The Strategic Case for Resource Nationalism

Abstract

Governments have long been preoccupied with ownership of oil supplies as a means of increasing energy security. Debate about this practice has grown in recent years as Chinese national oil companies have increased their efforts to acquire overseas oil assets. While some “resource nationalists” praise this as a sound strategy, other scholars argue that countries are best served by relying on the free market for their oil imports.

We make two arguments in this paper. First, the free market school is generally correct that in the conditions they examine (normal, functioning oil markets), strategies of resource nationalism confer little strategic gain (though more gain than those analysts acknowledge). But a strategy of resource nationalism can confer real strategic benefit during times of global supply shock, embargo, and blockade - times when price does not determine distribution of oil supplies.

On China specifically, we offer a second set of arguments. (a) In the short term, China’s policies of resource nationalism cannot confer upon it true energy security as long as the United States can sever its transportation routes by force. China remains vulnerable to energy cutoffs in times of extreme crisis. (b) However, even in the short term, China’s strategy of resource nationalism pays off in various ways: it may win China better deals, and may secure supplies during oil shocks and embargoes. Furthermore, China’s policies of resource nationalism have raised the bar for others who would wield the oil weapon against it. (c) Finally, China’s resource nationalism strategy should be understood as part of a long-term effort. If its power continues to grow, China may someday field sufficient maritime power to protect its transport routes. China’s resource nationalism is laying the foundation today for a future in which it will be as energy secure as any of the major importers.

Keywords: energy, oil, natural resource, resource competition, East Asia, China, security dilemma