An America that doesn't play by the rules

PUBLISHED : Sunday, 20 June, 2010, 12:00am
UPDATED : Sunday, 20 June, 2010, 12:00am

More than just oil is spewing from the Gulf of Mexico gusher. One is Western exceptionalism. In 1984, a poisonous gas leak at the cheaply built, poorly run Union Carbide plant in Bhopal, India, killed anywhere between 3,000 and 8,000 immediately, another 15,000 or more subsequently and, to this day, leaves tens of thousands with major health problems.

Five years later, Union Carbide paid out just US$475 million in compensation - roughly US$1 billion at current prices. Its chairman, Warren Anderson, was charged but released on bail. He fled back to the US, but the US prevailed on the Indian government and he avoided extradition. It begs the question: what is an Indian life worth compared with an American livelihood?

In the BP disaster, 11 people were killed. Though the damage to livelihoods is immense, and that to the environment as yet hard to calculate, it is worth noting that this spill may be no greater than the Ixtoc 1 disaster in the Mexican section of the Gulf which gushed for 10 months.

Although the worst damage was caused to Mexico itself, the US suffered too. But Pemex, as a state-owned enterprise, claimed sovereign immunity and never had to pay a cent in compensation. It's a pity for BP that Margaret Thatcher sold government control, so it cannot claim the same. But reserve real pity for those regions of the world, such as the delta areas of Nigeria, which for years have been ravaged by oil spills with little clean-up or no compensation.

US President Barack Obama's mix of crude language and authoritarian threats recall Hugo Chavez. Obama is running scared because of upcoming elections and the fact that the oil industry is at a loss about how to deal with the problem. But the US has an established method of determining liabilities and compensation; it is known as the rule of law. Obama has no business pre-judging it. BP has huge assets in the US which it could be forced to liquidate to pay compensation. And, unlike the fugitive Union Carbide boss, BP head Tony Hayward is still in the US, facing up to a congressional inquisition and Obama's insults.

Not that the US popular reaction is particularly nationalistic. It seems more aimed at Big Oil in general. And, like Big Tobacco and Big Finance, it generates plenty of cash to be an easy target for populist politicians. But the hypocrisy of the Obama administration is stunning. Whatever the extent of BP culpability, it is clear that US government agencies have waived numerous safety rules and accepted dubious contingency plans in the quest to speed discovery. Is Obama suggesting that decisions taken by the previous administration are no longer valid?

One good result may come of all this: a US decision to escape the oil addiction. But it is questionable whether one disaster, which directly affects a relatively small number of people, can do what the 1973 Arab oil crisis failed to achieve.

Meanwhile, the episode has emphasised that there are serious political risks in operating in mining and some other industries in the US - risks different from, but perhaps no less than, in West Africa, Sudan or Iran. That is great news for companies like China's PetroChina and CNOOC, Malaysia's Petronas and Brazil's Petrobras, which are not convinced ventures in these areas are morally wrong and politically dangerous. Meanwhile, the major Western companies will be weakened by restrictions on exploring in 'safe' Western waters.

In another direction, the episode is a reminder to China that US politics is a latent threat to its US$1.5 trillion holdings of US government and agency debt. Hayward has inherited the title of chief media and congressional whipping boy from Lloyd Blankfein of Goldman Sachs. But congressional hearings are cathartic events. There is no knowing what a Congress angry with China, but with no identifiable individual or company to be pilloried, will do.

Philip Bowring is a Hong Kong-based journalist and commentator