A new wave of expropriations?

With oil prices near $60/barrel, it seems like the best of times for oil companies. But it easily could be the worst of times. Recall the tumultuous sequence of events that followed the last global surge in commodity prices, during the 1960s and 70s. In the mid-1960s, copper prices jumped by more than 50 percent and then kept on rising. 1968 was the best year yet for Anaconda Copper’s Gran Mineria mine in Chile. Profits had more than doubled. US-based Anaconda contended for the title of the world’s largest metal producer; and in Chile, Anaconda owned the world’s largest open-cast copper mine. Then, in 1969, the Chilean government announced it was revising Anaconda’s concession. Two years after that, the government seized the mine, paying Anaconda little compensation. Following this political risk loss in Chile, Anaconda Corporation suffered a financial meltdown. By 1977, Anaconda had ceased to exist, its remaining assets snapped up by Atlantic Richfield. The demise of Anaconda was only one among many such incidents. During the 1960s and 70s, host-country seizures of foreign direct investments claimed a staggering one-fifth of the value of US investment in the developing world. Well over 1,500 foreign affiliates of multinational firms were taken, many with little or no compensation. It is widely assumed this could never happen again. The conventional wisdom has it that these expropriations were driven by ideology – communism and post-colonial nationalism. The incidents most remembered today are the seizures of private property that accompanied upheavals like the Cuban revolution. These were complete, indiscriminate, uncompensated and clearly political. But the conventional wisdom is wrong. The number of such...