THOMAS W. WALDE^
Two years ago the English opened up the trade, which they still continue, to the Levant, which is extremely profitable to them, as they take great quantities of tin and lead thither, which the Turk buys of them almost for its weight in gold, the tin being vitally necessary for the casting of guns and the lead for purposes of war. It is of double importance to the Turk now, in consequence of the excommunication pronounced ipso facto by the Pope upon any person who provides or sells to infidels such materials as these.1
I. INTRODUCTION: WHAT ARE ECONOMIC SANCTIONS ABOUT-WHY Do THEY CONCERN THE INTERNATIONAL OIL & GAS INDUSTRY?
Since its origin in the nineteenth century, the international petroleum industry has operated, and learnt to operate, in often highly politically charged environments. The competence in identifying, assessing, and managing such political risk has always been-- and is likely to be in the future-an essential factor of corporate and managerial competitiveness in this industry. Political risk reflects the exposure of the technical and business approach to the industry to the often much more volatile, less forecastable, and less manageable events in the "political" sphere-as contrasted to the supposedly more "rational" sphere of commercial decision-making. Politics sometimes specifically targets and hits the petroleum industry not only due to its strategic character, large capital investment, and public visibility, but also because the industry's global nature, imbued with "foreign" elements resented in nation states, makes it a very suitable target. But politics can also hit the petroleum industry rather accidentally, in particular when this industry is in the way of conflicts between states, between conflicting ideologies, or within a country, between ethnic groups or classes that hate each other. Political risk shows up in many faces. As national and global politics evolve, old faces may reappear and new faces are certain to emerge. The political risk of the 1960s and 1970s was nationalisation in all its forms;2 instability of the legal and fiscal framework, high transaction cost, and the weak force of the institutions of law are key facets of political risk in the former Communist countries.3 These are the two faces of political risk originating from "weak" participants in the international economy. But there are also significant political risks created in the developed economies, including environmental regulation, both in substance and as a pretext for domestic protectionism,4 and economic sanctions. Economic sanctions, as a form of political risk of current and possibly growing significance, that originate in the developed world and in particular in the United States, is the topic of this paper.
A lot has been written on economic sanctions.5 I will not repeat all of the interesting analyses and concepts already published, but rather select such information, intelligence, and concepts that are of particular relevance to the international petroleum industry. I am particularly interested in the techniques of managing the political risk of sanctions: forecasting and anticipatory measures; management of specific sanctions before, when, and after they arise; and strategies of political lobbying, of compliance, and of avoidance of sanctions. While the literature is extensive on the formal foreign policy aspects of sanctions, very little is known on the corporate response: How do companies react to sanctions-and how should they? Issues of the legal-and ethical-boundaries of primarily commercially motivated corporate behaviour arise here. What is the impact of lobbying on the U.S. Congress (where most sanctions originate), both with respect to legislative action and implementation of the often discretionary and open-ended rules? What is the impact of economic sanctions on competition in the petroleum industry: Who suffers and who benefits? What is the competitive impact of sanctions and can one explain the expansion of U. …