It is easy to forget what a fine mind Stephen Harper has because he so frequently harnesses it to divisive partisan schemes. But every so often, the prime minister turns his intelligence to a difficult public issue and comes up with a smart solution.
His decision on the $ 15.1-billion bid by China National Offshore Oil Corporation Ltd. (CNOOC) to take over Calgary-based Nexen Inc. falls into that category. He said yes to the controversial acquisition, but no to future takeovers of Canadian energy firms by state-owned foreign companies.
His answer was pragmatic, balanced and shrewd enough to make a gambler smile.
He gave the Chinese government what it wanted — but not what it really sought: a precedent it could use to buy up companies in the oilpatch, guaranteeing China a growing share of Canada’s energy wealth.
He gave the energy sector what it wanted — but not what it was really hoping for: an unrestricted infusion of Chinese-controlled capital into the oilsands.
And he left his critics scrambling to pinpoint what they found objectionable. Some attacked him for abandoning his free market principles. Others accused him of knuckling under to Beijing, ignoring the environment and catering to Alberta. The majority resorted to words such as ambiguous, incoherent and irresponsible. No dominant voice emerged from the cacophony.
That is not to say the prime minister’s overall energy policy is praiseworthy.
He refuses to acknowledge or mitigate the damage petroleum extraction from the oilsands is doing to the atmosphere. He is using the power of the state to stifle dissenting voices. He is pouring taxpayers’ money into a dubious scheme to capture and bury carbon emissions. He is boosting pipeline construction despite local opposition. And he is waiting for the U.S. to set enforceable greenhouse gas caps before imposing limits on Canadian fossil fuel producers.
The problem wouldn’t have arisen if China had continued to take a minority stake in Canadian energy companies or formed joint ventures with them. But when state-owned mega-firms such as PetroChina,SinoChem and CNOOC started taking control of Canadian companies, Harper became uneasy. And when CNOOC made a bid to acquire Nexen, the 10th biggest revenue generator in the energy sector, alarm bells went off.
The government had no legislation to deal with a threat like this. The 39-year-old Investment Canada Act was drafted long before policy-makers envisaged the possibility of foreign governments buying up Canada’s strategic assets.
Harper had three options:
• He could approve the proposed takeover, treating it like a normal commercial transaction with a foreign buyer, which would have signalled to China that it could take a run at a major oilsands producer such as Suncor,Cenovus or Canadian Natural Resources Ltd.
• Or he could permit the Nexen takeover on the grounds that CNOOC met the tests of “net benefit to Canada” that were in effect when it applied, but make it clear those rules are now history; Canada is updating the Investment Act to preclude foreign state-owned enterprises from buying Canadian oil producers in all but “exceptional circumstances.”
Are there risks? Yes.
But looking at the big picture, Harper got it right.