Blackmail & Corporate Welfare

Government Plays Monkey To Rio Tinto’s Organ Grinder

- Murray Horton

You could have knocked CAFCA down with a feather. So, Rio Tinto is not going to close its Bluff smelter as it threatened to do earlier in 2013 (and has threatened to do every time it feels that its charmed existence in New Zealand is going to become less cushy). Instead, in August 2013, it condescended to keep it open - but only guaranteed that until January 2017. And, having rejected the Government’s offer of a taxpayer subsidy a few months earlier (because that offer wasn’t for a long enough period), it has now condescended to accept a “one off incentive payment” of $30m of taxpayers’ money.

The icing on the very big cake for Rio Tinto is that the threat to close a few months earlier was a tactic to try to pressure Meridian over its power price contract, on which the ink was barely dry and which only took effect in January 2013. So, now it has “negotiated” a new rate (secret, of course, like the smelter’s power price rate always has been for half a century), but one which Cabinet Minister Tony Ryall said returns “the price of power paid to around pre-2013 levels”. In other words – the Government has wiped the new, higher power rate which Meridian had taken a year to negotiate.

Subsidy & Power Price Cut To Save Asset Sales Programme

The Government said that it had decided to subsidise the smelter to save the jobs of several thousand Southlanders employed by it, directly or indirectly. All very unusual coming from a Tory government not noted for any interest in keeping New Zealand workers in jobs. That was only a side issue as far as the Government is concerned; very convenient for public relations purposes. Rio Tinto commenced its blackmail of the Government knowing that it held the aces – Meridian is next off the block in the Government’s underwhelming garage sale of public assets (the sale process is scheduled to start in October 2013). Closing the smelter would have driven down Meridian’s attractiveness to would-be buyers. How ironic that the selfishness and ruthlessness of one transnational corporation could have buggered up the plans to flog off more of our public assets to transnational corporations.

If the smelter closed, that would have wiped Meridian’s biggest customer, the smelter being the country’s single biggest user of electricity and left the Government working out what to do with a surplus of electricity, fully one sixth of the total output, and no further excuses not to cut the exorbitant rates charged to domestic consumers by the profit-driven electricity market. It would be a great bonus to have 15% of the country’s electricity suddenly available and no longer committed to one smelter. There would no excuse for the moneygrabbing power companies not to cut their prices (we’ve been falsely promised lower power prices since the “electricity reforms” of the 1990s). Heaven forbid – there’s no profit in that for the power companies and no big fat salaries and bonuses for their CEOs. That would “send the wrong signals” to the all-important market.

Rio Tinto continually does this in the knowledge that it has always been deemed “too big to fail” by the succession of Governments, both National and Labour, that it has effortlessly outmanoeuvred for 50 years. It pays a top secret super cheap price that is not available for any other user and all it does is export electricity from NZ in the form of alumina, while being subsidised by all other electricity users. The smelter is the textbook example of corporate welfare in New Zealand. It is the biggest bludger in the country.

This latest handout is in addition to the massive taxpayer subsidy it has been receiving continuously for  50 years, in the form of the Manapouri power station built with public money for its exclusive use (and let’s never forget that men died building that); and the  cheapest and most secret power price rate in the country bar none. Rio Tinto won the 2011 Roger Award for the Worst Transnational Corporation Operating In Aotearoa/New Zealand (and was runner up in 2012, 2009 and 2008). The 2011 Roger Award Judges’ Report concluded that the company has a 50 year history of “suborning, blackmailing and conning successive New Zealand governments into paying massive subsidies on the smelter’s electricity; dodging tax, and running a brilliantly effective PR machine to present a friendly, socially responsible and thoroughly greenwashed face to the media and the public”.

Liability, Not An Asset

The extremely detailed Financial Analysis reveals that the smelter’s claimed benefits to NZ, namely annual export earnings of “around $1 billion” are, in fact, overstated by four fifths. The full, damning, 2011 Roger Award Judges’ Report can be read at The 2012 Judges’ Report is more succinct: “…it has us by the balls and has continued to squeeze ever since. It is corporate welfarism, but somehow doesn’t attract the same vindictiveness as the sickness beneficiary”. In short, it is a liability to New Zealand, not an asset.

What about the people who work for the smelter, directly or indirectly? Indisputably, the smelter closing would have a negative impact on Invercargill and Southland. But let’s keep a sense of proportion – in disaster terms it doesn’t compete with Christchurch having lost 185 lives, 50,000 jobs in the central city alone, and sustained $40 billion worth of damage in a matter of seconds on February 22, 2011. If Christchurch can get back in the saddle after that, Invercargill should be able to handle the smelter closure and its attendant job losses. As a plus, the city will be able to shake off its unhealthily dependent situation as a company town with its local government at the beck and call of this transnational bludger. It needs to start planning for that now. While the smelter is good for Southland, it is bad for the country. It would have been a better deal to give the affected workers the $30 million handout and closed the smelter down.

The tobacco industry used to employ a lot of people here, but that was deemed to be no longer in the public interest. Lacing lollywater with booze and selling it to kids as bottles of ready to drink (RTD) hard liquor supports a lot of jobs too but there’s plenty of public demand to get rid of that particular industry as well. The P (for “pure methamphetamine”) drug industry provides an income for thousands of people too, but we don’t hear any demand for that insidious trade to be kept going to keep them in a job. History is full of examples of horrible industries that kept people in jobs (such as the slave trade) but which were banned and/or abolished for the greater good.

Shut It Down!

Guess what? As soon as the deal was announced, in August 2013, Rio Tinto announced that it is no longer selling Pacific Aluminium – which comprises five aluminium smelters, a bauxite mine and alumina refinery in Australia and New Zealand (the Bluff smelter is its only NZ asset). Rio Tinto, the mother company, then immediately announced a half-year profit of $NZ5.27 billion. Isn’t that a worthy beneficiary of corporate welfare from the New Zealand taxpayer? Not. Meantime, the Government can proceed with its sale of Meridian (remember that, “Mum and Dad investors”, you’ve already paid $30m of your own money before you get granted the privilege of buying something you already own), and the issue of the future of the smelter can be put off until January 2017. But, wait – 2017 is election year. What a coincidence. Rio Tinto will keep the blackmail script handy for that. This must be the only sideshow act where the monkey feeds the peanuts to the organ grinder. The smelter constitutes a crime against the people of New Zealand and has done for its entire existence. In the national interest, it must be closed and the sooner the better.

A whole book could be written about Rio Tinto’s misdeeds in New Zealand, and those of its subsidiary that used to be better known as Comalco. A good place to refresh your memory about its outrageous early history here is CAFCA’s 30+ year old classic comic booklet “The Amazing Adventures Of NZ's No.1 Power Junky: The True Story Of Comalco In NZ” (Pete Lusk & Ron Currie, 1977, updated 1982; online at An oldy but a goody.


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