Monday, March 12, 2012

329 Responsibility for Oil Rig had been outsourced to Marshall Islands tax haven

Responsibility for Oil Rig had been outsourced to Marshall Islands tax haven

(1) Responsibility for Oil Rig had been outsourced to Marshall Islands tax haven
(2) Pentagon's Afghan War uses BP fuel & bolsters BP during its Gulf crisis
(3) Obama shields BP assets, limits liability to $20 billion paid out over four years
(4) BP engineer, 6 days before explosion, described rig as "a Nightmare well". BP put cost above safety
(5) Britain relies on BP for annual dividend (£1 in every £7); Pension Funds heavily dependent

(1) Responsibility for Oil Rig had been outsourced to Marshall Islands tax haven
http://articles.latimes.com/2010/jun/14/nation/la-na-oil-inspection-20100615

Foreign flagging of offshore rigs skirts U.S. safety rules

The Marshall Islands, not the U.S., had the main responsibility for safety inspections on the Deepwater Horizon.

By Tom Hamburger and Kim Geiger, Tribune Washington Bureau

June 14,

Reporting from Washington — The Deepwater Horizon oil rig that exploded in the Gulf of Mexico was built in South Korea. It was operated by a Swiss company under contract to a British oil firm. Primary responsibility for safety and other inspections rested not with the U.S. government but with the Republic of the Marshall Islands — a tiny, impoverished nation in the Pacific Ocean.

And the Marshall Islands, a maze of tiny atolls, many smaller than the ill-fated oil rig, outsourced many of its responsibilities to private companies.

Now, as the government tries to figure out what went wrong in the worst environmental catastrophe in U.S. history, this international patchwork of divided authority and sometimes conflicting priorities is emerging as a crucial underlying factor in the explosion of the rig.

Under International law, offshore oil rigs like the Deepwater Horizon are treated as ships, and companies are allowed to "register" them in unlikely places such as the Marshall Islands, Panama and Liberia — reducing the U.S. government's role in inspecting and enforcing safety and other standards.

"Today, these oil rigs can operate under different, very minimal standards of inspection established by international maritime treaties," said Rep. James L. Oberstar (D-Minn.), chairman of the House Transportation Committee.

Some offshore drilling experts, as well as some survivors of the explosion that led to the massive spill, say foreign registration also permitted a confusing command structure and understaffing — factors that may have contributed to the disaster.

Senior members of Congress — including Oberstar and House Natural Resources Committee Chairman Nick J. Rahall II (D-W.Va.) — have begun looking into the inspection and staffing issues. The House Subcommittee on Coast Guard and Maritime Transportation will hold a hearing Thursday on foreign-flagged rigs in the Gulf of Mexico.

Different types of rigs are classified differently, and the Marshall Islands assigned the Deepwater Horizon to a category that permitted lower staffing levels.

"Over the years, the manning dwindled down and down," said Douglas Harold Brown, chief mechanic aboard the Deepwater Horizon, who had been assigned to the floating drilling rig since shortly after it was manufactured in 2000.  "I believe that safety was compromised by this," he said in an interview.

(2) Pentagon's Afghan War uses BP fuel & bolsters BP during its Gulf crisis

From: chris lenczner <chrispaul@netpci.com> Date: 18.06.2010 04:03 PM

Tomgram: Nick Turse, BP and the Pentagon's Dirty Little Secret

Nick Turse

June 17, 2010.

http://www.tomdispatch.com/post/175262/tomgram%3A_nick_turse%2C_bp_and_the_pentagon%27s_dirty_little_secret__/

It couldn't be worse, could it? In the Gulf, BP now claims to be retrieving 15,000 barrels of oil a day from the busted pipe 5,000 feet down. That's three times the total amount of oil it claimed, bare weeks ago, was coming out of that pipe. A government panel of experts now suggests that the real figure could be up to 60,000 barrels or 2.5 million gallons a day, the equivalent of an Exxon Valdez spill every four days -- and some independent experts think the figure could actually be closer to 100,000 barrels a day.

In the meantime, we just learned from the Los Angeles Times that -- go figure -- the "primary responsibility for safety and other inspections" on the oil rig that blew in the Gulf "rested not with the U.S. government but with the Republic of the Marshall Islands," and that those impoverished islands had outsourced their responsibilities to private companies. Go BP! We also learned that the relief wells sure to staunch the flow of oil by "early August" could take far longer, fail, or even make matters significantly worse; that BP cut every corner in the book to save money when drilling its well; and, oh, that evidently even the heavens are angry at the oil giant, since on Tuesday a lightning strike put its sole drill/retrieval ship in the Gulf out of action for hours, leaving all that oil pouring into the water unimpeded. However bad the bad news is, each new dawn it only seems to get worse, as does the "collateral damage," whether to pelicans or the Gulf's beaches and wetlands.

Meanwhile, in Afghanistan, that war equivalent of BP's Gulf disaster, things are similarly trending downward at a startling pace as the news from there grows ever grimmer. The model American offensive in the southern town of Marja, declared a "success" in early May, has faltered badly and has been labeled by Afghan war commander General Stanley McChrystal a "bleeding ulcer"; the "government in a box" that he claimed the U.S. would merrily roll out after U.S. and Afghan troops decisively shoved the Taliban aside, is still in absentia, and the Taliban remain all too present; Afghan President Hamid Karzai now openly indicates that he thinks the Americans can't win in his country and he's planning accordingly; the much ballyhooed American "offensive" in Afghanistan's second largest city, Kandahar, has once again been delayed; corruption increases; American and NATO death tolls grow worse by the month as support for the war in the U.S. sinks; the "collateral damage" only increases; and this week, in a piece in the New York Times, we were told things are so bad that a serious drawdown of forces in 2011 is considered unlikely. Go figure (again)!

And oh, the heavens are evidently not so happy with our Afghan operations either, since Centcom commander General David Petraeus fainted while under what one commentator called "withering" questioning about drawdown schedules for U.S. troops in a Senate hearing room Tuesday.

To make matters more complicated, as Nick Turse, TomDispatch regular and author of The Complex: How the Military Invades Our Everyday Lives, points out, America's two distant disasters are not only out of control and seemingly unstaunchable, but more intimately connected than we might imagine. The American disaster in Afghanistan runs, in significant part, on BP-produced fuel, and government payments for that fuel are bolstering BP while it lives through its purgatory in the Gulf.

In addition, lest the American people learn the absolute worst, BP, evidently working hand-in-hand with the government, has put great effort into avoiding unnecessarily ugly photos, potentially negative stories, and unwanted information from the Gulf, by adopting methods of news control pioneered by the Pentagon in Iraq and Afghanistan. These include the "embedding" of reporters with government minders on public beaches, in the water, and in the air. It has even evidently become the norm in the Gulf now for officials to speak of reporters covering the scene as "media embeds." In this way do our disparate disasters merge in corporate and government hands. Tom

Kick Ass or Buy Gas?
How Taxpayers Are Subsidizing BP's Disaster Through the Pentagon
By Nick Turse

Residents of Louisiana, Mississippi, Alabama, and Florida are livid with BP in the wake of the massive, never-ending oil spill in the Gulf of Mexico -- and Barack Obama says they ought to be. But there's one aspect of the BP story that most of those angry residents of the Gulf states aren't aware of. And the president hasn't had a thing to say about it.

Even as the tar balls hit Gulf beaches, their tax dollars are subsidizing BP and so far, President Obama has not shown the slightest indication that he plans to stop their flow into BP coffers, despite the recent call of Public Citizen, a watchdog group, to end the nation's business dealings with company. In fact, the Department of Defense, which has a longstanding, multi-billion dollar business relationship with BP, tells TomDispatch that it has no plans to sever current business ties or curtail future contracts with the oil giant.

Talking Tough

In recent weeks, against a news backdrop of oil-soaked pelicans, President Obama has been talking tough. "We've ordered BP to pay economic injury claims, and we will make sure they deliver," he announced on June 1st. Days later, he rebuked the oil giant for considering plans to pay out large dividends to shareholders and for spending tens of millions of dollars on an advertising campaign to repair the company's tarnished image.

"My understanding is that BP had contracted for $50 million worth of TV advertising to manage their image in the course of this disaster," the president said. "Now, I don't have a problem with BP fulfilling its legal obligations. What I don't want to hear is that they're spending that kind of money on shareholders and spending that kind of money on TV advertising, [but] they're nickel-and-diming fishermen or small businesses here in the Gulf who are having a hard time."

As part of his ongoing attempt to deal with flak from critics who claim that his reaction to the disaster in the Gulf of Mexico has been far too measured and that his administration has mishandled its response to the disaster, Obama told NBC "Today Show" host Matt Lauer: "I don't sit around just talking to experts because this is a college seminar. We talk to these folks because they potentially have the best answers, so I know whose ass to kick."

While the president has been on the verbal warpath, the U.S. military has -- with little notice -- continued to carry on a major business partnership with BP, despite the company's disastrous environmental record.

Repeat Offenders

As an institution, the Pentagon runs on oil. Its jet fighters, bombers, tanks, Humvees, and other vehicles burn 75% of the fuel used by the Department of Defense. For example, B-52 bombers consume 47,000 gallons per mission, and when an F-16 fighter kicks in its afterburners, it burns through $300 worth of fuel a minute. In fact, according to an article in the April 2010 issue of Energy Source, the official newsletter of the Pentagon's fuel-buying component, the DoD purchases three billion gallons of jet fuel per year.

Thanks to the wars in Iraq and Afghanistan, the Department of Defense has been consuming vast quantities of fuel. According to 2008 figures, for example, U.S. military bases in Iraq and Afghanistan used a staggering 90 million gallons per month. Given the base-building boom that preceded President Obama's Afghan surge, the 2010 figures may be significantly higher.

In 2009, according to the Pentagon's Defense Energy Support Center (DESC), the military spent $3.8 billion for 31.3 million barrels -- around 1.3 billion gallons -- of oil consumed at posts, camps, and bases overseas. Moreover, DESC's bulk-fuels division, which purchases jet fuel and naval diesel fuel among other petroleum products, awarded $2.2 billion in contracts to support operations in Iraq and Afghanistan last year. Another $974 million was reportedly spent by the ground-fuels division, which awards contracts for diesel fuel, gasoline, and heating oil for ground operations, just for the war in Afghanistan in 2009.

The Pentagon's foreign wars have left it particularly heavily dependent on oil services, energy, and petroleum companies. An analysis published at Foreign Policy in Focus found that, in 2005, 145 such companies had contracts with the Pentagon. That year, the Department of Defense paid out more than $1.5 billion to BP alone and a total of $8 billion taxpayer dollars, in total, to energy-related firms on what is a far-from-complete list of companies.

In 2009, according to the Defense Energy Support Center, the military awarded $22.5 billion in energy contracts. More than $16 billion of that went to purchasing bulk fuel. Some 10 top petroleum suppliers got the lion's share, more than $11.5 billion, among them big names like Shell, Exxon Mobil and Valero. The largest contractor, however, was BP, which received more than $2.2 billion -- almost 12% of all petroleum-contract dollars awarded by the Pentagon for the year.

While one exceptionally powerful department of the federal government has been feeding money into BP (and other oil giants) with abandon, BP has consistently run afoul of U.S. government regulators from the Occupational Safety and Health Administration (OSHA). According to the Center for Public Integrity, "BP account[ed] for 97 percent of all flagrant violations found in the [oil] refining industry by government safety inspectors over the past three years." Records obtained by the Center demonstrate that between June 2007 and February 2010, BP received a total of 862 citations, mostly for alleged violations of "OSHA's process safety management standard, a sweeping rule governing everything from storage of flammable liquids to emergency shutdown systems." Of these citations, 760 were considered "egregious willful," which OSHA defines as a violation even more severe than those committed due to "plain indifference" or evidencing "intentional disregard for employee health and safety." As a result, BP faces $90 million in penalties which the company is currently contesting.

Over those same years, BP received around $5.7 billion in federal contracts, according to official government data. In fact, the $2.2 billion the Pentagon paid to the oil giant in 2009 accounted for almost 16% of the company's nearly $14 billion in annual profits.

This fiscal year, the U.S. military has already awarded the company more than $837 million, inking its latest deal with BP in March.

The Pentagon's Green Revolution

In recent years, the gas-guzzling Pentagon has launched a major effort to invest in developing green technology -- or at least give the appearance of doing so -- with, at best, mixed results. As defense-tech writer Noah Shachtman has pointed out, the military is "now focusing on algal feedstock for biofuel and next-generation solar panels. One of the world's largest solar-power projects is planned for the Army's main training center, at Fort Irwin, Calif. Billions in stimulus money were spent to green military facilities."

But efforts in the Bush years to develop "green" vehicles generally stalled, flopped, or barely got rolling. Under the Obama administration, more ambitious goals have been set, but tangible results are still lacking. Last year, the military's contracts for renewable fuels derived from algae, according to DESC, added up to less than 22,000 gallons.

One major reason for this, Shachtman writes, is that "the current systems for delivering power and fuel to war zones are reliable, if inefficient and unsustainable. Military leaders," he adds "don't want to jeopardize operations in Afghanistan or Iraq for something perceived as experimental or risky." As a result, whatever solar panels it has installed or renewable jet fuel it has purchased, the Pentagon remains dependent on buying huge amounts of petroleum products from BP and other large energy corporations, and when it comes to war-making, any substantive reduction in oil dependence appears far off indeed. ...

Nick Turse the author of The Complex: How the Military Invades Our Everyday Lives (Metropolitan Books). His website is NickTurse.com.

(3) Obama shields BP assets, limits liability to $20 billion paid out over four years
From: Mel <bmelvi@tpg.com.au> Date: 17.06.2010 07:03 AM

http://www.wsws.org/articles/2010/jun2010/spil-j17.shtml

Obama cuts deal to shield BP assets

By Tom Eley
17 June 2010

President Barack Obama reiterated his defense of oil giant BP after a White House meeting with the company's CEO Tony Hayward and board chairman Carl-Henric Svanberg.

After the meeting, Obama and BP announced the establishment of an independently operated escrow account, the Independent Claims Facility, funded by up to $20 billion paid out over the next four years. BP said it would delay dividend payouts over the remainder of the year estimated at $10 billion. Other details of the escrow account remain vague.

The US media presented the meeting and announcement as a humbling of BP. It was nothing of the sort.

In fact, the meeting was a choreographed event with two purposes: to diffuse popular anger against both BP and the Obama administration, and to assure the financial markets that BP is in no danger of bankruptcy or criminal prosecution. There will be no serious consequences for the disaster that killed 11 workers on April 20 and has since pumped upwards of 60 million gallons of oil into the Gulf of Mexico.

Even were it clear that the $20 billion will really be made available to the blowout's many economic victims—and it is not—this is a preposterously small sum for a catastrophe whose real cost will run into the hundreds of billions, if not trillions. All the costs of environmental cleanup are to be paid out of this fund, according to the Financial Times. There can be no doubt that this alone will far surpass $20 billion.

The deal ensures that the overwhelming burden of the costs of the disaster will be borne by the government, and ultimately the working class.

"I'm absolutely confident BP will be able to meet its obligations to the Gulf Coast and to the American people," Obama said in a short press conference after the meeting. "BP is a strong and viable company and it is in all of our interests that it remain so."

With these words, the Obama administration indicated that it would not seek to force a BP bankruptcy, let alone seize the company, and its goal is that BP continue to be a profitable concern, paying out dividends and gargantuan executive salaries for years to come.

The financial markets were cheered by Obama's comments. In the hours after the press conference BP's share price increased sharply, then finished the day up about 22 cents.

Though the administration had done nothing to punish BP, Obama had been under pressure from financial circles to throw it a lifeline. The preceding weeks had seen BP shares tumble by half and on Tuesday Fitch downgraded the company's credit rating by six notches.

The escrow account is meant to shield BP from potentially hundreds of billions, or even trillions, in damages. While both Obama and BP promised that the account did not mean a $20 billion cap on liability had been put in place, the Independent Claims Facility is a preemptive blow against the tens of thousands of lawsuits BP is likely to face over the coming years.

While it remains extremely vague, the escrow account will be BP's first line of defense in determining what are "legitimate claims," a phrase both Obama and company executives have repeatedly used. Those claimants deemed "illegitimate" might turn to the court system for redress, but having been ruled unfounded by a supposedly neutral observer, they will have a black mark hanging over them, and US courts are already notorious for defending corporate privilege.

This is the fate that awaits the blowout's financial victims. Millions of Gulf Coast residents are likely to suffer financially through layoffs which will ripple through the economy far beyond the fishing and tourism industries, through declining home values in a region already devastated by the real estate collapse, and through, in all probability, an epidemic of health problems.

If there are 10 million such victims—less than the combined population of Louisiana, Mississippi and Alabama, the three states hardest-hit so far—the miserly $20 billion escrow account would mean a mere $2,000 per person.

The oil blowout's victims on the Gulf Coast can take little comfort in Obama's selection to oversee the fund, Kenneth Feinberg. Over the past ten years, Feinberg has become a favored "fixer" of the US government.

Feinberg was selected to distribute funds from an escrow account for the US victims of the September, 11, 2001 terrorist attacks on New York and Washington. This financial settlement was viewed as a crucial component of a broader effort to block any inquiry into the still unexplained stand-down of the US military-intelligence apparatus leading up to the attacks.

And it was Feinberg who was given the role of Obama administration "pay czar," tasked with putting on a show of limiting pay and bonuses for the multi-millionaire executives at Wall Street firms that had received Troubled Asset Relief Program (TARP) bailout funding. The limits set by Congress on pay restrictions meant that Feinberg's role was purely symbolic.

Obama's statement that he intends to see to it that BP remain a viable company puts the lie to the claim that the escrow fund will be independent. Feinberg's real task will be to protect BP and deny the just demands of the people. As an unelected appointee, Feinberg will be free from "political pressure"—i.e., he will face no consequences from popular anger when he turns down claims.

Like his Oval Office speech from the evening before, Obama's remarks at Wednesday's press conference might as well have been written by BP's public relations department. There was nothing said that the firm could possibly have found objectionable.

Even his own rendering of the conversation with Svanberg—Obama did not meet privately with the widely-hated Hayward—revealed that this was no "showdown," as it was presented in the US media.

Obama said in his press conference that he told Svanberg to remember those who have been devastated by the blowout. "Keep in mind those individuals, that they are desperate, that some of them, if they don't get relief quickly, may lose businesses that have been in their families for two or three generations," the president said, quoting his own plea. "And the chairman assured me that he would keep them in mind."

In other words, Obama met with Svanberg, not as an advocate for an outraged population demanding justice, punishment or compensation, but as a supplicant, pleading with the chairman of the oil giant. It was, incredibly, Obama's first meeting with any high-ranking BP official in the 58 days since the blowout took place. Perhaps it was the earliest he could get on their appointment calendar.

Obama also said that BP would put in place a $100 million fund to compensate oil rig workers who lost their jobs as a result of Obama's six-month moratorium on deep-sea drilling, which BP had indicated last week it would oppose. Announcement of the measure was a political boost for Obama, who has been attacked by Republicans over the moratorium, which in fact applied to only a tiny share of the rigs operating the Gulf.

Svanberg was even allowed to present BP as a caring company. "I hear comments sometimes that large oil companies are—are greedy companies or don't care, but that is not the case in BP," said the Swede, known in his homeland for eliminating tens of thousands of jobs at the mobile phone company Ericsson. "We care about the small people."

In fact BP's criminal disregard for the health and safety of "small people" and the environment is richly documented, before and after the blowout. Even as Svanberg was uttering these words, new reports were emerging from the Gulf Coast of private security guards and Coast Guard soldiers preventing media from visiting public beaches and waters.

(4) BP engineer, 6 days before explosion, described rig as "a Nightmare well". BP put cost above safety

http://www.wsws.org/articles/2010/jun2010/pers-j15.shtml

Gulf oil disaster: a trillion-dollar corporate crime

Patrick Martin

15 June 2010

The oil disaster in the Gulf of Mexico is a corporate crime whose magnitude almost defies comprehension. The eventual cost—combining damage to complex Gulf and coastal ecosystems, wiping out of the fishing and tourism industries, and long-term health consequences for the population of the region—is likely to total over $1 trillion.

The explosion that destroyed the Deepwater Horizon drilling rig, killed 11 workers and began the massive and continuing flow of oil was not an "accident," but the product of willful corporate cost-cutting and negligence. Further evidence of this fact was provided Monday in documents released by the House Energy and Commerce Committee. One document was an email from a BP engineer, Brian Morel, on April 14, six days before the explosion, in which he described the rig as a "nightmare well which has everyone all over the place."

An accompanying letter from the committee detailed decisions made by BP officials during the days leading up to the disaster. "The common feature of these five decisions is that they posed a trade-off between cost and well safety," the letter said. "Time after time, it appears that BP made decisions that increased the risk of a blowout to save the company time or expense."

In this context, the much-publicized demand by the Obama administration and congressional Democrats, that BP establish an escrow fund of about $20 billion from which compensation would be paid to fishermen, seafood processors and others robbed of their livelihood by the disaster, is a fraud.

The $20 billion fund would represent only two years of dividend payments for BP. This is likely to be portrayed as a "compromise," in which the oil company agrees to suspend dividend payments, partially or wholly, for a few months, as a public relations gesture while the Gulf crisis dominates the headlines.

This amounts to an effective amnesty to the giant oil company, and a back-door bailout, since any compensation above the escrow fund amount would become the responsibility of local, state and federal governments, i.e., like the cost of the Wall Street bailout, it would come at the expense of the working class.

The scale of the Gulf oil disaster is so enormous that for any serious estimate of the real costs in terms of cleanup, compensation and long-term repair of damage, the bidding starts at a trillion dollars and rises rapidly upwards.

An estimate published by Earth Economics, an environmental group, found that the Mississippi River Delta in Louisiana alone had an economic value of between $330 billion and $1.3 trillion, based on benefits provided like water supply, water flow regulation, hurricane protection, food production, raw materials production, recreational value, carbon sequestration, atmospheric composition regulation, waste treatment, aesthetic value and habitat value.

Besides Louisiana, however, oil from the BP spill is now washing ashore on the coastline of Mississippi, Alabama and the Florida panhandle. Vast plumes of undersea oil have been detected in the deep waters of the Gulf of Mexico, beyond the continental shelf, where the destructive impact on ocean ecosystems and the food chain is incalculable.

Even the lower-range figure for the Mississippi Delta exceeds the $189 billion market capitalization of BP. In other words, the resources of even one of the largest oil companies are entirely inadequate, either to stop the leak itself or to remedy the damage. ...

(5) Britain relies on BP for annual dividend (£1 in every £7); Equity Funds heavily dependent

http://www.wsws.org/articles/2010/jun2010/ukbp-j17.shtml

Gulf crisis stokes Washington-London tensions

By Jean Shaoul
17 June 2010

BP's criminal actions in the Gulf of Mexico have generated a huge crisis for British capitalism and the City of London. This is not because the disaster has cost the lives of 11 oil workers, wrecked the livelihoods of tens of thousands of workers and created the world's largest environmental disaster. Far from it.

It is because yet another British-based company faces a possible threat to its existence. Having lost its engineering and manufacturing base, the British financial elite has for years been dependent upon the banks, insurance and oil. With the collapse of Britain's banks, BP is not only its premier company, it is also the emaciated edifice upon which finance capital depends.

BP's annual dividend accounts for £1 in every £7 of dividends paid out by British companies.

BP is the most important holding for nearly half of the UK's equity income funds, with some holding as much as 10 percent of their stock in BP, particularly following the banking collapse. But it is not just UK pension funds that depend upon BP, so do California retirement system Calpers, the Teacher Retirement System of Texas and Ohio Public Employees Retirement System. As a result, some insurance and pension funds have reduced their holdings, but most have few alternatives.

BP's share price has fallen by more than 40 percent since the disaster, its lowest level since 1997, while the cost of insuring its debts against default has risen to junk bond levels. This is despite the fact that BP is predicting free cash flow, after both operating and capital expenditure but before dividends, of about $11 billion for 2010, $22 billion for 2011 and $23 billion for 2012, assuming oil prices do not fall below $80 a barrel as a result of the recession.

While BP is unlikely to have to pay all the costs and fines in connection with the disaster immediately, it is clear that this leaves no room for dividends and must eat into BP's future investment plans—already low compared to other oil majors—under conditions where its existing gas and oilfields are running dry. Moreover, it has room to borrow only another $18 billion.

The firm, for years a blue chip company, has now become the most frequently traded stock among private clients. There is now talk of BP putting its US business, the former Amoco and Arco companies which it bought in 1999, into Chapter 11 bankruptcy protection, which would then allow BP to be sold off piecemeal.

But the scale of the claims that BP faces—the cost of the cleanup, fines and compensation to those hurt by the disaster is escalating by the day—could also take its insurers down with it, unless criminal charges render at least some of BP's insurance invalid.

BP has announced that it is withholding this quarter's dividend, worth about $2.62 billion or $10.5 billion a year. This is many times more than the company has spent so far on cleaning up the greatest environmental disaster in US history. While the oil company initially made the offer to ward off criticism from President Barack Obama as part of a public relations exercise, it is now staring bankruptcy in the face.

Last week Obama demanded BP pay the wages of rig workers laid off by other firms because of the six-month moratorium on deepwater drilling in the Gulf. On Wednesday, BP agreed to deposit up to $20 billion—a sum equivalent to just two years' dividends—into an escrow account to meet the rising cleanup and compensation costs. Obama also told the company to come up with new plans to capture more of the oil from the leaking well.

Obama's purpose in upping the pressure on BP is to reach some sort of agreement that the administration hopes will curb growing popular outrage over the disaster while preserving the longer-term interests of BP and the oil industry as a whole.

BP also faces at least $14 billion in fines, $4,300 for each barrel of oil spilt, as the estimates of the daily amount of oil leaking and the time it will take BP to plug the leak rise. But even this underestimates the scale of the fines, based as it is on a daily leakage of 30,000 barrels a day. US government-sponsored scientists have now put an upper figure at 60,000 barrels a day, and this could still rise.

The City and the media were appalled at this turn of events, which they saw as a major threat to the financial elite. Nothing and no one must interfere with the divine right to dividends, not even for a few months.

The response was rabid nationalism, jingoism and anti-US rhetoric. There were cries that Obama had singled out BP rather than US subcontractors such as Halliburton for criticism, and demands that Prime Minister David Cameron defend the British company from US attacks, including US threats to prosecute the company and remove the statutory cap on BP's liability.

Norman Tebbit, a cabinet minister under Margaret Thatcher, lambasted Obama in the Daily Telegraph for being "despicable" and "xenophobic". This was a reference to Obama "harping on" about "British Petroleum", BP's former name.

Boris Johnson, the Conservative Mayor of London, ranted about "the anti-British rhetoric that seems to be permeating from America" and said this might damage UK interests.

The Daily Telegraph, in an article headlined "Obama's boot on the throat of British pensioners", highlighted the impact of the fall of BP's share price on the London Stock Market and on pension funds, which have invested heavily in BP.

The Telegraph editorialised, "BP's shareholders, many of whom invested in the company after being let down by the banks, have every right to feel angry at the prospect of losing their dividend". This was, it said, grossly unfair, since Transocean, the Swiss-based company, part owned by BP, which owns the Deepwater Horizon rig that caused the explosion, would be paying out a $1 billion dividend.

A Financial Times editorial chastised the entire administration, from Obama down. It complained about the "vituperative statements" emanating from the White House, such as Obama's statement that he wanted to know "whose ass to kick" and the White House's "ratcheting up of the pressure" on BP.

The British government has traditionally had a very close relationship with BP. Labour Prime Minister Tony Blair's former personal assistant, Anji Hunter, quit Downing Street in 2001 to work for six years as director of communications for BP. Last year, after lobbying by the company, Labour ministers supported the release of Abdel-baset al-Megrahi, the man convicted of the Lockerbie bombing, as a sweetener to clinch a £500 million oil deal with Libya.

This has continued with the Conservative government. David Cameron and the Chancellor of the Exchequer George Osborne intervened to squash any notion that they were hanging BP out to dry. Both spoke to Carl-Henric Svanberg, BP's chairman, urging him to find a "constructive solution" to the crisis.

Cameron said, "We need to be clear that BP needs to do everything it can to deal with the situation and the UK government stands ready to help" (emphasis added).

He did not, however, say what the government would do other than plead BP's case with Obama before a visit to Washington next month. Obama, for his part, told Cameron that he did not intend to "undermine" the stock market value of BP.

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