Politicians promise not to loot oil companies--unless they really, really need the money to balance their budgets.
Off the desolate island of Sakhalin lie billions of barrels of oil and trillions of cubic feet of gas. Russian oil companies either can't or won't put up the money to retrieve this energy. So, as our Tokyo Bureau's Benjamin Fulford relates on page 60, the Russian government is issuing a come-hither to Western capital. Royal Dutch/Shell, ExxonMobil and others are smitten with the seismic data. They are in the starting stages of pouring $45 billion into this economic wasteland.
Shell, magnanimously, is willing to forgive and forget the contretemps it had with Lenin 80 years ago over its wells in the Caucasus. This time no expropriation, Russia promises. Already, though, it seems that the oil companies are being double-crossed over a value-added tax. The situation reminds one of Lucy promising not to snatch the football from Charlie Brown.
Who cares, besides oil company shareholders? We all should, because there is a close connection between property rights, prosperity and other freedoms, as Harvard historian Richard Pipes recounted two years ago in his book Property and Freedom . Unfortunately, respect for property ownership is something of a freakish occurrence in human history, limited in time and place.
Oil companies are particularly likely to be victims of theft. Lázaro Cárdenas made a hero of himself by expropriating oil companies operating in Mexico in 1938. Venezuela nationalized its oil industry in 1976. Three years later Jimmy Carter went after oil company property with a windfall profits tax. The populist tradition continues more recently in pending litigation against Exxon over the Valdez spill, in which the citizens of Alaska may succeed in looting $5 billion from the company, over and above cleanup costs.
The mobility of capital today puts some limits on the ability of legislatures (or tort lawyers) to tax businesses to death. Let the state of Washington levy a windfall software tax and Microsoft will relocate in a microsecond. Oil companies, on the other hand, are easy prey, at least once they have sunk their wells and laid their pipelines.
Will the Russian government resist the temptation to balance its budget 10 or 20 years from now by changing the terms on which oil and gas are drawn from the seabed? That could happen, but if so it would be something of a freak occurrence in the history of energy politics.