That's Enough 'Kicking Ass', Mr. President

Malcolm Rifkind, London Times June 11, 2010

The great British love-in with Barack Obama may be coming to an end. While there has been deep understanding of the environmental catastrophe that has struck the United States and of BP’s responsibility, there is also growing concern that the President’s angry rhetoric is going over the top and risks dividing the United States and the United Kingdom.

The Prime Minister is due to speak to the President at the weekend. BP will be high on his agenda. But already, I suspect, Sir Nigel Sheinwald, our Ambassador in Washington, has been on the phone to the Chief of Staff at the White House making it clear that serious damage is being done to many common British and American interests.

That BP deserves criticism is not in doubt. There is also much sympathy for the President as he seeks to assure the American public that he is in control of a disaster that has still not been fully resolved since the oil spillage began in April. His predecessor, George W. Bush, was widely criticised for his inadequate response to Hurricane Katrina. Any politician understands President Obama’s political imperative.

But, in the same way, Mr Obama must understand that an American president does not just have a domestic audience. Whatever their political purpose for his own electorate, his words resonate throughout the world and, however unintended, can have serious and damaging consequences.

That is what is now happening.

The President is entitled to make clear that BP must accept full legal and moral responsibility for the consequences of the spillage. That that will cost billions of pounds is BP’s problem and rightly so.

But the White House, in recent days, has gone far beyond that. The Associate Attorney-General, speaking, presumably, with the President’s approval, has testified that the Justice Department will take action to force BP to withhold its next dividend payment to shareholders, due next month.

That has led to a further huge drop in the BP share price — the company’s value has slumped from £120 billion to £55 billion since the oil spill began. Already there is speculation that BP may become ripe for takeover, with suggestions that China’s national oil company may be interested.

Such comments by US officials on BP’s dividends policy might have been reasonable and necessary if BP had given any indication that the interests of shareholders were to be given precedence over the rights of those in the United States who have suffered severe loss because of the oil spill.

So far as I am aware, there has not been a single remark by anyone in BP to that effect. On the contrary, BP has emphasised that as a global company, which still has massive assets, it is perfectly capable of meeting its obligations in the United States while paying a dividend to its shareholders based on the overall profitability of the company at the present time.

The American interference on dividend policy has very serious consequences — and not just for BP. The dividends that it pays are a significant component in the income of pension funds in both Britain and the United States. BP says that £1 in every £7 that pension funds receive from dividends from FTSE 100 companies comes from BP. Pension funds would find a severe gap in their income if no dividend were paid. No less than 18 million people in the United Kingdom either own BP shares or are beneficiaries from pension funds that hold BP shares.

Current White House rhetoric is not just a dangerous worry for British pensioners. No less than 40 per cent of BP shares are held in the United States. A suspension of dividends would deprive US savers of $4 billion per annum.

In addition there are 22,800 people employed by BP who live in the United States. There are, therefore, many American voters who will not thank President Obama if he jeopardises their income or their pensions by careless talk on BP.

This crisis should never have become a problem that needed the Prime Minister to speak to the President. On the gravity of the environmental damage that is being done there is no dispute. On BP’s responsibility, both for the original accident and for the depressing time it is taking to cap the well, there is no disagreement.

The President should make it clear that he has no desire to destroy a great global company. The future of its chief executive is for the company to decide and not for the White House. While he might, as he has said, wish to “kick ass”, he should concentrate his energies on more productive activity.

Part of his problem is, of course, that the buck stops with the President, but in this case he simply does not have the power to deliver the outcome that the American public are expecting and demanding.

The spillage in the Gulf of Mexico is the most serious of its kind that the world has yet seen. The technology to deal with it is not fully developed and little of it, in any event, is controlled by governments or lawmakers.

The President is, therefore, dependent on BP to sort out its own mess. Not only is that its responsibility. There is no one else with the technology or the skills to do it better or sooner.

Lord Acton once indicated that power without responsibility was not only the prerogative of the harlot but also a political curse. That is so, but the truth of the matter is that responsibility without power can be even worse. That is the President’s dilemma, but it could quickly become a crisis for him and the rest of us. Only he can make sure that it doesn’t.

Sir Malcolm Rifkind was Foreign Secretary, 1995-97

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