The Prize: The Epic Quest for Oil, Money, and Power

by Daniel Yergin

Outright nationalization had been an obvious resort for some exporting regimes—in Russia after the Bolshevik Revolution, in Mexico, in Iran. The concept of “participation,” partial ownership achieved by negotiation, was consciously devised as an alternative to nationalization and full ownership because it satisfied the interests of some of the main oil exporters. Oil was not only a symbol of national pride and power; it was also a business. Outright nationalization would disrupt relations with the international companies and put the oil-producing country directly into the business of selling oil. The country would thus face the same obstacle that bedeviled the independents who had built up large reserves of oil in the Middle East—the problem of disposal. That would lead to a battle royal with other exporters for markets. The oil companies not only would be free to shop around for the cheapest barrel, but also would have strong incentive to do so, since they would now be making their profits on sales in the consuming markets, rather than in production.