Critical thinking

BC’s resource sector should make this case: they’re critical to free countries.

Mark Milke, The Orca, April 25, 2022

In his 2015 book, Winter is Coming: Why Vladimir Putin and the Enemies of the Free World Must Be Stopped, Garry Kasparov argued that it had been “naïve” for the free world to think it could use economic and social ties to “gradually liberalize authoritarian states.”

Kasparov, the world’s top-ranked chess player for 20 years who retired in 2005 to lead pro-democracy opposition in Russia, was writing about the business and political tap dance that many leaders, be they in Europe, Asia, or the Americas, were engaged in vis-à-vis Russia.

That hope stemmed from two influences: The first was the assumption that the more nations that “tie” each other up with commercial and social institutional cooperation—think of a thousand Lilliputian strings that web everyone together and also keep giants down—the more that irascible leaders tempted to abuse their own people and make war on others will be unable do so. Perhaps they might even convert to benign rule.

The second influence was more straightforward: money.

A lot of cash was to be made selling hamburgers in Moscow or in joint oil and gas ventures in Russia. And once that started, it was assumed Russian elites and politicians would never turn the clock back. There was just too much money from abroad invested into Russia. With everyone profiting from such flows, including corrupt politicians, permanent economic and social liberalization was a lock—or so it was assumed.

Enter Russia to dispel illusions

Russian president Vladimir Putin’s March invasion of Ukraine—for the second time in a decade—has blown up both assumptions.

A budding tyrant such a Putin was always going to prefer his own freedom of action to international institutional niceties and norms. This includes the wish-fulfillment fantasies of German politicians that higher imports of Russian natural gas would give them leverage over Russia and not vice-versa.

This desire by Putin to act as he pleased should have been obvious long ago with Russia’s cut-off of natural gas supplies to Ukraine in 2009 in mid-winter; with a past invasion of Ukraine and another one in Georgia. It should have been starkly evident when Russian journalists and opposition figures were murdered with poison at home and abroad. Even Russian opposition leader Aleksei Navalny was poisoned in August 2020. He survived, barely, and blamed his attempted murder on Vladimir Putin.

As for the notion that Russia under Putin would be loathe to start a war lest he scare away foreign investment, he just did. Here’s the loss in oil and natural gas assets to Western companies: Earlier this month, Shell announced it was writing down its Russian holdings by between US $4 billion and $5 billion; Exxon Mobil will say goodbye to $4 billion; BP expects it might lose its $14 billion share of the Russian oil producer Rosneft and that’s in addition to $11 billion in BP foreign exchange losses since 2013.

Meanwhile, Total—a French company that along with Shell is exiting Canada’s oil sands—has $13.7 billion in capital invested in Russia. Total is attempting to hang on to its Russian business and assets but it would ironic if it loses all that, having preferred Russia to Canada for oil investment.

That was a long introduction to an argument for resource development in Canada, including British Columbia, and for those involved in it to start making the emphatic case that resources from oil to natural gas to forestry and mining matter to sustaining democracies in the face of autocracies and tyrannies.

Some BC history: As a kid growing up in British Columbia, it was clear to me BC was a resource province, narrowly or broadly defined. From all the industries just noted plus fishing and farming, a lot of British Columbians paid their mortgage with great-paying resource jobs.

A short history of BC’s resource industry decline

Fast forward to 2022 and a major economic advantage of British Columbia, natural resources, has been repeatedly attacked over the last four decades.

There was the “war in the woods” on forestry in the 1980s and 1990s and multiple regulatory tie-ups in mining ever since. There has been chronic opposition to oil exploration off the coast and academic opposition to LNG. One academic once wrongly argued natural gas exports weren’t profitable—tell that to Australia and Qatar now exporting and profiting from the same. Even fish farms are being phased out.

The result has been a booming natural resource sector in other countries: Latin America with mining including ex-BC firms; southern U.S. states for forestry including ex-Canadians companies; the U.S. and OPEC on oil; America, Australia, Qatar, and Russia on natural gas. A perfect example is LNG, where British Columbia has one export facility under construction while Australia, Qatar and the United States have dozens exporting LNG today.

BC’s resource sector is still financially significant; resource revenues will provide $3.4 billion to the provincial government’s budget this year, or $300 million more than what the province will spend on welfare. (That figure doesn’t include indirect corporate, personal, and property taxes from the resource sector to governments, or payments to First Nations.) Such revenues could be substantially higher if BC’s resource sector had been allowed to flourish.

Opposition in the past decades came from some environmentalists and Indigenous leaders, though the latter cohort is increasingly pro-resource development.

However, it was and always has been possible to avoid the purists and make a simple case for resource extraction and exports from British Columbia: The world will always need what British Columbians can extract. Oil and natural gas for everything from gasoline for transport trucks and heat for your home to lumber for those homes, and minerals to build your e-vehicle battery or for your cellphone.

Resources are akin to money and money = power

Post-Ukraine invasion by Russia, we can now add another reason to develop resources beyond all the economic ones: It makes more sense to have democracies and allies produce what the world needs rather than be over-reliant on regimes such as Russia’s.

Europeans are finding this out the hard way. Between 2005 and 2019, Europe bought $390 billion in oil and natural gas from tyrannies and autocracies including Russia, and over eleven times that much—$4.6 trillion, in oil imports, from nations considered illiberal or outright autocracies or tyrannies. Instead of moderating Vladimir Putin, the Russian tyrant has made his country more illiberal and repressive at home and a danger to other nations abroad.

Garry Kasparov was correct: the belief of politicians and CEOs in free countries that dollars and cents and institutional cooperation would prevent the rise of a warring tyrant was an illusion. British Columbians and other Canadians might now learn from that mistake, and view resources in the light of our own national interest and those of our allies worldwide.

Mark Milke is president of The Aristotle Foundation for Public Policy, a new think-tank that hopes to launch later this year. His most recent book is The Victim Cult: How the culture of blame hurts everyone and wrecks civilizations. You can follow him on Twitter @MilkeMark. Image credit: Pexels.