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THE ENERGY CHARTER TREATY:

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Grafting Liberal Governanceon the Oil-exporting Countries:

Will the Transplant Take Root?

Bernard Mommer*

Paper presented to the

International Studies Association 42nd Annual Convention

20-24 February 2001 Chicago, IL

Economics and Natural Resources

1 Ricardian Rent Theory

2 Private and Public Mineral Ownership

3 US Oil

4 Conclusion

Liberal, Proprietorial, and Conciliatory Governance

The International Energy Agency1 The National Oil Companies in the Consuming Countries

2 Conclusion

International Investment Treaties

1 Defining ‘Investment’

2 Trade-related Investment Measures

3 Making an Investment

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4 Dispute Settlement

5 Taxation

6 ‘Sovereignty over Energy Resources’

7 Conclusions

The National Oil Companies in the Exporting Countries

Conclusions

*Senior Research Fellow, Oxford Institute for Energy Studies and St. Antony’sCollege, Oxford, England. E-mail: [email protected]

1 Economics and Natural Resources

the early days of political economy, not surprisingly, land and landlords played a major rol

or the physiocrat Turgot, writing in 1766, all surplus value was groundrent whereas profits a

ages were not distinguished from each other. Land and labour were the two original factors

oduction.[1]

Hardly ten years later, Smith distinguished between land, labour and capital.[2

ut forty years onwards, in 1817, Ricardo started to dismantle the trilogy and to bring it down

e binomial of modern economics, labour and capital.

[3]

Land was “assimilated to capital”.

[

atural resources had been taken out of the visible hands of the landlords and placed into the

visible hands of the market. It was deemed to be sufficient to consider land – i.e. natural

sources generally – no longer as a category of its own. From the viewpoint of bourgeois

onomics at least, the revolutionary transformation was over. The same goes for Marxism,

ough for Marxist economics land as a factor of production disappeared somewhat later. To

e question of land tenure is consigned to ‘development economics’.

1.1 Ricardian Rent Theory

he alleged irrelevance of land as a factor of production is based on the understanding that it h

o bearing on prices. According to Ricardian rent theory, the price of natural resources is

etermined just like that of all other goods: by its marginal production cost including the usua

ofit. Hence, the “appropriation of land and the consequent creation of [ground]rent”[5]

play

le at all. Nevertheless, tenants can always afford to pay some groundrent as long as there are


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onomic rents even on the poorest land, generated by successive portions of investment at

ecreasing productivity. In other words, the empirical fact that tenants always pay some

oundrent may be compatible with the theoretical assumption that the marginal groundrent o

oduction is zero. Moreover, competition amongst tenants will drive those economic rents, a

oundrents, into the pockets of landlords. Subject to competition in the product market,

owever, they cannot afford to pay more. Thus, competition will compel the tenants to invest expand production as long as it is profitable to do so, i.e. up to the point where marginal

oduction costs equal market prices.

Yet the crucial question is not if the marginal groundrent on production is zero, but if th

ow of investment is hampered. Even if marginal groundrent on additional investment in all

ases is zero, this does not preclude the possibility that some land has not been leased becau

nnot command the groundrent the landlords are asking for. If this were the case, demand wo

e met by investment into a restricted area, and necessarily at higher marginal production costhe outcome would be higher-than-otherwise prices. On the other hand, whether or not this is

ue, is an empirical rather than a theoretical question.

But it gets worse. Ricardo’s model depends on the form of groundrent. If it is a fixed an

ual payment, at the time already the most common form in British agriculture, then there is n

oblem. Yet if we suppose that the tenants are sharecroppers and the groundrent consists of

rtain percentage of the harvest, then there is no marginal produce that does not pay groundr

nd, a fortiori, the flow of investment is restricted. Contrary to Ricardo’s expectations,arecropping never disappeared completely in agriculture. Though it is, indeed, an ancient f

groundrent, it is also a modern one. It is actually quite widespread even in modern econom

ch as the United States.

1.2 Private and Public Mineral Ownership

Worst of all, however, in mining the equivalent of sharecropping, royalty, is still the dominan

rm of groundrent.[6] Ricardo, aware of this fact, resorted to excuses. Royalties, he argued, w

aid in “consideration of the valuable commodity”[7]

taken out of the land and, hence, they di

ot constitute groundrent at all. But this is irrelevant. The relevant fact is that a royalty is paid

e owner of the natural resource. The flow of investment is restricted because on top of techn

oduction costs and the usual profit, there is a royalty to be paid.

And there is yet more. In mining private landed property as such may cause a significan





crease even in technical production costs. The classical debate on this subject took place in

volutionary France, decades ahead of Ricardo’s writings. The French National Assembly

cepted that as long as minerals were to be found close to the surface, private governance –

nd to the tiller – would guarantee a reasonable outcome. Thus, the Mining Act of 1791, to th

ay the basis of the French law of mineral property, confirmed the surface owners’ rights to m

l minerals “which may be worked open-air or with excavations and daylight down to the depone hundred feet”.

[8]Yet the deeper the mines the more costly and difficult it would be to

djust to the fragmentation of private surface property rights. (Optimal techniques require tha

servoirs or deposits be exploited as natural unities. Failing to do so entails, for example, too

any wells or shafts to be drilled, which is the more costly the deeper the minerals are found)

herefore, the search for, and production of, those minerals to be found in greater depths were

bject to a license or concession. These activities were proclaimed to be of ‘utilité publique’

hus eminent domain rights would prevail over private surface property rights. Hence, public

ivate mineral ownership is a question of efficient governance, i.e. different ways to hand ov

e minerals to the miners.

My case studies of British coal and US oil fully validate this viewpoint. As a matter of f

ven in US oil and in spite of the conservation policies in place, the technical costs of private

ineral ownership were, and are, at least as high as groundrent itself.[9]

In British coal these

osts became intolerably high with increasing mine depth, which lead to the nationalisation oe deposits in 1938. Regarding oil, in the twentieth century private mineral property disappea

verywhere, with the sole exception of the USA. Governments, companies, and consumers, al

gree on public mineral ownership. Private mineral governance in US oil is a lonely relic, a qu

history.

1.3 US Oil

ighly competitive markets notwithstanding, in US oil marginal groundrent came not down zut to a customary groundrent .

[10]The most important component of that groundrent is a usu

yalty,[11]

of one-eighth in most of the USA but of one-sixth in some parts of the country. M

markable is the stability of these rates, which developed in the 1870s. It was only in the 197

at the ‘OPEC revolution’ – an earthquake, quite at the top of the Richter scale – brought abo

me movement, and one-fifth seems now to be the usual minimum royalty in many parts.





The point here is that the market generated standard contracts, for quite obvious reason

here is a very significant saving of time and money in not starting negotiations from scratch

very single lease but from a standard form, which includes a customary groundrent. This

inimum has to be important enough to whet the appetite of the landlord. The customary

oundrent thus represents to the landlord the equivalent of the usual profit to the investor.

owever, it also establishes a level playing field for the competing companies. Next, it becomn established right, and it may actually become a legal problem to offer less. Finally, a comp

gal and economic structure evolved. This governance structure was as difficult and costly t

hange as the gauge of railroads. Once a governance structure is in place, competition settles i

e new order. US oil went through an extreme variety of market conditions without it affecti

e essence of its governance. However, this does not mean that it not continued to develop an

dapt to changing circumstances in one way or another. Yet fundamental changes, creating ne

overnance, require extraordinary circumstances, and an equally extraordinarily strong politicill, i.e. power. The power of the market itself is not sufficient; it requires the kind of power t

eates markets.

1.4 Conclusion

icardian rent theory is obviously wrong in assuming that competition between landowners

ould suffice to guarantee a smooth and frictionless flow of investment. Yet there is no attem

look back and to reintroduce land as a factor of production into economic theory. Looking

e real world, economists will at best discover that it is imperfect, but not that there is someth

rong with the theory.

Thus, the idea that landlords might rise again from the dead in the second half of the

wentieth century and, worse, be reincarnated as sovereign states joining together in a cartel

aying a significant role in the world economy, was simply unimaginable. In the 1960s all

nergy economists forecasting oil prices agreed that OPEC was not worth their trouble. Lande

operty in international oil was a none-issue. It was rarely mentioned, and then only in order e dismissed as irrelevant. This explains their complete failure to analyze the problem ever sin

turned not just into an issue but also indeed into by far the most important one in the

etermination of prices. Thus the OPEC revolution of the early 1970s took the governments o

e consuming countries completely by surprise.

Still, economics had something very important to offer to these governments: a model o

erfect world, able to provide guidelines for political action according to the device that land





ndlords should have no bearing on prices.

2 Liberal, Proprietorial, and Conciliatory Governance

he irrelevance of land and landlords in the determination of prices defines liberal mineral

overnance. It entails that concessions are granted as soon as the land may command a usual

ofit without paying groundrent. Still, there may be a groundrent, but only if there are exaordinary profits and, of course, the groundrent-collecting device has to conform to Ricardi

nt theory. In other words, it has to be designed so as not to hamper the smooth flow of

vestment. Marginal groundrent has to be zero. Obviously enough, liberal mineral governan

based on consumers holding sovereign power.

On the contrary, proprietorial mineral governance is based on a sovereign power where

terest of landed property prevails over consumers. It is thus able to restrict the access to the

nd maximizing groundrent, and marginal groundrent is certainly not zero. Between thesextremes an interval of stable equilibria exists as shown by the example of US oil. Hence, it m

e qualified as conciliatory governance. Landed property plays a role and has a bearing on pr

ut it does so basically as a ‘sleeping partner’ of the intermediaries, the tenant companies.

Thus, the history of international oil in the twentieth century may be summarized as fol

ws. The conciliatory governance of US oil provided a first reference to international oil, wh

as fully implemented by the 1950s. The oil-exporting countries then benefited from the sam

ual royalty rates as landowners in the USA. Moreover, as sovereigns, they also benefited fro

e same federal corporate income tax rates. All in all, this amounted quite neatly, though

cidentally, to a fifty-fifty profit sharing. But that level of groundrent, by the end of the 1950

o longer satisfied these countries, which controlled the most prolific oil fields in the world.

ollectively they began to build up their own proprietorial governance, claiming their soverei

ghts to do so. In the context of the liberation movement in the Third World in general, they

ere most successful. At the heart of their policy in the 1960s was the increase of marginaloundrent, in spite of falling prices. The outcome was the OPEC revolution of the early 197

e explosion of oil prices, and the nationalization of the international tenant companies.

In the exporting countries national oil companies (NOCs) replaced the nationalized com

anies. In the consuming countries governments had to step in, first of all to guarantee securit

pplies. More important in the long run, regarding prices, these governments would promote

beral governance, which they introduced, to start with, only in their own territories. Nowhe





as this done more radically than in the British North Sea. At present, the governments of the

onsuming countries intend to graft liberal governance on the oil-exporting countries.

If one looks for one single indicator for liberal vs. proprietorial governance in oil, the be

ne is probably the relation between proven reserves and production, compared to the world

verage. Regarding crude oil, in 1998 OPEC produced 42.5% of the world’s output, though 7

the world’s proven reserves were located within its area. This has to be compared with theost liberal oil-producing country of the world, the UK, with 0.5% of the world’s proven

serves producing 3.8% of the world’s output. What we may call the utilisation ratio of the

atural resource is only 56% in OPEC, but 787% in the UK. The USA, with 451%, holds an

termediate position.

Liberal vs Proprietorial Governance in Crude Oil:Utilisation Ratio of the Natural Resource

998 Proven Reserves Production Utilisatio

Ratio(1,000,000 b) (%) (1,000 bd) (%)PEC 809,044 76.0% 27,739 42.5% SA 22,546 2.1% 6,243 9.6% 4K 5,191 0.5% 2,506 3.8% 7

World 1,064,128 100.0% 65,273 100.0% 1

ource: Republic of Venezuela, Ministry of Energy and Mines, Petróleos y otros datos esta

sticos, 1998; pp. 203, 208.

3 The International Energy Agency[12]

he governments of the developed consuming countries – the OECD countries – took the lead

onfronting OPEC. In 1974 they founded the International Energy Agency (IEA).

[13]

Not surisingly, it first adopted an International Energy Programme (with the status of an internatio

eaty, like the OPEC Charter) to deal with emergencies. In 1976 a Long-Term Programme

llowed. The goal was to reduce dependency on imported oil. This was to be achieved, on th

ne hand, by reducing demand and, on the other, by increasing domestic production of oil and

as and alternative sources of energy. In this paper we concentrate on the latter.

To increase domestic production, licensing and fiscal regimes should be revised “so as t





ncourage timely development”[14]

of the reservoirs. Member countries were also encouraged

o exploit all economically (…) appropriate opportunities to minimise declines in their own

digenous oil production”.[15]

The same principle applied, of course, to alternative sources o

nergy such as coal, relatively abundant within OECD countries. In 1979, after the renewed

oubling of oil prices during the time of the Iranian revolution and the ensuing Iraq-Iran war, EA agreed on minimising the use of oil for electricity generation. National energy policy

anning should preclude “new or replacement base load oil-fired capacity; progressively

onfine] oil to middle and peak loads; and [make] maximum use of fuels other than oil in dua

red capacity”.[16]

Member countries had also to ensure “that fiscal regimes, e.g., governme

yalties and severance taxes, (…) do not adversely affect the viability of coal mining

evelopments”.

[17]

Until then royalty had been omnipresent, being an unquestioned part of the US referenc

the North Sea, for example, the typical US royalty rate of one-eighth prevailed. Yet in 1983

ritish government took the lead in scrapping royalties for new developments. Thus, new acre

as brought into exploration, some previously non-commercial discoveries became

ommercially viable, and the closure of ageing oil fields was postponed. In other words, the

arginal groundrent was brought down to zero, and the scope of fiscal regimes was

stematically limited to Ricardian rents. Regularly held licensing rounds granted a continuoow of land.

In the US federal offshore the government started in the 1980s a programme of ‘area wid

asing’ to the same effect. And in the 1990s on federal lands some timid attempts were made

ake royalties more flexible downwards. Nevertheless, the liberal oil policy in this country

hieved only modest success, as (private and public) royalties are widespread and deeply roo

Moreover, member countries were urged, “to promote diversified investments in world-

ide production”.[18] Indeed, at present non-OECD countries consume more than half of wor

nergy. Of course, of special interests were the “developing countries with significant potentia

r future hydrocarbon supply”, where the IEA would “support activities of international

ganisations to help improve investment regimes”.[19]

The campaign against royalties as a re

ollecting device and in favour of excess profit taxation went worldwide.[20]





3.1 The National Oil Companies in the Consuming Countries

he European countries founded the first NOCs early in the twentieth century as part of the se

the concession system in the Third World, as their (onshore) natural resource base was very

oor. Most of the NOCs of the Latin American consuming countries, on the other hand, were

unded between the two World Wars. They were supposed to explore, to produce, and to ref

omestically, within a general policy of import substitution. The exporting countries started top their national oil companies only in the 1950s. Conceived as agencies of the landlord state

ey dissolved into the NOCs resulting form nationalization in the 1970s. The last wave of NO

relatively resource-rich consuming countries was triggered by the OPEC revolution.

oncerned about security of supply and the economic threat of high prices, Canada and the

nited Kingdom, for example, set up PetroCanada and the British National Oil Company

BNOC). By the end of the 1970s the USA was the only significant oil producer without a NO

This last wave of NOCs was short-lived. The issue of security of supply at reasonable pras taken up collectively by IEA/OECD within the context of a strong liberal environment. T

ew NOCs came to be seen as an inappropriate answer to the OPEC revolution. They were

smantled and privatised during the late 1980s and early 1990s. On the other hand, the old

uropean NOCs had lost their raison d’être with the nationalization of those concessions. Hen

ey too were privatised. The UK took the lead in both cases, privatising BNOC and BP.

The Latin American NOCs suffered a similar fate. The old idea that the international oil

ompanies were not interested in the development of national reservoirs but only in importinom their highly profitable concessions elsewhere, was now obsolete. Moreover, the model o

otectionist, import-substituting economic development in Latin American countries was in

eep crisis. In the 1990s, under increasing external pressure, they turned to privatisation and

beralisation. Argentina privatised Yacimientos Petrolíferos Fiscales (YPF), the oldest Latin

merican NOC, and in Brazil Petrobras, the youngest one, is being privatised at this moment.

This leaves us at present only with one important set of NOCs: the NOCs of the exporti

ountries, the agencies of the landlord states.

3.2 Conclusion

verall, whatever could be done within the consuming countries would never be enough. The

atural resource base is insufficient. 76% of the world’s crude oil reserves are located within

PEC, with another 6% in the former Soviet Union (a net oil-exporting area). Regarding nat

as – an energy source of similar importance to crude oil with world-wide reserves equivalen





bout one trillion (1012) barrels – OPEC holds 42% of world reserves, and the former Soviet

nion 39%. Within the OECD coal is the only abundant source of fuel, but in an increasingly

nvironmentally conscious world it is stigmatised as the dirtiest source of energy. Nuclear

nergy, for a variety of reasons, never lived up to expectations.

Thus, despite high prices, the OECD only succeeded in restraining but not in eliminatin

ependency on OPEC oil. OPEC production peaked in 1979 at about 30 million b/d, and by 1ad fallen to half that level. Prices collapsed in 1986. But then the growth of demand for OPE

l resumed with the growth of the world economy. Today OPEC production is back to 30

illion b/d, albeit at lower prices. The IEA has estimated that by 2010, due to both demand

creasing to 45 million bd and declining domestic production, the OECD countries will have

mport 70% of that demand. Demand in the ‘rest of the world’ is expected to grow even faster

his increase is likely “to be met primarily by the major Middle East producers and Venezue

1] despite the widespread consumption of coal and, more recently, natural gas in power

eneration.

There was no way out of the dilemma for the OECD countries. There had to be some

oexistence with OPEC. But was it not worth a try to bring OPEC, or at least some member

ountries, into the liberal governance of international oil? After all, since the ‘OPEC revoluti

e performance of member countries had been appalling. Apart from wars between some

embers, military and civil unrest in others, and foreign indebtedness in most of them, not onelivered the promised political and economic development. By 1989, some of them were

ternally very weak and divided, and they began to give in to the mounting pressure to re-ope

pstream oil to private investment. And then came the surprise of the century, the fall of the

erlin Wall and the collapse and disintegration of the Soviet Union, at that time the second m

mportant oil-exporting country. With the victory of capitalism over communism and the end

e Cold War, new territories rich in hydrocarbons were suddenly and unexpectedly opening

foreign investors.This new international political context provided a unique opportunity for the consumin

ountries to advance in their agenda on a truly global scale. The nascent liberal governance o

ternational oil, so far still limited in its scope to the consuming countries, was suddenly

pgraded to a model for a new world of global capitalism.

4 International Investment Treaties





ermanent sovereignty over natural resources’ was the catch phrase of Third World countries

e 1960s. This referred to the dismantling of the cobweb of concessions and other contracts,

hich still covered their natural resources after independence. The OPEC revolution took it u

ore radically then any other group of countries. Thereafter, however, OPEC stagnated. The

as nothing OPEC would ever agree on again beyond prices and quotas. In the 1960s, OPEC

ollectively confronted the international tenant companies, the dominant players of theonciliatory governance structure then in force. During that period it produced a most notable

eclaratory Statement of Petroleum Policy in Member Countries.[22]

But in the 1980s and

990s there was no collective answer whatsoever to the governments of the developed

onsuming countries, the new dominant players in the set up of liberal governance. The weak

ember countries could now be chosen individually and, isolated, be worked on.

In order to contain and confront the concept of ‘permanent sovereignty over natural reurces’ in the ‘rest of the world’, given the majority of Third World countries in the UN, the

eveloped consuming countries – first the Europeans, then the USA and other members of OE

started to negotiate a series of Bilateral Investment Treaties (BITs). Usually these BITs were

oncluded between one developed and one underdeveloped country. The flow of investment w

edictably in one direction only, and the rules agreed upon were those to the liking of the cap

xporting developed countries. Traditional international law was thus revitalised – though it

o longer called international law of ‘civilised nations’ – as it was endorsed by many ThirdWorld countries, whatever their public discourse in multinational fora.

After the demise of the Soviet Union the trickle of BITs turned into a torrent. A majorit

em were concluded, of course, between OECD member countries and Russia, the Newly

dependent Republics and the Eastern European countries. Then the European Union (EU) w

s eyes on the hydrocarbon riches of the former Soviet Union grasped the opportunity to init

ultilateral negotiations (rendering hundreds of individual BITs unnecessary). The first result

as, in December 1991, a non-binding European Energy Charter. This was the starting point

e subsequent negotiation of a binding Energy Charter Treaty (ECT), which was concluded i

ecember 1994.

In the developed world, apart from the EU, the 1989 USA-Canada Free Trade Agreeme

USACFTA) deserves mentioning. In spite of its name, it also covers investment and applies t

pstream oil.[23]

In 1993 this treaty was extended to the North American Free Trade Agreem





NAFTA), including Mexico, though for the time being the relevant set of rules was not appli

Mexican oil.[24]

Last but not least, regarding world trade, GATT’s languishing Uruguay

ound was also given a new boost leading to its successful conclusion in 1994 and the

undation of the World Trade Organisation (WTO). Though a treaty on trade, it has, as we sh

e, some relevance to investment. Thus, in the five years from 1989 to 1994 the consuming

ountries achieved very significant advances in setting up a liberal governance of internationa

4.1 Defining ‘Investment’

ITs, as their name suggest, consider investment. The ECT is generally regarded as a multi

teral investment treaty and nothing else. Yet the term ‘investment’ in these treaties is typica

efined in an all-inclusive way. Thus “contractual rights, such as (…) production or revenue-

aring contracts, concessions, or other similar contracts”, as well as “rights conferred pursua

law, such as licences and permits”, are simply ‘investments’. Hence, upstream contracts ine dealt with as “investment agreements”.

[25]We quote here as an example the USA-

zerbaijan BIT. It really does not matter very much which BIT one chooses as, for example, a

omparison with the Canada-Venezuela BIT shows.[26]

On the other hand, the ECT defines

nvestment’ as, amongst other things, “contractual rights, such as (…) production or revenue

aring contracts, concessions, or other similar contracts”, as well as “any right conferred by l

contract or by virtue of any licences and permits granted pursuant to law to undertake anyconomic Activity in the Energy Sector”, or simply “returns”.

[27]Consequently, though the

eaties cover all kind of upstream contracts, they only deal with the rights of ‘investors’.Natu

source ownership is completely ignored .

4.2 Trade-related Investment Measures

he USA-Azerbaijan BIT also outlawed trade-related investment measures (TRIMs) in ac

ordance with GATT/WTO. Moreover NOCs were forbidden to favour national suppliers of oods and services in their procurement policies and, more generally, to link an ‘investment’

ational development:

Each Party shall ensure that its state enterprises, in the provision of their goods orservices, accord national and most favoured nation treatment to covered investments.

Neither Party shall mandate or enforce, as a condition for the establishment,





acquisition, expansion, management, conduct or operation of a covered investment, any requirement (including any commitment or undertaking in connection with the receipt of a governmental permission or authorisation):

(a) to achieve a particular level or percentage of local content, or to purchase, useor otherwise give a preference to products or services of domestic origin or fromany domestic source (…).

(e) to transfer technology, a production process or other proprietary knowledge toa national or company in the Party’s territory (…).

(f) to carry out a particular type, level or percentage of research and development

in the Party’s territory.[28]

he Canada-Venezuela BIT contains the same clauses, except that it does not outlaw a ‘buy

enezuelan’ policy of state enterprises. The ECT stipulates, “a Contracting Party shall not app

ny trade-related investment measure that is inconsistent with (…) GATT”. With its typicalmbiguity, the ECT adds exceptions and clauses allowing signatories to opt out, and others

esigned to maintain the pressure on reluctant signatories to keep moving in the desired direct

9]

4.3 Making an Investment

pstream investment, there is no other way, depends on some kind of permit from the natural

source owner and, ultimately, on the support from sovereign power. Mining companies needis support more than any other kind of enterprise. A car factory may choose its location;

ining companies have to mine where the deposits are found. Thus the sovereign owner may

iscriminate’ and concede permits to selected investors, e.g. national companies, private or

ublic. Similarly, if privatising NOCs, the state may favour national private companies or buy

his was specifically outlawed in the USA-Azerbaijan BIT:

With respect to the establishment, acquisition, expansion, management, conduct,

operation and sale or other disposition of covered investments, each Party shallaccord treatment no less favourable than that it accords, in like situations, toinvestments in its territory of its own nationals or companies (…) or to investments in its territory of nationals or companies of a third country (…)

whichever is most favourable.[30]

he Canada-Venezuela BIT does not cover the making of an investment, the so-called pre-in





estment phase. And in the more complex multilateral ECT, which includes countries less

esperate than Azerbaijan to attract foreign investment, agreement on such an unambiguous

ording was impossible. Each Contracting Party would only “endeavour to accord” such a no

scriminatory treatment.[31]

Further pressure, however, was put on the reluctant signatories o

e ECT to agree to a firmer commitment, through a “Supplementary Treaty” still to be ne

otiated.[32]

4.4 Dispute Settlement

the USA-Azerbaijan BIT, private investors – not the governments – are given a menu of

hoices for the settlement of an ‘investment dispute’, from national courts to international ar

tration, independently of whatever may have been written into the ‘investment agreement’ i

uestion or into a foreign investment law.

[33]

The same applies to the Canada-Venezuela BIThe dispute settlement provisions in the ECT, heavily influenced by the precedents created w

e USACFTA and NAFTA, were worded almost identically.[34]

This was certainly the most

mportant achievement of the ECT. It entered into force upon signing the Treaty, even before

eing ratified by the member countries (though there was a possibility to opt-out).

4.5 Taxation

the USA-Azerbaijan BIT sovereign taxation is referred to in relation to expropriation:

Neither Party shall expropriate or nationalise a covered investment either directlyor indirectly through measures tantamount to expropriation or nationalisation(hereinafter referred to as ‘expropriation’) except for a public purpose; in a non-discriminatory manner; upon payment of prompt, adequate and effective

compensation.[35]

he word ‘indirectly’ alludes to taxation. In the same indirect manner, it is stated, “no provis

this Treaty shall impose obligations with respect to tax matters”. This is followed by severaxceptions, the most important of which refers to ‘investment disputes’ based on “an investme

greement or an investment authorisation”.[36]

The latter, in plain English, are concessions o

cences, while the former means:

a written agreement between the national authorities of a Party and covered investment or a national or company of the other Party that (i) grants rights with





respect to resources or other assets controlled by the national authorities and (ii)the investment, national or company relies upon in establishing or acquiring a

covered investment.[37]

hus, this clause covers upstream contracts signed between NOCs and foreign investors – a m

mportant point we will come back to later. The reader should keep in mind that no landlord-

nant relationship is supposed to exist. According to the Ricardian rent model groundrent is

ever passed on to consumers. To make sure that this is actually the case, the governments of

onsuming countries always have wanted to subject taxation totheir sovereignty. Accordingl

e treaty established the following procedure:

A national or company, that asserts in an investment dispute that a tax matterinvolves an expropriation, may submit that dispute to arbitration (…) if:

(a) the national or company concerned has first referred to the competent taxauthorities of both Parties the issue of whether the tax matter involves an expropriation; and

(b) the competent tax authorities have not both determined, within nine monthsfrom the time the national or company referred the issue, that the matter does not

involve an expropriation.[38]

hus even investors without any contractual relationship are offered the option of internation

bitration in tax matters as long as one of the parties – the USA or Azerbaijan government –ot ruled, within nine months, that a new tax or tax increase ‘does not involve an expropriatio

he Canada-Venezuela BIT establishes a period of only six months. The ECT, while includin

ual diplomatic caveats, generally adopted the same procedure.

4.6 ‘Sovereignty over Energy Resources’[39]

he only developed oil-exporting country, Norway, was part of the negotiation of the ECT (th

K is a marginal exporter, and firmly committed to liberal governance). Its presence probably

xplains why the question of sovereignty was taken up at all, though it was treated under the

eading ‘Sovereignty over Energy Resources’ and no longer ‘Permanent Sovereignty over

atural Resources’.[40]

State sovereignty and sovereign rights over energy resources were recognised, though o

they were “exercised in accordance with and subject to the rules of international law”. In th





me way, “the rules in Contracting Parties governing the system of property ownership of

nergy resources” were not at stake, but they should not affect “the objectives of promoting

cess to energy resources, and exploration and development thereof on a commercial basis”.

as also agreed that “Contracting Parties undertake to facilitate access to energy resources, in

ia, by allocating in a non-discriminatory manner on the basis of published criteria

uthorisations, licences, concessions and contracts to prospect and explore for or to exploit orxtract energy resources”. All this suggests that the next step could be to oblige the sovereign

ower, in one way or other, to put those ‘energy resources’ on the market. Remarkably enoug

is possibility had to be formally denied:

Each state continues to hold (…) the rights to decide the geographical areas withinits Area to be made available for exploration and development of its energyresources, the optimalization of their recovery and the rate at which they may be

depleted or otherwise exploited, to specify and enjoy any taxes, royalties or otherfinancial payments payable by virtue of such exploration and exploitation, and toregulate the environmental and safety aspects of such exploration, developmentand reclamation within its Area, and to participate in such exploration andexploitation, inter alia, through direct participation by the government or throughstate enterprises.

this paragraph the desperate, and somehow funny, effort to avoid any suggestion of a link

etween energy and natural resources, especially non-renewable ones, is particularly striking.

While the language may sound odd, there is nonetheless a recognition of the states’ property

ghts: rights to deny investors access to particular ‘areas’, to get compensation for its natural

source, to set production levels, and to participate with its NOCs in exploration and produc

on. This could hardly be more contrary to the spirit, and even the letter, of the rest of this

reaty. Its essential purpose, so systematically and carefully expressed, was to hammer into th

ead of resource-rich signatories the idea that there was no such thing as an international land

nant business relationship but only a state-taxpayer one. Yet this alien Article had to be grafnto the ECT; without it, the complex multilateral negotiations would have failed. No such cl

to be found in the Azerbaijan-USA and Canada-Venezuela BITs.

4.7 Conclusions

beral governance of international oil, which the developed consuming countries have been

uilding since the early 1970s, evolved into a grandiose framework of international trade and

vestment treaties, an attempt to create one global economy united by free trade and free in





estment. In this global economy, mineral resources would be subject to the global sovereign

onsumers.

NAFTA and the ECT also promoted new rules between the developed countries. In both

eaties the arbitration rules were innovations and went far beyond whatever the EU or the OE

ad agreed to before. In the euphoria following the success of the ECT, the OECD launched t

ea of a general Multilateral Agreement on Investment (MAI). Yet this attempt failed, largelyue to the resistance of France. Since then, ECT and WTO stopped moving at the breathtaking

elocity that they had displayed after 1989.

The ECT became effective with its ratification by thirty signatories, in 1998.[41]

Yet, no

verything went smoothly. The USA had pressed hard to be part of these negotiations to prev

e ECT from becoming a ‘European’ treaty as originally intended. However, in the end it wa

e USA that refused to sign. It regarded the approach to the pre-investment phase as too soft

ompared with standards already established in some BITs, and it was not willing to swallow

ticle on sovereignty. It believed that the ECT would create negative precedents regarding ne

ITs (for instance with Russia) and multilateral treaties (for instance with Latin American

ountries).[42]

It was nonetheless largely the US presence in these negotiations that produced

mong other things, the far-reaching arbitration clauses.

Russia signed, but it has not ratified so far. This is, of course, a major failure of the ECT

fter all Russia controls 74% of proven reserves in crude oil of the former USSR, and 85% inatural gas. “Negotiations [were] largely led, on the Russian side, by the reformist groups, and

e negotiations and their results [were] a strategy of the reformers aimed at imposing the

reaty’s market economy model on the internal policy debate”.[43]

Yet, back home, various

ational interest groups retained a great deal of power, not least in the oil and gas sector in wh

ver 60% of Russian exports and fiscal revenues originate. From their perspective, the ECT w

fficult if not impossible to accept. From the viewpoint of the Newly Independent Republicsings looked somewhat different, as stated by Kazakh President Nursultan Nazarbayev: “I do

ink that in today’s world weapons can do anything to protect a country. Our main security

uarantee (against Russia) will be a powerful Western business presence in Kazakhstan.”[44]

In practice, private foreign investors have not been very successful in getting their hands

ussian oil. By 1998 cumulative spending in the projects involving ARCO, BP, ENI, and She





ill amounted to very little and the outlook is not very exciting.[45]

Yet, the Russian

overnment is under continuous pressure to ratify the ECT. In April 1998 at the G8 Energy

inisterial in Moscow, the Energy Charter Secretariat and the IEA presented a joint paper on

Energy Investment’, largely based on “valuable studies carried out by or under the auspices o

e World Bank and the European Bank for Reconstruction and Development”.

[46]

Its executmmary strongly argues that royalties, a groundrent collecting device that concedes virtually

eedom to investors to minimize their fiscal liabilities – their only choice is to produce or not

ould be scrapped:

Experience has shown that an unstable or unbalanced tax system can be the singlemost important factor in deterring investors. This has been particularly true wheretaxation is based on gross revenues rather than on profits, with allowance for

incurred costs.[47]

his point is further developed elsewhere:

Profit-based systems are more self-adjusting and give a better basis for investorsto assess the fiscal impact over the life of their investment project (…). Finding theright tax structure is of particular importance to Russia where the oil industry

accounted for 70 per cent of federal government revenues in 1997.[48]

s a matter of fact, the homeland of fiscal regimes based on royalties and severance taxes is th

SA. Yet this country is also the homeland of the largest, most prosperous and successful priv

etroleum industry in the world. And nowhere have fiscal regimes been more stable. Profit-ba

stems, however, concede a maximum of freedom to investors to minimize their fiscal liabili

The joint paper ends with some ‘Recommendations’. On the issue of equal pre-investm

pportunities it asserts, “national economic benefits arising from an (…) investment will not b

etermined by the nationality of the investing company”. Privatisation opportunities should “b

pen to companies without discrimination on grounds of nationality. There should be no

onstraints on the subsequent resale and purchase of shareholdings or other assets after

ivatisation”. On energy trade, it recommends that WTO rules should be followed as closely

ossible. Last but not least, it concludes that Russia “should continue to pursue, as a matter of

iority, ratification of the 1994 Energy Charter Treaty”.[49]





5 The National Oil Companies in the Exporting Countries

ne may wonder why oil-exporting countries should subscribe to such investment treaties? T

lateral and multilateral investment treaties represent the negation of ‘permanent sovereignty

atural resources’. One can hardly be more radical. Still, as far as the really desperate Newly

dependent Republics are concerned, one may not be surprised. Their problem, above all, wa

eep in check Russia. But how can one explain that less desperate, experienced, and relativeleveloped oil countries such as Venezuela subscribe to this kind of treaties? The general answ

of course, their poor performance since nationalisation. In these countries exist ‘reformist

oups’, keen if not desperate to impose a ‘market economy model on the internal policy deba

nd the consuming countries may threaten quite effectively to exclude, in a kind of tit for tat,

on-oil sector of the exporting countries from the benefits of international trade and investme

Yet, this is hardly sufficient. Signing and ratifying this kind of international treaty is not

nough. To implement it effectively requires some powerful liberal agency, be it reforming th

d proprietorial one, the Ministry of Petroleum, or creating a new one. There are certainly

veral political options one can think of. But there is one important feature to be observed

verywhere: the privatisation of the NOCs is not on the top of the liberal agenda in the exporti

ountries. Typically, in the joint paper the Russian government was told that:

major studies have noted that the existing Joint Venture licensing arrangements are

based on an administrative system that views the Subsoil Licence as the supremedocument, while the agreement among parties to the Joint Venture is onlysecondary. This exposes the investor to several significant risks. The terms of thelicence to use the subsoil are subject to unilateral change by new legislation andare terminable by the governments on various grounds. It is subject to allapplicable taxes at all levels of government, and no protection is provided againstadverse changes in tax laws or other laws (…). Disputes are not subject toimpartial adjudication because there is no contractual relationship between the

Joint Venture partners and the government.

[50]

s a matter of fact, all developed countries grant concessions or licences in exactly the same w

intended by Russia, even if these countries have, or had, NOCs (for example, Norway, and

ntil recently Canada and Great Britain). However, in the exporting countries the problem, fr

e viewpoint of the consuming countries, is to limit their sovereignty – beyond the sovereign

be granted access to the land. National investment treaties were playing their part, but more





ould be done combining these treaties with ‘production sharing agreements’[51]

or similar ty

upstream contracts. The NOCs are thus involved in the business. Their importance lies, of

ourse, not in their role as business partners but as ‘umbrellas’ or ‘hostages’. They guarantee t

ey will absorb detrimental changes in legislation, most importantly in taxation, be it through

aying directly on behalf of the foreign ‘partners’, or be it through paying indemnities. Thus,

directly, through so-called ‘stabilization clauses’, the NOCs deliver actually the state as aostage. And the NOCs with their international investment or, at least, with their international

les, have something the ‘partners’ can take on to enforce these clauses and those treaties. Of

ourse, it is in this context that international arbitration is of crucial importance. Hence, thoug

ivatisation is certainly on the agenda further down the road, the priority is getting the transp

rmly rooted. Meanwhile the solution is some kind of ‘partnership’ with the NOCs. Azerbaija

oceeding exactly along these lines, is quoted in that paper as the example to be followed. – I

ay be worth pointing out, that this construction is based on the triangle of state, NOC, and

reign investment; national investment does not fit into the picture.

Next, one wonders, why not try and transform the NOCs into liberal licensing and con

acting agencies? Though in the past they had been the groundrent collecting agents of the

ndlord states, their role had expanded enormously with nationalisation and, inevitably, princ

gent problems had begun to arise. These companies were outgrowing their roles as mere

perators, becoming fully-fledged producing companies and, as such, groundrent paying tenasentful of their high tax bills and – in the case of OPEC members – resentful of quotas.

rustrated, within an environment of general frustration, the respective NOCs could be the ob

an agency-capturing strategy. In their new role they could be politically extremely helpful

essing liberal governance in a national costume minimizing adverse domestic reaction and,

us, the danger of the liberal transplant being rejected.

Venezuela and Petróleos de Venezuela (PDV) provide an extreme example. After nation

ization, PDV gradually took over Venezuelan oil policy, displacing the Ministry of Energy ines in the process. Already in the 1980s it engaged in minimizing fiscal revenues through

ansfer pricing, acquiring refineries in Europe and the USA. In response to the IEA coal polic

e company promoted Orimulsion (a mixture of water and extra-heavy oil), which comes

asically down to sell extra-heavy crude to power stations at the price of coal. This involves a

scount of a few dollars per barrel undermining the international price structure of oil. In the

980s, but more radically in the 1990s, it largely succeeded in dismantling the royalty-based





scal regime in favour of excess profit taxation and, last but not least, in bringing down taxati

vels in general.[52]

From 1976 to 1993, the fiscal contribution of PDV was, on average,

quivalent to 70% of export revenues in oil. Today, this percentage has fallen below 40%. Th

ercentage is even lower in the new upstream contracts with private investors, successfully

omoted by PDV after 1989. In all these contracts PDV assumes the role of an ‘umbrella’, or

ostage’, guaranteeing effectively the exemption of the private partners from sovereignxation. It was a pioneer in introducing international arbitration first at the contractual level,

en in pressurising the government into negotiating BITs, most notably with Canada and the

SA. The BIT with Canada went through, though the one with the USA failed. Still PDV,

bbying heavily, managed to push through a USA-Venezuelan treaty on double taxation and

ven more important and despite the radical political changes, the Investment Promotion and

rotection Law. The Investment Law was passed in October 1999. It contains the same defini

‘investment’ as quoted above, and suggests that BITs are the right instrument to promote

reign investment. However, PDV failed to prevent one policy change: the new Natural Gas

aw established a royalty rate of 20% as a minimum, and the government has announced that

me rate will apply to all hydrocarbons.

The success of a policy of agency capturing depends, of course, on a variety of circum

ances. It completely failed so far, for example, in Mexico. However, the reader should be

minded that this is by no means the only strategy possible. Overall, in all oil-exportingountries the role of NOCs as the government’s tax collecting agencies can no longer be taken

anted.

6 Conclusions

he political and diplomatic bureaucracy of consuming countries, the employees of internati

l companies, independent consultants, and captured NOCs constantly insist that oil-exportin

ountries have to compete to attract foreign investment. They rarely admit that competition mso work in reverse, with foreign investors competing for access to scarce reserves. This is so

bvious that, inadvertently yet unavoidably, it is admitted from time to time. The joint paper

cognises that recently “companies have been forced to drill in deeper waters and in more

chnically difficult environments”.[53]

This, of course, is because they have nowhere else to

ven so there are places where drilling would be much cheaper:





High cost energy resources have been and are developed world wide, whilecheaper resources are left in the ground. This is an unfortunate consequence of thegeographical concentration of resources and monopolistic behaviour coupled withlarge political uncertainties [sic!]. This waste of resources can be reduced throughcloser economic and political co-operation, underpinned by international treaties.[54]

deed, both investors and consumers could save very significant amounts of money through

wer prices. Hence, the natural resource owners are urged to adopt profit-based fiscal regim

ith the necessary downward-elasticity regarding prices, and upward-elasticity regarding cos

et under such regimes, there is no question that the oil-exporting countries would lose out.

Michael Klein, chief economist of Royal Dutch-Shell in London, recently suggested a

enario of this kind, the ideal Ricardian world:

With declining real oil prices the fight over upstream rents continues to intensify.Many oil-exporting countries crucially depend on oil revenues (…). As populationgrows and the price of oil declines, producer countries open up all parts of the oiland gas business for foreign investors. They revise tax regimes to attract investors.In particular, countries with marginal fields abolish royalties (…). To providerelief to the fiscal authorities more and more countries are privatising their nationaloil companies (…). The public authorities realise that they get the best deal asowners of oil and gas when several oil companies compete for acreage (…). Overtime, auction design is streamlined and many contracts are awarded to the bidderof the highest marginal tax rate rather than an up-front signature bonus. Bidding onthe tax rate improves risk sharing (…) by 2040 all national oil companies areprivatised and tax systems for upstream operations converge to regular corporate

tax regimes as upstream rents diminish.[55]

his is hardly a scenario that oil-exporting countries will feel comfortable with. Especially tak

to account that gross-revenue taxation of petroleum products, so condemned in the oil-

oducing countries, is heavily and systematically used by the consuming countries to restraiemand by raising the price of petrol at the service station to several times its refinery-gate pr

It seems more likely to me that the world by 2040 may look similar to the USA today,

here the federal government has not been able to prevent Alaska and other oil producing sta

om collecting very significant groundrents. It seems unlikely to me that the world by 2040 m

ok similar to Great Britain with its centralized political structure, where the Scottish never

old of a penny of groundrent, in spite of the fact that almost all of British oil is produced in





cottish waters.

On the other hand, although international oil companies, especially the big European on

ow support liberal fiscal regimes and are antagonistic towards royalties, this may change onc

ey recover some share of production in the exporting countries. Their alliance with consume

ay weaken when they will have to deal, once again, with the governments of the exporting

ountries and their peoples. They may well re-discover the virtue of gross-value based fiscalgimes. To produce oil without paying groundrent may turn out to be the more costly alterna

The oil-exporting countries are likely to lose much of their relative importance over the

w decades, and liberal governance structures have already made significant inroads into som

l-exporting countries. Still, it seems highly unlikely to this author that the landlord states w

linquish their groundrents only to embrace the dogma of liberalism. They may be forced to

cept it today for both domestic and international reasons. They may also be very much

onfused about the nature of the treaties and contracts they are signing. But in the long run thee bound to become aware of their losses, and they will have a new and closer look at the

counts of their tenants.

The strategy of agency capturing may also backfire. It is a divisive strategy, designed to

eepen the political and economic crisis of the targeted countries. The outcome may not be as

xpected. Venezuela is a case in point. PDV’s ‘hidden agenda’ was one major cause for the

ollapse of the political regime in that country. In the end, the company, in a desperate effort t

ush ahead with its liberal agenda, got deeply involved in the 1998 Presidential elections, to n

vail. Hugo Chávez Frías, the leader of the failed military coup d’État of 1992, won the electi

6]Though his success was due to the appalling performance of the non-oil economy, with t

beral oil policy playing a very minor role, this policy nevertheless lost most of its thrust. Yet

still too early to know the final outcome.[57]

Also in other oil-exporting countries it is not

fficult to forecast that the liberal agenda in oil will run into trouble sooner rather then later.

n extremist agenda, which just doesn’t make sense. Hence the conflict-ridden history of oil in

e twentieth century is very likely to extend well into the twenty-first century.

________

Back to Paper Archive Back to ISA









]Anne Robert Jacques Turgot: The Formation and the Distribution of Riches.

]Adam Smith: The Wealth of Nations.

]David Ricardo: On the Principles of Political Economy and Taxation, 3 ed., London, 1821.

]Mark Blaug: Economic Theory in Retrospect , Homewood (Ill.), 1968; p. 78.

]Ricardo, op. cit., p. 45. – At the time of Ricardo the term ‘rent’ only applied to groundrent.

]Marx apparently shared Ricardo’s prejudice against sharecropping and royalties as medieval and incompatib

th capitalism. See Karl Marx, Das Kapital, Vol. 3, Marx-Engels-Werke, Vol. 25, 1966; pp. 795 ff.]

Ricardo, op. cit., p. 67. – Ricardo never used the term ‘royalty’. At his time this term still referred exclusivelyneral groundrents paid to the Royals.

]Honoré-Gabriel Victor de Riqueti Comte de Mirabeau: Collection complète des travaux de M. Mirabeau l'aîn

ssemblée nationale, Vol. 5, Paris, 1792; p. 491. – Our translation.]

Bernard Mommer: Private Landlord-tenant Relationship in British Coal and American Oil: A Theory of Min

al Leases, OIES Paper EE20, Oxford Institute for Energy Studies, 1997.0]

Marx used in this context the term absolute groundrent . Marx, op. cit., pp. 756 ff. However, a customaryoundrent is not necessarily an absolute groundrent. For example, in the oil-exporting countries the customaryoundrent in the 1950s was a fifty-fifty profit sharing, but prices at that time were determined on marginal lands

e USA.1]

The same obtains for British coal. See Mommer, op. cit .2]

Richard Scott: IEA The First 20 Years. Vol. 1: Origins and Structure (1994); Vol. 2: Major Policies and Ac

ns (1995); Vol. 3: Principal Documents (1995). Published by the OECD/IEA.3]

However, the membership of OECD and IEA is not identical. France joined IEA as late as 1992. Norway isly a conditional member. Mexico joined OECD in 1994, but not the IEA.4]

Scott, op.cit., vol.2, p.169.5]




Scott, op.cit., vol.2, p.169.





9]Scott, op.cit., vol.2, p.347.

0]For a detailed discussion of liberal and proprietorial fiscal regimes see Bernard Mommer: Oil Prices and Fis

gimes, OIES Paper WPM 24, Oxford Institute for Energy Studies, 1999.1]


OPEC Resolution XVI.90 (1968).3]

USA-Canada Free Trade Agreement , Chap. XVI: Investment.4]

North American Free Trade Agreement , Chapter VI: Energy.5]

Treaty Between the Government of the United States of America and the Government of the Republic of

erbaijan for the Encouragement and Reciprocal Protection of Investment , Art. I. This treaty was signed byesident Clinton and President Aliyev on 1 August 1997.6]

Agreement between the Government of Canada and the Government of the Republic of Venezuela for theomotion and Protection of Investments. Signed on 1 July 1996, this treaty entered into force in January 1998.7]

The Energy Charter Treaty, Art.1.6.8]

Treaty USA-Azerbaijan, Art.II.1, Art.VI.9]

ECT , Art.10.0]

Treaty USA-Azerbaijan, Art.II.1, Art.VI.

1] ECT , Art.10.2, 3.

2] ECT , Art.10.3, 4.

3] Treaty USA-Azerbaijan, Art.IX.3.

4] ECT , Art.26.

5] Treaty USA-Azerbaijan, Art.III.1.

6] Treaty USA-Azerbaijan, Art.XIII.

7] Treaty USA-Azerbaijan, Art.I.

8] Treaty USA-Azerbaijan, Art.XIII.2.

9] ECT , Art.18.





0]UN General Assembly Resolution 1803 (1962).

1]The only institutions created under the ECT are the Charter Conference and the Secretariat.

2]On the other hand, in December 1994, at the same time the ECT was signed in Lisbon, in Miami the Summ

e Americas was held, the largest ever meeting of Heads of States in the Western Hemisphere. The Summit agrecreate a ‘Free Trade Area of the Americas’, extending NAFTA all over the Americas. An integral part of this

sign is the ‘Energy Initiative of the Americas’ with its annual ministerial meetings.3]

Thomas W. Wälde: “International Investment under the 1994 Energy Charter Treaty”, in Thomas W. Wäldd.): The Energy Charter Treaty – An East West Gateway for Investment and Trade, Kluwer Law International,ondon 1996; p.316.4]

Mehmet Ögütçü: “Eurasian Energy Prospects and Politics: Need for Longer-Term Western Strategy”, in We Energy Charter Treaty…, op. cit.

5] Energy Investment , joint paper by the Energy Charter Secretariat and the International Energy Agency pre

nted to the G8 Energy Ministerial in Moscow, 1 April 1998; p.5.6]

Energy Investment …, p.1.7]

Energy Investment…, p.ii.8]

Energy Investment…, p.21-2.9]

Energy Investment…, p.25-6.0]

Energy Investment…, p.20.1]

Cf. Energy Investment…, p.ii.2]

Bernard Mommer: The New Governance of Venezuelan Oil, OIES Paper WPM 23, Oxford Institute for Enerudies, 1998.3]

Energy Investment…, p.3.4]

Energy Investment…, p.18.

5]Michael Klein: “Energy Taxation in the 21st Century”, Oxford Energy Forum, Issue 40, Oxford Institute fo

gy Studies, Oxford, December 1999; p.13-4.6]

Bernard Mommer: “Venezuela: Politics and Petróleos”, MEES Vol. XLI, No. 50 (14 December 1998).7]

Bernard Mommer: “Ese chorro que atraviesa el siglo” in Asdrúbal Baptista (ed.): Venezuela siglo XX – Visi

estimonios, Fundación Polar, 3 vol., Caracas, 2000; vol. 2, pp. 560-2.