There are many global variables in play, covering economic, political, and strategic aspects - and all with far-reaching economic implications. The changes that accompanied the operations of big multinationals is one of the most important of these changes.
In the past, these companies were completely subject to the desires and policies of their governments, and having had to explain their pursuit of political agendas that often contradicted their commercial interests. This is been especially evident during the current decade, setting off a ‘rebellion’ by supra-national companies, so to speak.
Some of these companies followed an approach commensurate with the interests of shareholders to achieve more gains in light of intensified global competition and the entry of new players. This development - the separation between the interests of multinationals and the policies of their governments - has been driven by several reasons, the most important of which will be addressed.
These entities are in the main public joint stock companies and with shareholding by individuals from countries other than those in their home market. It has become more so as technology facilitates the process of trading on international stock exchanges.
This means that anyone and from anywhere can engage in trading from his/her office or home, which has significantly led to widening the base of retail shareholders. Whereas earlier, this would have been limited to a group of large shareholders.
The first factor coincided with the emergence of countries, businessmen and companies from the eastern hemisphere, who have enormous financial capabilities and were able to acquire substantial stakes in multinationals. Their representatives would even assume positions on the boards of directors.
Impact on bottom-line
Their voices have at times been in contradiction to some of the political agendas of major countries. As these companies are managed on a commercial basis, it has become necessary for them to align themselves with the commercial interests of all shareholders, including the new ones.
Also, the business operations conducted by these companies outside their home countries have expanded significantly and often surpassing the scale of their domestic business. Any withdrawal from foreign markets due to non-economic factors signifies a decline in their business and a substantial hit on profits, accompanied by the anger of shareholders and decline in share prices (which may not be borne by their financial situation).
It is thus apparent that several multinationals have recently shown reluctance to pull out from certain regions affected by wars and conflicts. They have showed hesitation despite pressures exerted upon them. This reflects the change that occurred in the structure and management of such mega-corporations, indicating their strengthened position and surpassing the influence of external pressures.
They are now solely driven by the interests of shareholders and away from political calculations, prioritising goals focused on maximizing profits, rather than getting involved in political disputes that do not align with their goals.
High-profile energy deals
This approach is likely to solidify as these companies distance themselves from conflicts, putting their commercial interests as a top priority. This is evident in the new contracts that these companies have signed with various countries, including those in the Arab world and particularly the GCC nations. Some significant examples can be highlighted…
Highlighting the importance of this agreement for both sides, Patrick Pouyanne, CEO of TotalEnergies, underlined the possible redirection of some volumes of LNG flows to non-European countries.
“If we need to redirect part of these LNG flows to another country... I think Qatar and ourselves, if it is in our interest, we will do it,” Pouyanne said, adding “it was not France, but TotalEnergies that committed to the deal”.
The oil giant Shell also signed a similar agreement with Qatar, which mirrors that the actions of other companies operating in the GCC and other regions will also be the same, highlighting the separation between the interests of these companies and the political agendas of their home governments.
The ongoing international changes necessitate a comprehensive understanding to gauge their essence and future implications on economic relations between the GCC with major countries and corporations. Such insights are essential for leveraging these changes to attain greater benefits that serve the interests of the GCC.