Research Article: 2024 Vol: 28 Issue: 1
Agnese Cimdina, University of Latvia
Citation Information: Cimdina., A. (2024). Negotiating trust as a market entrance strategy: the case of Nordic energy companies in the gulf. Journal of Organizational Culture Communications and Conflict, 28(1), 1-16
Based on post-doctoral research on expansion of Nordic companies to the Gulf region, this article addresses efforts of Nordic managers to establish business in the rapidly growing Gulf energy market. The experiences of Nordic managers were collected over the course of ten fieldwork visits to the UAE between 2016 and 2020. The fieldworks mainly consisted of company visits, including participant observation with formal and informal meetings and in- depth conversations with Nordic executives and their cooperative partners in the Gulf.
Most Nordic executives and diplomats whom I met in the Gulf named trust as a prerequisite for successfully launching a business there. They commonly told me that ‘you can’t succeed in this market unless you have the right trust relationships’. I explore how the Nordic perception of trust confronts the so-called wasṭa system in which trust is openly institutionalized through having the right connections in Arab countries. Is it possible to retain a Nordic way of doing business outside of the Nordic countries? Why do Nordic managers relate trust to ‘corporate ethicizing’ 1and how far will they go in forsaking their Nordic values to gain commercial success? I seek to understand what expectations regarding social trust are embedded in the Nordic and the Gulf “models” of doing business? And how does the articulation of the Nordic model affect how Nordic managers approach business development and negotiate tensions in the Gulf.
To answer these questions, I focus on the entrance of two Nordic companies, Statoil2 and Energy Nord,3 into the Gulf market. First, I look at the features that render the Gulf market attractive to Nordic energy companies. Then I shortly outline the experiences of Statoil there. While drawing on insights from Statoil I continue with telling the story of Energy Nord management in the Gulf to illustrate the very process of trust-building through intermediaries and its role in market entrance and business development. Through an in-depth analysis of the “game of trusting” as experienced by my key informants, Nordic executives from Energy Nord and influential Emirati citizens, I describe nuances in the ways they perform and negotiate trust, one bound by Nordic CSR and business ethics requirements and the other by wasta and kafala. By referring to local citizens, Nordic expatriates, and diplomats in the Gulf, I reflect on how conflicting discourses on trust influence business development prospects and on the ‘inner insider’s’ perspective on the insider, that is, on the intermediaries’ perspective on Nordic companies doing business in the Gulf.
Allowing a glimpse in the ‘inner insider’ perspective on the Nordic energy community’s presence in the Gulf, I show anthropological approach to international business challenges and a more dynamic conceptual landscape, where the businessmen are grappling with social complexities that are bigger than themselves or institutions from whence they came.
Thus, the article demonstrates how trust becomes negotiable and transformative in internationalization of Nordic business beyond the Nordic model. In comparison with the institutional mechanisms of trust integral to the Nordic model, trust-building in the Gulf is located within a broader post-tribal context in which the importance of wasṭa is emphasized as the backbone of social organization in Bedouin societies (Cunningham & Sarayrah, 1993; Brandstaetter, et al. 2016). The experiences of Nordic managers in the Gulf demonstrate that
the concept of social trust as perceived by Nordic actors does not conform to expected patterns in the Gulf, thereby impeding the successful internationalization of Nordic business into the region. As my observations show, trust is understood differently in the Nordic and the Gulf regions, and these differences have an impact on the outcome of collaborations and business transactions. The article takes a critical stance not only toward the assumption that the nature of trust is universal but also toward the assumption that the Nordic mode of trusting provides a competitive advantage in the Gulf. By reflecting on how trust-building through an intermediary in the Gulf is deeply rooted in the cultural narrative, in local traditions and even in local legislation, I argue that trust cannot be judged a universal concept as it contains a multitude of dimensions (Broch-Due & Ystanes, 2016), each of which needs to be addressed.
In reflections about the character and origins of trust in the two regions some measures of analytical generalization became inevitable, making it difficult to avoid “the danger of producing typifications and generalizations” (Abu-Lughod, 1993,7) at the expense of individual differences within the groups of Nordic and Emirati executives the main subjects of the article.
Nordic Model as a Corporate Virtue?
The trust building practice of Nordic managers in the Gulf can be compared to the sense of “corporate virtue’4 that regulates the moral side of business. In borrowing the notion of corporate virtue from (Rajak, 2016; Dolan & Rajak, 2016), I equate the Nordic corporate virtue with the so-called Norwegian VG rule, which is mentioned now and again by Norwegian diplomats abroad. Namely, whatever you say or do abroad must be able to withstand being publicized by the Norwegian tabloid, VG. This unwritten but functional rule reflects both the importance Nordic executives attach to conduct that displays high Nordic moral standards and to their relations with the state they represent.
There are widespread assumptions that trust, openness and integrity are the guiding values of Nordic leadership (Andreasson & Lundqvist, 2018), that social capital in the form of trust makes it possible for the Nordic countries to assert themselves in global competition (Skirbekk, 2012), that an exceptionally high level of trust is one of the Nordic region’s most vital resources (Andreasson, 2017) and that such trust provides an important competitive advantage (Repstad, 2005). During my fieldwork among Nordic executives in the Gulf, trust emerged as a significant element in the performance of corporate virtue as well as one of the greatest challenges to developing business relationships. Nordic executives often had to navigate conflicting expectations from their respective Nordic and Gulf stakeholders with regard to who should guarantee trust and how it should be done. There was an ambivalence to the way in which trust needed to be performed. Although a vital asset, trust had to be established and used in the right way, at the right times and places, and on the right scale for Gulf partners, but care had to be taken so that the Nordic approach would not be tarnished by adapting to local understandings of trust. In other words, while trust as corporate resource could be adapted, instrumentalized and deployed to respond to specific challenges and audiences (Dolan & Rajak, 2016), to raise a company’s profile and to enable corporations to survive and expand, Nordic actors also had to remain alert to the so-called VG5rule, namely, that what one does abroad must be able to withstand publicity in the Norwegian tabloid VG or its equivalent in their respective Nordic states.
As ‘it is conventional wisdom and theoretical assumption that the Nordic Model informs a better kind of global capitalism’ (Knudsen et al., 2020, 2), perhaps the Nordic states more than any others expect their companies to act responsibly when ‘going global’ (ibid.) deploying the image of the Nordic model as a resource in their operations abroad.
According to (Knudsen et al., 2020) the Nordic model can be said to share the following characteristics: exceptionally egalitarian and democratic political traditions, the welfare state and labour market policies and regulations. Trust is perceived as a value that plays a significant role in guaranteeing success of the model at home (ibid.) due to good institutions (Grimen, 2012). When promoted internationally, the Nordic Model is presented as rooted in virtues such as trust, consensus and egalitarianism that should ideally be universal (Knudsen et al., 2020). For example, Norwegians tend to believe that their business model sets the standard for good practice (Cimdina, 2012). However, while working abroad, Nordic energy companies must also adapt to local particularities where the standards and procedures of business practice, corporate ethics and relations with a state can be substantially different from those of the Nordic context (Knudsen et al., 2020). In the Gulf context, this requires the Nordic institutional trust to be transformed into something performative and negotiable, thereby opening the door to both opportunities and challenges.
The Market for Nordic Technologies
Despite its relatively small size, the UAE houses most of the Nordic companies active in the Gulf; more than 200 companies, mainly in the oil and gas and maritime sectors, are present in the UAE from Norway alone. Formerly known as the Trucial States, the rather isolated and impoverished communities of the southern Arabian Gulf were transformed into wealthy and globalized societies over roughly two generations (Bristol-Rhys, 2010). Before 1971, the UAE did not exist as a country on the world map the small villages dotting the coasts at Ras al Khaimah, Sharjah, Abu Dhabi, and Dubai were inhabited mainly by fishermen, pearl divers and seafarers (Al-Fahim, 1995).
Since the discovery of oil in the 1960s, the UAE has financed rapid socioeconomic development through hydrocarbon exports and built an extremely energy-intensive economy (Abdel & Luomi, 2016). The country’s impressive oil and natural gas revenues have enabled it to build an ultramodern infrastructure, to guarantee a high level of welfare for UAE nationals, to support a hundredfold population increase, to attract entrepreneurs from all over the world and to exert international influence. With sustainability challenges increasing rapidly, however, the UAE along with the other GCC6 countries have started to focus on diversifying the economy by investing also in cleaner and more sustainable energy sources (Abdel & Luomi, 2016). While diversification of the Gulf economy and energy present good opportunities for Nordic technologies, the UAE (like Norway) continues to accelerate the development of its oil and gas sector, which plays a crucial role in realizing the country’s overall development agenda. The prioritization of clean energy by the Nordic region’s politicians and top-level management (Ekelund & Westling, 2018) notwithstanding, the fact that GCC countries hold almost one third of all proven crude-oil reserves and one fifth of global gas reserves (Nikolina, 2016) makes them very attractive to Nordic companies operating in energy sector.
Smart Technologies or Smart Trust Relations?
In 2016, during my first visit to Abu Dhabi, Statoil was among the major international oil firms involved in discussions with the Abu Dhabi National Oil Company (ADNOC) about joining offshore production in the emirate. The existing offshore oil concession would expire in March 2017 and would then be split into several parts under new terms. Statoil was reluctant to comment on the process but acknowledged that they were looking at a broad range of opportunities in the Middle East.
In 2017, Statoil signed a cooperation agreement with Masdar, the Abu Dhabi Future Energy Company, over renewable energy development at Hywind Scotland the world’s first commercial-scale floating wind farm. Statoil’s partnership with Masdar was a success story and a significant step toward the diversification of energy resources for these two oil economies. However, business in the renewable energy sector was not primarily what Statoil had hoped for when expanding to the United Arab Emirates (UAE) in 2010. At that time, Norwegian offshore technology was estimated to be 60 per cent less carbon intensive than the world average, and Statoil strongly believed that their technology gave them a significant competitive advantage in the Gulf.
In 2018, when the ADNOC finally opened bidding to six oil and gas concessions, the first-ever offering of major onshore and offshore blocks in a competitive round, Statoil was not among the companies that would be granted business development agreements in Abu Dhabi. While the Austrian oil and gas company, OMV, which, according to Reuters Dubai, was granted a concession right, was willing to contribute a participation fee of 5.5 billion dirhams ($1.5 billion), Statoil explained to me that the commercial terms were not attractive to them. According to Statoil, their main disadvantage was the fact that the value of their knowledge-based technology did not count in the bidding.
If, as industry rhetoric puts it, Statoil’s technology can extract more oil in a more environmentally friendly way, if they can deploy carbon-capture technology and storage to prevent carbon dioxide from entering the atmosphere and use electric instead of gas turbines, why did their proven environmental technologies not open the door to business in a country that has one of the highest levels of CO2 emissions per capita in the world?
Speculation in the Nordic business milieu was intense. Some agreed with Statoil’s explanation that the UAE’s focus was on the commercial rather than the technological aspects of the oil business; some believed that Statoil’s technology was too advanced for the region; others felt that Abu Dhabi wanted to keep the business for themselves.7 The majority, however, speculated that important relationships had not been properly considered. The UAE is known not only as an oil economy but also as a ‘relational economy’, where trust relationships come before business. Given states’ interest in the energy sector, starting an energy business in another country means establishing relationships not only with local clients, partners and employees but also with the state (Knudsen et al., 2020). As reported by the media,8 top-level Norwegian government officials were initially involved in promoting Statoil and improving its chances of establishing business in the Gulf. In 2010, when Statoil opened its office in Abu Dhabi, the then Norwegian Minister of Foreign Affairs was present to help to open the door, so to say, to the Arab world. He introduced the CEO of Statoil to the Abu Dhabi Crown Prince. The Minister had meetings with several ruling sheikhs to contribute to building trust and securing some access to the seemingly closed circle of oil governance (ibid.). The promotion of Norwegian carbon capture technologies and incentives to prevent global warming was on the minister’s agenda. The UAE sheikhs, in turn, demonstrated an interest in sustainability solutions and announced their plans to build the first carbon neutral city in the world Masdar City. However, in the years to come, top Norwegian officials did not prioritize the UAE. Some Nordic actors in the Gulf speculated that this lack of attention might be one of the reasons Statoil did not succeed in winning a concession from the ADNOC, and that the sheikhs were sending the message that, in the Gulf market, technological excellence is not sufficient if you have not established the right trust relationships.
Trust-building the Unknown Way
In the aforementioned case of Statoil, it was not the company itself but expatriates in the Gulf who pointed to the lack of trust relationships as a possible major impediment to Statoil’s expansion there. Trust emerged as an essential element in the popular discourse about the business environment in the Gulf; several companies such as Energy Nord placed trust-building at the forefront of their operations in the region. Furthermore, trust was also an important element in Nordic executives’ own narratives about their successes or failures in the Gulf. The following story reflects the approach and experiences of Energy Nord’s executive managers Carl and Matias in establishing the company’s business in the Gulf through building trust and negotiating the unfamiliar local norms involved in the process.
Carl had moved to the Gulf around 2010 after the financial crisis had hit Europe. After spending several years promoting Nordic trade in the Gulf, he was headhunted for a management position at Energy Nord. He shared with me stories of his long business experience in the Gulf and made it possible for me to meet with his colleagues and business partners. During numerous meetings, he came across as a businessman who, while not discarding his Nordic values, tried to impeccably uphold and enhance the corporate standards he encountered in the Gulf.
Despite temperatures that can reach +50º C, Carl wears a sleek, trendy suit and a perfectly ironed, dazzlingly white Hugo Boss shirt decorated with fine cufflinks. And despite the sandy, dusty, drought-stricken streets, his shoes are polished and shiny. Respecting local norms, he never wears shorts or short-sleeved shirts. His actions are as disciplined as his appearance; he is always on time for meetings and always keeps his promises. He has realized the importance of first impressions in a region where appearance counts and where modesty is seldom appreciated.
Most sales deals at Energy Nord are initiated through his hands. ‘I don’t have any special skills, I just happen to know the right people’, he jokingly admitted when I asked him about the key to his success in the region. He is often approached by diplomats, managers, entrepreneurs, sales promoters and trade mission organizers for suggestions on where to start, whom to contact and how to succeed in the Gulf.
On one occasion, I met him at a local golf club—a favourite place for many Nordic expatriates in the region. Our conversation was frequently interrupted by phone calls. The calls from local Arabs he would always answer kindly, saying ‘Hello dear friend, how are you?’, regardless of his level of stress or lack of time. Nordic callers he would greet with a perfunctory ‘Carl here’.
‘You can buy those market analyses from whatever public place, but it doesn’t help you to establish a business. It is the most stupid thing to believe that a market analysis will open any door to you here’ he confidently answers a call from an aspirant forging ahead with starting a business in the UAE.
Another call follows, this time from a multibillion European company wanting to consult about a nuclear energy project in the Gulf. Then a call from a Nordic entrepreneur hoping to establish a factory in Saudi, asking how to proceed and which parties to approach. Carl suggests three alternatives, one of whom is a person from a royal family: ‘in which case all your problems would be solved’, he adds.
After the phone conversations, he turned to me, saying: ‘Here you are as strong as your networks. That’s why I have those 1800 numbers in my phone and 5000 business cards. The influential people are well connected throughout the Gulf. After six years in the region, they know me as trustworthy. If we shake hands, I always keep the promise.’
In my conversations with Carl, trust emerged as a significant form of symbolic capital, which, in (Bourdieu, 1998), could be converted into economic capital, with the time
invested in gaining trust serving as a gauge both of a businessman’s prospects and of the hidden transaction costs of Gulf markets. Carl noted:
“There is no public info, you don’t know who is who. I talk to people when somebody has a problem, use time to understand how they sort it out, I meet local people who know families, tribes, decision makers, and try to understand the real connections between them. If you want to do that by yourself from scratch, you must reckon on three to five years”.
Entering the Gulf: When Energy Nord opened its first branch office in the Middle East, the choice of the location was the UAE, which they would use as a gateway to the rest of the Gulf (a common practice among Nordic companies) Opening an office in the UAE was an important step in implementing the company’s internationalization strategy, as they were looking to grow in the Middle East Saudi Arabia, Qatar, Kuwait, Iran—where major investments in oil refining and petrochemicals were expected.
Expansion into the Middle East was planned carefully, Matias, the CEO of Energy Nord, recalled, in order to avoid the mistake Statoil had made in Iran in 2002. He was referring to Statoil’s efforts to secure oil contracts in Iran by hiring the services of a third party—the Iranian consultancy firm owned by the son of a former Iranian President. According to Norwegian media reports,9 consultancy firm was paid US$15.2 million by Statoil to influence political figures in Iran to grant oil contracts to Statoil. The arrangement was exposed by Norwegian journalists. Statoil was found guilty of corruption by Norwegian and US authorities and ordered to pay millions of crowns and dollars in fines. The incident also led to the resignation of Statoil’s Chairman, its CEO and its Director for International Operations. Statoil agreed to pay fines and acknowledged that its ethical policies and standards had been violated. The substance of the case and its settlement is described on the Statoil website, reiterating the commitments made by the company and explaining something about the complicated practice of developing a business in the Gulf where the intermediary chosen may prove to be the key to the success or failure of one’s business.
Although the hurdles involved in starting a business are not identical in the UAE and Iran, this case was perceived by several Nordic executives in the UAE as a warning to be careful in choosing their intermediaries and not to compromise their Nordic corporate virtue. After all, in the UAE, it was not a question of whether to choose an intermediary (usually a ‘sponsor’) or not, it was a matter of whom and how.
‘Teaming up with the right sponsor can make or break a business’
This was a phrase I heard from a number of consultants in the Gulf.10 The choice of the local sponsor was seen as one of the most crucial decisions a foreign company must make. Some historical and socio-cultural context is necessary for understanding the concept of sponsor and different aspects of being a foreigner in the Gulf. (Wapler, 2001) provides an apt description of the role of a sponsor in Saudi Arabia.
“Traditionally, a traveller crossing the tribal lands other than his own used to negotiate protection for his journey from a member of the home tribe. Nowadays, foreigners (travellers) wishing to do business in Saudi Arabia (the different tribe) require a protector who guarantees, and vouches for, the foreigner to the Saudi authorities (the members of the tribe). Strictly speaking, this guarantor is a sponsor or ‘kafeel’. The sponsor or ‘kafeel’ of a foreigner passing through Saudi Arabia is the person he is visiting in the country whose name appears on the visitor’s visa (‘tacheera ziarat’) issued by the Saudi Arabian consulate. A foreigner or foreign corporate entity is not free to work or do business personally in his or its own name in Saudi Arabia”.
The current practice in the region derives from the outlined context (see also (Longva, 1997). In the UAE, where the economy and the presence of foreigners boomed after the discovery of oil, Sheikh Zayed, the founding father of the UAE, issued a law to protect his country requiring that every foreign company be under the sponsorship of an Emirati (Mandet & Ba‘alawi, 2018).
The creation of a branch office is one of the main legal forms by which a foreign business, including Statoil and Energy Nord, establishes its presence in the UAE mainland.11The branch office can be set up with 100 per cent foreign ownership, but it must appoint the so called local sponsor. As per the UAE Commercial Companies Law, the sponsor must either be a UAE national or a company 100 per cent owned by a UAE national.12 The sponsor serves as a guide or guarantor for the foreign investor and facilitates the settlement of administrative and legal matters with the regulatory authority. In addition to his initial function of kafeel, the sponsor often serves as a gatekeeper to the local market and acts as an intermediary who helps foreign businessmen navigate local business circles. Both Nordic expatriates and Emiratis themselves differentiate between sponsors as either active or sleeping. A sleeping sponsor is seen as a pure formality that is necessary to fulfil the law; such an arrangement is considered a hidden fee or license to operate with no engagement in business development. Active sponsors charge higher fees and are expected to engage actively in developing a foreign business by mediating its relationships with influential local actors.
Upon entering the UAE, Energy Nord cautiously chose a sleeping sponsor. During its first years of operation, Energy Nord had considerable turnover, and its branch office grew to more than 100 employees; however, the company’s access to UAE government tenders did not transpire as hoped. The market potential was far from exhausted. Matias indicated that a reason for this might be a lack of trust: ‘Procurers can reject you during the technical prequalification stage for participating in a tender if they don’t trust you.’ He indicated that the fault often lay with the passive attitude of a sleeping sponsor. As the foreign executives widely believed that an active sponsor could build trust between their company and government entities, Energy Nord made the decision to replace the existing sleeping sponsor with an active one connected to the royal family.
‘For what purpose would you need access to the royal family?’ I asked Carl. ‘Because the government and the royal family are one and the same, and at the end of the day they decide everything’, he answered briefly.
As I continued my research into other Nordic companies, I kept bringing up this question. Their responses indicated the perception that, if problems arise, only trust relationships with influential locals could bring about a positive result.
Trust as a Matter of Negotiation?
Expatriate executives widely believed that a sponsor from a better-positioned tribe was more influential but more expensive and harder to come by. Such sponsors were seen as valuable in building trust relationships with public authorities and resolving legal matters. Remuneration for the sponsor was negotiated based on the social prominence of the sponsor and his family and on the contribution he would make to the business.
Rashid, a young Emirate lawyer, acted as a sponsor for several Nordic companies. He admitted that there was a lack of transparency with regard to sponsors’ capabilities and to their contractual agreements. He told me about Nordic branch offices that had been charged excessively high sponsorship fees. ‘Nordic managers often don’t understand the local law and trust wrong sponsors’, he said, ‘when they find out that they have overpaid, they are already stuck with the contract for 20 years’.
By ‘the law’ Rashid meant not only the UAE Federal Law on Commercial Companies and the additional business regulations related to mainland companies in the UAE, but also the local legal system in general, which many expatriates perceived as complex and unpredictable due to the mix of civil, common and Sharia law principles and to the frequent changes in these regulations. Moreover, expatriates perceived the UAE as a kin-based society with widespread favouritism that was difficult to penetrate.
I learned that there was an understanding among expatriates in the Gulf that locals do not fight each other; that family always comes first, followed by tribe, then country; that kinship and religious ties are thicker than money or employment; that Emiratis usually do not befriend foreigners; that local hierarchies are unbreakable; and that, in the case of a conflict, expatriates cannot expect an Emirati to stand on their side. Securing trust relations via sponsorship was thus perceived by many as the only way to secure goodwill from Emiratis.
Carl was convinced that most expatriates had one shortcoming in common in their trust-building activities with locals—an organizational structure with a two- to three-year presence in the particular market that does not support consistency in business relations in the Gulf: ‘When they have established all the right trust relations, they have to move. The new executive has to start from zero again. Relations are built between people, not institutions! You can’t succeed unless you as an executive make time to establish your own trust relationships.’
Since in the Gulf, as experienced by Nordic expatriates, trust was put in persons rather than in institutions, the two-year term of expatriate contracts was too short for establishing solid trust relations with the key local persons. Furthermore, Carl stressed the necessity to follow the generational change in the Gulf and its effects on the business: ‘The men who started to build these countries in 1970s are getting old. Young tigers are taking over. Some of the family members are rising and some are falling. I need to understand who the trusted person will be to go up. Then our business will go up too!’
An active sponsor with whom Energy Nord intended to replace their sleeping sponsor was a man named Majed. He was an Emirati soon to retire from a governmental position—a typical job for an Emirati national. Majed was perceived as very valuable by Energy Nord not only because he was close to the royal family but also because there were few Emiratis in the country. The total UAE population in 2019 was 9.68 million; however, hardly 10 per cent of those were Emiratis.13If we exclude children and Emirati women (with whom foreign men were not to interact), the number of potential local sponsors was reduced by at least half— and not all of them had equal influence. Although visually Emirati society is homogeneous, stratification and divisions go deep (Bristol-Rhys, 2016). This was often confusing for expats who have assumed that all Emiratis are equally wealthy, high-ranking and empowered (ibid.). ‘Would you as a sponsor accept any foreign company?’ I dared to ask Majed, as I got to
meet him. ‘Of course not’, he replied:
“I want a solid company with a good reputation. You can find a sleeping sponsor for 10K dirhams just ask anybody wearing a kandura.14 But he won’t pick up the phone when you call him. For a bigger amount, you can have a sponsor who will take you to big companies and knock on their doors, but you can also get a sponsor who will open those doors straight ahead, like I do. My yearly fee is 200K dirhams; it's a lot, but I'm an active sponsor”.
However, a new contract with Majed could not be signed before the contract with the existing sponsor had been terminated. Besides, the existing sponsor had brought an action before the court against Energy Nord to retain his contract. Matias believed that their chances of winning the case were poor. The common law practiced by local courts led him to think that the judge’s ruling would be subjective and favour the local sponsor. When my fieldwork
ended two years later, the sponsor case was still unresolved. Energy Nord still had the old sleeping sponsor, which made it difficult for them to expand into new business areas.
Trust within the Nordic Model?
Anthropologists based in Norway conclude that, in Norway, there is something beyond personal interaction that guarantees trust between people and institutions that trusting somebody does not take place only within one’s circle of family and friends (Archetti, 1984); that everybody who belongs to their society deserves trust; that decisions are not taken behind closed doors (ibid.); that the majority relies on public institutions in the belief that they will assume responsibility for the people’s interests (Lien, et al. 2001); and that legitimate sanctions for violations of this norm guarantee trust in social relationships (Sørhaug, 1996). This does not mean that most people in Nordic countries are satisfied with what their public institutions are doing; nevertheless, there is a powerful expectation that the state will do ‘it’s best’ (Lien, et al., 2001) regardless of personal contacts.
Drawing on a number of studies on the origins of trust in Nordic countries, (Andreasson, 2017) writes that the modern history of Nordic trust began with the rise of the major popular movements in the second half of the nineteenth century, when the movements set up associations—which were local, democratically governed and member-based—at the grassroots level. The culture of voluntary associations held society together, promoting strong local norms of trust and respect that facilitated collaboration (Andreasson, 2017). Over time, Nordic associations developed a close relationship with the state, which supported the associations and subsidized them with tax revenues. This led to civil society working in parallel with the state, even if the associations could be critical of state politics, thus contributing to a diffusion of power. In turn, this arrangement helped to increase trust in institutions and fostered a more general trust in society (ibid.).
The history outlined above indicates that the exceptionally high level of trust enjoyed in the Nordic countries is likely to have evolved from the well-functioning institutional mechanisms of the Nordic model. At the same time, interestingly, the Nordic model could be viewed as cooperation without (the necessity of) interpersonal trust. In their book, Cooperation Without Trust? (Cook, et al., 2005) claim that, while trust works only in ongoing interpersonal relations, institutions can substitute for trust by ensuring credible commitments and maintaining a sense of fairness. According to them, institutions—not trust function as guarantors for cooperation.
The Norwegian philosopher (Grimen, 2012) tends to equate the Nordic model with good institutions. He believes that, by reducing vulnerability and insecurity, good institutions become a framework for citizens’ activities without citizens having to take precautions and that we often forget what it takes for neighbours to be able to trust each other. Good neighbourhoods require good institutions, he concludes (ibid., 85).
The suggestion that a society with strong institutional mechanisms can function without mutual interpersonal trust leads one to think of Nordic trust as dyadic trust between the individual and the state represented by its institutions and of Nordic society as a society where strong institutions, rather than one’s fellow citizens, guarantee a high level of trust between strangers.
The scale of social trust in Nordic countries has earned international recognition. However, this approach to trust raises the question of whether an understanding of personal, professional and public relationships solely through the institutional frame is not too simplified and ethnocentric a model, and one that overlooks other modes of trusting in different contexts.
Trust within the Gulf context?
While the culture of voluntary associations that promotes strong local norms of trust and respect that support and facilitate collaboration throughout the state seems to hold Nordic society together (Andreasson, 2017), social conventions that favour the interests of tribal members above national interests has been typical in the Gulf, where nation states are a recent innovation (Barnett, et.al., 2013). The history of the Arab world, both before and during colonial rule, is a history of families and tribes (ibid). Researchers point out that individuals in the region still tend to identify more strongly with their tribal group than with a value system that assigns virtue to actions that further state interests (ibid.); that commitment to personal relationships is deeper than to formal institutions (Lackner, 2016); and that the wasṭa network seen as ‘a state within a state’ is an effective method for dealing with institutions (Kroph & Newbury-Smith, 2016).
Wasṭa is understood as having connections to people who have better connections (Bristol-Rhys, 2016) and seems to be the primary way in which social capital is managed in many Arab societies; an understanding of this concept is therefore essential to explaining patterns of trust-building in the Gulf. Mediation wasṭa used to be the cornerstone of social organization in the traditional Bedouin cultures of the Arabian Peninsula it was usually applied to settle disputes between members of different tribes (Cunningham & Sarayrah, 1993). Traditionally, the head of a family or tribe acted as waseeṭ to mediate within the tribal group and to negotiate conflicts with other tribal groups. In this way, wasṭa helped maintain the unity, integrity and status of the group within the broader society (Barnett, et al., 2013).
Another dimension of wasṭa is that of intercession, in which a broker uses structural gatekeeping power to provide or deny access to resources unattainable to another party (Cunningham & Sarayrah, 1993; Brandstaetter, et al. 2016). The mediation and intercessory dimensions of wasṭa make it a complex construct with ambiguous ethical connotations ranging from ‘unambiguously positive’ to ‘premodern evil’ (ibid.). Wasṭa may be judged differently by the same individuals depending on whether they are focusing on ‘objective’ management principles or on personal and group relations (Lackner, 2016).
Nowadays, the ability to mobilize wasṭa is often seen as a way of circumventing channels to solve problems, of gaining access to those with power and better connections (Bristol-Rhys, 2016), of speeding up administrative procedures or of gaining employment. Wasṭa is available only on the basis of long-term relationships (Ramady, 2016) especially in family networks. The recipient of a favour does not even have to reciprocate to the donor himself—rather he is expected to reciprocate by showing solidarity to any other relative when needed.
‘Could you explain what wasṭa is?’ I asked Khalid, another Emirati lawyer.
‘Wasṭa!’ [He was excited.] ‘It’s like, if my brother works in the ministry and can help me with something, it’s going to be wasṭa. Wasṭa is a good thing, but it could also be a bad thing. If I have graduated from university, but you are just from high school, and we both apply to work in the ministry, but they hire you because of wasṭa, then it’s bad wasṭa. But it’s good to have connections. It’s very common here. Everybody knows what wasṭa is. Here in the UAE you see it everywhere’, Khalid explained.
‘I’ve never heard people using that word’, I admitted.
‘We do have this word, but you can’t go and say: “Do me wasṭa.”’ ‘Do foreign companies need wasṭa?’
‘Yes, but it’s not easy for them. If I need something from the oil companies, I know the CEOs or someone else, so this is wasṭa for me—opening some possibilities. Most foreigners don’t have such connections.’
Wasṭa was rarely mentioned by those Emiratis who had it (Bristol-Rhys, 2016), and I never heard Nordic executives mentioning wasṭa, but I saw them searching for it through local sponsors. In the Nordic model distributing (public) favours, positions or influence to one’s own group members would be considered nepotism, an abuse of power for private ends or even corruption. Thus, the challenge for Nordic executives in the Gulf was to balance and negotiate the cultural norms surrounding these two very different conceptions of social trust.
Based on their institutional approach to trust, Nordic managers considered wasta as a power to ‘corrupt’ their ethics by potentially translating it into forms of nepotism. Meeting such ‘othered’ practice of trust potentially threatened their image and integrity in the eyes of the tabloid press at home. However, while only mobilizing wasta as a ‘corrupting’ force contradicting to the Nordic model, they failed to see the ethically manifold character of wasta, namely, that there are ‘good’ and bad ‘versions’ as explained by Khalid. As pointed out by both researchers and local mediators, there was clearly a strong degree of ambiguity to the concept in local practice.
Wasṭa persists in the Gulf societies largely because of their tribal structure (Barnett, et al., 2013) and might be viewed as innocent, reflecting a strong sense commitment bound by honour and mutual obligation (Ramady, 2016). Many state officials and business owners, such as Rashid and Khalid, who have been trained in Western universities, are familiar with the idealized models of modern management based on merit, objective rules, efficiency, and equity; it is in this context that certain practices associated with wasṭa have taken on negative connotations (Lackner, 2016). At the same time, Lackner reminds us (ibid.) that wasṭa has been fundamental to the social cohesion of the Gulf States, establishing and strengthening political structures and allegiances, allocating significant roles to social groups that might otherwise find themselves marginalized. What can be derived from the intermediaries’ take on wasta is that it is not only about trust, but to a large extent also about connectivity, which implies forms of trust, but isn’t equivalent to them. Wasta is an ethically manifold concept which can be enacted in ‘good ways’ and ‘bad ways.’ It connects more ‘traditional concepts’ of kinship, relations and hierarchy to the contemporary process of extraction and power that opens up for various complexities in doing business.
The Costs of Trust?
The system of sponsors laid down in the UAE Commercial Law can be seen as a formalization of wasṭa and a commercialization of Emirati social capital that compels Nordic executives to transform their patterns of trust from institutional to negotiable through intermediaries, which at times jeopardizes their principles of corporate ethics.
As Carl pointed out: ‘In the Nordic countries we don’t really understand what a middleman is our risk management and legal departments don’t accept it. But in order to sell anything in the Gulf, you need to have middlemen.’
On the one hand, Energy Nord had to develop a profitable business for its Nordic parent company. On the other hand, to secure this value, the right local intermediaries and costly trust building was needed.15As Grimen points out, trust and mistrust have different costs anyone who mistakenly trusts others risks a large and painful loss, but those who mistakenly do not trust others risk losing opportunities and isolating themselves (Grimen, 2012). Under the conditions of fierce business competition, seeking trust through intermediaries remained a middle ground to follow. However, failing to integrate relation
building through middlemen into the institutional trust model characteristic to the Nordic model, Nordic trust proved uncompetitive in the Gulf.
Triadic relations in terms of trust bought through intermediaries as formalized or embedded in wasṭa, have implications for Nordic corporate virtue for a number of reasons. If wasṭa is an influential force in most significant decisions in the Gulf (Cunningham & Sarayrah 1993); if structural power emanating from a gatekeeper position in triadic relationships through middle men makes wasṭa increasingly prone to cronyism, nepotism, rent-seeking behaviour or even corruption; if trust through wasṭa leads to granting special privileges to friends or acquaintances; if wasṭa permits individuals with influential family or financial power to benefit disproportionately; and if wasṭa is used to seek benefits from the government or when attempting to bypass inefficient civil agencies (Daoudi & Dunn, 2016) then a Nordic entrepreneur doing business in the Gulf must constantly face difficult choices.
How to satisfy the need for wasṭa that makes business possible in the UAE and remain compliant with the corporate ethics of the Nordic model was a common challenge among the Nordic executives. The insight I was given into their trust-building considerations allowed me to observe the manifestations of their corporate virtue as an ‘evolving and flexible set of practices and language’ through which they attempted to position themselves as ethical actors. Negotiations of trust through sponsors as intermediaries became a set of practices and language through which Nordic executives assessed their business prospects in the Gulf. Their emphasis on ethics and trust as an active process revealed ‘how moral strategies are mobilized and diffused through specific material and discursive practices’ (Dolan & Rajak, 2016, 17).
Statoil’s relationship-building model through influential middlemen in Iran in 2002 clearly did not withstand the publicity it garnered. Thus, the apparent caution in Statoil’s approach to the Abu Dhabi market following the company’s failure in Iran was seen by several Nordic executives as a concerted effort to avoid making the same mistake again.
A decade later, trust relations developed in the Gulf provided for Energy Nord business opportunities in Iran, which, like the UAE and Saudi Arabia, was regarded as a country where the potential for generating profits was immense. Shortly before the sanctions on Iran were lifted in 2016, an organization proposed that Energy Nord design an oil refinery for Iran. However, Energy Nord declined the proposal. Carl told me as if making excuses for having missed a lucrative business opportunity:
“We can do oil plants, but we said ‘no because of the sanctions. Then they asked but what if the order comes from a European country can you do it then? No, we repeated! We are a Nordic company, we have certain rules and we have certain ethics. In the Nordic countries, we always follow the law”.
Nordic Energy’s corporate virtue manifested itself as a strong self-narrative about ethical behaviour deeply ingrained in the perception of corporate personhood and as a self- regulating mechanism with regard to building partnerships and sustaining company’s reputation. In addition, it displayed the power of ‘virtuous language’ as an asset in the production of corporate virtue (Kirsch, 2015, 50). Being a trustworthy corporate actor, polishing the Nordic image and avoiding any violation of the so called VG rule came across in my fieldwork as the main elements of Nordic corporate virtue; these three elements were intertwined with corporate and national identity as if declaring that Nordic = corporate virtue and Nordic = trust. When considering partnerships, this self-image imbued with Nordic values worked as a kind of filter. As Nordic institutional trust did not prove productive in navigating Gulf business circles, wasṭa–like threads of influence were sought and employed to build relationships that could potentially result in advantageous and reliable sponsor agreements. For Nordic executives, seeking, testing and assessing the influence of a potential intermediaries be it an active sponsor, an official, a royal family member or all three in one
person who could open doors to business opportunities in the market was an intense process fraught with concerns that the use of intermediaries would cast doubt back home in the Nordic countries on the ethics of their dealings. The various ways in which Nordic executives used the language and practices of trust in building corporate partnerships revealed how far they felt they could go for the sake of profitable business ventures and still preserve their Nordic self-image. Their corporate virtue in trust building manifested itself as ‘an evolving, flexible, and overlapping set of practices and discourses through which a business (re)makes and asserts itself as an ethical actor’ (Dolan & Rajak, 2016, 5).
One thing that we can learn by studying Nordic corporations in the Gulf is that trust-building is intrinsically linked with the perception of relationship between state and its citizens and with corporate virtue as a self-image that, in the case of the Nordic corporations, happens to overlap with their national self-narrative as ethical actors. At the same time, ethics as corporate virtue is flexible and take shape through adjustments made to integrate into the local environment. As (Dolan & Rajak, 2016) state, commercial imperatives, social relations and cultural meanings come together to create various ethical formations to which executives must adapt to be able to survive and grow in the market.
The efforts of Nordic energy companies in the Gulf to integrate into the local networks of trust relationships illustrate not only the fact that ‘there is a considerable variety in the behaviours and attitudes that produce trust in each context, but that the people inhabiting these contexts have radically different ways of understanding what trust is’ (Broch-Due & Ystanes, 2016, 8) and that mutually supportive relationships require conscious work to be maintained through ever-evolving acts of entrustment and negotiations. The social roles and obligations of sponsors such as Majed, Rashid and Khalid indicate that, in the UAE, it is not the autonomous, inward-looking individual envisaged by the Nordic thought but rather the perception of the self in relation to one’s family, tribe or closest social group that counts, and that trust-building is a vital aspect of group solidarity necessary for developing relationships in the broader community. The individual agent, central to the economic models of Western philosophy and Nordic institutional and business paradigms, corresponds neither to corporate nor personal life-worlds in the Gulf.
This article has shown that Nordic institutional trust as portrayed, for example, by (Andreasson, 2017 & Grimen, 2012), is difficult to put into practice in the Gulf due to the wasṭa and kafala mechanisms ubiquitous in daily life and ensconced in the region’s policies, which contrast powerfully with the fundamental principles of the Nordic model. While the broad perception of Nordic state institutions as fair and efficient helps explain why Nordic countries are recognized as world leaders in social trust, it does not automatically mean that the Nordic form of trust provides competitive advantage in the Gulf, where interpersonal trust through middlemen or intermediaries called ‘sponsors’ is collectively expected and perceived as being the most efficient way of doing business. Adjusting to social norms and legislation in the UAE, Nordic executives had to transform their understanding of trust from being institutionalized (as between an individual and the State represented by its institutions) to being negotiable (as trust-building through an intermediary, usually a sponsor), thereby opening the door to both opportunities and challenges.
It should be noted that in the Gulf, the perception of interpersonal trust as a source of protection and a path to opening doors in both business and law enforcement processes does not simply reflect the mechanisms inherent to the legal system. Trust-building, including wasṭa, also exists as an element of discourse a conception of models of interaction—on which actors base their performance.
Research for this article has been conducted within author's post-doctoral research project Smart Energies in Intercultural Contexts: Nordic and Middle East Business Interactions in the Name of Sustainability (Project № 1.1.1.2/VIAA/1/16/168, funded by the European Regional Development Fund (ERDF) in affiliation with the University of Latvia, Faculty of Business, Management and Economics and in cooperation with the University of Bergen, Department of Social Anthropology in Norway and Nordic Innovation Hub in Abu Dhabi. Special gratitude goes to Ståle Knudsen, Professor at the University of Bergen, for commenting on this article.
1This term is borrowed from Catherine Dolan and Dinah Rajak, ‘Ethnographies of Corporate Ethicizing’, Focaal Journal of Global and Historical Anthropology 60 (2011): 3-8
2The Norwegian state is the main shareholder in Statoil with a holding of 67%. The company is present in more than 30 countries and has more than 20,000 employees. I am truly grateful to Statoil for the collaborative attitude of their executives during my visits in Abu Dhabi. In May 2018, Statoil was renamed Equinor; however, I retain the name Statoil in this article to reflect the name in use during my fieldwork.
3The name of the company and its management are anonymized at the request of the company. The company is of Nordic origin, has more than 1000 employees and is present in several international markets. I express true gratitude to the management of the company for their collaborative attitude.
4In this article, the concept of corporate virtue relates to the perceptions of Nordic managers how to build business relations without forsaking their Nordic values. Since the case concentrates on Nordic energy companies, it should be added that discussing the ethics or “virtue” of fossil fuel extraction is not in the scope of this article.
5Generally known by the abbreviation VG, Verdens Gang [The Course of the World] is a Norwegian tabloid newspaper.
6The six-member countries of the Gulf Cooperation Council—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, the UAE.
7The Mubadala Investment Company, which is owned by the Government of Abu Dhabi, was a shareholder in OMV.
8Sverre Rørvik Nilsen, ‘Støre åpner dører for Statoil i Abu Dhabi’ [Støre opens doors for Statoil in Abu Dhabi], Finansavisen, 19 January 2010, updated 15 December 2013;
9See: Øystein Andersen, ‘Statoil innrømmer korrupsjon’ [Statoil admits corruption], Dagbladet, 13 October 2006, updated 15 December 2016; Ntb, ‘Statoil-direktør går og Iran-avtale stoppes’ [Statoil director leaves and Iran agreement is stopped], Stavanger Aftenblad, 12 September 2003; Bent Tandstad, ‘Trekker Statoil og Olav Fjell for retten i Iran’ [Statoil and Olav Fjell are taken to court in Iran], NRK, 23 October 2012.
10Consultancy services for building trust relationships and reducing risks for foreign companies in the Gulf was a whole industry that reinforced the discourse of the Gulf institutional framework and business environment as mystified, uncertain and relationship-based—despite local authorities’ incentives to formalize and systematize it according to such unified criteria as In-Country Value and Localization programs in the GCC Oil and Gas industry.
11A branch office of a foreign company is an extension of the parent company and is not considered a separate legal entity. It may engage only in those activities in which the parent company engages.
12This refers to the time frame from 2016 to 2019, when I was doing fieldwork.
13See: https://www.globalmediainsight.com/blog/uae-population-statistics/
14Traditional dress for Emirati men consists primarily of the kandura—a long-sleeved, ankle-length tunic, most often white in colour.
15Nordic executives in the Gulf estimated that trust building takes an average of three years and costs 2–3 million Norwegian crowns in working capital per year in addition to sponsorship fees that varied depending on the sponsor’s influence.
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Received: 12-Jan-2024, Manuscript No. JOCCC-24-14713; Editor assigned: 13-Jan-2024, Pre QC No. JOCCC-24-14713(PQ); Reviewed: 27-Jan-2024, QC No. JOCCC-24-14713; Revised: 01-Feb-2024, Manuscript No. JOCCC-24-14713(R); Published: 08-Feb-2024