Fueling State Capitalism: How Domestic Politics Shapes Foreign Investments of National Oil Companies

Governments invested hundreds of billions of dollars in foreign oil and gas assets through their national oil companies (NOCs) in the late 1990s, raising concerns about a resource war and asymmetric interdependence. Andrew Cheon argues that these investments were commercial ventures by ambitious state-owned enterprises seeking to become global players amid rising oil prices. He shows that competition among NOCs' principals at two different levels of government conditions their foreign investments, with non-democratic governments being less constrained. Fueling State Capitalism unpacks the role of institutions, both national and bureaucratic, in shaping the global expansion of national energy firms and probes the energy security motivations of NOC investments and the origins of bureaucratic structures. Cheon concludes that bureaucratic institutions will be critical in achieving decarbonization that allows governments to meet their political objectives and helps NOCs ensure their long-term commercial viability through a managed transition to renewable energy.

Format: Hardback
Length: 256 pages
Publication date: 24 May 2023
Publisher: Oxford University Press Inc

Governments across the globe began investing substantial sums of money into foreign oil and gas assets through their national oil companies (NOCs) in the late 1990s, sparking concerns about a potential resource war and unequal interdependence. While most critics view these investments as politically motivated and inefficient, Andrew Cheon presents a different perspective in his book "Fueling State Capitalism." Cheon argues that these investments are driven by ambitious state-owned enterprises seeking to expand their global presence amidst rising oil prices. Some NOCs have taken aggressive approaches, venturing into politically risky destinations, while others have pursued more moderate strategies. The ability of NOCs to pursue foreign investments varies depending on the regime types and bureaucratic structures of their respective governments.

Using principal agent theory, Cheon demonstrates that competition among the principals of NOCs, both at the national and bureaucratic levels, shapes their foreign investments. While competition between the chief executive and opposition parties can hinder democratic governments' ability to tolerate failed investments abroad, non-democratic governments face fewer constraints. An overlap of authority among bureaucratic institutions can lead to counterproductive behavior among NOCs, whereas a clear line of authority can prevent such behavior.

In his book, "Fueling State Capitalism," Cheon examines investments made by NOCs from 79 countries between 2000 and 2013, along with case studies of China, India, Brazil, Norway, and Russia. He unpacks the role of institutions, both national and bureaucratic, in shaping the global expansion of national energy firms. Cheon also delves into the energy security motivations behind NOC investments and investigates the origins of bureaucratic structures.

Based on the experiences of NOC global expansion, Cheon offers insights into the challenges and opportunities faced by these enterprises as they navigate the complex terrain of international business. He emphasizes the importance of effective governance, transparency, and accountability in ensuring the sustainable development of foreign oil and gas assets.

In conclusion, "Fueling State Capitalism" provides a valuable perspective on the foreign investments of NOCs, challenging the conventional narrative of these investments as politically driven and inefficient. By examining the role of institutions and the energy security motivations behind these investments, Cheon offers valuable insights into the complex dynamics of global energy markets and the role of state-owned enterprises in shaping them.

Weight: 426g
Dimension: 243 x 160 x 16 (mm)
ISBN-13: 9780197672884