A great summary, thanks Bikemad! Hereis a fascinating, if...

A great summary, thanks Bikemad!

Hereis a fascinating, if lengthy, article showing what happens whenAustralia fights for its sovereignty and resources. The sadstory continues today as successive Australian governments havefailed to collect more than a pathetic fraction of the legitimatetaxes and royalties we are owed...

TheAustralianCitizens Party(https://citizensparty.org.au/)publishes a subscription newsletter, the AustralianAlert Service, thelatest issue of which, 7 August 2024, Vol. 26 No. 32, contains areprinted article from their archives

ThePetroleum and Minerals Authority: the battle for control overAustralia’s ‘great mineral wealth’

By Melissa Harrison, Australian AlertService, 20 April 2022.

AAS is reprinting this article this weekto commemorate the 50th anniversary of the Whitlam government’shistoric joint sitting of Parliament in 1974, which passed the billestablishing the Petroleum and Minerals Authority introduced byWhitlam’s Minerals and Energy Minister Rex Connor. On 5 August2024, ABC 7.30 broadcast historic footage of the joint sitting,including Rex Connor’s introduction of the bill, which can beviewed here:https://www.abc.net.au/news/2024-08-05/50th-anniversary-joint-sitting/104186780

Australia’s high fuel prices and insanely small fuel reserve arethe legacy of decades of government policy to allow “the market”to dictate Australia’s resources policies. It wasn’t always so.There was a political battle in the 1970s to establish nationalcontrol of Australia’s resources, including national developmentand processing of petroleum. If it had succeeded, today the nation’sfuel prices would be cheaper and fuel supplies would be far lessvulnerable to global events. It didn’t succeed, however, andAustralians have been paying for it ever since.

The government of Labor Prime Minister Gough Whitlam wasfiercely determined to end foreign control over Australia’s naturalresources. After his election in 1972, Whitlam created the Departmentof Minerals and Energy, appointing visionary nationalist Rex Connorto lead it. Connor was deeply committed to developing Australia’sresources sector under a government-directed national mineral andenergy policy, declaring in Parliament on 12 April 1973 that “[j]ustas it has been stated that war is much too serious a matter forgenerals to control, so a Labor Government says that exclusivecontrol of Australia’s fuel and energy resources is much tooserious to be left to individual companies”.

The Whitlam government pursued its policy objectives througha number of ambitious resources projects. This included efforts togreatly expand the remit of the Australian Industry DevelopmentCorporation (AIDC), a national resource development fund which waspreviously championed by Liberal Prime Minister John Gorton andCountry Party leader John “Black Jack” McEwen.

Under Connor’s leadership, a national Pipeline Authoritywas established in 1973, which was intended to facilitate theconstruction and operation of a vast transcontinental pipeline grid.The Authority could buy and sell petroleum; regulate natural gasprices; secure petroleum reserves; and was intended to ensure uniformgas prices across the country.

In addition, the Whitlam government established a RoyalCommission into the petroleum industry; introduced stringent exportcontrols on the minerals industry to ensure fair prices; encouragedAustralian firms to deal collectively with foreign cartels tostrengthen their negotiating power; and directly intervened incontract negotiations to insist upon higher prices.

Prior to 1972, the federal government did not collect dataor statistics on mining investments or contracts, and very fewofficial figures were maintained on the extent of foreign ownershipof the industry, or of how much profit went overseas. Connorcommissioned the Fitzgerald Inquiry to report on the “contributionof the Mineral Industry to Australian welfare”. The inquiry’sexplosive findings revealed that in the preceding six years, miningcompanies had received more in tax concessions and subsidies thanthey had paid in taxes and royalties, and around half of companyprofits were sent overseas. The Whitlam government ended the taxconcessions for the mining industry which had allowed multinationalsto pay minimal or negligible taxes, while enjoying immense profits.

In a 19 March 1973 speech to the annual dinner of the AustralianMining Industry Council (AMIC), the industry’s peak lobbying body,Whitlam threw down the gauntlet: “We shall do business, and weshall do it with honour; but we do not regard the rape of ourresources as inevitable, and we certainly do not intend to lie backand enjoy it. … We need to be satisfied that our mineral exportpolicies and practices are in the best interests of Australia and ourtrading partners. It is perfectly clear that large companies withinterests crossing many national boundaries may conduct theirbusiness in a way which, while maximising returns for themselves,will be to the detriment of a particular country. We will satisfyourselves that those companies operate in Australia in our interestsas well as their own. … The one thing you can be sure of is thatthe free-wheeling approach of the previous Government is goneforever. We have much to share and much to gain in our trade with therest of the world. But it must be clear that, in regard to minerals,Australia henceforth intends to be the mistress of her ownhousehold.”

A focus of Whitlam’s government was to “buy back thefarm”—a strong emphasis on returning Australian resources backinto Australian hands. In his 13 November 1972 election speech,Whitlam stated that “in truth, it has not been the ‘farm’ whichhas been sold—not the industries like wheat or wool or fruit ordairying or gold … It is the strongest and richest of our ownindustries and services which have been bought up from overseas”,namely, Australia’s natural resources and resource industries.

In a 7 August 1974 parliamentary speech, Connor noted thatabout 62 per cent of Australian minerals were under foreign ownershipor control, and in the case of crude oil and natural gas, thisexceeded 70 per cent. The Whitlam government was determined thatthese figures would not rise, and intended to progressively reducethem, with the objective of 100 per cent Australian ownership inuranium, crude oil, natural gas and black coal. Connor was determinedthat Australia would move from being primarily an exporter of rawmaterials, to become a substantial exporter of semi-processed andprocessed materials. In parliament on 17 October 1974, Connordenounced the current inherited situation of foreign ownership in theresources sector, such as the vast offshore petroleum explorationrights granted over the North-West Shelf of Western Australia, whichwere held predominantly by an overseas consortium, with only 15 percent Australian equity. Connor stated that the “total foreignownership and control of oil and natural gas production, refining andblending within Australia, is over 82 per cent, and policydeterminations in respect of the petroleum industry within Australia,have been the subject of decisions by foreign directorates.” Connorand Whitlam consistently emphasised that their objective ofAustralian ownership would not be achieved by usurping the reasonableinterests of overseas organisations, which currently had majoritycontrol over much of the sector, but by encouraging and supportingAustralian participation. While Australia would be the primarypartner in future enterprises, they welcomed continued participationfrom overseas companies, albeit under appropriate conditions.

The Petroleum and Minerals Authority

The Whitlam government primarily intended to pursue its resourcesdevelopment policies through its flagship institution, the Petroleumand Minerals Authority (PMA). As described by Whitlam at the 1979inaugural Rex Connor address, “The functions of the PMA were toexplore for and develop Australia’s petroleum and mineral resourceson Australia’s behalf and to promote Australian ownership andcontrol of those resources through co-operative ventures with privatecompanies. Should an Australian corporation have discovered a lodethat appeared to have great potential yet lacked the finance tofurther explore or develop it, such a corporation would have beenable to gain assistance from the PMA rather than from overseascapital. The PMA would also have been able to invite privatecorporations to participate with it in areas it held in its ownright. Like the multinationals, it would have been able to search forand find minerals, extract them, process them and market them, sothat it would be one of the few Australian concerns to participate inthe highly profitable activities of processing and marketing. Unlikethe multinationals, however, it would distribute its benefits to thepeople of Australia—and that meant all the people, not just a fewthousand shareholders.” (Emphasis added.)

The PMA operated under the Minister’s direction and had ahigh degree of flexibility in how it could perform its legislatedfunctions. It could purchase and lease land and equipment; acquireinterests in mining undertakings; and lend money to Australian miningventures. Although initially capitalised with only $50 million, thePMA could borrow money from banks and the AIDC, which would beguaranteed by Treasury. Connor intended that a major function of thePMA would be to secure future reserves through offshore oil and gasexploration along the Continental Shelf of Western Australia and inareas of the Arafura and Timor Seas. Connor refused to allowmultinationals to “farm out” their excessively large explorationpermits to other companies, insisting that if the permit-holders didnot have the capacity to explore themselves, their permits must bereturned to the government.

Opposition to ‘buying back the farm’

The Whitlam government’s visionary resources policies werefiercely opposed from many quarters. Both the Pipeline Authority andthe PMA were considered severe threats to the interests ofmultinational companies and were attacked by industryrepresentatives, including the AMIC.

State governments, threatened by a perceived encroachment upontheir collection of state mineral royalties, viciously attacked thePMA. For example, Western Australian Premier Sir Charles Court warnedthat companies would be refused access to mining tenements if theyaccepted any form of federal assistance, which dissuaded severalcompanies from participating in proposed joint ventures with the PMA.

The Opposition Liberal-National Coalition announced thatthey would oppose the PMA and publicly railed against itsestablishment, making wild claims that the Whitlam Governmentintended to socialise the entire industry. Opposition politiciansdenied the findings of the Fitzgerald report and stridently defendedthe mining and petroleum sector. The PMA legislation passed the Houseof Representatives in December 1973, but faced unprecedentedobstruction from an Opposition-controlled Senate which was extremelyhostile to Whitlam. The Senate was gridlocked over six Labor billswhich the Opposition refused to pass, including the PMA Bill, whichwas only resolved by a double dissolution of both houses ofParliament followed by a general election in May 1974, when Whitlamwas re-elected. The PMA Bill was eventually passed in a historicjoint sitting of Parliament in August 1974.

Whitlam’s resources policies were also hampered by severalcourt actions, including by the state governments of Victoria, NewSouth Wales, Queensland and Western Australia, which launched legalproceedings against the PMA Bill. In June 1975, the High Courtcontroversially declared the legislation invalid on a proceduraltechnicality, to the glee of State Premiers and the federalOpposition. Notably, three of the judges who ruled against the PMAwere members of the secret “brains trust” which would contrivethe legal basis upon which Governor-General Sir John Kerr would sackWhitlam several months later; and the fourth judge who ruled againstthe PMA was a long-time friend of Kerr’s.

Whitlam and Connor emphasised that the PMA Bill was onlyrejected on procedural, not constitutional, grounds, announcing theywould therefore reintroduce the legislation as soon as possible.The Petroleum and Minerals Authority Bill 1975 wasintroduced on 30 October 1975; however, less than two weeks laterKerr ousted Whitlam from government. The PMA was subsequentlydismantled by Whitlam’s successor, Liberal PM Malcolm Fraser. (Muchlater in his life, Malcolm Fraser would express a change in hisoutlook, including support for what Whitlam had been trying to do.)

Although the PMA was in operation for less than a year, itachieved considerable successes, despite the aforementioneddifficulties. It acquired interests in oil and gas reserves of theCooper Basin; replaced a proposed foreign interest in valuableNew South Wales coal reserves; assisted a small exploration companyto develop a high-grade copper deposit which would otherwise havebeen lost; assisted a number of companies involved in oil and gasexploration and mineral development; engaged in a coal explorationprogram in New South Wales; and was studying procedures and strategyfor offshore petroleum exploration and development.

Capital strike

The Whitlam government had determined that it would need to raise$4 billion to fund urgent energy development needs, including anatural gas pipeline; petrochemical plants; uranium plants; theupgrading of export harbours; further development of the CooperBasin; and electrification of rail facilities. In a 9 July 1975parliamentary speech, Connor announced that Australia’s provenrecoverable reserves of minerals and energy were worth an“astronomical” $5.7 trillion (in 1975 terms!), representing asecurity ratio of $1,425 in assets for every $1 in proposedborrowing. Connor declared that this was the “best security everoffered to overseas lenders” and slammed the Opposition’scomplaints about the size of the proposed loan, saying it was“peanuts” compared with the depth and range of Australia’sresources.

However, the traditional finance centres of Wall Street and theCity of London refused to extend credit to the Whitlam government,even though Australia had an excellent credit rating. Connor believedhe was facing a capital strike, and blasted the “same internationalforces and their Opposition puppets which frustrated the early birthof the Australian Industry Development Corporation and whichdestroyed Prime Minister Gorton [who] now turn their malice, theirspleen and their venom on an Australian Government which stands intheir path as they seek to enlarge further their grip on Australia’sresources of minerals and energy.” Connor declared that Australia’soffence, “in the eyes of certain international forces”, wasborrowing on the credit of Australia, rather than thealternative—which was for those funds to come into Australia asforeign investment and foreign ownership, which Connor said had been“the tragedy of Australia’s development hitherto”.

In late 1974, the Whitlam government decided to pursuefunding from oil-producing Middle Eastern countries, which were newlyawash with petrodollars in the wake of the 1973 oil crisis. This wasa funding source which had recently been tapped by the InternationalMonetary Fund and the governments of Japan, France and the UnitedKingdom. The situation would ultimately spiral into the so-calledLoans Affair, in which key figures of the Whitlam government,including Rex Connor, were targeted and publicly discredited in amedia storm over alleged impropriety, although no loan was everobtained and no commissions were paid. Veteran Australian journalistJohn Pilger has documented that the CIA’s fingerprints were allover the Loans Affair scandal.

Notably, establishment firms of the City of London played aless-publicised role in the Loans Affair. One of the primary figuresin the scandal, CIA-linked bankrupt Tirath Khemlani, was introducedto Connor on recommendation of a prestigious London bank and bullionfirm, Johnson Matthey, one of the five institutions which set thedaily gold price. Johnson Matthey’s glowing recommendation ofKhemlani was communicated through the Australian government’s legaladvisers in London, Coward Chance & Co., a company whosepredecessors had worked for the London Clearing House since itsfounding in 1888. Coward Chance & Co. also represented theinterests of a plethora of major multinational oil companies,including companies in the “Seven Sisters” international oilconglomerate.

Opposition Leader Malcolm Fraser used the Loans Affairscandal as justification to block supply in the Senate, intending toforce another general election. Governor General John Kerr, who hadlinks to British and American intelligence, used the situation asjustification to controversially dismiss Whitlam on 11 November 1975.

Whitlam’s policies obstruct US and Crowncommercial interests

The Whitlam government’s determined pursuit of an independentforeign policy, including for greater jurisdiction over US defencefacilities which were stationed in Australia, alarmed and angeredestablishment figures in US government and intelligence circles. InJune 1973, US President Richard Nixon appointed “coup-master”Marshall Green as US Ambassador to Australia. Green, a key advisor toUS Secretary of State Henry Kissinger during the NixonAdministration, was an influential policy planner for Southeast Asiawho had been involved in four countries where there were coups,including senior diplomatic postings during USbacked coups in SouthKorea (1961) and Indonesia (1965).

Declassified diplomatic cables published by WikiLeaks reveal thatin addition to defence and foreign policy issues, the Whitlamgovernment’s resources and energy policies, including its objectiveof majority Australian-ownership, were of significant concern to theUSA. In a detailed December 1973 report on Whitlam, Green describedthe prospects for the US government’s three major concerns, listing“exports and investments” as second only to US defencefacilities, and before Australia’s foreign policy decisions.

Green and other figures in the US embassy were intenselyinterested in the Whitlam government’s resources policies,including the progress of the Petroleum and Minerals Authoritylegislation. The Green-appointed Deputy Ambassador, William Harrop,cabled on 8 August 1974 that of the six bills involved in the Senategridlock, the PMA Bill was “of greatest importance to USinterests”. Green closely monitored Connor’s and Whitlam’sstatements on resources policy and foreign investment; collecteddetailed information on foreign ownership of resources companies andthe extent of Australia’s oil reserves; and secretly gatheredinformation from multinational oil companies. Journalist John Pilgerdescribes an incident where a senior Whitlam Minister, Clyde Cameron,was threatened by Green that if the Whitlam government handed overcontrol and ownership of US multinationals to the Australian people,“we would move in”.

Green was closely attuned to American business interests inAustralia. Shortly after his arrival, Green met with senior businessexecutives at the Australian American Chamber of Commerce, where hewas informed of their concerns about the Whitlam government’sforeign investment and resources policies, and about Connor’sproposed Petroleum and Minerals Authority. Green planned to continue“low-profile” meetings with these business leaders every fewweeks. Pilger documented that in early 1974 Green addressed theAustralian Institute of Directors, where he essentially incitedbusiness leaders to rise up against the Whitlam government, sayingthat they “could expect help from the United States”, which wouldbe similar to the help “given to South America”—where aCIA-orchestrated coup had occurred in Chile only a few monthsearlier.

Soon after his arrival, Green paid an “introductory call”to Rex Connor, where Connor confirmed the Whitlam government’scommitment to the policies which Green said “ha[d] greatlydisturbed foreign minerals interest in Australia”. Connor “bluntly”informed Green that the level of foreign ownership was excessive andwould not be allowed to increase. Connor “strongly reiterated”that “no existing foreign ownership would be disturbed, but allfuture growth of industry would be under Australian ownership”.Green was clearly cognisant of the value at stake—in his 9 July1975 parliamentary speech, Connor quoted Green himself saying that,per capita, Australia was the world’s most resources-rich nation.

In July 1974, Nixon ordered a secret review of US policytowards Australia, which inquired into the areas of defence,intelligence-sharing and economic issues, particularly foreigninvestment prospects. The heavily redacted report documented“disturbing protectionist mutterings” from both sides ofpolitics, saying that “Australia’s great mineral wealth” hadinspired Australian “resources diplomacy”. The report profiledkey figures of the Whitlam government, including Connor, noting thatConnor’s Ministry was responsible for pursuing “Australia’sownership goals in the energy and minerals industries”. The reportdetermined that the operation of the AIDC, the Pipeline Authority andthe PMA would “have a major influence over future foreigninvestment in Australia”.

In November 1974, Green met with media mogul Rupert Murdoch, whocorrectly “predicted” that in a year hence, elections would takeplace in Australia, sparked by refusal of appropriations in theSenate. Notably, Murdoch’s own business interests had been thwartedby Whitlam’s Australian-ownership policies, which impacted aproposed joint venture between Murdoch and BHP to build an aluminarefinery. In early 1975, Murdoch ordered his editors to “killWhitlam”. The subsequent savaging of Whitlam and biased backing ofFraser was so outrageous that journalists from Murdoch-owned TheAustralian took industrial action against it.

A few months before the Whitlam coup occurred, Green waswhisked out of Australia to a plum role in the US State Department.

Considering the intense interest that the documentation shows theUS government maintained in Whitlam’s resources and foreigninvestment policy, it is reasonable to assume that a similar level ofinterest was maintained by other participants in the Whitlam coup:namely, the British Crown. The Crown has major financial interests inthe world’s largest mining and resources companies, better known asthe Anglo-Dutch raw materials cartel, including Rio Tinto (thenCRA—Conzinc Riotinto Australia), which would have been threatenedby the Whitlam government’s attempt to assert national control overAustralia’s resources.

Dismantling of Whitlam’s resources policies

After coming to power in a landslide election victory afterWhitlam’s ousting, Prime Minister Malcolm Fraser dismantled thePetroleum and Minerals Authority and divested its assets, as part ofhis election promise to return resources back to the control of theprivate sector. Fraser retained the Pipeline Authority, although itspowers were curtailed; only part of Connor’s pipeline grid was evercompleted, and the Authority’s remaining assets were privatised in1994. Privatisation of the Australian Industry DevelopmentCorporation began in 1989 and was completed in 1997.

The Fraser government restored tax subsidies and concessions formining companies. In 1976, Deputy Liberal Leader Phillip Lynchannounced that the Fraser government “firmly believe[d] thatforeign capital should play a bigger role than it has in the pastthree years”, approving large overseas loans for state governmentsto build infrastructure, intended to entice multinational companiesto invest in mining. Although the Fraser government shared Whitlam’sdesire to maximise Australian ownership and initially intended toretain 50 per cent Australian ownership provisions, these weregradually watered down to suit the interests of multinational miningcompanies, to attract further foreign investment.

In the decades since, foreign ownership of Australian mineralresources has only become more pronounced. According to a 2017 reportpublished by the Australia Institute, Undermining ourdemocracy: Foreign corporate influence through the Australian mininglobby, Australia’s mining industry was now 86 per centforeign-owned. Two companies, BHP Billion (76 per cent foreign-owned)and the Queen’s own Rio Tinto (83 per cent foreign-owned) accountedfor 70 per cent of listed mining company resources.

A 2016 Treasury paper on foreign investment in Australia observedthat less than 10 per cent of current mining projects were solelyowned by Australian companies, while over 90 per cent had some levelof foreign ownership. Foreign investment accounted for an 86 per centshare of the ownership of major mining projects (26 per cent from theUSA and 27 per cent from the United Kingdom).

In addition, a 2021 investigation by journalist MichaelWest revealed that over the past decade, the mining industry sold$2.1 trillion worth of Australian resources overseas, but Australiangovernments received only 9.1 per cent of this sum in taxes androyalties paid. If only considering royalties, the rate fellto 5.6 per cent of the value of the exports. On average, miningcompanies made a 1,654 per cent revenue mark-up on Australiancommodities. West revealed that the mining industry also exaggeratedits contribution in royalties. The Minerals Council of Australia(formerly AMIC) commissioned Deloitte to produce a report whichsupposedly demonstrated the generous contribution which miningcompanies had made to the Australian economy; however, Westdiscovered large discrepancies in the data, which was exaggerated byan average 19 per cent; and by 33 per cent in previous periods.

Australia’s “great mineral wealth” has been exploited byforeign cartels for many decades, to the great detriment of theAustralian people. The Citizens Party has committed to taking up theunfinished work of visionaries such as Whitlam and Connor, toreassert national control of Australia’s vast mineral resources. Aspart of our mineral resources policy, the ACP will establish anational resources company (p. 16), in the spirit of the Petroleumand Minerals Authority, to develop our strategic resources for themaximum benefit of the Australian people.