence than resource-scarce ones. (4) The economic dimension of the resource curse emphasizes inappropriate policies to deal with commodity price volatility, Dutch disease, commodity dependence, and the challenges of rent allocation. The political and institutional dimension refers to rentier state and rent-seeking dynamics. The concerns of resource-rich developing countries may include getting a fair share from extraction and asserting national sovereignty over subsoil assets, carefully managing the extractive rent, diversifying export markets and the economy, and smoothing the impact of boom-and-bust cycles. …

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