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Subsidising the Oil Spill Economy

While claiming to care about climate change, the British government has spent decades intervening to protect oil giant BP's private profits – as well as giving it hundreds of millions in public subsidies.

When oil giant BP announced its target to go net zero by 2050 in February last year, it did so without providing any specific details on how it would get there, promising it would do so at an investor meeting later that year. Just a few months later, newly obtained documents show that former energy secretary Andrea Leadsom described the company as a ‘key stakeholder’ in the upcoming international climate conference, COP26. The company’s executives met the government’s COP26 unit ‘to discuss how BP could contribute to the [UK] presidency,’ and government officials asked what ‘more we can do’ to support BP’s international work.

The latest revelations demonstrate how the British government has long regarded the success of private oil company BP as key to its own national interests – even when that success contradicts or comes at the expense of its own purported foreign policy and environmental goals.

In another meeting between BP executives and Kwasi Kwarteng—now minister for clean growth—officials promised to support the oil giant’s ‘business wins’ internationally while encouraging them to invest in the energy transition. But that transition has been slow: the oil giant is still producing 3.8 million barrels of oil every day, compared with 4 million a day in 2005. In 2019, BP made its ‘biggest acquisition in twenty years,’ new oil and gas reserves in West Texas that gave it ‘a strong position in one of the world’s hottest oil patches,’ according to the company. Its foray into lower-carbon fuels has been much more limited in scope: in 2018, BP invested just 2.3 percent of its budget in renewable energies.

So while the government has enshrined in law a new target in law to slash emissions by 78 percent by 2035, BP is pressing on with the pace of its fossil fuel exploration. Just last month, the company announced that it and the Italian oil giant Eni were in talks to merge their oil and gas operations in Angola into a new joint venture that would create one of Africa’s largest energy businesses.

Why, then, does the government’s relationship with BP persist? The explanation lies in the revolving door without a doorman, through which the company’s senior executives find themselves advising Prime Ministers, and former top spies end up with a seat at the oil giant’s table.

BP’s 2014 appointment of Sir John Sawers, who had been chief of the Secret Intelligence Service for the preceding five years—and left only six months before—sailed through the government’s appointment process with a ‘worrying lack of scrutiny’. Just last year, former boss of the civil service Sir John Manzoni stepped down from his role after six years; he had spent 27 years at BP before entering government, including a spell as vice president.

Another former boss of the company, John Browne, was so close to ex-Prime Minister Tony Blair it was suggested that an appropriate name for the company would be ‘Blair’s Petroleum’. He has been a member of the House of Lords since 2001. In 1997, Lord Simon, another former chairman of BP, came under fire following his peerage for failing to declare his £2 million shareholding in the oil giant as he undertook new responsibilities at the Department of Trade and Industry.

This cosy relationship is a disaster for climate change. It also leaves the door wide open to abuse beyond even the patronage and personal gain of the company’s former and current executives.

There are, for example, tax benefits. A 2019 report by the European Commission found that the UK led the European Union in fossil fuel subsidies: the UK spent £10.5 billion a year in support of fossil fuels, compared to £7.1 billion on renewable energy. BP’s defenders in government claim that it pays large amounts of tax in the UK, so we all benefit from its business activities – but the company paid no tax in the UK in 2015. Instead, it received over £210 million in credits from the public purse. And this wasn’t a one-off. In 2017 and 2019 the company’s accounts show it was a net receiver of tax money in the UK.

The relationship affects foreign as well as domestic policy. After the Deepwater Horizon oil spill disaster in the Gulf of Mexico in April 2010, the company was left with a £13 billion clean-up bill. The government viewed the financial hit as BP’s problem, but reportedly feared it would hit pension-holders: around 1.5 percent of UK pension industry money was invested in BP, and about 7 percent of UK pension fund annual income came from the company at the time.

So when the US Environmental Protection Agency barred BP from bidding for new federal contracts following the Gulf disaster, the UK government intervened on its behalf. After BP signed a joint venture in January the following year to exploit the vast oil and gas reserves of Russia’s Arctic shelf with the Russian energy giant Rosneft, then secretary of state for energy and climate change Chris Huhne ‘publicly blessed’ the deal in a meeting with Rosneft’s chief executive Igor Sechin.

At the same meeting, BP was assured by multiple government departments, including lawyers from the Treasury, that they would find ‘an operational solution’ to allow BP to reopen the major North Sea gas field it owned jointly with Iran, despite the EU’s sanction regime against the country. The solution, a couple of years later, would be for Iran’s share of the profits to be held by the British government in a frozen account.

Declassified documents show that besides helping BP complete geopolitically risky deals with countries on its own sanctions list, the government’s steadfast support has seen it leverage conflict and environmental disaster in support of the oil giant’s private corporate profits.

Documents from John Major’s government show how the need for peacekeeping support and political legitimacy during the civil war in Angola during a fragile period of peace between 1995 and 1997 were levered for assurances BP would win new operating licenses in the country: the UK embassy in Luanda sent a memo to the UK foreign office in which it recommended ‘that the BP card be played with care and subtlety’.

Research by Global Witness at that time warned that the awarding of oil contracts raised serious questions about the role of oil companies in prolonging the war, since the revenue from these deals was likely being spent on weapons shipments. In 1995, Major’s government also rejected Nelson Mandela’s personal appeal to impose oil sanctions on Nigeria as it wanted to protect the UK’s wider commercial interests, despite Nigeria’s military regime executing nine environmental activists.

Transparency campaigners have long raised concerns that having BP at the policy-making table ‘is inviting the fox inside the hen house’, but as one former Whitehall official put it: ‘The presumption that the British government should have an intimate relationship with big British multinationals, especially BP and Shell, was in the air you breathed.’ As that air becomes ever more polluted, it’s these historic relationships between private companies and a government that props up their profits—against the interests of the public—that must, at some point, break.