No more than a sliver of Canada’s natural resources should ever be controlled by non-democracies
Canadians are used to peace and relative prosperity compared to the rest of the world and are occasionally naïve about it. They assume it’s a regular state of affairs rather than an exception.
Canada is an exception, in large part because the country is surrounded by three oceans with one neighbour, the United States, a democracy and a superpower. That would give serious pause to any other country thinking of invading Canada.
During the height of the Cold War, for example, the Soviet Union was never going to invade Canada as it did Czechoslovakia in 1968. There were easier targets to invade or disrupt.
A self-satisfied, cocoon-like approach leads some Canadians to be glib about our lucky position in the world. That also leads to flippancy about the critical usefulness of energy – oil and gas still being the bulk of that concept – to Canada’s national interest.
An example arrives regularly when an energy firm from some foreign country, say Saudi Arabia’s government wealth fund or some other nation with a regressive regime, invests in a Canadian energy company. This occurred in the first quarter of 2020 when Saudi Arabia’s Public Investment Fund bought shares in Suncor Energy (US$481 million worth) and Canadian Natural Resources ($408 million).
Ignore that the Saudi government increased oil production dramatically in early 2020, collapsing world oil prices and making Canadian resource company shares cheap to buy. (The same Saudi fund recently sold the Suncor shares for US$1.2 billion.)
Consider that when such investments are made, social media lights up with comments along the lines of “I guess all that concern about tyrannies having too much control over the world’s oil and natural gas production is misplaced. After all, now that the Saudis own part of a Canadian company, tyranny oil exists in Canada.”
This is a rudimentary failure of analysis.
When foreign funds buy small chunks of Canadian energy companies, that doesn’t somehow magically change Canada from a constitutional monarchy to a banana republic or a rogue regime. Such purchases also don’t somehow corrupt Canada’s longstanding tradition of the rule of law or independent courts.
Such purchases, when minimal, don’t allow a questionable foreign government to disrupt Canada’s energy supply chain, as happened when Russia cut off Ukraine’s natural gas in the winter of 2009. Nor do such shares hook a country on energy from autocracies in the manner that Russia’s Nord Stream 2 natural gas pipeline will soon make Germany more dependent on Russia, where the regime has been tied to murders journalists and critics and apparently tries to do the same to opposition figures.
But if a non-democratic country bought a controlling interest in multiple Canadian-based energy firms, there would be legitimate questions raised about whether this was wise and in Canada’s national interest.
In 2012, China’s state-owned CNOOC bought Nexen Inc. for US$15.1 billion. There was legitimate concern about an entity controlled by a non-democratic regime getting a toehold in Canada’s energy sector. That purchase followed Chinese state-owned Sinopec’s purchase of Daylight Energy for $2.1 billion in 2011.
The best free-market argument against such deals was that Canadians should oppose a foreign state-run oil company buying Canadian resource companies for the same reason Canadians should oppose the return of Petro-Canada as a state-owned oil company: nationalized companies are inefficient and far too subject to political directives rather than market forces.
The recent Saudi purchases in Canada seem opportunistic, while the Chinese acquisitions seem more long-term. Neither buy has fundamentally changed Canada’s institutions or on-the-ground realities – so far. But the Chinese regime is aggressive in advancing its interests, including national interest as defined by the Communist Party of China.
The occasional opportunistic buying of slivers of shares in Canadian oil companies doesn’t turn Alberta, or the rest of Canada, into an autocracy or tyrannical dictatorship. In contrast, it matters immensely if democracies – Ukraine, Poland, Germany – are too dependent on oil and natural gas pipelines from suppliers where the regime is wolfish.
Natural resources are used as political weapons by some regimes; it’s naïve to think otherwise. That should mean that no more than a sliver of Canada’s natural resources should ever be controlled by non-democracies.
Oil and natural gas should always be looked at as part of Canada’s national interest, though few people think in those terms.
Hampering Canada’s oil and natural gas sector will allow autocracies and tyrannies to garner even more market share. And nearly half the world’s oil and natural gas production already flows from wells in such countries.
Keep an eye on regimes that don’t have Canada’s best interests at heart. Flippancy in analysis should be avoided.
And Canada’s oil and gas firms, whether majority-owned by Canadians or liberal democratic allies, shouldn’t be forced to end exploration, production and exports any time soon. The opposite should be the assumed policy.
By Mark Milke
Canadian Energy Centre
Mark Milke is with the Canadian Energy Centre, an Alberta government corporation funded in part by carbon taxes, and co-author of the report, The 2021 Tyranny Index for Oil and Gas.
Courtesy of Troy Media.