8 August 2013

Chief Reporter

Blackmail & Corporate Welfare

Government Plays Monkey To Rio Tinto's Organ Grinder

CAFCA says you could have knocked us down with a feather. So, Rio Tinto is not going to close down its Bluff smelter as it threatened to do a few months ago (and has threatened to do every time it feels that its charmed existence in New Zealand is going to become less cushy). Instead, it has condescended to keep it open - but only guaranteed that until January 2017.

And, having rejected the Government's offer of a taxpayer subsidy a few months ago (because that offer wasn't for a long enough period), it has now condescended to accept a "one off incentive payment" of $30m of taxpayers' money.

The icing on the very big cake for Rio Tinto is that the threat to close a few months ago was a tactic to pressure Meridian via the Government over its power price contract, on which the ink was barely dry and which only took effect in January. So, now it has "negotiated" a new rate (secret, of course, like the smelter's power price rate always has been for half a century), but one which Tony Ryall says returns "the price of power paid to around pre-2013 levels". In other words - the Government has wiped the new, higher power rate which Meridian had taken a year to negotiate.

Rio Tinto commenced its blackmail of the Government knowing that it held the aces – Meridian is next off the block in the Government's underwhelming garage sale of public assets. If the smelter closed, that would have wiped Meridian's biggest customer, the smelter being the country's single biggest user of electricity, and left the Government working out what to do with a surplus of electricity, fully one sixth of the total output, and no further excuses not to cut the exorbitant rates charged to domestic consumers by the profit-driven electricity market. Power prices might have had to go down! Heaven forbid – there's no profit in that for the power companies and no big fat salaries and bonuses for their CEOs. That would "send the wrong signals" to the all-important market.

Rio Tinto continually does this in the knowledge that it has always been deemed "too big to fail" by the succession of Governments, both National and Labour, that it has effortlessly outmanoeuvred for 50 years.

It pays a top secret super cheap price that is not available for any other user and all it does is export electricity from NZ in the form of alumina, while being subsidised by all other electricity users. The smelter is the textbook example of corporate welfare in New Zealand. It is the biggest bludger in the country.

This Government is a big fan of market forces for the mugs, and corporate welfare for the transnationals such as Warner Brothers, Sky City and MediaWorks. But Rio Tinto is in a class of its own as a transnational corporate bludger, head and shoulders above the rest, and has been for many decades.

This latest handout is in addition to the massive taxpayer subsidy it has been receiving continuously for 50 years, in the form of the Manapouri power station built with public money for its exclusive use (and let's never forget that men died building that); and the cheapest and most secret power price rate in the country bar none.

Rio Tinto won the 2011 Roger Award for the Worst Transnational Corporation Operating In Aotearoa/New Zealand (and was runner up in 2012, 2009 and 2008). The 2011 Roger Award Judges' Report concluded that the company has a 50 year history of "suborning, blackmailing and conning successive New Zealand governments into paying massive subsidies on the smelter's electricity; dodging tax, and running a brilliantly effective PR machine to present a friendly, socially responsible and thoroughly greenwashed face to the media and the public".

The extremely detailed Financial Analysis reveals that the smelter's claimed benefits to NZ, namely annual export earnings of "around $1 billion" are, in fact, overstated by four fifths.

The full, damning, 2011 Roger Award Judges' Report can be read here.

The 2012 Judges' Report is more succinct: "...it has us by the balls and has continued to squeeze ever since. It is corporate welfarism, but somehow doesn't attract the same vindictiveness as the sickness beneficiary".

In short, it is a liability to New Zealand, not an asset.

This smelter constitutes a crime against the people of New Zealand and has done for its entire existence.

In the national interest, it must be closed and the sooner the better.

Meantime, the Government can proceed with its sale of Meridian (remember that, "Mum and Dad investors", you've already paid $30m of your own money before you get granted the privilege of buying something you already own), and the issue of the future of the smelter can be put off until January 2017.

But, wait - 2017 is election year. What a coincidence. Rio Tinto will keep the blackmail script handy for that. This must be the only sideshow act where the monkey feeds the peanuts to the organ grinder.

Murray Horton


Campaign Against Foreign Control of Aotearoa,
P.O. Box 2258