Oil politics makes for greasy bedfellows, and that accounts for some odd and ominous slipping and sliding on the part of Albertan oil developers and their guy in Ottawa, prime minister Stephen Harper.
Back in the 1980s, gas and oil tycoons were so ticked at prime minister Pierre Trudeau for creating Petro-Canada — a government-owned oil company to advance Trudeau’s National Energy Policy – that they helped launch a new neo-conservative political party.
And now they must cheer on their chosen leader, Stephen Harper, as he opens the tar sands to Nexen and CNOOC, a government-owned oil company owned by a foreign government that describes its economy as “Communism with Chinese characteristics.”
Stephen Harper made it clear he wasn’t happy with the decision he made.
We did not spend decades getting rid of Canadian government control of the oil economy in order to see foreign government control, he said, conceding that something had gone terribly awry in the affairs of mice and neo-conservative men.
By way of penance, Harper promised not to do it again. It is the end, not the beginning of a trend, he promised. Future foreign government ownership of the tar sands will only be allowed “on an exceptional basis,” he said.
We must all be prepared for the exception to become the rule.
No story is not likely to end happily when it starts with a government decision to roll out the red carpet for a behemoth owned by a tyrannical government that spends $76 billion a year spying on and jailing its own critics.
China is not a typical minority stockholder. Corruption and cutthroat cost-cutting are so bad that Chinese companies can’t make milk without poisoning it with melamine, let alone oil and gas without leaks and explosions. That’s what happened in its Penglai oilfields last year, according to Tim Armstrong, Ontario’s former agent general for the Asia-Pacific area, a critic of the deal.
It is not possible, now or the in any near future, to have oversight of Chinese government resource plans, since the government offers virtually no mechanisms to provide transparency on itself — the owner, as well as policy-maker for three-quarters of Chinese business enterprises. I wonder if some of these companies can figure a way to wiggle around Harper’s proposed limit of foreign government investments to about $300 million per purchase? How about breaking up a big company into many fictional $300 million dollar pieces, just like government staff do whenever they have to get around a rule setting a cap on any one contract? And I wonder if they even have to bother with that, given the clause in the new Canada-China trade deal, the Foreign Investment Promotion and Protection Agreement. The very title of the agreement makes no suggestion of any limits, and, true to the title, one clause specifies that Chinese companies already operating in Canada can expand without limits. It seems that the exceptional basis horse has already left the barn.
None of which is to say that Canada’s PM is anybody’s fool. We must drill deeper than ideology and party politics to understand why this deal is only the beginning.
Start with a cool assessment of the investment prospects of a tar pit that has become a world symbol of environmental degradation, not exactly a gateway to positive branding, and that is also extremely expensive to extract quality oil from – much more expensive than the old wells and new shale gas reserves the US expects to tap into for most of its fossil fuel needs over the next decades.
Proceed with a cool assessment of the value of that high-priced tar knowing it is landlocked, and has no apparent way of being piped to a port that can serve the fast-growing, fuel-hungry Asian economies.
Then do a cool assessment of the trends in world trade that influence a Canadian government oriented to selling barely-processed resources with little in the way of value-added or creative manufacturing.
That resource export orientation is a tried and true easy and fast way for investors to make money, and it’s usually been the job of progressive governments to pressure, subsidize and coax companies to try the harder route to wealth, which creates so many more jobs and other benefits.
Harper Conservatives are not in that tradition. That is a given. Otherwise, the Canadian government wouldn’t be hunting for investors in tar sands, but investors in ways of extracting maximum value over tens of generations from this godsend of a resource. If the government were thinking tar sand products, instead of tar sand oil, it wouldn’t worry about pipes, because trains would do just fine. And it would look for investors from Canadian pension funds, which are awash in funds that need to be invested.
If the Harper government wants to hustle barely-processed fossil fuels, why does it feel it must lock in relations with China, rather than pursue the multiple routes of foreign trade promoted by the World Trade Organization?
Here’s where the big squeeze comes for the person caught between a tar pit and a hard place.
Harper deserves kudos for knowing, and being candid about, where the world trade winds are blowing.
While travelling through Asia this fall, he was frank with any reporters who asked what was on his mind.
The world has changed fundamentally since 2007-9, he told reporters —referring to the world before Arab Springs, food price hikes, housing bubbles, banking meltdowns and prolonged recession. Many industrial countries are retreating to protectionism, he said, and the WTO has become a dead duck.
That’s why, Harper said, his government is pushing bilateral trade deals so aggressively. Canada has launched 60 sets of negotiations, and has succeeded already with nine. That’s why a China deal is so important, he explained.
The US and WTO may have been the apples of the Canadian neo con eye way back in the 1990s, but that was then, and this is now. Nothing dogmatically ideological about this crew.
Harper’s casual conversation with reporters in India made no reference to the other blindingly obvious major new trend in the changed world since 2007-9. The respected Economist magazine devoted a special issue to it, which referred to “state capitalism on the march.” Two thirds of Asian companies listed on the Fortune 500 are state-owned, a reflection of the fact that state agencies are the fastest way for an economy to grow and to keep the coercive power that “bureaugarchs” like – one reason why states are key actors in land grabs around the world. Tar sands, of course, are the crown jewels of land grabs.
China is already home to many of the world’s biggest state capitalist firms, most of which start each day knowing they enjoy a captive market of over one billion people. In effect, state capitalist or state-linked investment is about the only investment China offers. There are few exceptions there for Harper to be able to play with.
When landlocked tar is the card Conservatives are leading with, and actually the only card they hold, there’s not much choice but to suck up a few bitter pills about state investors.
Welcome to Harper’s new National Energy Policy. Perhaps we could call it “neo-conservatism with Chinese characteristics.”