Fukushima, TEPCO & Kamikaze Shareholder Activism

It is no surprise that with stock prices not rising with any alacrity in the developed world for years and years, shareholder activism has become a high art of sorts. The most common complaint is of firms holding too much cash on hand. Who's brave enough to invest in such an uncertain world? A long time ago, consumer activist Ralph Nader was the scourge of big business, famously calling the Chevrolet Corvair Unsafe at Any Speed before going on to many more targets. With products being built to a generally higher standard nowadays, Nader has mellowed with age and become that most pedestrian of whiners, the shareholder activist. He is complaining that Cisco Systems holds far too much cash that should be distributed to shareholders alike himself. Not so wild and crazy anymore, eh, Ralph?

However, not all shareholder activists are created equally reticent. The Japanese are famous worldwide for their surface calm and general orderliness. Witness that country's noted fastidiousness about cleanliness, timeleness, and other hallmarks of conscientiousness. However, when excited, these most calm peoples of the earth can and do go banzai. Witness kamikaze attacks during World War II or group suicide as an online recreational activity in contemporary Japan.

In case you missed it, we had a very interesting phenomenon happen with the Tokyo Electric Power Company (TEPCO), parent firm of the now-infamous Fukushima nuclear power plant whose emissions have been the largest since Chernobyl and whose fate gripped the world in fear for a number of weeks after the devastating Tohoku earthquake. As the nation's largest utility, you can bet much anger was vented during its recent shareholder's meeting. Combine the apologetic tendencies of Japanese who've felt they've let the side down [hari-kiri, anyone?] with outraged shareholders who are just coming to grips with the magnitude of TEPCO's contingent safety liabilities and you had a most interesting gathering. "Go jump into a reactor and die!" yelled a crazed fogey evidently displeased with this turn of events. From the New York Times:

The operator of the stricken Fukushima Daiichi nuclear plant met with angry shareholders on Tuesday, offering profuse apologies as hecklers shouted abuse from a rowdy floor. But a motion that would have forced the company to abandon its nuclear program was defeated. “I apologize from the bottom of my heart for the trouble and fear that we have brought to our shareholders, and to society,” the chairman, Tsunehisa Katsumata, said at the shareholders’ meeting at a tightly guarded Tokyo hotel. “We will do our utmost to bring the accident to a resolution and to work toward our mission of providing a stable source of electricity,” he said.

Some investors refused to be placated. “Go jump into a reactor and die!” one elderly man shouted at the row of executives, before being escorted out by attendants. At one point, when Mr. Katsumata tried to wrap up a question-and-answer session, angry shareholders rushed toward the stage. The session continued. With her voice shaking, a woman told board members that they were unfit to lead the company. She said the company had ignored warnings about the dangers of nuclear power. “Shame on you!” she cried. “You should all be sacked.”

Tokyo Electric has been fighting for its survival since the March 11 quake and tsunami ravaged the Fukushima Daiichi nuclear power plant, about 140 miles north of Tokyo, leading to hydrogen explosions and releases of radioactive material in the worst nuclear accident since the Chernobyl disaster in Ukraine in 1986.

Total up the amount of compensation due to those whose lives have been disrupted and it could make BP in the Gulf of Mexico look distinctly Little League, like say Bush-era deficits compared to Obama-era cataclysmic debt orgies. Despite having a public debt already 200% of GDP, the Japanese government may yet have to keep the troubled parent company afloat. Someone needs to keep the lights on, right? It's not pretty:

At least 80,000 people in northeastern Japan have fled their homes, and farmers and fishermen in the area have had to abandon their livelihoods. Factories within a 20-kilometer evacuation zone have had to move or close. Tokyo Electric could face as much as 11 trillion yen, or $136 billion, in compensation claims, analysts have estimated. The cost of dismantling the Fukushima Daiichi plant could reach an additional 20 trillion yen, according to the Japan Center for Economic Research.

The dismal forecasts have cast a dark cloud on the financial health of Japan’s largest utility, a company with strong links to government that has dominated the country’s power industry for decades. Last week, Moody’s cut Tokyo Electric’s credit rating to junk status, after a similar move by Standard & Poor’s last month. Tokyo Electric shares have plunged more than 80 percent since the earthquake.

Prime Minister Naoto Kan has said that the government should provide a safety net for Tokyo Electric, to keep the company afloat while it pays damage claims. Japan is considering setting aside about 230 billion yen from a planned 2 trillion yen supplementary budget to help Tokyo Electric, according to Bloomberg News. Mr. Kan has been eager to hold Tokyo Electric accountable and to avoid having to dip into public money. But he also wants the company to avoid bankruptcy, which would bring chaos to the stock and credit markets.

The company had about 933,000 shareholders at the end of March. At that time, financial institutions held about 30 percent of Tokyo Electric shares, while other corporations had 5 percent. Individual investors held about 44 percent, while overseas investors held 17 percent.

We then come to the crux of the energy issue. The Germans have done themselves no favours economically or environmentally by announcing that their nuclear plants will be wound down in due course. What more Japan, a country even more hard up in terms of local energy sources?

Still, the shareholders’ demands mirror a growing antinuclear sentiment among the Japanese public. On June 11, tens of thousands marched across the country, calling for an end to nuclear power in Japan. In a poll published by the Nikkei business newspaper on Monday, 47 percent of respondents said they wanted fewer nuclear power plants in Japan, an increase of 5 percent from a month earlier.

Most experts agree that it would be difficult for Japan to permanently close all of its 54 plants without substantial fuel costs, as well as a large increase in carbon emissions. Before the Fukushima crisis, nuclear power provided 30 percent of the electricity needs of Japan, a resource-poor country with few domestic sources of energy to draw on.

Still, 35 of Japan’s 54 reactors are already closed for maintenance or safety checks, and others are scheduled to follow, which could leave the country without any nuclear power by next April. To make up for the shortfall, power companies around Japan have increased their purchases of natural gas.

Alike the kamikaze pilots of yore, shareholder activists with a penchant for self-immolation--let's all jump in the reactor and die!--should ponder whether their proposed cure is worse than the illness that plagues a nation in troubled times. Increasing the safety margin of nuclear plants I understand--these are problems dealing with corporate governance where there is indeed room for improvement. Doing away with them altogether in Japan's case? To paraphrase Ralph Nader, modern shareholder activist, I am not fully convinced nuclear power is Unsafe at Any Location.

Countering Rising Food Prices at the G-20 (Sort Of)

In case you missed it, the G-20 recently held a meeting of agricultural ministers in gay (as in happy) Paris. Given the wide range of global governance problems, focusing on things other than finance is welcome even if they ultimately return to matters of Mammon. France being the current head of the G-20 as well as the EU's largest agricultural producer and the world's second largest exporter of such products--its interest in the matter is evident. That said, we too came to an impasse over two important agricultural matters at the aforementioned meeting.

First, government subsidies for the production of biofuels remains a hot topic. Some blame diversion of food crops to biofuels as one reason for soaring food prices. Certainly, I would distinguish among the cost-effectiveness of such solutions. The US programme is a massive financial boondoggle, whereas that of Brazil has established its economic rationale for quite some time. At any rate, the UN Food and Agricultural Organization (FAO) believes that curtailing such subsidies should alleviate price rises hurting some of the countries hardest hit by rising food prices. A recent NY Times op-ed has this to say on the matter:

The price of agricultural commodities has surged by more than a third over the past year — cereal prices by 70 percent — surpassing even the levels that sparked widespread food riots in 2008. According to the World Bank, the rise in prices pushed 44 million more people into hunger in the second half of 2010.

It is disappointing that the agriculture ministers from the 20 large industrial economies who gathered last week in Paris failed to end two policies that are a big part of the problem: bans on agricultural exports by certain producers and government supports for food-based biofuel production.

A report for the Group of 20 meeting by the United Nations’ Food and Agriculture Organization, the World Bank and others noted that eliminating or curtailing these policies would help mitigate the spikes in prices that have deepened hunger in the poorest countries in the world.

The United States, Brazil and several other biofuel makers opposed an agreement to cut support for biofuels. This country is the world’s biggest ethanol producer. The 13.5 billion gallons made here last year used about 40 percent of the nation’s corn crop. Government supports include a nearly $6 billion annual subsidy for ethanol makers.

The ministers agreed only to further study the relation between biofuel production and food prices. That is just an excuse for continuing to protect these industries. The cost should be clear to all by this point. The report to the Group of 20 noted that biofuels consumed 20 percent of the global sugar cane crop between 2007 and 2009, when food prices soared, as well as 4 percent of the beet crop and 9 percent of the world’s production of coarse grains like corn.

There's also the matter of major agricultural producers refusing to export their products, also exacerbating high prices worldwide:

The ministers also failed to forbid the use of export barriers to hold down food prices at home. Argentina [see my earlier post on its soy export limits], Russia and more than two dozen others have adopted bans since prices began to surge, sending global prices even higher and discouraging investment in food producing regions. The ministers did agree that countries could not restrict sales to the World Food Program so it can continue to address crises. It is not enough.

That said, the speculation-wary Sarkozy has shown his influence in putting in place mechanisms for determining if rising prices are due less to supply and demand dynamics but trader profiteering, howsoever defined:

The agricultural summit meeting, the first of its kind, did make some progress. The participants agreed to set up a system to monitor world food stocks and production to prevent misinformation that can contribute to price fluctuations. They also agreed on a pilot program for an emergency food reserve system to respond to shortages in vulnerable countries.

The Guardian also has a summary of other areas discussed if you are further interested in this important topic.

Of Arctic Oil Grabs and Greenland's Independence

Some rich men came and raped the land; nobody caught 'em
Put up a bunch of ugly boxes and Jesus people bought 'em
And they called it paradise--the place to be
They watched the hazy sun, sinking in the sea

[NOTE: I almost missed this one, but it's better late than never. Might as well cue up "The Last Resort" by The Eagles while you're at it.] There's something profoundly distasteful about the whole process of warming over Mother Earth to exploit her oil and gas resources in the Arctic. Which, when used, will further worsen global warming. As most of you know, melting of ice up North has prompted all sorts of manoeuvring to secure future exploration rights among the Nordic countries, Canada, the United States, and Russia. Recently, the major nations in the impending Arctic oil grab got together and signed the Nuuk Declaration. The World Policy Institute provides a brief description:

On May 12, the 7th Arctic Council Ministerial Meeting convened in Nuuk, Greenland. The Arctic Council is a high-level intergovernmental forum created to promote cooperation among the Arctic states. Its members are Canada, Denmark (via Greenland and the Faroe Islands), Finland, Iceland, Norway, Russian Federation, Sweden, and the United States. Permanent participants include indigenous organizations such as the Inuit Circumpolar Council (ICC) and the Saami Council. Unlike member states, permanent participants do not have voting rights.

The meeting, attended primarily by foreign ministers, produced the first legally binding agreement arrived at by the Arctic states since the formation of the Council in 1996. This agreement requires states to cooperate on search-and-rescue operations, including giving permission for all states to traverse foreign waters when necessary. The eight Arctic states also formally agreed to jointly develop measures for oil pollution preparedness. Finally, the Nuuk Declaration also noted that the Arctic sea ice is melting at a faster rate than previously predicted, accelerating access to oil and gas reserves and opening up new sea routes for commerce and tourism.

However, the more interesting behind-the-scenes story involves diplomatic manoeuvring by the main players. While the Nuuk Declaration was being negotiated, WikiLeaks published a series of cables online pertaining to US policies concerning the Arctic. We might as well use some "Internet Freedom" right here, ey? (This story involves our Canadian friends so the lingo should be accurate ;-) As it turns out, the haughty Americans who usually avoid intrusions on national sovereignty at the UN are now considering signing on to UN Convention on the Law of the Sea according to leaked cables. This to be better placed to economolest Mother Earth when the time comes. From the first cable:

4. (C) D said the Administration continued to urge the Senate to ratify the UN Convention on the Law of the Sea (UNCLOS), and had not given up all hope of achieving this during the Bush Administration. Ratification was clearly in the U.S. interest. [Danish Foreign Minister Per Stig] Moeller agreed, joking that "if you stay out, then the rest of us will have more to carve up in the Arctic."

Then there are predictions verging on the edge of conspiracy theory that future energy revenues will allow Greenland to become independent of Denmark. Naturally, major American energy firms are keen on approaching the players there for...future collaborations. These from Cable 129049 from the Copenhagen embassy in 2007:

2. (SBU) Summary: Greenland is on a clear track toward independence, which could come more quickly than most outside the Kingdom of Denmark realize.

3. (SBU) With Greenlandic independence glinting on the horizon, the U.S. has a unique opportunity to shape the circumstances in which an independent nation may emerge. We have real security and growing economic interests in Greenland, for which existing Joint and Permanent Committee mechanisms (described reftel A) may no longer be sufficient. American commercial investments, our continuing strategic military presence, and new high-level scientific and political interest in Greenland argue for establishing a small and seasonal American Presence Post in Greenland's capital as soon as practicable. End Summary.

14. (SBU) One senior Greenlandic official commented recently that his country (Greenlanders and many Danes alike routinely refer to Greenland as a ""country"") is "just one big oil strike away" from economic and political independence.

Chevron and ExxonMobil are part of an international consortium exploring off Greenland's western coast, and the U.S. Geological Survey is completing an assessment of Greenland's potential oil and gas reserves. Its initial findings suggest Greenland might have reserves to rival Alaska's North Slope. To help the Greenlanders secure the investments needed for such exploitation, I recently introduced Home Rule Premier Enoksen and Minister of Finance and Foreign Affairs Aleqa Hammond to some of our top U.S. financial institutions in New York.

Hence the US engaging in all sorts of public relations efforts in Greenland. This being the 21st century, there's even paranoia about the Chinese wanting in on the action and thus the need to ward them off:

Our international visitor invitations, English teaching programs and joint scientific/environmental projects have reinforced Greenlandic desires for a closer relationship with the United States, just as Greenland assumes ever-greater charge of its international relations and edges closer to full independence. Our intensified outreach to the Greenlanders will encourage them to resist any false choice between the United States and Europe. It will also strengthen our relationship with Greenland vis-a-vis the Chinese, who have shown increasing interest in Greenland's natural resources… While Greenland has long been believed to possess significant hydrocarbon and mineral stocks, only in the last three to four years -- with the rise in world oil prices -- have international investors have begun to seriously explore Greenland's potential. An American Presence Post in Greenland would provide us with the needed diplomatic platform to seek out new opportunities and advance growing USG interests in Greenland.

Just when I was going to reach for my hankie over how all these nations were concerned about "the conservation, sustainable use and protection of Arctic flora and fauna for the benefit and enjoyment of present and future generations, including local populations and indigenous peoples" as per the Nuuk Declaration, I was plunged back to naked reality. It's an Arctic land grab, plain and simple. Will Greenland really be the 194th country after South Sudan? A question worth pondering, perhaps.

Who will provide the grand design?
What is yours and what is mine?
Cause there is no more new frontier
We have got to make it here

We satisfy our endless needs and justify our bloody deeds
In the name of destiny and the name of God

Fukushima Fallout: German Hypocrisy on Nukes?

As someone with an interest in both the introduction of innovations and sources of energy, I have closely followed developments in the public acceptance of nuclear power. To be sure, this acceptance varies country by country. What's more, harrowing incidences alike those of the Fukushima power plant tend to elicit different responses.

A few weeks ago, I probed why the French have not really questioned their reliance on nuclear power despite Fukushima reminding us all of its obvious hazards. On a crudely instrumental level, the French would be shooting themselves in the foot if they themselves expressed reservations about nuclear power since they are the world's biggest users and exporters of the technology. How would it look like to prospective customers if France itself began doubting the safety of its atomic products and services? Given French pride in their engineering achievements, there's also an element of distancing--"our" nuclear plants are safer and are not in an earthquake zone besides.

An interesting contrast is Germany. To be sure, there have been many u-turns here. Chancellor Merkel's socialist predecessors decided to phase out this technology before the CDU decided to extend its operational life. However, the recent Japanese calamity has resulted in another reassessment that (they say) will result in the irrevocable closure of these plants. And on and on it goes:

Germany's coalition government has announced a reversal of policy that will see all the country's nuclear power plants phased out by 2022. The decision makes Germany the biggest industrial power to announce plans to give up nuclear energy. Environment Minister Norbert Rottgen made the announcement following late-night talks.

Chancellor Angela Merkel set up a panel to review nuclear power following the crisis at Fukushima in Japan. There have been mass anti-nuclear protests across Germany in the wake of March's Fukushima crisis, triggered by an earthquake and tsunami.

Mr Rottgen said the seven oldest reactors - which were taken offline for a safety review immediately after the Japanese crisis - would never be used again. An eighth plant - the Kruemmel facility in northern Germany, which was already offline and has been plagued by technical problems, would also be shut down for good. Six others would go offline by 2021 at the latest and the three newest by 2022, he said. Mr Rottgen said: "It's definite. The latest end for the last three nuclear power plants is 2022. There will be no clause for revision.

Yes, whatever. While German deep greens may rejoice, there's the important matter of how Germany will replace the nearly 25% of its electricity needs accounted for by atom splicing. Yes, there will be the standard paeans to energy saving and renewable sources in this politically correct age. As I blogged earlier, though, it appears (non-CCS) King Coal is making a comeback to help fill the void. More questionable yet if eliminating nuclear power is really your goal is that the Germans appear to be buying more power from...the French. So, having let up on nuclear power, it looks like it's becoming more reliant on, er, others' nuclear power:

France became a net exporter of electricity to Germany last month after the Japanese atomic disaster and subsequent shutdown of German reactors reversed an electricity trading trend between Europe’s biggest markets. In April, France was a net exporter of power to Germany for the first time since the summer months of June, July and August last year, according to data published on the website of Reseau de Transport d’Electricite, the grid operator owned by Electricite de France SA, Europe’s biggest power generator.

Overall, French power imports from Germany outstripped exports last year. Power trading between the countries may change following German Chancellor Angela Merkel’s decision in March to shut the country’s seven oldest reactors and today’s announcement of an exit from the power source by 2022.

EDF operates France’s 58 nuclear reactors which allow the country to be an net power exporter to European neighbors and provide relatively cheap electricity to customers at home. The state-controlled utility is developing a new atomic plant at Flamanville in Normandy and has plans for another in northern France at Penly. Since the Fukushima disaster in March, French President Nicolas Sarkozy, who is facing an election next year, has vowed to continue to invest in the atomic industry.

France, which relies on nuclear plants for about three- quarters of its power needs, exported a net 509 gigawatt hours to Germany last month compared with net imports of 618 gigawatts during the same month last year, RTE said. In the most recent month, Germany joined Belgium, Italy, Spain, Switzerland and the U.K. in relying on France for more power imports than exports, the data indicates.

So, not only does Germany lose more energy independence via this move, but it too is buying nuclear power from its neighbour at a presumably higher cost. And of course, it's a ridiculous application of NIMBY--Not In My Back Yard. Not only are the Germans incentivizing the French to ramp up nuclear power production, but there is no wholesale safety improvement in moving nuclear power production to your next-door neighbour. You may not see the plants in your immediate surroundings, but it would be ludicrous to think fallout from a major accident in France would somehow skip Deutschland. And how exactly does increasing coal usage figure into a green economy?

The BBC also has an interesting piece on the politics of nuclear power in the Fatherland. As I said, Germany's policy makes little sense from an economic or environmental sense. Even if you're an environmentalist opposed to nuclear power, you'd probably agree.

UPDATE: Estimates place German phase-out of nuclear power as adding 20 to 40 million tons of carbon dioxide annually as it returns to fossil fuels. Talk about dubious reasoning.

Maybe Costly Fuel Will Doom Low Cost Airlines

Let me confess by that I live with the very embodiment of environmental evil. My flatmate is one of those Europeans who have taken advantage of the advent of low-cost carriers to travel around the continent affordably to see more of what it has to offer. This week Bratislava, the next Riga, maybe Prague in two weeks' time. This is so because certain environmentalists view short-hop flights as a unique form of devilry. When bus and train networks will take you pretty much anywhere you want to go, they argue, why fly Ryanair or EasyJet? Short-haul flights of the sort weekend vacationers like my flatmate take are said to be far worse in climate change terms than terrestrial transportation. Too, airports and the constant buzz of airplanes supposedly add to the noise pollution of already aurally challenging urban life. Living under a flight path, I certainly appreciate Icelandic volcanoes late in the evening!

So you have movements alike Plane Stupid here in the UK who spend their time fighting the expansion of major London airports alike Heathrow and Stansted. Recall the "Battle of Heathrow" a few years back. Certainly the potty-mouthed Ryanair CEO Michael O'Leary regularly tossing f-bombs in the direction of the green crowd does nothing to endear himself to them.

But wait. Despite the endless enviro-pessimism of this crowd, they should find comfort in costly aviation fuel--not diminished European appetite to rediscover scenic towns across the continent via air travel--dooming Ryanair and Easyjet expansion. Earlier on, the news was that Easyjet was now losing money, and that it did not plan to increase capacity for the first time ever:

Rising oil prices and aviation taxes have nearly doubled easyJet losses as the budget airline announced a freeze in fleet growth over the next two winters.

EasyJet admitted that consumers will not swallow the higher fares needed to offset higher costs, so aeroplanes will be parked in slower months to stem losses. The Luton-based carrier revealed the capacity squeeze as first-half pre-tax losses, racked up during the traditionally quiet six months to 31 March, rose from £79m to £153m.

EasyJet highlighted the struggle for airlines to pass on soaring costs as revenue per seat slipped by 2.1%, which it attributed to a £1 increase in air passenger duty last autumn to £12 per flight. The near-doubling of losses was driven by a £43m impact from fuel, which now accounts for more than a quarter of the cost base, and a £21m hit from APD. EasyJet said it would hold its fleet size for its 2011 and 2012 winter programmes at 204 planes, while warning that it could change plans to grow its total fleet from 199 jets to 220 over the next two years.

Things are no better for Ryanair. Aside from not making much money, it now plans to reduce flight capacity for the first time in its history. It is also thinking of a move upmarket as low-cost fares look to have run their course for now:

Ryanair Holdings Plc (RYA) will cut capacity for the first time in its history next winter as fuel costs threaten to render dozens of routes unprofitable, ending decades of growth that made it Europe’s No. 1 discount airline.

Ryanair fell the most in 20 months in Dublin trading after Chief Executive Officer Michael O’Leary said he’d ground 80 of 300 jets and lay people off for the low season starting in October. Even with a 12 percent fare increase he forecasts net income no higher than last year’s 401 million euros ($563 million) -- or 18 percent less than estimated by analysts.

“It’s the first time ever that we’ll go negative on traffic,” O’Leary said in an interview. “We take delivery of 50 aircraft this winter so instead of running around trying to open up new bases and routes in November and December we’ll sit them on the ground. With higher oil prices it makes no sense.”

Ryanair has transformed the European airline industry since O’Leary took over in 1990 after studying the growth of Southwest Airlines Co. in the U.S., offering flights between cities never previously served by air and luring passengers from established carriers with bargain-basement fares and a no-frills service. More recently, the CEO signaled plans to attract higher-paying flyers after exhausting opportunities to lift sales by charging for everything from checked bags to credit-card bookings.

So there you go: costly fuel may do in the expansion of short-haul flights so reviled by the environmental crowd in a manner that all sorts of protests have failed to achieve all these years. At least the charity calendar survives, eh?

The Hugo Chavez - Formula One Connection

It seems colourful regimes and Formula One go hand in hand given that the latter is already populated with several colourful characters. From S&M fetishists to crash artists, F1 has all the shenanigans going on. Given that it is one of if not the world's most-watched sport depending on who you're listening to, there's also the allure of a vast global audience. While watching the qualifying session for tomorrow's Shanghai Grand Prix, my early morning daze failed to dim my awareness of one of Williams' sponsors: PDVSA. That, of course, is the national energy company of Venezuela and a vehicle for various Hugo Chavez pet projects. Remember when Hugo Chavez made the PDVSA-owned CITGO chain in the US sell discounted heating oil to poor American citizens to show up el diablo Jorge Bush?

Just as Fernando Alonso brought Spain's Santander Abbey from McLaren to his current team Ferrari, drivers tend to bring their national sponsors with them for obvious reasons as the home audiences tune in to watch their compatriots. And so it is with Williams F1's new driver, Pastor Maldonaldo, the reigning GP2 champion. Our man Pastor's website is swathed with Venezuelan flag colours, while nearly all his sponsors are affiliated with the Venezuelan government. As a vehicle for jingoism, sports has few peers, and so PDVSA signed a long-term contract with Williams F1 worth $14M at the start of the year:

Williams has followed up its signing of driver Pastor Maldonado with a long-term sponsorship deal with Venezuela's state-owned oil company PDVSA. Venezuelan driver Maldonado took the GP2 title last term and will drive alongside veteran Brazilian Rubens Barrichello in 2011. And the cars will carry the livery of the world's fifth largest oil exporter.

The country's president Hugo Chavez announced the deal in Caracas and team owner Frank Williams feels it will make a huge difference to their competitiveness following the loss of a number of sponsors at the end of the 2010 season. "They are a substantial partner and can make a meaningful difference to our fighting ability," Williams said in a statement.

PDVSA's head of corporate affairs Julio Gonzalez added: "Pastor will fly our flag this year and carry the hopes of an entire country in this new chapter of his career." Williams finished sixth behind the dominant Red Bull outfit in last year's Constructors' Championship.

Although it has fallen on hard times in recent years without a major engine supplier, Williams is a storied name in F1. It has won 9 constructors and 7 drivers titles. It is also a paragon of British motorsport, with Sir Frank Williams obviously having been knighted. Certainly, there is political risk being involved with an outfit like PDVSA that may result in reputational damage.

In particular, I am thinking of another storied British institution that decided to accept funding from another oil-rich country with a chequered past. For Williams' sake, I hope it won't become another LSE-Libya episode. Meanwhile, the Guardian has a wryly amusing take on Hugo's newfound fondness for bourgeois recreational activities alike motor racing:

Chávez has embarked on a little revisionism, recognising the importance of sport to his nation's economy and the value of having Venezuela represented on the global sporting stage. This year the state-owned oil company PDVSA will put $14m (£9m) into the Williams Formula One team, which will this season have the Venezuelan Pastor Maldonado as one of its drivers – a decision that led to Chávez being accused of hypocrisy (capitalism surely has no greater sporting expression) and misusing his patronage (Maldonado is an avowed supporter of the president).

Last, I found it curious that the description of PDVSA on the Williams website states "Between 2004 and 2010, PDVSA contributed $61.4 billion to social development projects across the country." I'd settle for exchanging this sort of braggadocio for rising not falling Venezuelan petroleum production and not sending away auditors to hide this fact.

Post Fukushima, French Still [Heart] Nuclear Power

Just when a nuclear power revival was supposedly in full flower, troubles with the technology at Japan's Fukushima facility are prompting a global reassessment of its costs and benefits. Yes, it's a virtually carbon-free technology. Yes, it weans you somewhat from importing fossil fuel from perpetually unstable parts of our world. But, as Fukushima reminds, safety challenges associated with the technology come in all sorts of shapes and forms. End result? The Germans are actually going backwards in forsaking nuclear power for old-fashioned coal power. Some progress.

However, the same sentiment is not shared by their French counterparts. As you probably know, over three-quarters of France's energy needs are accounted for by atom splitting. Such is their overall level of public comfort with the technology that few have complained about it in Fukushima's wake. The prestige of being the chief of France's nuclear power firm remains undimmed as its current head and that of the nuclear services firm EDF are battling for the honour of leading Areva (whose famous ad featuring the 70s disco hit "Funkytown" is featured above).

Part of the reason why nuclear power is so firmly entrenched domestically in France is that it sets an export base to sell these engineering wares. Although the French haven't developed cold feet in using nuclear power, the fear is that foreign customers may be. So, a primary task is assuaging them that, yes, modern French technology is more advanced (read: safer) than that of 70s-era nuclear plants in Japan.

For reasons familiar to those who've studied some European history, the French usually punch above their weight in international diplomacy, whether it's dealing with the aftermath of the global financial crisis or erstwhile arms customer Moammar's slaughter of Libyan civilians. Hence, it should be of no surprise to anyone that the French are once again at the forefront of proposing international rules to ensure the safety of nuclear power. To say that they are self-interested would be an understatement, but you can't argue with the sheer energy they put into jumping the gun. From the coverage of President Sarkozy's visit to Japan a few days ago in Reuters:

France -- the most nuclear-dependent in the world -- called for new global nuclear rules and proposed a global conference in France for May as President Nicolas Sarkozy paid a quick visit to Tokyo on Thursday to show support. "We must look at this coldly so that such a catastrophe never occurs again," said Sarkozy, who chairs the Group of 20 bloc of nations, during his brief stopover.

It was the first visit by a foreign leader since a March 11 earthquake and tsunami battered northeast Japan, leaving nearly 28,000 people dead or missing. The damage may top $300 billion, making it the world's costliest natural disaster.

Prime Minister Naoto Kan, under enormous pressure as he struggles to manage Japan's toughest test since World War II, welcomed the gesture of solidarity. "I told him a Japanese proverb -- 'a friend who comes on a rainy day is your true friend', and thanked him for coming to Japan from the bottom of my heart," he said.

While there is of course a humanitarian concern in assisting the Japanese deal with their nuclear woes, you can't help but believe that the French are eager to lend their disaster containment expertise to once again demonstrate their engineering prowess to would-be clients:

France is a global leader in the nuclear industry, and Paris has flown in experts from state-owned nuclear reactor maker Areva to work with Japanese engineers. "Areva is one of the companies that will make the most out of a nuclear revival and therefore will be in most trouble if there isn't a nuclear revival," said Malcolm Grimston, an expert from London's Imperial College. "Certainly Sarkozy or France generally have a very strong interest in getting things moving as quickly as possible and trying to ensure that there isn't a major backlash (to nuclear power). France would be one of the biggest losers from that."

Other nations are also scrambling to help Japan. The United States and Germany are sending robots to help repair and explore the damaged Fukushima Daiichi plant. Kyodo said some 140 U.S. military radiation safety experts would soon visit to offer technical help.

The International Atomic Energy Agency (IAEA), which says the situation at the Fukushima plant remains very serious, already has two teams in Japan, monitoring radiation levels. The Japanese disaster, the worst nuclear accident since Chernobyl in 1986, has appalled the world and revived heated debate over the safety and benefits of atomic power.

It isn't hard to decipher where the French stand on this issue alongside their nuclear national champions. As the events in Japan unfold, they're busy lauding loan guarantees the US is making for developers of new nuclear power plants Stateside. The business of atom splitting will go on for the French.

Moammar, Italy & BRICs: The Battle for Libyan Oil

A few days ago, we had former UNDP head Mark Malloch Brown talk impressively about global events, especially goings-on at the UN in relation to the Middle East/North Africa. One of the things he pointed out was that perhaps an even worse humanitarian disaster is occurring in Cote d'Ivoire. While this is sadly and undoubtedly true, I'll take the crude Marxist route of economic determinism and suggest the difference boils down to energy. Possessed of the finest grades of petroleum reserves--light, sweet crude that is easy to refine--Libya will remain a prize far greater than the Ivory Coast. Tis the way of the world: I am afraid and ashamed of in equal measure.

Arguably, two of the countries that have pressed hardest for a no-fly zone over Libya are those with the most commercial interests there. Perhaps it's a matter of saving face. Remember that prior to leading the current international effort to penalize the Gadhafi regime, Nicolas Sarkozy was telling everyone not too long ago that it was OK to sell arms to Libya. Given its imperial history, Italy has invested in Libya and has in turn attracted investment by Libyan powers-that-be. However, the head of Italy's largest petroleum company ENI (formerly Agip), has been thinking ahead about the future implications of sanctions should Gadhafi remain in control--or at least of the key oil-producing regions. From the WSJ:

The head of Italian oil giant Eni SpA called for Europe to drop sanctions against Libya, saying it was "shooting itself in the foot" and endangering its energy security by punishing the Gadhafi regime.

Eni Chief Executive Paolo Scaroni's comments come against a background of threats and warnings by Col. Moammar Gadhafi against foreign oil companies, especially those from countries that have backed the opposition rebels and called for a no-fly zone above Libya...Foreign companies such as Eni, which suspended production and evacuated staff when the violence erupted, are keen to resume operations in a country that holds the largest oil reserves in Africa and has long been considered one of the great unexplored frontiers of the global energy industry.

But they face a dilemma. Libya is likely to face an era of deep international isolation, with a new round of sanctions that could affect foreign oil companies. Those from states that called for Col. Gadhafi's ouster, like France and Italy, may be singled out for punishment by the leader and his inner circle.

And those that try to rekindle their relationship with a reviled regime face grave risk to their reputations in Western markets. "Companies that go grovelling back to Gadhafi are not going to look great in the eyes of Western public opinion," said Samuel Ciszuk, a North Africa energy expert at IHS Global Insight. "It's going to be a very uncertain environment for them."

Indeed, it's by no means certain that the West will not eventually forgive and forget as it has done in the past. ENI thinking is simple: if the West offends Gadhafi sufficiently but he is not dislodged from power, then there are others who would certainly welcome the opportunity to take its place:

In interviews published this week, Col. Gadhafi indicated that contracts with Western oil companies could come under review. He told the Italian daily Il Giornale he felt "betrayed" by Italian Prime Minister Silvio Berlusconi, who had previously courted the Libyan leader but called for him to step down after the uprising broke out...Italy has suspended its 2008 "friendship treaty" with Libya and frozen Libyan investments in the Italian economy, including large stakes in defense contractor Finmeccanica SpA and lender UniCredit SpA.

Asked whether Libya might reconsider its contracts with Eni, the Libyan strongman said he "believes and hopes" that the "Libyan people" would reconsider their economic, financial and security ties with the West. Speaking to Russia Today, the pro-Kremlin channel, Col. Gadhafi said Libya can "no longer trust the West...That is why we would like to invite companies from Russia, China and India to invest in our oil production and construction industries," he added.

Other officials in Libya have said they are eager to have Western companies back. Shokri Ghanem, head of Libya's National Oil Corp., or NOC, and the country's de facto oil minister, said last week that Libya would respect all contracts and wanted its current partners to return to work as soon as possible.

Speaking on the sidelines of a parliamentary hearing on Italy's energy ties to Libya, Mr. Scaroni said imposing sanctions was "shooting ourselves in the foot," because not taking Libyan gas would undermine Italy's energy security. Eni has been in Libya since 1955 and is the largest single foreign investor there; in 2007 it signed a $28 billion deal to extend its Libyan oil contracts to 2042. But sanctions have forced Eni to suspend shipments of the oil it produces there, which account for about a quarter of Italy's oil supply. It also shut down the Greenstream pipeline which supplies 10% of Italy's natural gas.

With Libya's political future still uncertain, Mr. Scaroni appeared to hedge on where Eni's allegiances lie. "Whatever political system there is in the future, it will have its own NOC, which will have contracts and relations with us," he said. "I don't see any reason that these ties should be compromised."

Now for more on the BRICS--all of which declined to cast their vote. Permanent security members China and Russia unsurprisingly did not vote on the resolution implementing the no-fly zone. While Russia being attracted to Libya's energy supplies is indeed like bringing coals to Newcastle as the saying goes, the Chinese would certainly welcome the opportunity to expand its access to such supplies. Are they currying favour just in case? In addition to abstaining, both countries now express "regret" over military action.

Meanwhile, non-permanent security council members Brazil and India did the same. (Remember, there are five permanent security council members and ten rotating ones--which Brazil and India happened to be at the time of the vote.) Brazil does not lack for energy resources, but India could certainly stand to gain in the aftermath if Gadhafi manages to cling to power. Gadhafi has already suggested as much.

Although I suspect these major emerging economies are more concerned with keeping the principle of non-interference intact, you cannot rule out the possibility of some--particularly China and India--hedging their energy bets. Energy realpolitik--if the Italians can't do without it, imagine how countries many time its size keep it in mind.

Ultimately, it hinges on whether Moammar Gadhafi remains in power or nor. Insofar as Western enforcers of the no-fly zone are reluctant to launch a ground effort lest another protracted counterinsurgency-type challenge appear (as Gadhafi warns), there are any number countries and companies jockeying for position in anticipation of ever after.

Fukushima Folly: Nuclear Power in Question (Again)

Chernobyl, Harrisburg, Sellafield, Hiroshima
Stop radioactivity - it's in the air for you and me
[Radioactivity]...discovered by Madame Curie

Shall we be adding Fukushima to this list? Leave it to the Germans to perform probably the most buoyantly morbid song of them all in "Radioactivity." In recent times before Kraftwerk ("Power Plant" in German) co-founder Florian Schneider quit this famous band--or at least for now--banks of primitive analogue synthesizers they used to operate were replaced by far more advanced and compact digital devices. For instance, in the concert footage above from their otherworldly live album Minimum Maximum, they could be arranging pole dancing lessons for all we know on their laptops instead of "performing."

Yet time moves on. For a while--let's say between Chernobyl and now--many longtime environmental activists started to consider nuclear power as a lesser evil to burning fossil fuels. While storing and disposing of hazardous material has and always will be issues, their use did not result in significant carbon emissions. You can indeed say that we are now back to the future with the nuclear power plant troubles in Japan. Rising fuel prices have in recent years been good for the nuclear industry, yet the outcome of the current incident may result in public clamour to minimize its use while lawmakers respond accordingly. Nuclear plant builders and suppliers that have been amidst much competition in recent years may find their business dry up.

Still, there are a number of things to point out. First, contrary to what perma-doom Greenpeace folks have said, the Fukushima reactors are not the most "modern" reactors. As the newswires or even something as pedestrian as Wikipedia notes, these are the oldest operating ones in Japan. Moreover, the explosion that occurred did not happen at the reactor as Kyodo News explains:

Japanese authorities have confirmed there was an explosion at the Fukushima No. 1 nuclear power plant Saturday afternoon but it did not occur at its troubled No. 1 reactor, top government spokesman Yukio Edano said. The chief Cabinet secretary also told an urgent press conference that the operator, Tokyo Electric Power Co., has confirmed there is no damage to the steel container housing the reactor. Edano said the 3:36 p.m. explosion caused the roof and the walls of the building housing the reactor's container to be blown off. He said there has been no serious damage to the steel container of the reactor...

The top government spokesman said Tokyo Electric Power has begun operations to fill the reactor with sea water and pour in boric acid to prevent an occurrence of criticality, noting it may take several hours to inject water into the reactor. In addition, it will take about 10 days to fill the container with sea water, he said. Officials of Japan's nuclear safety agency said there was no sign that radiation levels had jumped after the explosion.

There is a Japlish press release by TEP with much the same facts. Things are still unfolding, and the letting off of pressure may have produced more drama than warranted. While there have indeed been minor incidences with such plants over the years, the Japanese tend to be meticulous about things--the anti-Homer Simpsons. It is up to Japan now to prove the Greenpeace crowd wrong. Otherwise, we will be back in that post-Chernobyl climate that led to much wariness about nuclear power for several years which took global warming and high oil prices to eventually play down.

Chain reaction and mutation - contaminated population
Stop radioactivity - it's in the air for you and me

Celeb Enviro-Activist James Cameron Defends BP

Given that he is Hollywood's most bankable director--or among the top 3 at least--Avatar and Titanic director James Cameron certainly isn't an unknown quantity. As the former film would suggest, he is very much in the conflicted movie star mold: he makes a living selling commercially successful titles while deploring the surrounding commercial infrastructure that enables his very success. Certainly, he is no Charlton Heston--an actor with strong conservative conservative leanings.

However, one of the surprising things you may want to know about him is that, despite his left-of-centre and environmental stylings, Cameron does feel regret about the plight of poor old BP. Here is a guy who, in a Bono-esque frame of mind, is protesting the proposed construction of the Belo Monte megadam in Brazil. (If constructed, it would be the third largest dam in the world in terms of output.) A few days ago, I cam across an interesting interview of him with the Wall Street Journal's technology correspondent Kara Swisher that nobody else seems to have noticed. Among other topics, Cameron (James, not David) describes how he has offered help to BP as one of his interests is operating submersibles that may aid in the spill control efforts:
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MS. SWISHER: Let's talk a little bit about BP.

MR. CAMERON: It goes back to loving exploration and underwater technology.

For 22 years, I have been working with a number of the top people in the very small deep-submergence communities. They build the subs and I go in them or I build a robotic vehicle, take it down in a sub, do exploration, do forensic wreck surveys. I then have this hobby called directing movies that I do occasionally. Over the last few weeks, I have watched, as we all have, with growing horror and heartache, what is happening in the Gulf.

I know really, really smart people that work at depths much greater than what that well is at. They do not drill for oil, but they operate all kinds of vehicles, all kinds of electronic optical-fiber systems, and have all the remote manipulators and so on. Most importantly, they know the engineering that it requires to get something done at that depth. I thought, "Why don't I get all these people together for a brainstorming session?"

MS. SWISHER: You had gone to BP first?

MR. CAMERON: They could not have been more gracious, but they basically said we've got the assets on site that we need. We sat in a room for 10 hours and worked this problem out. It is a very, very complex problem. What you find out is there are things that hold [BP] back from the obvious things like, put a clamp on it, put a valve on it, screw something onto it. It is not a plumbing problem. If they make a mistake, they can blow out down below. It could come up in 30 places and then you will never contain it.

I never thought I would be defending BP. I think they have got some very good engineers working on this problem. I think there are a lot of political shenanigans going on, and there was no transparency whatsoever. I started to shift my perspective to this idea that the government really needs to have its own independent ability to go down there and image the site, survey the site, and do its own investigation and monitor it.

MR. MOSSBERG: So, what is the result of this?

MR. CAMERON: We are writing it all up and putting in reports to various agencies. This was done privately. This was not done under our government process.
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Is James Cameron merely America bashing like he did with the overt Iraq references in Avatar? Even Americans enjoy this "sport" which is perhaps more popular than football. Certainly, his environmental credentials would be put under doubt if he were siding with the pantomime villain here of BP. After all, Avatar was about resource exploitation. If a highest-profile environmental activist of all people could say that BP is tackling matters in good faith, then the US hysteria looks rather less justified, doesn't it?

The British are Coming to Kick Obama's Ass on BP

A few days ago, some bozo predicted that matters would come to a head between the US and UK over the nefarious BP spill:

It will be interesting to see how transatlantic relations will be affected by this spill. The Tories are usually sycophantic towards the Yanks, but their coalition partners the Lib Dems aren't. Perhaps Deepwater Horizon will finish off the hoary notion of a "special relationship" once and for all.

As I noted well before the American press did, the British public is up in arms over the way the Yanks have blackballed BP. Ever one to channel negative sentiment given his inability to do anything constructive to mitigate the oil spill, Barack Obama has labelled British Petroleum a "recurrent environmental criminal" while searching for "whose ass to kick" at the company. While the exceedingly litigious Yanks attempt to sock it to BP by tying it up in litigation sure to cost billions of dollars, the British are pushing back for the understandable reason that Britain's plight is very much tied to BP. Depending on whom you listen to, £1 out of every £6 to £8 in dividends paid out in the UK come from BP shares. What's more, UK pension funds have large holdings of BP stock. With the stock price of BP dropping like a blown offshore platform, let's just say many Britons are up in arms over American bellyaching over BP. Somewhat surprising to me is that the normally transatlantic-friendly Tories are leading the charge:

Senior Tories today warned Barack Obama to back off as billions of pounds were wiped off BP shares in the row over the Gulf of Mexico oil spill. [London] Mayor Boris Johnson demanded an end to “anti-British rhetoric, buck-passing and name-calling” after days of scathing criticism directed at BP by the President and other US politicians.

Former Conservative Party chairman Lord Tebbit branded Mr Obama's conduct “despicable”. And with the dispute threatening to escalate into a diplomatic row, Mr Johnson also appeared to suggest that David Cameron should step in to defend BP. He spoke as the US onslaught against the firm became a “matter of national concern” — especially given its importance to British pensions, which lost much of their value today as BP shares plunged to a 13-year low.

Asked on BBC Radio 4's Today whether he thought the Prime Minister should intervene, Mr Johnson said: "Well I do think there is something slightly worrying about the anti-British rhetoric that seems to be permeating from America. Yes I suppose that's right. I would like to see cool heads and a bit of calm reflection about how to deal with this problem rather than endlessly buck-passing and name-calling.

"When you consider the huge exposure of British pension funds to BP and its share price, and the vital importance of BP, then I do think it starts to become a matter of national concern if a great UK company is being continually beaten up on the international airwaves. OK, it has presided over a catastrophic accident which it is trying to remedy but ultimately it cannot be faulted because it was an accident that took place. BP, I think is paying a very, very heavy price indeed."

Downing Street steered clear of criticising Mr Obama's conduct but in an apparent reference to concerns over UK pensions highlighted the “broader impact” of the spill and the need to deal with it swiftly. British business chiefs are alarmed that tough talking by Mr Obama and other US politicians is undermining the battered oil giant.

BP's shares fell by 12 per cent at one point today on the London market, after hitting their lowest level since 1997 in New York trading overnight, amid intensifying political attacks in the US. Their price dropped to 345p in early London trading before recovering to 370p — still down five per cent. The slump means the firm's share price has almost halved since the spill started in mid-April, when a well ruptured and the rig exploded, killing 11 workers.

Mr Cameron is due to speak to Mr Obama at the weekend over the issue. Among the President's criticisms of BP was his suggestion that chief executive Tony Hayward would have been axed if he had been working for him. BP said its latest effort to capture oil from the leak with a cap was now collecting about 15,000 barrels a day.

Here's a fair warning to the Yanks: the British are coming to kick Obama's ass on BP as my post title goes. By comparison to what I'm hearing, other Evening Standard articles are almost sedate with titles such as "American attacks on BP help nobody" and "PM must counter this US jingoism that threatens our pensions." Meanwhile, the Telegraph says "Gulf of Mexico oil spill: David Cameron fails to back BP in fight with Barack Obama." Meanwhile, the Daily Mail is even more strident - "Stand up for your country, Cameron: PM ducks chance to speak up for BP after cynical attacks from Obama."

Make no mistake: this may indeed be the conflict that finally finishes off the hoary notion of a US-UK "special relationship." I think that the recent record of trying to get with America speaks for itself--fiascos in Afghanistan and Iraq as well as the subprime implosion borne of neoliberal ideology. Certainly, Nick Clegg thinks the "special relationship" is hogwash. If he listens more to the right-of-centre British press, David Cameron will soon be taking the fight to Obama as well. It lends that bit of frisson to the upcoming England vs United States World Cup match, no? In honour of the Americans, let's call it BP Bowl I.

PS: An unidentified wiseacre sent me an invitation to join the "Boycott BP" Facebook page. You needn't ask me to boycott BP for I already do in the sense that I travel via BMW: bus, metro rail (subway), walk. If I can get to my destination in under 30 minutes of walking, I do. Having lived in the US for some time and seen the bulbous girth of your typical Americans firsthand, let me just say their environmentally damaging and unhealthy ways are not for me. In the end, BP is in America because its services are indispensable to their way of life.

UPDATE: See my update on what happened during BP Bowl I and recent evolutions in the US-UK political row over BP.

BP Spill: How Litigious Yanks Hurt UK Pensioners

(Before reading on, I suggest playing AC/DC's "Cover You In Oil" above.) British Petroleum's oil spill in the Gulf of Mexico is not only an ungodly public relations fiasco but also a corporate social responsibility one. With the US government likely to fine BP over a billion dollars, its stock is sinking as quickly as thousands of barrels of oil are rising. To be sure, much blame falls on BP. It, after all, claimed in its permit application that it could handle a spill ten times the current one.

All the same, BP--despite its ham-fisted efforts at stopping the oil spill--probably has the most expertise in containing accidents of this sort. I am reminded of Charles Perrow's renowned volume on Normal Accidents where he investigated the Three Mile Island nuclear incident (as well as the space shuttle Challenger explosion in the revised edition). In it, while he does make suggestions for improving safety that can be done at little cost, these systems must ultimately be plotted on the dimensions of "Net Catastrophic Potential" and "Cost of Alternatives" to determine to see if they are worth pursuing.

Before you fire off angry e-mails in my direction, note that it's the Evening Standard's idea behind this post's title, not mine. Aside from hyperconsuming debt and grub, another American pastime is suing the bejesus out of all comers. (Possibly for rather irresponsible consumption of excess debt and grub, it ought to be noted.) While again reading the evening paper on the ride home, the newspaper's editorial section comes up with its own opinion of the Deepwater Horizon mess. While ranking offshore drilling as being high on net catastrophic potential, they tacitly believe that it is something worth pursuing in a world of dwindling natural resources. That is, the cost of alternatives is higher. There are few alternative domestic energy sources America can tap to replace the role petroleum fills at the current time.

What is more, there is an interesting IPE angle posed here: economic reality means that offshore drilling is not likely to abate in the near future. Therefore, American politicians' "smack BP and toss its execs in jail" attitude borne of American thirst for energy is misguided. Ultimately, pensioners whose funds hold many BP shares and rely on dividends from them are the real victims of US litigation lust (or so they say). There is something to be said for this line of argument. Alike the Mexican border being turned into on big crack house for America, this spill may be more an indictment of the energy-intensive American way of life than anything else. However, it would have helped if BP were more forthright about its damage limitation capabilities. At any rate, here's the op-ed:

The US government's decision to bring criminal charges against BP as a result of the oil spill in the Gulf of Mexico is a characteristically American reaction to a crisis: if something goes wrong, sue. But it is questionable whether that approach at this point will do anything at all to address the real problem, which is that every effort that BP has made to stem the leak has failed.

Bringing criminal charges against company executives will do nothing to add to the urgency with which BP is attempting to put matters right. Deep-water drilling is patently risky and, when it goes wrong, has potentially devastating environmental consequences. Almost certainly, better contingency plans should have been in place and may have prevented 11 deaths. But they weren't, there was an accident and there can be no doubt that BP, which has most to lose from this crisis, has done everything possible to put things right.

It has failed, but not from want of trying. And the notion that the US government can succeed where BP has failed by "taking over" the operation seems illusory. The US reaction is political, an attempt by the President to respond to increasingly angry calls in the US for him to be seen to do something. But sometimes this approach is downright damaging.

An attempt retrospectively to get tough with BP by bringing criminal charges will not help us now. Indeed, the prospect of a hugely expensive lawsuit in addition to the damage to the company's reputation in the US has already driven the BP share price down; there are likely to be cuts in the dividend. Some 40 per cent of BP profit is derived from the US.

One in every six pounds that UK institutions earn in dividends is derived from BP: a reduction will have a direct, adverse effect, not just on fat cats, but on British pensioners. This is bad for all of us. We can understand American anger at this environmental and human catastrophe but the punitive approach to BP will help no one.

Agreed--criminal charges are a nonsense. All the same, the usual suspects--Senators Charles Schumer (D-NY) and Ron Wyden (D-OR)--are calling on BP not to pay $10 billion out in dividends in anticipation of further obligations arising from this spill. I wonder how those UK pensioners would feel if BP is turned into a "growth stock" via American legislation:

Two Democratic senators pressed BP on Wednesday to delay plans to pay shareholder dividends worth an expected $10 billion or more until the full costs for cleaning up the oil spill in the Gulf of Mexico are calculated. Sens. Chuck Schumer of New York and Ron Wyden of Oregon called it "unfathomable" that the oil giant would pay out a dividend to shareholders before the total cost of the cleanup is known. In a letter to BP CEO Tony Hayward, the lawmakers said taking action to "move money off of the company's books" will make it more difficult for BP to pay the U.S. government, fishermen and others affected by the environmental disaster.

BP PLC has paid an estimated $1 billion to clean up the oil leak and expects to spend billions more. BP spokesman Toby Odone called the distribution of dividends "a company matter" that will be decided by company leaders. BP paid $10.4 billion in dividends last year and $10.3 billion in 2008.

But, does Tony Hayward listen to AC/DC? I think he's doing a fair bit of headbanging right about now. And definitely, he's got the (litigious) Yanks covered in oil. Send John Edwards to New Orleans, ASAP.

It will be interesting to see how transatlantic relations will be affected by this spill. The Tories are usually sycophantic towards the Yanks, but their coalition partners the Lib Dems aren't. Perhaps Deepwater Horizon will finish off the hoary notion of a "special relationship" once and for all.