Obama drills for a scape­goat

Daily Mail - - City & Finance - by ALEX BRUMMER

THE White House war on BP is re­ally tak­ing its toll on the com­pany. As Pres­i­dent Obama steps up his anti-Bri­tish Petroleum rhetoric the worse it be­comes for BP in­vestors. The shares have now plum­meted 40pc since the Deep­wa­ter Hori­zon rig ex­ploded on April 20.

Clearly, the en­vi­ron­men­tal dam­age is ap­palling and some of the com­ments made by chief ex­ec­u­tive Tony Hay­ward at the be­gin­ning of this episode might have been best left un­said. Nev­er­the­less, there is some­thing deeply dis­qui­et­ing about Amer­i­cans – re­spon­si­ble for the world’s worst ever in­dus­trial ac­ci­dent at Union Car­bide in In­dia – lec­tur­ing a Bri­tish com­pany on re­spon­si­bil­ity.

The very sug­ges­tion by Obama that Hay­ward would not be safe in his job were he BP chair­man is the kind of com­ment one might have ex­pected from the Krem­lin rather than the head of state in the home of Ango-Saxon cap­i­tal­ism.

Of course, Amer­ica has ev­ery right to be an­gry. But as we noted on these pages yes­ter­day this spill is still far less than the Ix­toc catas- tro­phe in the Gulf of Mex­ico some three decades ago. It is dwarfed by the nat­u­ral seeps of oil which oc­cur ev­ery day.

What Obama is re­ally do­ing is fight­ing the mid-term elec­tions at BP’s ex­pense. In and around the belt­way, the mo­tor­way sys­tem which sur­rounds Washington, Obama may be seen to have saved his pres­i­dency with health care re­forms and the ef­fort to re­form the fi­nan­cial sys­tem.

This view is not shared in the hin­ter­lands. Obama’s ad­vis­ers be­lieve he should drop his tra­di­tional ‘cool’ and be­come an­gry be­fore the midterm elec­tions in Novem­ber if he is not to see the Demo­cratic ma­jori­ties on Capi­tol Hill van­ish.

BP is an easy scape­goat and the greater the threat of fines, the fur­ther and faster the com­pany’s shares fall. The in­tra­day drop in

Budds of June

the shares be­low 400p – the shares later re­cov­ered to 408.9p – is se­ri­ous. A fall­ing share price helps no one. It may make it less likely that the com­pany will leave its le­gendary div­i­dend in­tact but it also makes it harder to raise the fi­nance that may be nec­es­sary for clean-up costs and to sur­vive as an in­de­pen­dent unit.

Obama should back off or he risks pro­vok­ing a back­lash by for­eign in­vestors in the US and the over­seas hold­ers of vast amounts of dol­lar-de­nom­i­nated debt. The great na­tional de­bate on the size of the pub­lic sec­tor has be­gun with Chan­cel­lor Ge­orge Os­borne the mae­stro to the process. His de­ter­mi­na­tion to take a Cana­di­anstyle ap­proach will be sup­ported by the dire warn­ings from the credit rat­ings agency Fitch which warns of a ‘ for­mi­da­ble f i scal chal­lenge’.

To help him meet that chal­lenge Os­borne is de­ploy­ing the tal­ents of vet­eran pol­icy-maker Sir Alan Budd and his small team at the Of­fice of Bud­get Re­spon­si­bil­ity. They have been pre­sented with a vast task and very lit­tle time to carry it out. By next week they must come up with some cred­i­ble eco­nomic and fis­cal fore­casts. It would be nice to think that they could project strong growth. But with the eu­ro­zone – the UK’s biggest ex­port mar­ket – strug­gling, the re­pair work could prove far more com­pli­cated than Canada in the 1990s.

Then there is the ques­tion of the Bud­get process. Hav­ing pre­pared one set of data on June 14 the OBR will have to present an up­dated fore­cast in the Bud­get just over a week later.

It will have to de­cide whether the Chan­cel­lor has a more than 50pc chance of meet­ing its tar­get for fis­cal pol­icy. All this seems rather labyrinthine and will im­pose huge pres­sure on the small group of peo­ple. One has to won­der if process will be­come more im­por­tant than pol­icy. Given the per­ils of fore­cast­ing the pub­lic fi­nances (the In­ter­na­tional Mon­e­tary Fund cal­cu­la­tions proved to be wildly out in the 1970s) it is ques­tion­able how use­ful any of this will be.

Cer­tainly, the for­eign ex­changes are not en­tirely con­vinced with the pound slip­ping against the dol­lar and euro. Some com­fort can be drawn, how­ever, from the gilts mar­ket where the in­ter­est rate on the 10-year bond is hold­ing steady well be­low its pre-elec­tion lev­els.

Bond mar­kets have not lost faith in the coali­tion’s abil­ity to de­liver just yet.

Power loss

When we sug­gested that a takeover of Chlo­ride by the Amer­i­can elec­tri­cal gi­ant Emer­son would be a loss to Bri­tish en­gi­neer­ing, the re­sponse from Emer­son’s ad­vis­ers was that the UK com­pany was not a crown jewel of en­gi­neer­ing at all since most of its man­u­fac­tur­ing was done over­seas.

If Chlo­ride is such an empty shell why have Swiss en­gi­neers ABB joined the bat­tle? It must have some skills-set worth pre­serv­ing if over­seas preda­tors f i nd i t so al­lur­ing.

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