Sakhalin Ii-Negotiation Process
1. Sakhalin: Assessment of Negotiation Process
Your assessment of negotiation processes covered in the three 'journey to Sakhalin’ cases.
The three Sakhalin cases meander through a path hardly uncharted in the geopolitics of resource extraction industrial history of the world. A weak, ill equipped state hungry of extraction investment courts a multinational giant on ‘asked for’ terms only to turn around and rewrite the rules of the game when it has incentives and capacity to do so. What follows may be anywhere between outright expropriation to subtle legal engineering, both aimed to extract power rents. The engineered re-domination often comes with inventive euphemisms for what is essentially full or diluted expropriation or nationalisation or collectivisation or redistribution.
From a negotiating perspective- between a natural resource rich, capital poor, technology poor, managerial skills poor developing state as host and a foreign corporation- Sakhalin is a quintessential example of obsolescence bargaining relationship. Such relationships are a function of parties’ goals, resources and constraints. The goals can be conflicting from inception but the hope of the game being positive sum keeps both parties engaged. The initial constellation of goals, resources and constraints favours the corporation but bargain obsolesces over time as and if, the state accumulates clout. The post Soviet break up Russia of 1993 with its economic chaos and a more stable, confident, re-ambitious Russia of 2006 clearly reflect the obsolescence/re-emergence pattern of bargaining power.
In addition, the natural gas being a non-general application, non-storable, pipeline transportable, not spot tradable commodity – in contrast to modern floating vessels over wells for deep sea oil extraction, demobilisable in reasonable time- facilitated gradual increase in host nation’s game theoretic bargaining power in negotiations as invested funds lay on its soil eliminating confrontation as
Your assessment of negotiation processes covered in the three 'journey to Sakhalin’ cases.
The three Sakhalin cases meander through a path hardly uncharted in the geopolitics of resource extraction industrial history of the world. A weak, ill equipped state hungry of extraction investment courts a multinational giant on ‘asked for’ terms only to turn around and rewrite the rules of the game when it has incentives and capacity to do so. What follows may be anywhere between outright expropriation to subtle legal engineering, both aimed to extract power rents. The engineered re-domination often comes with inventive euphemisms for what is essentially full or diluted expropriation or nationalisation or collectivisation or redistribution.
From a negotiating perspective- between a natural resource rich, capital poor, technology poor, managerial skills poor developing state as host and a foreign corporation- Sakhalin is a quintessential example of obsolescence bargaining relationship. Such relationships are a function of parties’ goals, resources and constraints. The goals can be conflicting from inception but the hope of the game being positive sum keeps both parties engaged. The initial constellation of goals, resources and constraints favours the corporation but bargain obsolesces over time as and if, the state accumulates clout. The post Soviet break up Russia of 1993 with its economic chaos and a more stable, confident, re-ambitious Russia of 2006 clearly reflect the obsolescence/re-emergence pattern of bargaining power.
In addition, the natural gas being a non-general application, non-storable, pipeline transportable, not spot tradable commodity – in contrast to modern floating vessels over wells for deep sea oil extraction, demobilisable in reasonable time- facilitated gradual increase in host nation’s game theoretic bargaining power in negotiations as invested funds lay on its soil eliminating confrontation as
References: Summary MBA course Materials, Global 2008 Cohort Wells L.T. and Gleason, E.S. (1995), ‘Is infrastructure investment still risky?, Harvard Business Review, September-October, reprinted in International Business Strategy, McGraw Hill Custom Publishing, 1st Edition pp 122-131 Wells Jr L. T. (1977), ‘Negotiating with Third World Governments’, Harvard Business Review, January-February 1977, reprinted in International Business Strategy, McGraw Hill Custom Publishing, 1st Edition pp 133-139 Encarnation Dennis J. and Vachani, Sushil (1986), ‘Foreign ownership: when hosts change the rules’ in Readings in international business: a decision approach [Robert Z. Aliber, Reid W. Click], MIT Press, Chapter 19