UK Debates Whether Obama’s Tough Talk on BP is Anti-British

Prime Minister's sympathetic comments provoke backlash from political opponents and business leaders

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by Graeme Wearden, Guardian

David Cameron risked the wrath of the City today when he said he sympathized with the frustration of the White House at the "environmental catastrophe" in the Gulf of Mexico.

Speaking in Afghanistan, the prime minister urged BP to do all it could to clear up the mess and he said he would discuss the matter with Barack Obama over the telephone ahead of a visit to Washington next month.

As BP’s shares continued to fall today, touching an 13-year low at one point, Cameron said:

"First of all this is an environmental catastrophe. We need to be clear about that. We need to be clear that BP needs to do everything it can to deal with the situation and the UK government stands ready to help. We have made offers of help and stand by to do more.

I completely understand the US government’s frustration because it is catastrophic for the environment and obviously everyone wants everything to be done that can be done. Yes of course it is something I will discuss with the American president when we next talk."

Asked whether it was right of the White House to blame BP when US contractors, such as Halliburton shared some of the blame, Cameron said "we are not going to solve the problems of BP and the Gulf" in Afghanistan.

His comments contrast with calls from British business leaders and London’s mayor and fellow Tory Boris Johnson for the White House to tone down their attacks. 

Johnson accused President Obama’s government of "anti-British rhetoric", warning that the near 50% slump in BP’s share price since the spill was bad news for UK pensioners.

"I would like to see a bit of cool heads rather than endlessly buck-passing and name-calling," Johnson told BBC Radio 4’s Today programme.

"When you consider the huge exposure of British pension funds to BP it starts to become a matter of national concern if a great British company is being continually beaten up on the airwaves."

BP shares plunge

Investors rushed to offload BP shares when trading began today, as fears grew over the future of the company. The oil giant’s shares dived 11% to 345.15p in early London trading, their lowest level since April 1997, as analysts predicted that it will be forced to cut its dividend payout.

They then clawed back some of these losses as stockbrokers speculated that BP could fall to a takeover bid from Chinese firm PetroChina, and were down 5.5% at 370p shortly before midday.

At today’s low BP had lost 47% of its value since the Gulf of Mexico disaster struck, wiping around £58bn off the market capitalisation of one of Britain’s biggest companies.

The cost of insuring BP’s debt against default also rose sharply this morning, as concern grew that its long-term future was under threat. The credit default swaps on BP’s short-term debt have now leapt to the level of a junk bond, research firm Markit reported today.

This morning’s sell-off came after the US government intensified the pressure on the company by demanding that it pays the wages of thousands of American oil workers laid off since the Deepwater Horizon rig exploded. BP moved to reassure the City that it has enough cash to deal with the disaster and in a statement released before trading began, said it was "not aware of any reason which justifies" a 15% plunge in its share price on the New York stock exchange last night.

But traders said that President Obama’s stinging criticism of BP was alarming investors, and bolstering fears that the company could be forced to cut its dividend.

"The best we can hope for is a postponement of what should be a very decent dividend," predicted David Buik of BGC Partners.

Evolution Securities agreed that BP was likely to suspend payments to shareholders until the leaking well had been permanently capped, in an attempt to assuage some of the anger felt against the company in America.

"Unilateral action against BP over its US operations, be it unreasonable or illegal, hangs over BP. Short-term dividend suspension looks a prudent move to protect BP’s US asset base," said Evolution analyst Richard Griffith.

Last night US associate attorney general Thomas Perrelli said that the justice department was considering issuing an injunction to block BP from paying a dividend.

"We are looking very closely at this and we are planning to take action," he told a congressional hearing.

BP’s dividend is worth $10bn (£6.9bn) a year – around a seventh of the total payout to shareholders from the FTSE 100.

Investment bank Standard Chartered has argued that it could make economic sense for PetroChina to acquire BP, although they conceded that political pressure could make such a deal impossible to complete.

"We expect China would support such a deal, while regulators in the US may raise antitrust concerns. While we cannot rationalise any argument that the deal should be blocked on grounds of national interest, local politicians may take a different view," they said in a research note published today.

Buik agreed that PetroChina would be thwarted if it attempted to buy BP. "Hell has a better chance of freezing over than Obama agreeing to China drilling in the Gulf of Mexico," he said.

Yesterday the White House said it would press the company to pay the salaries of staff laid off as a result of a six-month moratorium imposed by the Obama administration on exploration activity in the gulf. The freeze means a halt to work on 33 existing oil rigs, affecting thousands of jobs.

"It is an economic loss for those workers and those are claims that BP should pay," said White House press secretary Robert Gibbs last night.

BP also told shareholders this morning that its total spending on the clean-up operation has now hit $1.43bn, with another $300m promised to complete a series of sand banks off the Louisiana coastline.

It has emerged that BP’s contingency plan to handle an oil spill in the Gulf of Mexico was riddled with errors, including naming a deceased scientist as a recommended expert. Boris Johnson, though, suggested that BP should not be blamed for the spill.

"It has presided over a catastrophic accident, which it is trying to remedy," Johnson said. "But ultimately cannot be faulted because it was an accident that took place and BP, I think, is paying a very, very heavy price indeed."

Johnson’s comments were attacked by his predecessor, Ken Livingstone.

"It is staggering that Boris Johnson believes BP ‘cannot be faulted’ for presiding over one of the worst environmental disasters in the world," said Livingstone.

"The leak of millions of barrels of oil has put the livelihoods of millions of people at risk and threatens to damage the environment in the Gulf of Mexico for generations and BP have serious questions to answer about their conduct and the handling of the crisis."

Lord Tebbit, the former government minister, also criticised Obama’s attacks on BP and its management.

"The whole might of American wealth and technology is displayed as utterly unable to deal with the disastrous spill – so what more natural than a crude, bigoted, xenophobic display of partisan political presidential petulance against a multinational company?"

(Republished with permission of The Guardian)