Fairy tales and political charades

Published in the TT Sunday Guardian on 2021 01 24

Fairy tales and political charades

People generally believe that politicians make decisions in the best interest of citizens. This implied responsibility is exemplified by the biblical quotation taken from Proverbs 29:18 “Where there is no vision, the people perish…” However, a politician’s priority is to get re-elected. Reconciling these opposites creates communication conflicts.  

In democracies, decisions which cause the electorate pain invariably lead to a political price, election defeat and loss of office. For example, the NAR came to power with a landside (33-3) victory in 1986. Faced with the insurmountable issues of low international energy prices, exhausted foreign exchange reserves and unsustainable foreign debt, the NAR administration adopted austerity measures. Salary cuts, privatisation, changes in the tax regime. The 1990 coup attempt added to its woes. In 1991 NAR was voted out of office retaining only 2 seats. Political parties have not forgotten the lesson that painful medicine needs some sugar.

Except for the HSF and substantial reserves, the 2014 decline in international energy prices created conditions identical to 1986. This administration has opted to delay, borrowing and running down reserves, slowing the adjustment process. Petrotrin was in a precarious financial position with almost US$1 billion in debt which would soon become payable. Finding a solution was critical. Government’s narrative was that it had to act quickly to protect the economy and country’s rating from Petrotrin contagion.

Cabinet, not the Consultants, not the Espinet Board, decided it was best to close the refinery, retrench staff and restructure the company’s operating divisions into stand-alone legal entities owned by a holding company. The task then became limiting the political fallout.

Accordingly, the finance minister deployed the model used for CLF. He justified the closure by making Petrotrin the poster child for mismanagement and inefficiency. “A ward of the state” that acted illegally (not paying its taxes), overstaffed, and overpaid, a drain on the economy, coming to the MOF every week for a credit line, unable to pay its loans, a drag on the country’s credit rating and borrowing capacity.

This bought public acquiescence. Neutralizing the union was a trickier proposition. Closing the refinery, would make the Oilfields Workers' Trade Union (OWTU) a political enemy. In the 2010 elections the OWTU supported the UNC. Before the 2015 elections, Ancil Roget as head of JTUM signed an MOU with the PNM. In 2017 Cabinet overturned and publicly castigated the decision of Petrotrin’s Board for making a 0-0-0 wage offer, approving an “interim” 5% increase knowing fully well that it complicated the company’s financial position and set a bad precedent for future negotiations.

To mitigate the fallout, the OWTU was offered the carrot of owning the refinery. Addressing the nation in September 2018, the Prime Minister stated: “The refining assets of Petrotrin can now be put in a separate company for opportunity attention. The OWTU will be given the first option to own and operate it on the most favourable terms.” OWTU’s initial offer was rejected. Subsequently, there was a public offer, a request for proposals for the purchase of the Refinery assets.

Answering a Senate question in April 2019 the finance minister noted that 70 expressions of interest were received and “…Because of the number of expressions of interest, we are reasonably confident that we can finalise an arrangement either for lease of purchase or we’ll see with an operator by the end of the year…”

On September 20, 2019, the Finance Minister announced that a company owned by the OWTU, “Patriotic”, was the preferred bidder to own and operate the refinery and Paria Fuel Trading Company Ltd with an offer of US$700 million offer. In an unusual step the minister announced a three-year moratorium on all payments (principal and interest) towards the purchase of the refinery and a further ten years, at a fair market interest rate, to complete the payment of the US$700 million it had offered for the refinery. And then appointed a committee to lead negotiations? Normally terms are adjusted after negotiating, not before.

In November 2019, Patriotic delivered its response to the Cabinet appointed committee. On January 12, 2020, an inter-ministerial committee was assembled to examine the proposal. In April 2020, Energy Minister Franklin Khan said the Covid-19 pandemic only had delayed negotiations and the deal was still on.

Except for sceptics, the country accepted the story thus removing the refinery as an electoral issue, overshadowed by the pandemic. The PNM won the 2020 elections in August and in September 2020, the Prime Minister announced that Patriotic had until October 2020 to conclude negotiations. The saga has continued and now Patriotic has been given 15 days to find the money.

Thirty months have elapsed since the refinery’s closure and hundreds of millions taxpayer’s money spent in the process. The administration has given OWTU many opportunities (at least four) to fail, skillfully shifting the blame to OWTU. Managing the communication has promoted the fiction that the refinery could be restarted thereby mitigating the fallout. World market conditions and the refinery’s operating performance makes it highly unlikely that the refinery will be sold, or operations recommenced. The delay is allowing the country time to accept this reality thereby buying time whilst selling hope.