Kyodo news is reporting that the Japan's METI is requesting JPY20 billion for fiscal 2009 for "commodity M&A". A METI affiliate, Japan Oil, Gas and Metals National Corp., is already extending low interest loans to Japanese companies to help finance the cost of purchasing development rights for overseas mines producing non-ferrous metals. Since the development rights for more promising mines are already owned by Australian and Brazilian mining companies, METI will expand the scope of its financial support to include acquisitions of foreign companies that own such rights. If the Japanese government can subsidize commodity M&A, why can't China, India and other relatively wealthy industrializing nations do the same, if they are not already. Russia's Gazprom is already playing state-sponsored hardball with its competitors for complete dominance of its supply chains, including the recent invasion of Georgia.

One has to wonder what would happen to commodity prices and the stock prices for key global commodity producers if countries begin using sovereign wealth to aggressively bid for supplies of key commodities such as crude oil and non-ferrous metals. In the case of crude oil, major multinational oil producers increasingly have to deal with nationalized oil companies that are essentially an arm of the state. If countries also begin to nationalize non-ferrous producing resources, we could see the world squaring off between "the haves" and "the have nots", leading to conflicts and in some cases wars over natural resources. The ball is now clearly in the key resource owner/producers' court, and is expected to remain so for the foreseeable future.

China and Japan have already gone several rounds over oil fields that overlap their international borders. In the Arctic, which is believed to contain 1/5th of the world's undiscovered, recoverable oil, the five circumpolar states -- Canada, Russia, the U.S., Norway and Denmark -- are scrambling to claim new territory. Last August, a Russian submarine planted the country's flag on the seabed some 14,000 feet under the North Pole. Shortly afterward, Canadian Prime Minister Stephen Harper announced that his country's military presence in the Arctic would be beefed up.