DISCUSSION PAPER | Emerging ‘Resource Nationalism’ in Ireland

[This is Draft One of a discussion paper, prepared for the purpose of framing a debate on ‘resource nationalism’ in Ireland, which is the topic of an upcoming event called ‘Rage Against the Regime‘ (RAR) – taking place at the Grand Social, Dublin every Thursday, beginning 13 June 2013. Please feel free to leave comments or suggestions below, on the RAR Facebook Page –  Twitter – or email rar.ireland@gmail.com]

INTRODUCTION |  The Rise of ‘Resource Nationalism’ 

‘Resource nationalism’ is a current international trend that is seeing more and more governments around the world exerting greater control over their natural resources, and seeking greater revenues, taxes and other improved conditions for local communities, from foreign investors. Ireland is not part of this trend, and still forms its policy and makes its agreements on the traditional assumption of scarcity; that we don’t have many valuable resources. However, with growing public awareness and opposition to multiple government programs, all around Ireland, the pressure is mounting on the Government to fundamentally change its policy, and ensure the people get greater control over, and a great share of the benefit from, their natural resources and State assets.

Before examining this trend, and signs of Ireland’s emerging resource nationalism, it is necessary to examine the concept of natural resources in detail.  There are two schools of thought on what exactly constitutes a natural resource. One school maintains that a natural resource must have economic value, (e.g. oil or gold). The other school is based on aesthetic or other values. Black’s Law Dictionary (Seventh edition, 1999) gives both definitions. Black’s first definition is “any material from nature having potential economic value or providing for the sustenance of life, such as timber, minerals, oil, water and wildlife. ” The second definition is “environmental features that serve a community’s well-being or recreational interests, such as parks.” While the economic value of natural resources continues to increase on international commodities markets, the intrinsic values are also being increasingly cherished by the peoples whom they belong to.

Both of these values are driving a movement of ‘resource nationalism’ which is growing around the globe, but which has yet to take make a firm footing Ireland – which finds itself curiously out of step with other European and OECD countries, as well as developing countries, in this regard. However, a rise in the number of public controversies surrounding natural resources and state assets, and the method of their valuation and management indicates that ‘resource nationalism’ may yet emerge in Ireland as well.

RESOURCE NATIONALISM | Definition

Resource nationalism has been defined as “the tendency for states to take (or seek to take) direct and increasing control of economic activity in natural resource sectors.” [Ward, H. Working Paper: Resources nationalism and sustainable development, The International Institute for Environment and Development, March 2009. p. 5.]  While ‘resource nationalism’ has been described as ‘the most important political movement of the 21st century,’ the term has yet to enter into political debate in Ireland. The sentiment, however, is clearly behind many citizen actions taking place in communities all around Ireland.

‘Resource nationalism’ term applies to all natural resources, including: oil, gas, minerals, metals, forestry, fisheries, agriculture and air – and has also been used in relation to toll roads, and transport infrastructure, and other state assets. These are all areas where Public Private Partnerships (PPPs) or ‘concession agreements’ are created between the (host) national government and foreign investors/multi-national corporations. Resource nationalism is a counter-balancing force to the trend towards ‘resource privatism’, as Ward calls it.

The term also implies an active citizens movement within the host state, since the tendency for governments to seek a greater share of the profits from its national resources is often triggered by unrest in the population, as a result of perceived inequity in the current agreement, creating a political crisis or movement.

“Resource nationalism explains the situation where there is a certain sense that a country deserves a lot more from its natural resource endowments. There is therefore a citizen movement that makes a conscious attempt to get government to participate fully in natural resource extraction.” [see ‘A Case For Resource Nationalism In Ghana!‘ | GhanaWeb – 18 October 2012.

Clifford Chance, one of the world’s biggest law firms, published an article in July 2012 entitled ‘Resource Nationalism: A Return to the Bad Old Days? in response to the massive increase in resource nationalism taking place around the world, in both developed and developing countries. It described resource nationalism as follows:

“States can expropriate any type of asset or project within their territory. However, when they expropriate natural resources for strategic, nationalistic and economic reasons, it is usually referred to as resource nationalism. Although frequently influenced by ideology and domestic politics, resource nationalism is typically seen when a State thinks that a foreign investor is getting too good a deal for their investment, especially when prices for the natural resource rise beyond the levels originally anticipated. In these cases, the State may seek to impose new terms or regulations on the investment or the foreign investors to improve the position of the State.

So, ‘resource nationalism’ is an exercise of increased public control and ownership, which falls short of outright nationalisation, due to political pressure within the state. That pressure usually means that there have been major protests, and that disputes over resources and other related social, economic and environmental issues have become election issues. Unlike nationalisation, the new deal imposed by the state still results in some form of PPP or concession agreement persisting, but under radically altered terms, in favour of the state, its citizens and local communities, at the expense of foreign/multi-national investors.

PERMANENT SOVEREIGNTY | Ownership of natural resources by the people

Natural resources, like oil, gas, minerals, forestry – even air and water – make a significant portion of any nations wealth. Under the international law doctrine of ‘permanent sovereignty’, these resources belong to all the citizens of the state in which they are found, and form part of people’s and nation’s ‘right to self-determination’, and this part of international human rights law. This was clearly agreed upon in the declaration on permanent sovereignty over natural resources adopted by the United Nations General Assembly at its seventeenth session in 1962, [GA RES 1803 (XVII)] which included the following provisions:

1. The right of people and nations to permanent sovereignty over their natural wealth and resources must be exercised in the interest of of their national development and of the well-being of the people of the State concerned.

2. The exploration, development and disposition of such resources, as well as the import of the foreign capital required for these purposes, should be in conformity with the rules and conditions which the peoples and nations freely consider to be necessary or desirable with regard to the authorisation, restriction or prohibition of such activities.

3. In cases where authorisation is granted, the capital imported and the earnings on that capital shall be governed by the terms thereof, by the national legislation in force, and by international law. The profits derived must be shared in the proportions freely agreed upon, in each case, between the investors and the recipient State, due care being taken to ensure that there is no impairment, for any reason, of that State’s sovereignty over its natural wealth and resources.

As a result of the declaration, the concept of ‘permanent sovereignty’ over natural resources is now part of customary international law, including human rights law.

Natural resources and their relationship to human rights were also central to the 1972 Declaration of the United Nations Conference on the Human Environment (the ‘Stockholm Declaration’), signed by Ireland, which states: “Both aspects of man’s environment, the natural and the man-made, are essential to his well-being and to the enjoyment of basic human rights the right to life itself. Principle 2 of the Stockholm Declaration states:

“The natural resources of the earth, including the air, water, land, flora and fauna and especially representative samples of natural ecosystems, must be safeguarded for the benefit of present and future generations through careful planning or management, as appropriate.

The follow-up 1992 Rio Declaration on Environment and Development, which Ireland also signed, stated in Principle 11:

“States shall enact effective environmental legislation. Environmental standards, management objectives and priorities should reflect the environmental and development context to which they apply. Standards applied by some countries may be inappropriate and of unwarranted economic and social cost to other countries, in particular developing countries.

Principle 23 states;

“The environment and natural resources of people under oppression, domination and occupation shall be protected.

These principles of international law and policy have been expanded upon, in international law documents such as the ‘New Delhi Principles‘ – issued by the International Law Association (ILA) in 2002, which states:

1.2. States are under a duty to manage natural resources, including natural resources within their own territory or jurisdiction, in a rational, sustainable and safe way so as to contribute to the development of their peoples, with particular regard for the rights of indigenous peoples, and to the conservation and sustainable use of natural resources and the protection of the environment, including ecosystems. States must take into account the needs of future generations in determining the rate of use of natural resources. All relevant actors (including States, industrial concerns and other components of civil society) are under a duty to avoid wasteful use of natural resources and promote waste minimization policies.

Having signed so many agreements, Ireland must now fully enact them, and put them into practice. There are many areas of law and policy where Ireland remains in breach of these international agreements, which will be discussed in this paper. Not only is Ireland’s current development model based on unsustainable and flawed planning law and policy, but it is contrary to the international trend towards resource nationalism, which fairness and common sense, as well as international law and policy demands.

 

RESOURCE NATIONALISM | The “number one risk” world-wide

Resource nationalism has been ranked by Ernst & Young as “the number one risk” facing mining and metal companies worldwide, 2012-2013, “with many governments around the world going beyond taxation in seeking a greater take from the sector, with a wave of requirements introduced around mandated beneficiation, export levies and limits on foreign ownership.” It was also the number one risk for 2011-2012. [See ‘Resource nationalism is biggest risk to mining sector: report‘ | Reuters 7 August 2011.

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Occasionally, resource nationalsim is take to such as extreme that it results in outright nationalisation; but this is the exception to the rule.  According to Ward:

“The most far‐reaching instances of ‘resource nationalism’ such as Bolivia or Venezuelaís partial ‘nationalisations’ of their oil and gas sectors, mining contract renegotiation in the Democratic Republic of Congo, or Shell’s forced sale of its stake in the Sakhalin‐II project are widely reported in the mainstream press. But there are many more examples of policy initiatives or tools that might be dubbed ‘resource nationalism’ around the world.

One result of this is that resource nationalism has been used by oil companies as a reason to raise prices. The Financial Times published an article on 11 April 2013 entitled ‘Energy: More Buck, Less Bang‘, in which it explained the rise of oil prices in terms of resource nationalism:

“The inflation stems from the rising complexity of the energy sector. Oil extraction used to be as easy as sticking a straw into the sand: in countries such as Saudi Arabia and Iraq, it has largely stayed that way. But resource nationalism means the Middle East is now largely off-limits to western groups. Shut out of the “easy oil”, they have gone to the ends of the earth in search of the world’s remaining reserves. Companies such as BP, Royal Dutch Shell and ExxonMobil have invested billions to turn Canada’s bitumen into synthetic oil, and freeze natural gas into an exportable liquid. They have ventured out into the remote, iceberg-strewn waters of the Arctic, discovered huge new oil reserves under a 2km-thick layer of salt off the coast of Brazil and “fracked” their way through vast shale and “tight” oil formations from Texas to North Dakota. Projects are getting bigger in scale and more remote. The oil is harder to find and more expensive to get out,” says Christian Brown, chief executive of Kentz, the engineering and services group.

This desire for profits, regardless of resource nationalism, is driving the desire to use hydraulic fracturing or ‘fracking’ and other technologies, to make exploration and extraction of resources loss costly in financial terms to companies. This is being allowed by Governments in many jurisdictions, but is being actively opposed in Ireland by citizen groups.

Overall, the failure of the Irish government to seek a greater share for the Irish people, in natural resource transactions, and its friendly regulatory and tax environment, means that ‘resource nationalism’ is not even in the top ten threats to multinational companies and foreign investors. However, given the rise in public discontent, that may all be about to change.

 

NATURAL RESOURCES | Threats from unfair international agreements

Natural resources are constantly under threat, by parties within State Governments, who seek to profit personally from their sale or lease or make short-term political decisions that lead to irrational or inefficient decisions related to natural resources, at the expense of society and the environment. There is also a threat from foreign investors, such as pension funds, banks and multi-national companies who are anxious to harvest these resources at the lowest price possible. The problems lie in the contracts, often called Public Private Partnership (PPP) agreements or concession contracts, which are often exempt from public scrutiny. For example, in Ireland, Part III of the Freedom of Information Act sets out a series of related measures to protect information relating to key areas of Government activity, parliamentary and court matters as well as third party information of a personal, commercial or confidential nature. Concession contracts, for toll roads for example, have been deemed to be ‘protected’ under these measures, and exempt from public requests.

International standards have been adopted by the UN, EU and International Bar Association (IBA), which seek to ensure that all such agreements meet these standards, in terms of corruption, human rights, sustainable development, protection of the environment, and a national governments and the resource sector behaving in an open and accountable manner. These will be examined below.

This paper argues, however, that the ultimate responsibility rests with the people, to take ownership over their own resources, and pressure their elected officials to change national policy, or change their elected official and find some who will. Citizen movements are absolutely necessary if the Irish government is to be forced to change its policy, and engage in resource nationalism, as will be shown to have been the case in many other countries around the world. Before doing so, the case of the Congo, another country where there has been an absence of resource nationalism, will be examined.

 

THEFT OF NATURAL RESOURCES | Africa Progress Panel Report 2013

Recently, it has been noted that “state natural resource development projects have become sites of intense political, social, and cultural contestation among a diversity of actors. In particular, such projects often lead to detrimental consequences for the empowerment, livelihood, and cultural and economic development of historically marginalized communities,” according to Lillian Aponte Miranda, Associate Professor Of Law at Florida International University.

This was never more evident than in a report by the Africa Progress Panel, chaired by former UN Secretary General, Kofi Annan, published on 9 May 2013, entitled ‘Equity in Extractives; Stewarding Africa’s natural resources for all.’ The Financial Times of London  made it front page news on 10 May 2013, with the headline ‘Annan report blasts ENRC for costing Congo  $725m,’ and detailed how “Congo incurred losses of $1.36bn between 2010 and 2012 as a result of the alleged undervaluation of state assets in five mining deals, three of which involve ENRC.” ENRC is a UK based company, and according to FT “it emerged that the UK’s Serious Fraud Office is preparing to send investigators to the Congo as part of its criminal probe into ENRC.” The Times said that the report stated:

“On average, offshore companies paid just a sixth of the price of independent valuations in the case of the five deals scrutinised by the APP and then sold them on at rates of return averaging 512 per cent, the report says. This generated a return of $1.63bn on assets purchased for $275.5m, it calculates.”

In a separate articleThe Financial Times‘ also noted:

“The $75m deal in the mineral-rich Katanga region goes to the heart of the report’s criticism – namely that the Congolese state lost an estimated $1.36bn in potential revenues between 2010 and 2012 as a result of the alleged undervaluation of the assets. The sum is equivalent to twice the annual education budget of the country, which ranks at the bottom of the United Nations Human Development Index.

The lead editorial on 6 May 2013 also addressed the topic, with the title ‘Heart of darkness inside the Congo,’ which read:

“Mineral deposits ought to be a blessing for the country in which they are found. More often they are a curse. When citizens do not know how much their governments are paid paid for minerals, they cannot ensure that the revenues are well spent, or that their countries are even getting a fair deal.”

It is fairness that lies at the heart of a counter-trend in the international trade of natural resources; ‘resource nationalism’, which is seeing governments taking actions to claim greater control over its natural resources, usually as a result of pressure from the general population of the country. And it is unfairness is valuations of state assets, and natural resources, that lies at the heart of the social unrest building all around Ireland, as more and more of its state assets and natural resources come under threat.

 

OECD COUNTRIES | Rising resource Nationalism

Resource nationalism was traditionally associated with developing countries, but it has been spreading into OECD countries and even the EU. According to Clifford Chance, one of the world’s largest law firms:

“Resource nationalism is sometimes mistakenly seen as a purely developing world or emerging market phenomenon. Frequently, practitioners fail to define or qualify changes to the taxation regime or restrictions in foreign investments in developed economies as manifestations of resource nationalism, although they often are.”

This movement into the OECD and Europe is what is so worrying for multi-national companies:

  • United Kingdom | The government increased the North sea oil and gas levy from 20-32% in its 2011 budget [see ‘Osborne’s Budget ‘to fuel growth‘ | BBC News, 23 March 2011]
  • Australia | „„On March 19, 2012, the Australian parliament passed the Minerals Resource Rent Tax (MRRT) which, among other things, imposes a tax of 30% on iron ore and coal profits in excess of a certain amount. The MRRT became effective on July 1, 2012. One of the stated objectives of this new legislation is to give Australia an appropriate return on its non-renewable resources. (see ‘Australia’s “Super Profits Tax”: A High-Stakes Proposal for Australia and the Developing World Alike‘).
  • Canada | In 2010, the government rejected BHP Billiton’s bid to take over PotashCorp on the grounds that the bid was not in Canada’s best interests [see ‘BHP Billiton blasts Canadian government as it pulls $38bn PotashCorp bid‘ | The Telegraph, 15 Nov 2010]
  • Japan | The Democrats who took  power in Japan in 2009 promised to nationalize toll companies and end tolls by 2012. They would finance the end of tolls with issue of  $400b of central government bonds to buy out the country’s major toll companies and state toll corporations. They proposed a special “surcharge” on gasoline/diesel fuel to service the debt and pay for the free roads.
  • France | During the 1970s three of the four private sector providers of toll roads were nationalized when financial difficulties set in. (see World Bank – Toll Roads and Concessions). Note – The World Bank actively promoted PPPs in infrastructure.
  • Spain | In April 2013 Spain  abandoned efforts to rescue 10 financially stricken toll highways and will, instead, nationalize the PPP concessions under a scheme backed by the projects’ creditor banks. The government aims to guarantee bank loans outstanding on the troubled toll roads, which together involve a total investment of around Euro 5.6 billion (US$7.2 billion). (see Spain Nationalizes 10 Toll Concessions Worth $7 Billion).

 

DEVELOPING COUNTRIES | Resource Nationalism

Developing countries have also introduced several new measures, deemed to be manifestations of resource nationalism, ranging from new taxes to more restrictive export regulations:

  • Peru | The government announced a six-fold increase in its mining windfall tax in 2011. [see ‘Peru’s Humala signs bills to raise mining taxes‘ | Reuters – 28 September 2011.
  • Indonesia | In September 2011, Jakarta proposed a tax on mineral ore exports as of 2012, as well as a ban on exports of raw minerals by 2014. [See ‘Government to carry on 2014 raw mineral ores ban‘ | Jakarta Post – 11 January 2013.
  • India | New Delhi raised iron ore export duties to 30% from January 2012. [see ‘Govt hikes duty on iron ore exports‘ | Financial Express – 3 January 2012
  • Chile |  State-owned copper miner Codelco and London-listed Anglo American are involved in a court battle over the former’s attempt to exercise an option to acquire 49% of the latter’s most important Chilean operation [see ‘Anglo and Codelco restart talks on mines‘ | Financial Times, 22 May 2012.
  • ZAMBIA | In the 2012 budget, the government introduced an increase on the mining royalty from 3-6% and has revoked licenses from foreign mining companies. [see ‘Zambia Resource Nationalisation; Government Revokes Chinese Mine Licence‘ | African Development | 6 March 2013]
  • Panama | The government of Panama announced its decision to assume control of two toll-road concessions awarded to foreign companies in the 1990s,

Clearly, resource nationalism is already a major political movement world-wide, and is one the rise in the EU.

 

GREECE | A study in resource nationalism

European countries are seeing a rise in resource nationalism, triggered by the financial crisis. Greece is particularly relevant, since it also received an EU/IMF bailout, like Ireland, and is under similar pressure to sell state assets, and privatise natural resources.

A major rise in citizen’s objections to the terms of foreign investment has broken out, and has been deemed an expression of ‘resource nationalism’. On 27 April, 2013, the Canadian newspaper Globe & Mail reported that the Vancouver company ‘Eldorado Gold‘ is planning a major investment in the economically distressed country. But despite the needed jobs that will be created, a protest movement concerned about the environment and tourism is putting up stiff resistance. According to the Globe & Mail:

“The first mobilizations against the expansion of the old mines in the Halkidiki peninsula, the birthplace of Aristotle in northeastern Greece, began in late 2011. That’s when Vancouver’s Eldorado Gold Corp. grabbed most of the local mining industry and unveiled plans for a 1-billion ($1.32-billion) development that would turn the recession-stricken region into a gold-producing powerhouse. [see ‘Eldorado Gold’s Greek mining problem’ (subscription)]

The article details the rise in protest, and outbreaks of violence that have occurred:

Development skeptics asked: At what cost to the environment, tourism and agriculture? They concluded that the massive project, smack in the middle of a part of Greece that could pass for Tuscany, would do more harm than good and took to the streets. “To live, you need, air, soil and water,” explains Nina Karina, 50, an artist who opposes Eldorado. “This investment takes away all three from us.”

At first, the protests were fairly low key, although there were times when the trigger-happy Greek police flung tear gas canisters at hothead protesters armed with flares, rocks and gasoline bombs. By the autumn of 2012, something akin to civil war had broken out. The turning point came on Oct. 21 when about 2,500 protesters fought a pitched battle with more than 200 police along the forest road leading to Eldorado’s Skouries gold-and-copper deposit, the centrepiece of its Greek strategy.

“Sitting in a smoky café in Ierissos, a seaside town near the mining sites filled with “Canada and Eldorado Go Home” banners, Lena Panagiotopoulou, 40, recalls the terrifying battle. “The police smashed windows of cars and threw tear gas inside the cars and people were taken to the hospital,” she said. “They grabbed me and kicked me and made me kneel and I was just trying to protect my nephew. She was arrested with 13 others. Retribution came on the night of Feb. 16, when about 40 masked men invaded a Skouries work site in the forest, set fire to machinery and vehicles, and doused three security guards with fuel, threatening to burn them alive. Eldorado put the damage of the firebomb attack at $1-million (U.S.). Two men were arrested and another 18 are under investigation.

The article also notes that Canadian mining companies are not having an easy time in Europe even though job creation has become the primary goal of any government trapped in the debt crisis.

“And around the world, growing ‘resource nationalism’ is empowering citizens and governments to hold greater sway over proposed mine and energy developments. In Romania, Toronto-listed Gabriel Resources has spent more than a decade and $400-million-plus on the Rosia Montana gold project, the largest of its kind in Europe, with nothing to show for it. Well-organized opponents, who at one point included Hungarian-American billionaire George Soros, have turned it into an international environmental cause célèbre and unleashed lawyers to challenge every permit.

So, it is clear that resource nationalism is now a Western and European trend, and not just a feature of the developing world.

 

NORWAY | Successful resource nationalism in Europe

The Jakarta Post commented, “Tax hikes in Britain and Norway are seen as more ‘benign’ examples of resource nationalism.”(Hadi Soesastro, Op-Ed., The Rise of Resource Nationalism in Indonesia, JAKARTA POST, Sept. 13, 2007, at 7).  While resource nationalism in Britain is clearly on the rise, it has been a main feature of Norway’s economic and development policy for decades, and has been lauded as model for countries around the world.

The Irish Government has performed an analysis of Norway’s policy, and it has been discussed many times in the Oireachtas. But none of this has led to any change in national policy.

 

 

 

IRELAND | The seeds of ‘resource nationalism’

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A 2013 demonstration outside Government buildings in Ireland

 

Increased public dissatisfaction with states policies towards, and management of natural resources and state assets has led to an upsurge in ‘resource nationalism’ world wide.  But while there there is growing public pressure in Ireland to rebalance the scales in such transactions, there does not seem to be a corresponding impetus in Government to change any of its policies, despite promises to the contrary in the Programme for Government. So, in international terms, Ireland is not yet experiencing a rise in ‘resource nationalism’, and it is business as usual for foreign multi-national companies, profiting from cheap and easy access to Irish resources.

The sense of injustice, and frustration in Ireland is blatantly on the rise, as the fallout from the collapse of Irish banks continues to send tremors through more and more sectors of society. Even as Irish people are suffering on an individual, and family basis, from cuts, job losses, negative equity, lack of credit and emigration, they are speaking out about larger issues facing the nation as a whole, on broader social, economic and environmental issues, even though they pop up locally, one by one, in communities all around Ireland, from Dublin Bay to the Galway Bay.

Demonstrations have been rising rapidly all around Ireland over a broad range of issues relating to natural resources ranging from fisheries to forests, peat bogs to petroleum, wind farms to chicken farms, and from gold to tolls. They all have certain features in common, which relate to Government policies that appear to result in an unfair amount of control being given to multi-national companies over these natural resources, and state assets, to the economic, environmental and social detriment of the Irish people. Sweetheart deals appear to have been made with oil companies, agricultural companies, toll companies; mining companies; all kinds of companies. But at whose expense?

One proposal in particular, for the sale of state assets, that the Government agreed with the Troika, has ignited passions in many sectors of society, all around Ireland. The announcement of the sale of Bord Gáis, the proposed sale of Coillte, and other state bodies has invoked a further sense of unfairness in Irish people who see another raw deal, with valuable Irish natural resources, and state assets, being simply ‘given away.’ This comes against a backdrop of failed privatisations, and decades of Irish administrations bending over backwards to multi-national companies, in return for inward foreign investment.

The culmination of economic policies resulted in Ireland being ranked third on the 2012 Globaisation Index, prepared by Ernst & Young in partnership with the Economist Intelligence Unit. The index is measured by a country’s openness to trade, movement of capital, exchange of technology and ideas, labour movements, and cultural integration. This means that Ireland was ranked the most globalised country in the EU, and ‘The Most Globalized Nation of the Western World.’ It should come as no surprise then that Ireland is also the least ‘resource nationalized’ country in the Western World.

At the heart of Ireland’s long-term economic policy lies the extremely low corporate tax rate, which has also necessitated Government spending cuts in many areas of social and environmental importance. However, in order to be an attractive destination for foreign direct investment, there has to be an equally attractive regulatory scheme, which does not overly interfere with foreign business ventures.

The economic policies of the current Government continue to lay out a red carpet for foreign direct investment, with the lowest corporate tax rates in Europe, significant grants, light touch regulation, social partnership, and more than a few blind eyes. Total globalisation was in fact the objective of this entrenched policy, which was contained in economic Irish bibles like the Culliton Report (1992), and that has been achieved. But at what cost to society and the environment?

Foreign road tolling companies are sometimes being paid directly from public funds, when traffic levels fall below a certain level, and all are making significant profits, which are leaving the economy. Many believe Ireland’s oil and gas is literally being given away, as a result of corrupt transactions. Foreign multi-national companies are setting up massive fish farms here, with Government support, which may destroy local fisheries and industry. Farmers are being treated unfairly, and receive only a tiny portion of profits, having become essentially tenants on corporate plantations. EU regulations prohibiting turf cutting appear to have been unfairly implemented. Even Ireland’s valuable cultural heritage is apparently being mismanaged, and neglected, despite its value to the Irish economy.  With regards to the sale of state assets, there is a sense that ‘not only did the Government mismanage the Irish economy, but now it appears to be in the process of mismanaging Ireland’s natural resources, and valuable state assets, which it holds for the benefit of the people’.

Overall, while there are protests increasing in all parts of Ireland, against a multiplicity of issues relating to natural resources and state assets, the Government has not yet taken any steps to reverse the long-term trends, enforced by previous Fine Gael and Labour Governments, as well as Fianna Fail governments. There simply has not been any great deal of pressure placed on Government, who enjoy a large majority, and a fractured Opposition.

 

IRELAND | Pressure mounting on Government to change policy

After years of relative silence on the part of the Irish people, there is finally emerging a concerted movement within Ireland to get the Government to change its current policy in favour of greater equity for the Irish people concerning the management of Ireland’s natural resources.  This has been manifest in the prominent public campaign (led by The Woodland League) opposed to the sale of Ireland’s forests, managed by Coillte, as part of the Government’s proposals for the sale of state assets.

There are indications, at the time of writing, that the Government will not proceed with the plan, partly due to the public campaign, and partly due to opposition to the plan within the Labour Party. However, even if the sale is vetoed at Cabinet, where it is to be decided, there are many calls for a public inquiry into the financial affairs of Coillte, who have never paid a cent to the Irish Government, and an examination of the management of Ireland’s forests, which is currently accused of being below international standards. Irish Forestry policy is still based on a 1970’s model of softwood plantations, as espoused by Professor Frank Convery in his 1977 report, ‘Irish Forestry Policy‘.

The movement for fair and rational use of Ireland’s natural resources has also been apparent in the increased number of public campaigns opposed to a range of public private partnerships involving natural resources and state assets, including:

  • the proposal to approve Europe’s biggest fish farm in Galway Bay,
  • the license issued to Providence Resources for oil exploration in Dublin Bay, six miles off the coast, wherein the Irish people get minor compensation and few taxes;
  • the license granted for mining for gold and minerals in Inishfree
  • the ongoing controversy over the Shell gas pipeline and refinery on the coast of Mayo, which features allegations of corruption and inequitable distribution of profits
  • the license granted by the EPA for research into Genetically Modified Organisms (GMO) in Ireland, which poses a threat to organic farmers, and the entire food chain
  • the unfair arrangements between farmers and multinational supermarket chains, who are accused of taking an unfair share of profits
  • the unfair imprisonment of four turf cutters, and the manner in which European regulations concerning certain peat bogs are being implemented
  • the unfair agreements with road tolling companies, who are still making large profits from Irish roads, and some of whom are in zero-risk contracts, where they get paid directly by the government if traffic falls below minimum thresholds
  • the labour dispute at Tara Mines, Europe’s largest zinc mine, where workers are being unfairly forced to take pay cuts, despite reports of significant recent mineral discoveries

While the Government promised in the Programme for Government to “seek to maximize the return to the Irish people” for drilling of off-shore “reserves,” there has been no action thus far in that regard. However, pressure is now mounting on the Irish Government to start to join the ranks of other countries around the world who are now witnessing an upsurge in ‘resource nationalism’.

 

IRELAND | Historical protections for natural resources and state assets

As noted above, the protection of natural resources has become

Ireland inserted a clause into the 1937 Constitution of Ireland, Article 10, which says:

1. All natural resources, including the air and all forms of potential energy, within the jurisdiction of the Parliament and Government established by this Constitution and all royalties and franchises within that jurisdiction belong to the State subject to all estates and interests therein for the time being lawfully vested in any person or body.

2. All land and all mines, minerals and waters which belonged to Saorstát Éireann immediately before the coming into operation of this Constitution belong to the State to the same extent as they then belonged to Saorstát Éireann.

3. Provision may be made by law for the management of the property which belongs to the State by virtue of this Article and for the control of the alienation, whether temporary or permanent, of that property.

4. Provision may also be made by law for the management of land, mines, minerals and waters acquired by the State after the coming into operation of this Constitution and for the control of the alienation, whether temporary or permanent, of the land, mines, minerals and waters so acquired.

While the Constitution gives power to the Government, to control these natural resources and State assets, it does not require that they be managed for the benefit of the people, nor does it provide a minimum standard of care. The Constitution is archaic in this regard, and out of step with most modern Constitutions which are now including ra human right to have the nation’s resources protected. Ireland has also been accused of failing to live up to the EU directives and international agreements which it has signed, concerning protection of the environment, human rights, sustainable development and international finance and trade. That has led to calls for the Constitutional Convention to amend Article 10, and to include human rights protections for natural resources.

IRELAND | Signing of the Rio Declaration in 1992

Ireland’s troubled history of industrial development, and consequent poverty, shaped lax attitudes towards the protection of natural resources, as pointed out by Daniel McCoy of the University College London in The Barrington Prize Lecture, 1992/93, given to the  Statistical and Social Inquiry Society of Ireland, entitled ‘Sustainable Development – The Challenge for Irish Economic policy-makers. (Journal of the Statistical and Social Inquiry Society of Ireland, Vol. XXVI, Part V.) He noted that a 1988 survey by the European Commission found that only “42 per cent of the Irish agreed that protecting the environment and preserving natural resources are essential to economic development compared with an EC average of 55 per cent.

However, in 1992 McCoy witnessed a dramatic turnaround in State policy, when Ireland signed the The Rio Declaration on Environment and Development at 1992 United Nations “Conference on Environment and Development” (UNCED), aka ‘The Earth Summit’.

“Irish policy makers have accepted a formidable challenge in adopting sustainable development as the future objective of economic policy. Operationalising this objective, as this paper has described, is no simple matter. The first step required in developing a sustainable development strategy is to clearly define what is required.  One solution around such a stark choice would be the adaption of the system of national accounts to take account of the capital consumption of natural resources and the degradation of the environment. Proper valuation of natural resources and environmental assets is another crucial step in operationalising sustainable development. This valuation requires that all the costs and benefits of any action are fully internalised in making decisions.

In deciding whether or not to dispose of Coille’s holdings, Minister for Agriculture, Food and the Marine, Simon Coveney  stated on 14 June 2012 that “No decision on the possible sale of Coillte assets will be taken until the valuation process is finalised and all associated issues considered fully. A valuation of Coillte assets is accordingly being finalised by the NTMA (NewERA unit) in conjunction with my Department and the Department of Public Expenditure and Reform.” In other words there will be no independent evaluation, and there is a good chance that the official valuation will not be available under the Freedom of Information Act, since it will contain ‘sensitive’ commercial information.

Unfairly low valuations of precious Irish natural resources and state assets is what lies at the heart of public discontent, and this is exactly what has led to pressure on Governments all around the world to open up their valuation processes and transactions to public scrutiny. This surge in ‘resource nationalism’ has then led them to revalue their assets and resources and to renegotiate their terms and agreements with foreign investors. The question is whether or not this will actually occur in Ireland or not?

IRELAND | Disputes over national resources and assets rise

map_explorationdiscoveries2012

The term ‘resource nationalism’ has been almost completely absent from political and public debate, but actions on the ground do indicate that there is a rising sense of discontent amongst the Irish people, over the handling of natural resources and state assets – particularly in light of proposals to lease out Irish forests managed by Coillte, and the prospect of oil rigs 6 km off the coast of Dublin.  Protests about oil and gas exploration, fishing rights, mining licenses, turf-cutting agricultural rights, fracking, heritage destruction, road tolls, and wind farms all display elements of resource nationalism. However, there has been sparse Government acknowledgement of public opinion so far.

The term ‘resource nationalism’ has itself only been used in two reports in The Irish Times to date. A news report entitled ‘Report notes state ownership threat to oil’, which appeared in the Irish Times on 10 May 2007 stated:

“Increasing state ownership and rising resource nationalism are emerging as the main long-term threats to global oil supplies, according to a report for the industry by an energy consultancy. The report by PFC Energy highlights the shift in power towards state-controlled national oil companies.”

The PFC Energy report is not available online, but it is detailed in the Financial Times article, ‘Nationalism and state ownership seen as main threats to oil supply‘, 10 May 2007.  The report talks about how oil companies have sought to raise prices, in response to the increasing trend of nation states seeking a higher share of revenue from oil drilling.

On 12 July 2008, an Irish Times article entitled ‘Scraping the barrel’ by Michael Casey explained the ‘alarming oil price increases’:

“So where is the problem? If reserves are comfortable, why are prices rising at such an alarming rate? It was summarised succinctly, but elliptically, by the chief executive of BP. “The problem is not speculative or geological, but political.” Another insider was even more coy, saying that most of the problems were “above ground”. We got a bit closer to the truth when another oil chief referred to “rising ‘resource nationalism.’ The days when small countries like Ireland virtually gave away exploration rights are long gone.”

Or are they? While the term ‘resource nationalism’ has not caught on in Ireland, there has been rising discontent over the perceived inequity in Government policy and practice when it comes to concession contracts for oil, gas and other resources. Many have argued that Ireland is in fact ‘giving away’ its valuable resources, and there have also been allegations of corruption with regards to past contracts; particularly with regards to disgraced Fianna Fail Minister Ray Burke, who was Minister for the Environment when the contract with Shell was signed, for the Corrib gas field.  More recently, the issue of Ireland’s licensing and leasing policies and terms came back into the spotlight, as a result of the granting of a license by Providence Resources, for prospective drilling in Dublin Bay, in October 2012, and the subsequent public campaign against it.

In addition, there has been significant controversy surrounding the the proposed sale of state assets, in the wake of the McCarthy report. In particular, the proposed leasing of Ireland’s state forestry body, Coillte, has led to major public protests in 2013. There have also been protests in 2013 about plans for a multi-national’s plans to build Europe’s largest fish farm in Bantry Bay. Controversy continues around the closure of Ireland’s bogs, to turf-cutting. Domestic small farmers are increasingly suffering at the hands of large multi-national companies, and seeing their share of profits continuously decline. Even in Government concession contracts for toll roads, we have seen protests about the unfair agreements with multi-national toll companies, who are reaping in huge profits. These issues will be examined in detail.

dublin-bay-oil-exploration-protests-390x285OIL & GAS | Resource nationalism in Ireland

A form of resource nationalism was apparent in The Programme for Government, which was agreed by Labour and Fine Gael, on 3 June 2011. It contained the following Energy Policy objectives, which pertain to resource nationalism:

  • “We will provide efficient foreshore licensing and leasing process for marine energy.”
  • “We will incentivise and promote off-shore drilling and streamline planning and regulatory process for bringing ashore these reserves and seek to maximize the return to the Irish people.”

The Irish Government’s approach is two-pronged. On one hand, it seeks to make it cheaper and easier for multi-nationals to search for oil, and on the other, it promises to increase the stake the Irish people receive in the profits. However, to date, the government has not taken action on either front. An example of how badly the licensing system needs to be improved can be seen in the surrender of the Providence Resource license for drilling in Dublin Bay, in February 2013, after a High Court case where the Government admitted that the EU Environmental Impact Assessment (EIA) Directive have not been properly transposed into Irish law. To date, there has been no movement on the Government commitment to “maximize the return to the Irish people.”

A web site entitled ‘Irish Oil & Gas’ claims:

“There are several reasons why the gas from an Irish gas field might end up earning little or no revenue for Ireland, including:

• Ireland’s licensing terms for oil and gas transfer full ownership and control of those resources to private companies.
• Ireland uses only one means of extracting revenue from its oil and gas, namely corporation tax. Most gas/oil-producing countries use a combination of means of extracting revenue, including royalties, tax and a state share in production.
• Before declaring the profits on which Ireland’s very low tax rate (25%) is levied, companies can avail of extremely generous tax write-offs. For example, they can write off the costs of all exploration anywhere in Irish waters in the previous 25 years.

savegalwaybayFISHERIES | Irish Resource Nationalism | 

Major protests have broken out in 2013 over Irish fisheries. On 2 March, The Irish Times reported: “Up to 2,000 people have marched through Galway City in protest at plans by Bord Iascaigh Mhara to locate a €100 million fish farm on a 456 hectare site in the lee of the Aran Islands.” The article reveals that a wide alliance of groups and politicians have rallied around this issue:

The marchers who wielded banners proclaiming “Save Galway Bay” and the names of more than 20 angling and protest groups, were addressed at the City’s Spanish Arch by Icelandic entrepreneur and wild salmon conservationist Orri Vigfusson. Mr Vigfusson said he was dedicated to restoring the abundance of wild salmon that formerly existed on both sides of the North Atlantic, and warned the Galway Bay project could “destroy” wild salmon stocks in the region. The gathering was also addressed by the Mayor of County Galway Thomas Welby, Niall Greene of Salmon Watch Ireland, Brian Curran of the Federation of Irish Salmon and Sea Trout Anglers, Derek Hamilton of An Taisce, Michael Canney of Save Galway Bay, Enda Conneely of the Aran Islands, and independent TD Noel Grealish, among others.

The controversy over offshore fish farms has brought two state bodies into direct conflict;  the Board of Inland Fisheries Ireland (IFI) and  Bord Iascaigh Mhara (BIM).  IFI is the state agency charged with the conservation, protection, development, management and promotion of Ireland’s inland fisheries and sea angling resource.  BIM was established under the Sea Fisheries Act 1952, and is the Irish State agency responsible for developing the Irish seafood industry.

On 23 November 2012 the IFI made a statement on the proposed offshore salmon farm, in which it summarised its submission to  on the Environmental Impact Statement (EIS) prepared by Bord Iascaigh Mhara (BIM) for the proposed offshore salmon farm as part of the public consultation process:

In the submission, concerns were raised in relation to the location and scale of the proposed salmon farm and how its development and operation could impact on wild salmon and sea trout stocks and their habitat.  These concerns are based on scientific reports by respected authors and knowledge of the impact of existing fish farms on salmon and sea trout populations off the west coast of Ireland.

No Salmon Farms at Sea is waging a campaign against the proposed fish farm. It cites pesticides and sea lice as potential threats to domestic stocks.

walkwoods

FORESTRY | The proposed sale of Irish forests owned by Coillte.

The proposal by Government to lease out the State forests, currently managed by Coillte, has led to widespread protest in Ireland. Over 7,000 people gathered at an event in Avondale, Country Wicklow, in May 2013, organised by the Woodland League and the National Resources Protection Alliance, featured poetry readings and picnics and a tree was planted by actor Sinead Cusack. Singer Christy Moore played at the protest. However, in the wake of the protest, on 3 March, The Irish Times reported:

The Government is moving closer to dropping its plan to sell off the harvesting rights of State forestry company Coillte as part of a privatisation plan agreed with the EU-IMF troika. Certain Government sources are adamant that the initiative remains in the balance but remarks two days ago by Minister for Communications Pat Rabbitte are said to point the way for the plan to be shelved indefinitely. Mr Rabbitte told the Dáil that the “mooted privatisation of Coillte looks more unlikely every day”, after which Taoiseach Enda Kenny made a point of saying the matter remained under consideration.

However, the matter is far from resolved. Even if the Government does do a u-turn on the leasing plan, there are still many outstanding issues relating to the management of Irish forests by Coillte, who have not made a payment to the Irish state in X years, despite reporting millions in profits.

oil licence inishowenMINING | License granted on Inishowen

In April 2010 a community group called Inishowen Environmental Group (IEG) held its first meeting, which was prompted by news that Grosvenor Exploration and Mining Services (Ireland) Limited had applied to the Department of Communications, Energy and Natural Resources for prospecting licence to search many townlands in Inishowen for minerals such as gold, diamonds and other gems.  Over 400 objections were lodged, on various economic and environmental grounds, but the license was granted anyway.

In May 2012, the Exploration and Mining Division (EMD) of the Department of Communications, Energy and Natural Resources launched a prospecting license competition.  EMD’s remit includes: “Regulation and permitting of exploration for and extraction of minerals (excluding petroleum, stone, sand, gravel and clay); Promoting inward investment; Policy development; Representing and protecting the State’s interests as mineral owner of an estimated 60% of all minerals.” The WMD web site advertises mining opportunities in Ireland as follows:

Ireland has much on offer as a mining and exploration target. It is a stable Republic with a long mining tradition, diverse geology with a wealth of mineral potential, and a highly developed infrastructure. The Exploration and Mining Division of the Department of Communications, Energy and Natural Resources is responsible for promoting and regulating minerals exploration and development in Ireland – a country where you can avail of security of tenure, simple regulatory framework, low regulatory overheads, prospecting licence issue under six months and free exploration data. We encourage you to explore this site to find out more about the mining and exploration for minerals in Ireland.

Under the Minerals Developments Acts (1940-1999) the Minister for Communications, Energy and Natural Resources is required to submit a report to the Oireachtas, six months after any license auction. The report for the the period ending in December 2012 was submitted by Minister Pat Rabbitte. It states:

“The Report sets out details of the State Mining Leases, State Mining Licences and Prospecting Licences current as of 31 December 2012 and the total amount of all moneys collected by the Minister under or by virtue of any such Lease or Licence or otherwise in connection with the Minerals Development Acts for the twelve months ended 31 December 2012. As of 31 December 2012 there were: 9 extant State Mining Leases, 10 extant State Mining Licences and 589 extant Prospecting Licences.  In the period of six months ended 31 December 2012:  20 Prospecting Licences were granted, 27 Prospecting Licences were surrendered. Total receipts for the twelve months ended 31 December 2012 amounted to €8,963,508.91.

In addition to issues surrounding the granting of licenses, another major issue in the mining sector has broken out, with over 650 workers at Tara Mines in County Meath after being put on protective notice in January.  The mine, near Navan, Co Meath, is owned by Swedish firm Boliden which bought it in 2004. It is the biggest lead and zinc mine in Europe and the fifth largest in the world. Despite reports of major finds in recent months, the owners of the mines are seeking pay reductions from employees – claiming that there has been a decline in demand, due to a global slowdown in construction. So, not only are large profits from Ireland’s mineral resources leaving the country, and barely being taxed, but Irish employees are being expected to suffer as a result of an alleged reduction in global demand.


capAGRICULTURE | 
Unfair implementation of EU CAP policy

In Ireland, there have been massive protests about proposed reform of the Common Agricultural Policy (CAP), which would see an unfair distribution of payments to varied farmers, via a flat rate. However, these protests have also been calling for a fundamental rebalancing of the share of the profits being made by multi-national supermarkets operating in Ireland. The Irish Times reported on 9 October 2012 that:

“An estimated 20,000 farmers, accompanied by agricultural vehicles have taken part in a ‘day of action’ to highlight grievances over proposed Cap reform. The protest was called to highlight concerns about planned reforms to the Common Agricultural Policy and the upcoming budget. It also highlighted the margins being taken by supermarket chains at the expense of farmers.Placard messages included “No Cap cuts; no farm cuts; no extra costs; regulate the retailers.”

In addition to supermarket margins, there are other agricultural issues involving the use of Genetically Modified Organisms (GMO)s, which are  now undergoing research trials in Ireland despite strong protests, and plans to introduce the largest private fish farm into Galway Bay, a move that has awakened passionate protests in the West of Ireland.

tescoMULTINATIONAL SUPERMARKETS | Unfair agreements and practices

In Ireland, there have also been protests about the behaviour of foreign supermarket chains, such as Tesco, in Ireland. The Farmer’s Journal (01-04-2010) reported a protest by pig and poultry farmers over the retailers’ labelling of bacon and chicken products at Tesco, in Dublin. Over 50 farmers from all over the country were involved in the protest, which was part of the IFA’s ongoing campaign to ensure ’’verifiable country of origin’’ labelling on all farm produce sold by supermarkets.

Over 80% of pork and chicken sold in Tesco is imported. A similar protest took place in 2009 over Tesco selling imported potatoes from the UK.  Another IFA protest took place in Longford in 2010,  to highlight the discrepancies in lamb prices. According to The Longford Leader:

“County Chairman, IFA, Mr Sean Reilly, said that the protest was held in an effort to point out to the manager at Tesco the pressure that sheep farmers were under and to highlight to the consumer the difference in pricing between what the farmers were getting and what the consumer was paying for the produce.”

1347457714-funeral-procession-for-irelands-good-food-sector_1440208GMO TRIALS | Threats to the food chain, and Ireland’s ‘green’ brand

The Environmental Protection Agency (EPA) gave consent to Teagasc, the Agriculture and Food Development Authority, to carry out field trials on a genetically modified (GM) potato line with improved resistance to late potato blight, on 26 July 2012.

These would be the first field trials of a GMO crop on the island of Ireland since 1998, when a previous experiment by Teagasc was terminated by activists. In 2006, the GM-free Ireland Network successfully lobbied the Irish Government and Meath County Council to prevent the world’s largest chemicals company BASF from conducting a field trial involving a massive release of GMO potatoes near the Hill of Tara.

The previous government had adopted a policy in the October 2009 Revised Programme for Government which promised to “Declare the Republic of Ireland a GM-Free Zone, free from the cultivation of all GM plants.” It states: “To optimise Ireland’s competitive advantage as a GM-Free country, we will introduce a voluntary GM-Free logo for use in all relevant product labelling and advertising, similar to a scheme recently introduced in Germany.” However, the Green Party/Fianna Fail Government failed to implement the policy with legislation.  GM-Free Ireland claim this was a result of “intense propaganda and lobbying by the USA, the agri-biotech and animal feed cartels.”

The current Labour/Fine Gael Government is in favour of GMO.  Testing began in August 2012, after two High Court challenges failed. In September, 2012, opponents of the testing held a mock funeral procession through Dublin to symbolize “the death of Ireland’s good food sector.”

Teagasc has assembled a news archive, for those who wish to examine more of their arguments, and information. One the other side of the argument, GM-Free Ireland has a web site which lays out all of the arguments against GMO in Ireland.

The Irish Economy blog has a good discussion from 2010 on the issue, entitled ‘Should Ireland declare itself GM-free in food production?‘ by Alan Mathews. It called for an economic assessment to be performed, before any decision was taken.  An economic assessment was performed, and the results claim: “The study concluded that some GM crops have the potential to provide a significant economic incentive to Irish farmers.”

 

turfcuttersTURF CUTTING | Unfair implementation of new EU rules

On 6 March, 2013, four men appeared in Loughrea District Court, charged with illegal turf-cutting. Over 350 people protested outside the court, according to The Irish Times. The Turf Cutters and Contractors Association (TCCA) of Ireland had strongly condemned the prosecutions, which are taking place as a result of Ireland’s implementation of the EU Habitats Directive, which was transposed into Irish law in 2011.  European Communities (Birds and Natural Habitats) Regulations 2011 imposed restrictions on turf-cutting at 53 bogs that are designated areas of special conservation, and the men are being prosecuted under sections of the new regulations, which are being enforced by Gardai.

A statement by the TCCA issued in April 2013 states: “The TCCA exists to defend the right of Irish People to cut their own turf, for their own use, on their own turf banks, as our people have done for over 500 years and still our Raised Bogs remain the best preserved in all of Europe. ” The statement outlines proposals in relation to the implementation of the Directive:

“The TCCA’s proposals to the Government and EU Commission demonstratedhow in co-operation and consultation with the local communities people could continue to exercise their traditional, heritage, cultural and property rights, while at the same time protecting 10.3% of the Raised Bog area protected by the current SAC regime. Our Implementation strategy document demonstrated how this could be achieved over a three year phased transition period.”

The sentiments expressed by the Chairman in a recent address sum up the position of the turf-cutters, in relation to resource nationalism: “There is a real threat from Europe and The Irish Government to grab another Natural Resource from the indigenous people of this country but this appears to be the one that will break the camels back.” Once again, it is no so much what is being done, but the unfair way in which it is being carried out, that is inflaming.


frackingFRACKING IN IRELAND | Expressions of resource nationalism

The rise of resource nationalism has not just driven up prices, but it has also triggered a rise in ‘fracking’ and other intensive drilling practices, which are extremely harmful to the environment. As companies receive smaller margins in profits, under redrafted agreements, they are turning to radical methods for lowering costs, under pressure from shareholders. Fracking is one such method. In addition, drilling is now taking place in exceptionally sensitive, remote environments.

One of the consequences of resource nationalism has been that oil and gas companies have turned to new technologies, such as ‘fracking’, in order to  increase efficiency and access. John Kemp of Reuters made the link between fracking and resource nationalism in his column, 13 March 2012:

“For industry, fracking promises international oil companies, and a host of smaller and more innovative independents, access to new resources in stable countries with welcoming operating environments, avoiding the problems with resource nationalism that have hampered expansion in the major conventional oil and gas producing countries like Saudi Arabia, Libya and Russia.”

There has been a growing campaign against fracking in Ireland. On 24 September 2012 it was reported in The Irish Times that

 

 

carrickminders10HERITAGE | Campaigns to protect built and natural heritage 

A number of highly publicised campaigns have taken place against motorway proposals that threatened internationally significant heritage sites, such as the the Bru na Boinne/Newgrange UNESCO World Heritage Site, the Hill of Tara, Carrickmines Castle, as well as ancient woodlands in the Glen of the Downs in Wicklow. These, and other cases often led to Ireland repeatedly being found in breach of both Irish and EU law, in both the Supreme Court, and the European Court of Justice.

For instance, Dick Roche, who made an order for the demolition of the Lismullen Wood Henge national monument, which had been discovered during the course of construction, was later found to have acted in breach of EU law, by the European Court of Justice. Yet, while the EU Directive, which he acted under was found to have been in breach of the (Environmental Impact Assessment (EIA) Directive, the Government has still not amended the law, to protect other important sites.

The Planning Act was also found to have been in breach of EU law, because its thresholds are too low, to protect built and natural heritage, but again Ireland has failed to amend legislation. Instead, we are paying fines of XXX to the EU, for failure to comply with the court order. This is a source of engagement for many, as cuts to services for the most vulnerable in Irish society are increasing all the time.

Ireland’s failure to amend its heritage and planning laws, breaches numerous international agreements that Ireland has signed up to, such as the UNESCO Convention for the Protection of Cultural and Natural Heritage, the Council of Europe’s Valletta Convention, as well as declarations on sustainable development such as the Stockholm Declaration and the RIO Declaration. It can also be deemed a breach of human rights, under the AARHUS Convention, which guarantees certain procedures are in place that protect the environment.

Ireland’s flawed legislation also completely breaches the Government’s own, highly self-lauded Sustainable Development Strategy (SDS), which was launched by Minister for the Environment, Phil Hogan. At the press launch the Minister would not allow any questions from the press after the scripted announcement was read out.

Not only is the cultural and outstanding universal value of Irelands built and natural heritage being diluted, but the economic value is also being diminished, at an incredible rate. A study by the Heritage Council in 2012 found that major historical sites and ancient monuments are worth about a total of €1.5 billion in total to the economy. Yet, these sites remain under threat from illegal construction, neglect, and poor management.

 

bank-of-irelandBANKING NATIONALISM | The rise of bank nationalisation in Ireland

The great irony of this is that while the Irish government is rushing to privatise as many of Ireland’s natural resources as possible, and divest itself of as many national assets as possible, it is on the other hand increasing its nationalisation, and socialisation of the debts and liabilities of Irish banks.

Ireland’s immediate and unique response to the blooming financial was to nationalize the liabilities of its banks. This process began in late September 2008 with ‘the bank guarantee’, wherein Government made itself a surety for all past and future liabilities.

On 21 December 2008 the State began to recapitalise Ireland’s three main banks, Allied Irish Bank (AIB), Bank of Ireland (BoI) and Anglo Irish Bank. Under the plan the Government would take €2 billion in preference shares in each of Bank of Ireland and Allied Irish Bank and €1.5 billion in preference shares in Anglo Irish Bank, giving it a 75% control of the latter.

On 11 February 2009, Lenihan announced the provision of two €3.5 billion bailouts to AIB and BoI as part of his government’s recapitalisation scheme. The plan would also see the Minister appoint 25% of the directors at each bank.

Anglo Irish  Bank was nationalised and came into State ownership on 21 January 2009 following the signing into law of the Anglo Irish Bank Corporation Act 2009; emergency legislation to nationalise the bank, which was voted through Dáil Éireann and passed through Seanad Éireann without a vote, on 20 January 2009. On 29 May 2009, the Irish Government announced its intention to provide up to € 4 billion of capital to Anglo Irish Bank under the Irish Government’s bank recapitalisation programme, subject to State aid approval by the EU.

On 21 November 2010,  Taoiseach Brian Cowen announced that Ireland had formally requested financial support from the European Union’s European Financial Stability Facility and the International Monetary Fund (IMF). However, this did not fill the hole in Irish banks. In April 2011 it was announced that a further €24 billion (£21bn) recapitalisation, was needed. This was the fifth attempt to draw a line under the banking crisis, which so far cost the Irish state €46bn. (see ‘Further £21bn recapitalisation needed for Ireland’s banks’ – Herald Scotland – 1 April 2011)

In July 2011, Minister Michael Noonan won a court order to take control of Irish Life & Permanent after it failed to raise billions of euros in recapitalization by an end-of-month deadline. On 26 July 2011 The Wall Street Journal reported that:

Shareholders in Allied Irish Banks PLC, once the nation’s largest bank by market capitalization, voted to accept more government rescue aid that will effectively lead to the lender’s nationalization. The cost of saving the banks—probably increasing to €65 billion, or over 40% of the annual output of the Irish economy—pushed the government into a €67.5 billion loan deal in November (2010) from a bailout group comprising the European Union, the International Monetary Fund and European Central Bank.

While things have stabilized somewhat, there remains a possibility that further recapitalization of Irish banks will be necessary. In short, the Irish government is not following the international trend, in terms of implementing a new policy of resource nationalism, in an effort to compensate for the cost of the bank bailout, over the long term. Instead, it is ignoring the rising protestations of its citizens, and going for a short term influx of cash, which will hamper long term efforts to rebuild the economy, since most of Ireland natural resources will be effectively foreign-owned. While Ireland nationalised its liabilities, and socialised its debt, there has been no corresponding effort to nationalize its assets. Instead, it has been proposed, in agreement with the IMF, to divest the country of various state assets.

for sale your heritagePROPOSED SALE OF STATE ASSETS | The Review Group on State Assets and Liabilities

The current Government plan to lease out Ireland’s forests, owned by Coillte,  is part of a larger Government plan to divest Ireland of a number of it’s state assets which include (i) commercial state bodies, such as Coillte, and (ii) intabgiable assets, which include “radio spectrum allocated for broadcasting and telecommunications; carbon emissions permits; and mineral, hydrocarbon and other licences issued by the state.” This plan arose from two actions taken by the previous Fianna Fail/Green Party coalition Government.

The first was the establishment of The Review Group on State Assets and Liabilities, charied by University College Dublin economist, Colm McCarthy, by the Minister for Finance, Brian Lenihan in July 2010. The second action that triggered further pressure to divest was the EU/IMF/ECB (‘Troika’) bailout of Ireland in November 2010.

The Review Group on State Assets and Liabilities (a.k.a. McCarthy Review Group on State Assets) was established by the Fianna Fail Minister for Finance, Brian Lenihan, in July 2010. The Review Group was Chaired by Colm McCarthy, economist at University College Dublin. The other members were Mr. Donal McNally, Second Secretary, Department of Finance, and Prof. Alan Matthews, Department of Economics, Trinity College, Dublin. The Terms of Reference of the Group were:

  • To consider the potential for asset disposals in the public sector, including commercial state bodies, in view of the indebtedness of the State
  • To draw up a list of possible asset disposals
  • To assess how the use and disposition of public sector assets can best help restore growth and contribute to national investment priorities
  • To review where appropriate, relevant investment and financing plans, commercial practices and regulatory requirements affecting the use of such assets in the national interest.

However, the sale of state assets was not a requirement of the Troika for bailout funds.  The current plan for the sale of state assets was devised by the current Government, after it was agreed to by the Labour Party and Fine Gael in their Programme for Government, on 3 June 2011.

PROGRAMME FOR GOVERNMENT | Sale of State Assets

The Programme for Government agreed by Labour and Fine Gael, on 3 June 2011, also provided for the ‘Sale of State Assets’. These assets would include (i) Commercial State Bodies, such as Coillte and (ii) Intangiable Assets. These include, inter alia, radio spectrum allocated for broadcasting and telecommunications; carbon emissions permits; and mineral, hydrocarbon and other licences issued by the state.

  • “Over time, we also propose to finance the investment programme from the sale of certain state assets.”
  • “We will target up to 2 billion in sales of non-strategic state assets drawing from the recommendations of the McCarthy Review Group on State Assets when available.”
  • “Assets will only be sold when market conditions are right and when adequate regulatory structures have been established to protect consumer interests.”

THE MCCARTHY REPORT | Report of the Review Group on State Assets and Liabilities

The Group issued its report ‘Report of the Review Group on State Assets and Liabilities‘ in April 2011.  The Review Group’s Terms of Reference were:The recommendations of the Group are summarized in the Report as follows:

  • We are recommending that there should be a planned programme of asset sales to reduce the state’s very high level of indebtedness.
  • We are not recommending an accelerated sale process. This would inhibit attainment of value and in many cases would not be prudent or even possible given the requirement for revised regulatory procedures and complex legislation.
  • We are not putting valuations on individual state assets in this report. These depend on many factors and ultimately on what a buyer will pay. The net asset value of commercial company assets whose disposal is recommended is about €5 billion, but net asset value is no more than a rough guide to what might be realisable.
  • We are recommending restructuring of state companies and strengthened regulatory arrangements as preludes to possible sale, but also to enhance the competitiveness of the economy even if assets are not sold.
  • We are not recommending that core transmission assets in gas and electricity be sold to private interests in the immediate future. Such assets have been successfully privatised in some countries but we believe that disposal in current Irish circumstances involves risks and that consideration of this option should be deferred.
  • We are recommending changes in the governance of state bodies while they remain in public ownership to enhance efficiency and performance. We also propose a review of regulatory arrangements and a new structure for the oversight of regulatory agencies.
  • We are not proposing that all assets be disposed of. In the case of land-based assets in particular, we propose that the state sell the rights to reap the produce of the land but not the land itself.
  • We are proposing that intangible assets (rights, licences, options, leases etc.) be treated in exactly the same way as tangible assets. They should invariably be sold to the highest bidder.
  • The Group’s appointment pre-dates the resort, in November 2010, to official financing from the International Monetary Fund and the EU institutions. The Memorandum of Understanding dated 28 November 2010 mentions the Group’s consideration of these issues and enjoins the Irish authorities to consult with the IMF/EU later this year. It does not specify any target for an asset disposal programme.
  • We are proposing a planned, prudent approach designed to secure maximum value to reduce the debt burden and to meet and protect the public interest, decisions on which are a matter for the Government and the Oireachtas.

INTERNATIONAL BEST PRACTICE | Seeking Equitable Agreements

While it is easy to say that the Government should renegotiate new agreements, and set new terms, with regards to licenses and concession contracts for natural resources, it is vital that any such process should be done in an orderly fashion, according to the rule of law, so as to ensure the long-term best interests of all parties involved – and to ensure that any agreement made is truly sustainable; economically, environmentally and socially.

MMDA 1.0 | Model Mine Development Agreement

The Model Mining Development Agreement (MMDA) was developed by the the Mining Law Committee of the International Bar Association (IBA) and published on April 4 2011. MMDA was developed in response to the challenges posed by ‘resource nationalism’. P.S.G Leon, Co-chair of of the IBA Mining Law Committee gives some background to the model agreement in his paper ‘International best practice and resource nationalism: the International Bar Association’s model mine development agreement‘, published in the Journal of the Southern African Institute of Mining and Metallurgy, July 2011:

One of the most difficult areas in concession contracts in resource-rich developing countries is achieving an equitable balance between the interests of investors, host states and, increasingly, mine and near mine communities. While some countries in the Andean region have resorted to outright or creeping expropriation of natural resource contracts under the guise of resource nationalism, others such as the Democratic Republic of the Congo (DRC), have claimed international best practice in the review (and setting aside) of important concession contracts.

The MMDA offers a template for negotiation new concession contracts for resources, or re-negotiaiton of existing contracts, between host nations and international investors, and includes an overarching concerns for the health and welfare of the local community. Leon states: “The MMDA project was developed in recognition of a number of developments within the global mining industry:

  • NEED FOR INVESTMENT – The fundamental role that foreign investment plays in the mining sector in the growth of many developing economies and, in turn, the improvement of living standards in mine or near mine communities.
  • ENVIRONMENT – The negative impact, for example, environmental damage, that mines can have on surrounding communities.
  • SUSTAINABLE DEVELOPMENT – Host governments have developed strong views on the role that mining companies should play in the sustainable development of mine communities.
  • NEED FOR NEGOTIATION – There is a need to address the growing resistance of such communities to mining operations that may be of little benefit to them.
  • HUMAN RIGHTS – An increased focus by international organizations, non-governmental and civil society organizations on human rights issues related to foreign investment.
  • CORRUPTION – Anti-corruption legislation has become more pervasive under both the law of many developing countries and under international law. This, in turn, has led to a call by international organizations, non-governmental and civil society organizations for increased transparency in international resource extraction agreements.

MMDA | Content

According to Leon, “The MMDA endeavours to address the concerns that all relevant parties (potential investors, the host government, as well as the communities affected by mines) may have regarding a mining development agreement, in an equitable manner.” These concerns are summarised as follows:

  • efficient macro-economic management
  • an effective legal and regulatory framework
  • security of tenure and regulatory certainty
  • objective criteria for the grant of exploration and mining licences
  • limited administrative discretion
  • a defined role for government
  • efficient mining sector institutions and administrative capacity
  • infrastructure services
  • competitive fiscal and taxation conditions
  • effective investment protection
  • environmental sustainability
  • social responsibility
  • transparency

While the MMDA deals with mining, its application of best practice principles can also be applied to other areas of resource management, which are leading to resource nationalism. In addition, having these terms in the contract, gives rights to the various parties, which allow for enforcement.

UNITED NATIONS | Guiding Principles on Business & Human Rights

The United Nations published Guiding Principles on Business & Human Rights: Implementing the United Nations ‘Protect, Respect and Remedy’ Framework in 2011.  The document deals with three issues: 1. The State duty to protect human rights, and 2. The Corporate Responsibility to protect human rights, and 3. Access to remedy.

The purpose of the UN Guiding Principles is to provide an authoritative global reference point on the respective roles of business and governments in helping to ensure that companies respect human rights in their own operations and through their business relationships. The UN Guiding Principles are, of necessity, very ‘high level’; they apply to all countries and all business enterprises of all sizes and industries.

These Guiding Principles are grounded in recognition of:

  1. States’ existing obligations to respect, protect and fulfil human rights and fundamental freedoms;
  2. The role of business enterprises as specialized organs of society performing specialized functions, required to comply with all applicable laws and to respect human rights;
  3. The need for rights and obligations to be matched to appropriate and effective remedies when breached.

The UN is also preparing Guidance for the the oil and gas sector for implementaion of the UN Guiding Principles.

EUROPEAN UNION | Guidance on implementing human rights in business

The European Commission has developed sector-specific guidance to assist companies in those sectors to respect human rights in light of the challenges of their particular business environments in order to assist businesses to comply with the UN Guiding Principles. The Commission prepared guidelines for specific guidance for the oil and gas sector. The EC Draft Guidance has been prepared with the aim of discussing the general principles of the UN Guiding Principles in the specific context of the oil and gas industry.

Salient human rights issues typically highlighted by O&G companies in their policy commitments include: safety in the workplace, freedom of association and collective bargaining, the elimination of child and forced labour, diversity and equality within the workforce, security, the rights of local communities (including relating to health, education, livelihoods, food and water), the rights of indigenous peoples (including, in addition, those relating to land use, cultural heritage and self-determination) and impacts related to emerging activities like shale gas production (such as on the right to water and sanitation). – EC Draft Guidance: page 9.

The problem is that like the UN Guidance, the EC Guidance will not be legally binding. The final draft will be available in April 2013, according to the European Commission on Enterprise and Industry. Further information is available from the Institute for Human Rights and Business.

PROTECTIVE RESOURCE NATIONALISM

In a different form of resource nationalism, with American and European Governments taking protective measures to prevent foreign control of their natural resources.

The intended purchase of California-based Unocal by the China National Offshore Oil Corporation (CNOOC) was stymied by the U.S. House of Representatives on national security grounds in 2005.  The Spanish government blocked the takeover of electricity giant Endesa by German rival E.ON in 2007.

PROTECTIVE ACTS

Spanish has also been a victim of resource nationalism. Argentinean President Cristina Fernandez de Kirchner nationalized the Spanish-owned oil company Yacimientos Petrolíferos Fiscales (YPF) while Bolivian President Evo Morales sent special forces to seize control of Spanish power grid operator Red Eléctrica de España.

Fianna Fail Ard FheisIRISH POLITICS | Who is the fairest of them all?

‘Fairness’ – that is the new catch-word in Irish politics, for 2013. We saw it emblazonged over the Fianna Fail Ard Fheis, in May 2013. Fine Gael Minister for Health, Dr James Reilly claims “The three key principles that underpin everything we do in Fine Gael are transparency, accountability and fairness.” Labour’s web site claims the party will “continue to forward new ideas and policies on our vision for a fairer and better Ireland, for a fair society that is built on a prosperous and sustainable economy, personal liberty and social solidarity.” Clearly, Fianna Fail are convinced they can capitalize on growing public anger over the programme of austerity cuts, increased taxes, and Government proposals for changes to the social partnership agreement – all due to the irresponsible banks.  But will the Irish people really trust the the architects of the development model and resulting crisis, that led to the loss of Irish economic sovereignty, to come back and fix things?

 

 

 

 

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