Shareholders obscured in CNOOC-NEXEN deal

See, the thing about Solomon is, he never actually cut the baby in half.

Nevertheless, the prime minister’s split decision on foreign takeovers is being praised as Solomonic in some circles. But then, for some people cutting the baby in half — you can have the head and one of the shoulders, but the rest of it you get only in exceptional circumstances — is always the right decision. Because, you see, it’s a compromise, and compromise shows maturity, and maturity is the beginning of wisdom, and, well, it’s a compromise. God forbid he’d decided it on principle.

Aside from the babysevering community, however, the reaction was, as you might expect, mixed. Perhaps the most memorable was Tom Mulcair’s devastating put-down, that the only clear winners from Harper’s decision to allow the sale of Calgary-based Nexen to China’s stateowned CNOOC were the “Nexen shareholders” — oh, them — in “Mr. Harper’s oilpatch.”

I wasn’t aware until now that it was Harper’s oilpatch. Still, you could make a case that, as of Monday, it is. The prime minister may not have gone so far as to dismiss Nexen’s shareholders, a la Mulcair, as some sort of bit players in the whole drama, but current and prospective owners of other oilsands firms should be on notice: they no longer truly belong to you. They are, at least in part, Stephen Harper’s.

You might have paid for them. The legal title might reside with you. But practically speaking, they have been nationalized, at least in part. What part is that? The part of their value you would have obtained, had you been permitted to sell them to the highest bidder. Henceforth, some of the most likely bidders, especially for control stakes, will be excluded from consideration — but for “exceptional circumstances.”

The ease with which this issue — who owns the shares? — is passed over, in a debate that is supposedly all about ownership, is striking. If ownership means anything, it means the right to dispose of your assets as you see fit, and to reap the rewards that such ownership confers. If you don’t have that right, you don’t really own the asset. Someone else has helped themselves to it.

Certainly it never came up in all of the many accounts of “how the decision was made” that have appeared since. In some reports, it was a political fudge, offering something to each side of a divided caucus and, so we are informed, cabinet. In others, it was a shrewd move to preserve a bargaining chip in future negotiations with China: before we will allow your companies full rights to invest in Canada, you must grant our investors the same right in China.

In still other reports, it had nothing to do with either politics or reciprocity, but reflected the prime minister’s “growing concern,” fed by warnings from certain members of the business community, over the potential for Chinese state-owned firms to acquire control over much of the oilsands — or rather, not the oilsands themselves, which belong to the province of Alberta, but firms with rights to extract bitumen from them. Still, you get the idea.

The first thing you’ll notice about these explanations, all supposedly coming from insiders, is their mutually contradictory nature. If Chinese state ownership of the oilsands is the threat to Canadian interests it is made out, there’s no bargaining chip to play: we’re not after reciprocity, we just don’t want your kind around these here parts. On the other hand, if it is just a negotiating tactic, the prelude to a broader opening to Chinese direct investment, then the antis in the caucus can hardly be mollified.

But what’s common to all these explanations is a blithe unconcern for the rights of shareholders. It’s not clear that it even comes up. Take the “bargaining chip” argument. It sounds hard-headed and reasonable: why give up something without getting something in return? Except the negotiators are bargain- ing with somebody else’s chips.

The real conflict here isn’t between China’s interests and Canada’s, but between one group of Canadian investors and another. The government hopes, by refusing to allow the Canadian owners of certain assets to sell them to China, to pressure China into allowing other Canadian investors to buy assets from them. Certainly it would be preferable if China were to do that. But why should the interests of those Canadian investors, the ones who would like to buy, take precedence over the interests of the others, the ones who would like to sell?

The same basic lack of curiosity is evident in the “growing concern” crowd. I know I’m repeating myself here, but I still want to know: what, precisely, is the concern? Would someone please explain just what it is they think the Chinese are plotting to do to us? Starting with: How does China acquire this death grip on the oilsands in the first place? It can only be because the previous Canadian owners of these shares saw fit to sell to them. Why would they do this, if the oilsands are such a precious jewel? Why, in particular, if they know China’s desperate to buy?

Unless we think the existing owners are complete patsies, it can only be because China paid them a pretty stiff premium over what the shares were worth. But who cares about them? They’re just the shareholders.