Energy Security: Postcolonial Legacies of MNCs and Resource Exploitation in the Global South

Introduction:

Since the dawn of humankind, energy has been the schlüsselstein (keystone) of civilization’s progress. The conquest of fire is attributed to the Herculean labour of Prometheus in Greek mythology, as Aeschylus jots down, “With a flicker of defiance, Prometheus reached into the divine hearth and seized a spark. He carried it to Earth, a gift to humanity, a beacon of knowledge and power.”

Prometheus’ act marked the beginning of humanity’s reliance on energy. Apart from mythology, this human development is transforming the course of history. From primitive hearths to modern power grids, energy has remained an indispensable catalyst for societal advancement. Regarding international relations, as the International Energy Agency (IEA) stated, energy security is the “uninterrupted availability of energy sources at affordable prices.” 

Energy security has emerged as a pivotal concern in international relations, as Hashim Khatib, in his writing, alludes to the importance of energy security and likens it to sustainable development efforts, as, unless unaltered and affordable energy security is not completely ensured, sustainable development in varied fields isn’t possible. The relationship between energy security and international political economy is of cardinal essentiality, as international political economy is the symbiotic relationship between economics and politics; change in one affects the other and vice versa. Similarly, the intricate dynamics of energy production, consumption, and trade have created complex interdependencies among nations, accentuating the demand for a nuanced grasp of energy security’s theoretical Grundlagen.

This research ventures on a theoretical exploration of energy security within the sphere of international political economy through Liberalism, Realism, and Mercantilism while incorporating a constructivist perspective for a discipline-centric analysis of IPE. By integrating these perspectives, this study aims to provide a comprehensive framework for analyzing the multifaceted nature of energy security. This piece also embarks on a comprehensively exhaustive examination of the complex interstices governing energy security, situating its examination at the intersection of state agency, institutional configurations, transnational entities, resource scarcity, technological advancements, and economic determinants, which systematically weakens the topology of energy security.

Theoretical Analysis of Energy Security within IPE’s Competing Paradigms

Energy security has burgeoned as a vexing quandary with seismic repercussions for global governance. In this literature review, the theories of International Political Economy will be utilized to get a holistic grasp of Energy Security policies and global governance.

Mercantilism/Realism:

Firstly, a fundamental comprehension of Mercantilist thought is indispensable for a nuanced understanding of its enduring impact on contemporary energy security and global governance paradigms. Two famous Mercantilist theorists, Eli Heckscher, and Jacob Viner, proposed through their writings three core points: the importance of economic strength in bolstering state power, the emphasis on protectionist policies, the advocating for an export-oriented economy over an import-oriented one, and stratified valuation of economic activities, with manufacturing considered superior to primary sectors such as agriculture, some economic activities being better than others. 

Energy resources are crucial for any country. States consider energy resources as strategic assets for national power and security. Based on this observation, the Oil Embargo of the 1970s, in which Middle Eastern countries used oil embargoes as a strategic geopolitical tool, illustrates the strategic importance of energy resources. Moreover, the Pulitzer Prize-winning author sheds light on Russia’s use of oil and natural gas as strategic assets to exert influence over neighboring countries and Europe. According to Yergin, Russia’s energy preponderance has allowed it to brandish considerable geopolitical power.

Furthermore, Daniel Yergin says that states prioritize securing energy supplies to maintain economic stability and military power. It can be observed in many cases; let us again, use the example of Russia, which supplies natural gas to Europe while maintaining its influence in the neighbouring countries. In NordStream’s incident on the 26th of September 2022, an explosion occurred, which caused gas to leak, halting the flow of natural gas into Europe. This incident raised a few points: Europe’s dependence on Russia, the economic impact of the incident as gas prices soared across Europe, and how geopolitical tensions peaked, as no one knew who was responsible for the sabotage. This intersection between Mercantilist concepts and energy security policies has profound implications for global governance and market dynamics. 

Conspicuously, the major powers’ unceasing thirst for energy hegemony has skyrocketed geopolitical tensions, as exemplified by the US-China and Russia rivalries. This Mercantilist-driven agenda not only fuels market instability, as Yergin argues in his book “The Quest,” but also halts and strains global cooperation, as evidenced by the challenges faced by international organizations such as OPEC and IEA.

Liberalism:

The second theory in the IPE discourse is Liberalism, which, in its quintessence, contravenes all the propositions proffered by Mercantilist thinkers. Its cardinal tenets include the concept of “absolute advantage” put forward by Adam Smith, which contends that countries benefit from trading or producing goods at which they are efficient. The second concept is “comparative advantage,” put forward by David Ricardo, which proposed that countries benefit from trade by specializing in trades and goods at lower production costs, and the third main concept, “gains from trade,” was also put forward by Adam Smith, explains that trade intuitively is good and increases overall economic welfare, regardless of the trade balance.

So, what are the implications of Liberalism in the consideration of energy security? Liberals like Keohane and Ikenberry, in contrast to Mercantilism, belabor the role of international cooperation, trade, and market-based solutions in achieving security. In his essay “Reflections on After Victory,” John Ikenberry contends that the leading states’ character and legitimacy—rather than power—shape the international order. Ikenberry hinges on the post-war moments—1815, 1919, 1945, and the end of the Cold War, when the old order had perished, and newly powerful forces emerged in the aftermath of 1945. The United States, as the Mächtiger force and the new puissant, established a new order based on open markets, security alliances, institutional frameworks, and strategic restraint.

Therefore, the newly built order gave space to energy security. Global institutions and regimes promote energy security, such as the International Energy Agency, which is often cited as a prototypical institution keen on championing energy security and stability. According to liberal economic thought, the energy markets can optimally distribute energy resources excellently. Moreover, liberalism emphasizes an open market system, as discussed earlier, and disdains the state’s involvement in the market and any form of control over companies and industries. Despite its allure and appeal, liberal thought is always heavily critiqued. First, there is an overemphasis on the market; some critics view it in this way that these frameworks, in some way and form, favor a few powerful countries, perpetuating inequality. Post-colonial theorists may have come up with the concept of institutional dependency. Samir Amin, in his seminal work “Accumulation on a World Scale (1974),” excellently explains how the institutional structure of the Center exploits the periphery, causes underdevelopment, and keeps them dependent on the Center.

Marxism:

Marxist thought originated in the works of German-born political theorist and economist Karl Marx; he is widely known for his critique of capitalism. A famous economist, Robert L. Heilbroner, encapsulates Marx’s conception of capitalism; he states that, according to Marx, in the capitalistic world, there are two actors. The first is the worker, who forms a labor force, working for survival and a main component in the production of capital, and the other is the capitalist, whose sole purpose in this setting is to accumulate as much as possible while giving the working class as few as possible, so they can work for the capitalist to accumulate more.

Furthermore, Marx contends that this capitalist attitude leads to revolution; the working class rises against the capitalist class. Concomitantly, a Marxist perspective can be employed to elucidate the class-based dynamics, exploitative practices, and capitalist imperatives that underscore energy security policies. The Marxists see energy resources as a means of capitalist extortion and exploitation, which leads to inequality and underdevelopment. David Harvey, a British academic and Marxist analyst, critiques the neoliberal structure and policies, which lead to the concentration of capital into few hands; he calls the neoliberal process “accumulation by disposition,” where public assets are privatized, and the wealth is transferred from the poor to the rich. 

Harvey’s analysis is applicable to various instances that have occurred. The connection fits perfectly, for instance, the exploitation of energy resources in conflict zones, i.e., Iraq and Libya. ExxonMobil is a paradigmatic instance of neoliberal imperialism. ExxonMobil’s involvement in Iraq’s oil industry after the US-led invasion of Iraq on the prospects of Iraq having weapons of mass destruction, which was a hoax; the whereabouts of those WMDs are still a mystery. So, after the invasion, the state-owned oil industry was privatized, which allowed ExxonMobil to secure remunerative contracts and potentially extend profits through financial speculation. This accumulation by disposition was carried out as the result of the US-led invasion, creating a crisis and chaos in the country.

These neoliberal reforms and privatization were justified by the crises that were created by those who later made neoliberal reforms. These neoliberal products dictate the governments, getting subsidies and tax evasions. Through these maneuvers, the wealth was snatched from the public’s hands into the hands of those who already had plenty, ExxonMobil’s stakeholders thrived at the expense of poor Iraqis, the local Iraqis got displaced, and wealth was taken away from them. The above example sufficiently illustrates Harvey’s conception of Imperialism, accumulation by dispossession and disparate development. The instance proposed illustrates, as conceptualized by a Zimbabwean critic, Sam Moyo, that the pursuit of energy security is to serve the capitalist class; here, the capitalist class is the Europeans, and from them, energy security is the unaltered flow of energy into Europe only.

In conclusion, Marxists argue that global energy systems are characterized by disparate distribution and unparalleled development; they are structured in a way that fosters dependency and imperialism. Marxism endorses energy democracy, no energy democracy, as defined by the energy justice organization’s official website: “All peoples and communities have the right and ability to participate in, and make decisions about their energy system.” Apart from this, Marxism also advocates for decentralization and community control over energy resources.

Global Governance and Energy Geopolitics:

Effective global governance requires international cooperation and joint decision-making; global governance plays a crucial role in shaping energy geopolitics. To resolve these pressing challenges, some institutions are crucial to support relative peace in the world and avoid conflicts. Organizations like the IEA, OPEC, and the Energy Charter Treaty assist in cooperation and governance. Building on the works of Keohane, Oran Young, and Ann Florini, theoretical frameworks like regime theory, institutionalism, and global governance theory provide valuable understandings of Energy Security concerning Energy Geopolitics.

The Role of MNCs in Shaping Global Governance:

This inquiry emphasizes the role of MNCs in energy security, specifically examining the influence of oil corporations, with ExxonMobil and Shell being the examples at the forefront.

Multinational corporations, or MNCs, have production facilities in at least two countries. They contribute a significant part to the global economy and trade. According to the World Trade Organization, MNCs account for about 80% of global trade in goods and services. Regarding revenue generation, top MNCs collectively generate around 40 trillion dollars, significantly impacting the global economy. 

Let’s come to the main point of the inquiry without going further recklessly, as the focus of the study is to examine the role of MNCs in energy security, mainly oil corporations. ExxonMobil and Shell are the principal objects of concern. The collective market size of top oil companies, often referred to as the “supermajors,” such as ExxonMobil, Chevron, BP, Shell, and TotalEnergies, overwhelms the market. In unison, these companies account for a considerable percentage of the world’s oil production, with estimates of around 10-15% of the output. In terms of revenue, Shell generates 396 billion dollars, ExxonMobil generates 413 billion dollars, and above all is the Petro-giant—Saudi Aramco, which generates 604 billion dollars of revenue. These figures highlight the economic might of these corporations. The OPEC+ countries control about 40% of global oil production and around 80% of proven oil reserves. The statistics and data that have been given show the worth and might of these corporations.

This inquiry examines the implication of this influence through the perspectives of Postcolonial and Dependency theories, addressing the following question: How do ExxonMobil and Shell morph global energy governance and influence host countries’ energy security in the Global South?

MNCs – The Post-Colonial Legacy:

The Postcolonial theorists contend that MNCs are the vestiges of colonial legacies, perpetuating unequal power dynamics in the Global South. One of the most prominent postcolonial thinkers, Edward Said, stated that this underdevelopment in the Global South “The economic structures established by colonial powers have left a legacy of dependency that continues to affect the political and economic realities of formerly colonized nations.” Historically, along with other resources, colonial powers exploited energy resources, fostering dependency and underdevelopment in these regions.

Recent studies demonstrated that MNCs operating in extractive industries, particularly oil and gas, reinforce these dynamics, compromising energy security in the host countries. 

Dr. Ibeanu, in his work, “Oil, Globalization, and the Nigerian State,” poses two main points: 

• These MNCs marginalize local communities.
• Communities from where the oil is extracted get no benefits from it. 

He gives the example of the Niger Delta, where the perks gained from oil extraction are not shared with the local population, because of which the local communities remain poor and social unrest is imminent. Moreover, he talks about the dependency webbed by these MNCs around the host state, who forever remain vulnerable to fluctuations in oil prices. The exploitation of host countries’ oil resources keeps them underdeveloped without gaining from their resources, and the host countries persist in being unable to form their energy policies. Host countries are always vulnerable to the volatility of oil prices and supply flow. Furthermore, these corporations’ control over energy resources makes them powerful enough to influence energy governance, prioritizing their interests over host countries’ interests.

Energy Governance and MNCs:

According to Klare, MNCs lobby for favorable policies, push for regulations, and influence politicians to favor trade agreements. Realists would observe these practices carried out by the MNCs as securing interests to maintain power globally and within the host state. For instance, in the case of Nigeria, the local elite’s complicity in Shell operations resulted in underdevelopment in the energy sector. Moreover, Evans contends that the MNCs and the local elite perpetuate human rights abuses and engineer energy governance in favor of MNCs.

Brief Case Studies: ExxonMobil and Shell:

The research has been eagle-eyed and focused on the basic understandings until this point. Now, to make the arguments posed in the research assignment more poignant, we will look at some of the case studies: ExxonMobil operations in Iraq, the behind-the-scenes interplay of politics with economics, and Shell operations in Nigeria, which have already been discussed extensively.

ExxonMobil in Iraq: 

According to scholars, the invasion of Iraq was foremost motivated by a will and desire to control oil resources. The US-led invasion was motivated by the desire to control the reserves and maintain control through ExxonMobil, which would reinforce US dominance. The Marxist thinkers argued that ExxonMobil’s operations perpetuated uneven development and dependence on fossil fuels. This instigated the core-periphery debate, benefitting the core from the capital extorted from the periphery. 

This brief theoretical case study reveals the intricate interplay of politics, economics, and energy security in ExxonMobil’s operations in Iraq. There were no weapons of mass destruction, none found in Iraq. The final report by the CIA that surfaced in 2005 contended there were no WMDs in Iraq. The country was ravaged, but for what? The answer is this case study. From 2010 to 2020, ExxonMobil earned about 80-100 billion dollars, with 15-20% profit margins. Although these are estimates, the real values are not revealed. Foreign corporations with that much economic power have remained in vehement critique by postcolonial theorists because they have been actively influencing energy policies in host countries.

Shell in Nigeria: 

Shell has been operational in Nigeria since 1937. Shell’s involvement in Nigeria’s oil industry has been the subject of contentious debates. The theorists critically observe its involvement, and according to the theorists, Shell’s operations in Nigeria have significantly impacted Nigeria‘s economy. According to studies, Shell’s profit margin exceeds Nigeria’s government revenue allocation for social services. Moreover, Shell is responsible for bribing and engaging in corrupt practices to maintain its energy security monopoly in the country. Samir Amin accuses Shell of employing colonial practices in Nigeria, exploiting the resources at the expense of the population, and creating favorable economic and energy policies to get ultimate benefits while the populace anguish from the want and the very resources from which the core and elite are making immaculate capital. 

Mitchell, in his work Carbon Democracy, put forward the nexus of corporate and state. As revealed by the Global Witness Report, corrupt politicians and corporations pat each other’s back, one through bribes and the other by creating corporate-friendly policies. Immanuel Wallerstein, who came up with the world systems theory, beautifully encapsulated the idea that the capitalists of the core exploit the resources of the periphery.

Conclusion:

Energy security isn’t a unitary pursuit but a contentious dance with multiple partners. Achieving a sustainable and equitable solution demands a calibrated grasp of the interplay between economic theory, political realities, and corporate influence. Only through an intersectional synergy of vectors prioritizing resource security and environmental sustainability. Finally, energy justice, assurance of which would be prolegomenon and an enabling factor that would lead us all to an equitable and just future for mankind.

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