Common Market
The ludicrous oil crusade
Ian Davidson
The British government has always made it absolutely clear that it regards the coordination of its foreign policy with that of other European countries as the main, if not the only, useful function of the European Community. At the July summit in Brussels, Mr Harold Wilson was somewhat evasive when questioned by his European counterparts on his attitude to European economic and monetary union, or direct elections to the European parliament, or indeed anything that might be termed integration in the European context. But he was almost enthusiastic about the need for a joint European approach to world problems, especially economic problems. The row which has now broken out over Britain's demand for a separate, national seat at the December conference between oil producing and consuming countries makes it a little difficult to know just what Mr Wilson meant at the Brussels summit. At a preparatory meeting in Paris earlier this month it was decided that the industrialised oil consumers would get eight seats at the conference, and that the allocation of these seats would be fixed by the US, Japan and the European Community, on the clear assumption that the Community would be represented as a body. The British government's contention now is that North Sea oil puts Britain in a class apart from any other member state, that its interests cannot be represented by a joint Community delegation, and that Britain must therefore have a seat of its own.
The oddity of the situation is not the implication that, despite the referendum result, the Channel is still a thousand years wide, but that the government's attitude has so little connection with the reality of British interests. The root of the Whitehall argument is that,
whereas most of the other Community countries are energy importers and want a low oil price, Britain will be a major energy producer and needs a high oil price to ensure that the North Sea is commercially viable. Now the December energy conference may be an important event, since it is the first attempt to debate the problems created by the OPEC cartel and the quadrupling of the price of oil; but it is not going to decide the price of oil, now or in the future.
The price of oil is fixed by two partially interrelated factors: the worldwide balance of supply and demand and the solidarity of the OPEC cartel. On the supply side, the drive to maximise North Sea output would tend towards downward pressure on prices, but demand will be a function of the rate of recovery from the world recession, on which Britain can hardly have a measurable impact. In the medium term — say fifteen or twenty years — Britain will again become an oil importer as the North Sea peaks out, and its interest will once more be in cheap oil. But in the meantime, to pretend that Britain's general interests are more closely aligned with the OPEC countries than with the rest of the industrialised world with which we do the overwhelming majority of our trade, is to indulge in a ludicrous fantasy. In any case, Britain cannot in any real sense increase its leverage over the price of oil by getting separate representatiOn at December's conference; indeed, the reverse is likely to be true. The precondition of any internationally negotiated high price for oil must be that it is acceptable to all the members of the European Community (not to mention Japan and the US). To get such agreement from the Eight, Britain must offer some compensating advantage — supplies in the event of another Middle East crisis, or more generally, indications of British solidarity with the rest of the Community. yet so far the very suggestion of oil sharing in the Community context (as opposed to that of f the International Energy Agency) has tended to provoke the most chauvinistic reflexes in the UK, while the recent record on pollution, lorry drivers' hours, on economic co-operation with Canada and the energy conference have suggested that Community solidarity is at present a very low priority in Westminster. Energy is, in any case, only one of the subjects scheduled for discussion at the December conference, whose full title Is 'Conference on International Economic Cooperation'. On two of the three other subjects — Raw Materials, and Development Aid — Britain's real interests are very similar to those of other industrialised countries in Europe, aod the fact that the UK played a major role in the negotiation of the Lome convention with forty-six developing countries in Africa, the Caribbean and the Pacific, ought to strengthen the case for closer coordination of policies within the Community in future. Britain apparently had no difficulty in working closelY with other Community countries at the recent Special Session of the United Nations vvhich was devoted to development problems, and it is hard to see why the situation should be thought to have changed since then. Superficially Britain has a rather better case for having a special interest in the fourth subject at the December conference — Finance and Investment — in the sense that it is profoundly vulnerable to any withdrawal 01' OPEC money from the City of London. But the idea that this special interest is likely to be safeguarded by separate British representation in December is largely spurious. London has an advantage over most other financial centres (apart from New York) in that its large and sophisticated capital market can cope pretty smoothly with substantial flows of short-ter money. For this reason it attracted a disproportionate share of the vast increase in the OPEC countries' balance of payments surplus in the last two years. But while some of the Arab countries may retain vestigal feelings 0f political goodwill towards this country, in the medium term they are going to take a hard-headed view of the investment prospects of that part of their oil earnings which they cannot immediately spend on imports. If the British government is able to halt the slide in the value of the pound, and more generally to bring the British economy back on course, it will have a good chance of keeping Arab money in London; if it does not, it will not be able to make up for its failure of economic management by securing a separate seat at the producer-consumer conference. In the end, no doubt, some kind of comnro" mise will be fudged up, by which Britain either get a separate seat or will get special (ceremonial) privileges inside a CommunitY delegation, perhaps with a leading role on each of the four sub-commissions. But no makeshift solution can dispose of the question; whY did the government embark on this ludicrous crusade in the first place? To try and WO° Scottish voters away from the SNP? A knee-jerk of nationalism? Or simply that the government is so overwhelmed by the press of economic and political events at home over which it appears to have lost any effective control, that decisions on foreign policY questions are adopted without forethought and clung to without purpose?
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