Thursday, May 25, 2006

Australia's uranium cartel


[The bottomless moral pit of uranium mining. Mary Kathleen.]

Evan Jones

John Howard claims that nuclear energy is the debate that Australia has to have. John Howard claims that we have to demonstrate consistency. If we as Australians don’t trust nuclear power then why are we exporting uranium? Quite.

Into the act comes Peter Costello, Prime Minister in waiting. Mike Steketee, in the Australian of the 25th, notes:
Telling parliament that Australia had 8 per cent of the world's proven coal reserves, 2 per cent of natural gas reserves and 40 per cent of low-cost uranium resources, [Costello] added: Nobody in their right mind would think that we would deny ourselves export markets for gas or coal. Nobody in their right mind should deny Australia export markets for uranium, provided they are in countries with safeguards which comply with international obligations.

A market analyst noted in March:
uranium is the hot stock at the moment and Australia is the Saudi Arabia of uranium. We've got the highest-grade ore in the world and lots of it ...

When John Howard went to Canada to talk about collaboration on uranium, it wasn’t the first time the two countries with significant deposits got together on the subject. George Venturini, one of the initial group of Commissioners when the Trade Practices Commission was established to enforce the 1974 Trade Practices Act, discovered this earlier collaboration in the course of his job.

The fact that Venturini took his job seriously did not endear him to his superiors, and he was effectively sacked by the Fraser Government. He wrote one book about his experience as a Commissioner. But then he wrote another book about the uranium cartel – Partners in Ecocide: Australia’s complicity in the uranium cartel, Rigamarole Books, 1982. No major publisher was interested. And for good reason as this was a book about a non-existent subject, the cartel which didn’t exist.

The functioning of the cartel, and the role of the Australian and Canadian governments in the duplicity, is a ripper of a story. The story below is excerpted from Venturini’s Partners in Ecocide.

* * *

In 1976 the Friends of the Earth environmental activist group was engaging in a campaign against Mary Kathleen Uranium Ltd, a majority-held subsidiary of the British-based giant miner Rio Tinto Zinc through its major Australian subsidiary Conzinc Riotinto Australia (the Australian Atomic Energy Commission held the minority ownership in MKU). By chance, material came into their possession which exposed the existence of a global cartel amongst uranium producers.

In 1964, the US, the dominant consumer of uranium, imposed an embargo on the importation of uranium for enrichment. Moreover, in 1971, the US proposed to release surplus uranium onto the domestic and foreign markets.

In late 1971 and February 1972, major non-US producers and some governments discussed the organisation of a producers’ cartel to control prices and output of uranium. Represented were producers from and governments of France, South Africa, Australia, Great Britain and Canada. The British Government was not formally involved, but RTZ was in this instance an arm of the British state. The Canadian government was a key proponent, because Canadian producers had experienced hard times during the embargo (although by the early 1970s the prospects were for the dismantling of the restrictions).

The cartel was secretly established in June 1972, and known amongst its members as the Uranium Club. The Club members constituted the four governments and RTZ, with all other producers represented by their host governments. Secrecy of the arrangement and continuing dealings was considered crucial.

One other role of the cartel was to keep out middlemen, especially Westinghouse which was a major wholesaler. A letter from a key Canadian bureaucrat to his Minister in 1972 claimed that the object was to ‘eliminate competition once and for all’.

Key meetings between Australian producers and the Australian government (represented by a number of federal Departments) took place between February and August 1972. The government’s role in enforcing the cartel was through export controls (excused under ‘national security’) and inhibiting entry into production.

The then restrictive practices law in Australia was toothless, product of 1960s business lobbying, with the only requirement a registration system for recording arrangements for restraint of trade. Details remained secret. There was in place a lead and zinc cartel, overseen by Western Mining, which served as a model for the uranium ore cartel.

John Proud of Peko-Wallsend was the coordinator of the Australian producers ‘forum’. At a March meeting of companies and bureaucrats, the notes conclude with the instruction ‘Mr Proud stressed the need for extreme secrecy’.

Mr Louis Mazel of RTZ was a key enforcer of the Club. Mazel wrote to a loose-lipped executive in 1973:
It should be said that there is no ‘Producers’ Agreement’ or anything like it. Some of the uranium producers discovered, during the exchange of information on supply and demand, that there were some similarities of ideas and each producer is applying these in its own way.

In spite of internal differences, the cartel held together because of the volatile nature of uranium ore supply, and thus prices. Penalties were effected when members broke the rules.

Between 1972 and 1977, uranium prices rose from under US$5 to $42 a pound, although insiders noted that $6-7 a pound would cover operating costs, capital costs and an exploration incentives. Venturini notes that ‘this rise in prices transfers billions of dollars per year from consumers to producers’.

Enter Westinghouse. Westinghouse was the major producer of nuclear power plants (assisted in achieving a head start by its joint venture with the compulsive Admiral Hyman Rickover in the development of America’s nuclear powered submarine). With increasing competition from General Electric, Westinghouse then had the idea of attracting business by offering long-term contracts for the supply of uranium ore at roughly the then prevailing cheap prices.

Comes the 1970s price hikes (which came on the back of oil price hikes) and Westinghouse was in trouble, as it had to enter the market for the ore that it contracted to supply. In September 1975, Westinghouse announced that it would default on its supply contracts with electric utilities across the country, on grounds of ‘commercial impracticability’. There then ensued the most expensive private litigation in US history.

The utilities sued Westinghouse; Westinghouse in turn sued the members of the cartel.

The US business magazine Forbes had exposed the existence of the cartel in January 1975. The article quoted a US Atomic Energy Commission official:
They are a little sensitive about being called a cartel … One an only look at the evidence, that after they started meeting, the uranium market started getting … let’s say, less cut-throatedly competitive.

Following the Forbes article and the Westinghouse suits, the US Justice Department sat up and instigated a Grand Jury inquiry. The CIA and the State Department knew of the existence of the cartel but declined to inform the Justice Department. Indeed, the State Department tried to kill the inquiry. The inquiry concluded in mid-1978, but was discharged without indictments. Justice filed a suit against Gulf Oil, the ringleader of the US-based producers involved, but Gulf got off with a nolo contendere (no contest) plea and a trivial fine. Several Congressmen sought information on the case but with limited success.

In July 1976 ABC radio exposed the US investigations into the alleged cartel. On the same day, Doug Anthony, the Minister for National Resources and Overseas Trade, denied the existence of a uranium cartel. Anthony claimed that the high spot price had been brought about by market forces.

Enter the whistleblower. In August 1976, Friends of the Earth received out of the blue a package containing hundreds of pages of confidential files stolen from Mary Kathleen Uranium.

Coincidentally, Justice R W Fox was presiding over an inquiry regarding a joint proposal of the Australian AEC and Ranger Uranium to develop uranium deposits in the Northern Territory. Uranium mining had been the dominant item in Labor rank and file politics in 1975, and Prime Minister Whitlam had responded to the divide between Cabinet and a dissenting Caucus and rank and file by establishing the Fox Commission. The Commission declined to consider the material.

(The uranium industry received something of a check in 1976-77. The Fox Commission reported that 'the nuclear power industry is unintentionally contributing to the increased risk of nuclear war'. In May 1977, Prime Minister Fraser announced that uranium customer states must be signatories to the nuclear non-proliferation treaty, as a basis for the negotiation of bilateral safeguards. And Labor deliberated on what was to become its three-mine policy. None of these developments had any impact on the cartel's momentum. In July John Howard, fresh from a Ministerial debacle in the Business portfolio, was made Minister for Special Trade Negotiations. It was Howard's job to use uranium as a lever to gain better access to the European market.)

In October 1976, one of Westinghouse’s suits ended up in an Illinois District Court in Chicago. The defendants included the Australian-based producers. Many defendants, including the Australian producers, declined to appear or offer pleas.

The Fraser Government attempted to gag public discussion of the existence of the cartel, passing prohibitive legislation in quick time in November 1976. The Canadian Government did the same. So Friends of the Earth sent the material to an American Congressional Subcommittee Chair, who immediately launched an investigation of his own.

By June 1977 the Moss House Subcommittee on Oversight and Investigations unveiled the working of ‘a fully operational, price fixing, quota setting, international uranium producers’ cartel’. Al Gore was a member of that Committee, also by coincidence from Tennessee in the heart of the area supplied by the gigantic Tennessee Valley Authority, the largest electricity generator in the country. Gore was particularly intrusive in questioning regarding the cost impost on electricity consumption in his constituency.

The cartel had impinged on US energy authority costs because the ‘embargo’ had not prevented uranium ore imports in toto.

The Canadian Government was particularly anxious to keep these hearings out of the public domain across the border because it had underpinned the cartel’s appropriation of high ore prices from Canadian electricity producers. The cartel was in contravention of Canada’s own antitrust laws. The Justice Minister at the time happened to be one Jean Chretien, who evidently experienced no setback for his involvement, as he rose to be later Prime Minister of the country. The Government was forced to initiate an inquiry, such that one arm of government was investigating another. After four years of investigation it reported in 1981, acknowledging the illegal nature of the enterprise.

The UK became the only cartel host country not to enact legislation against document discovery for the purposes of US litigation, so Westinghouse moved its case to the UK in 1977. With the UK government behind RTZ, a British Court ordered selective discovery. RTZ executives then claimed the Fifth Amendment, claiming that disclosure would result in self-incrimination. An American Court offered immunity for the individuals but not the company. Then the House of Lords stepped in to prevent disclosure, ordering that disclosure was an attack on British sovereignty, notwithstanding legislation and treaties to the contrary. The state and capital become fused.

Westinghouse also sought disclosure through the New South Wales Courts in October 1976. A detailed question from the Opposition benches in September was met with a tardy reply in December. The then Resources Minister, Peter Nixon, claimed ‘I am not aware of any Australian mining companies being members of any international uranium producers associations’. Yet the previous Coalition government had been a party to the cartel’s establishment in 1972.

Nixon also disclosed that the November anti-disclosure legislation had been passed at the behest of the uranium producers. The Labor Opposition supported the legislation on ‘national interest’ grounds, while being ill-informed on substance. The Attorney-General, Bob Ellicott, summed up the Government’s intention thus:
[The Government] wants the mining operations of this country to be carried out by another method – one that is more likely to be efficient and in the national interest.

Nothing of the details of the Westinghouse suit seeped into the Parliamentary debate on the rushed bill. The Australian Law Journal rated the development one of ‘the most extraordinary pieces of legislation ever passed by the Commonwealth Parliament’.

Venturini notes:
The passage of an Act which is so alarmingly vague and reposes such wide discretionary powers in the Attorney-General have quite disturbing implications for parliamentary democracy and the principle of open government. Where uranium was concerned, the Australian Government accelerated the tendency to use the Parliament as a cipher.

The US Attorney-General Griffin Bell made a speech to the American Bar Association in August 1977:
Comity is a very small word that stands for a very large principle. Comity is a way of saying fair play.
Of course, there will be unavoidable situations where two sets of interests conflict … But I see no such excuse for deliberately enacting ‘blocking’ legislation solely to frustrate United States anti-trust laws, without regard to the seriousness of the case or the national interest at stake.
… there is a big difference between arrangements by Governments to structure markets within their jurisdictions and private cartels getting together to fix prices and allocate markets worldwide, even where those cartels have tacit support form Governments.

According to Venturini, ‘In 1978 Westinghouse offered to drop its antitrust suit against Australian uranium companies in exchange for cheap uranium’. The Government rejected the approaches.

In August-September Attorney General Peter Durack visited the US to plead Australia’s case, without success (although he told the Senate otherwise). With hardened resolve, the Government passed another Act in early 1979 in which the title highlights the purpose – the Foreign Antitrust Judgments (Restriction of Enforcement) Act. The Act was retrospective, but came just in time for developments in the US.

In 1979 the Chicago Court belatedly (this is a pending 1976 suit) ruled on a Westinghouse request to prevent assets of the defaulting producers being transferred out of the US, pending judgment. RTZ ignored the restraint. All the cartel governments (excluding France) then appealed on behalf of the uranium producers, claiming that the US District Court did not have jurisdiction (in effect that the Sherman Act did not extend beyond American borders). The US Court of Appeals ruled in favour of the lower court.

The Whitlam Government’s 1974 Trade Practices Act had this extra-territoriality intent written into the Act, but the Trade Practices Commission proceeded to ignore its power in its tolerance of the lead and zinc cartel. Venturini noted:
In the United States the matter is still approached within the strict boundaries of the judicial ethic instead of the flexible ‘parameters’ of the Australian Government’s plastic ethic.

In October 1979 the Australian Government filed a suit in a US court to overturn the District Court’s judgment against Australian companies. The Government also wrote to the Court in 1980 that there was nothing for the US authorities to worry about, because the arrangements were not directed at the US market, which was untrue. In the meantime, the British and Australian Government’s conferred unrepentantly on how best to protect their uranium miners on a global scale.

The 1979 suit by the Australian Government admitted to the existence of the cartel. However, it went on to claim:
It is true that the interests of the companies are … integrally connected with that national interest. But that is incidental. …
The Australian Government is concerned that the effect of a judgment for damages against the Australian defendants and the continuing enforcement of that judgment may constitute a serious irritant of indefinite duration in bilateral relations between Australia and the United States of America.


The District Court judge decided in Westinghouse’s favour in November 1979 regarding access to damages against the companies. The Australian companies immediately pressured Canberra to legislate to ‘allow the seizure of U.S. property in Australia if American plaintiffs seize Australian property in America’.

The Australian Financial Review, in a peculiar ideological reversal, claimed that the US court was acting in ‘what is almost a parody of nineteenth century imperialism’. It transpires that the author of the editorial was none other than that towering intellect and man of unsurpassable consistency, P.P. McGuinness.

Here was a significant conceptual divide. For one group (including Australia) it was ‘industrial co-operation’, for the other ‘criminal conspiracy’. The Paris-based Secretary General of the International Chamber of Commerce was organising a conference to deal with the problem. He claimed:
Companies are faced with uncertainties about permissible activities, and often with conflicting requirements both as to their conduct and to the production of information requested by foreign authorities.

A US Appeal Court decision in February 1980 gave the defendants reprieve but not absolution. In May Australia and the UK took their case to a meeting of Law Ministers of Commonwealth countries to tie up support from the Commonwealth bloc.

In June, the Government filed another suit to derail Westinghouse’s pursuit of the miners. The Government claimed to be not acting in the interests of the producers, but to be acting out of principle for the cause of national sovereignty, and to defend the ‘well-being of the international uranium industry, which is being jeopardized by these suits’.

In July, the Government asked the Australian States to all enact complementary legislation, to which they agreed.

In December, the US District Court judge intimated yet again that the defendants had no case and damages against them were appropriate.

In the meantime, the defendants were starting to making private settlements with Westinghouse. Australia’s CRA boss Rod Carnegie fulminated against the tyranny of the cost, claiming that it was blackmail to get access to do business in the US. The settlement decision was helped along by the election of Ronald Reagan as President in late 1980 – Reagan immediately proceeded to bring producers on board to gain privileged access into the Japanese market (something that the Australian government had been angling for for some time).

The government suits against the jurisdiction of US antitrust legislation remained pending and thus took on a life of its own. As Venturini notes, the enunciation of a functional ‘national interest’ had been jaundiced by the Australian government going overboard to underpin a handful of overseas-owned companies.
The crude reality is that in an economy such as the Australian, which is over-whelmingly controlled by multinationals, it is their interest in Australian uranium that the Australian Government calls ‘the national interest’. …
The Government had become too enmeshed in its role as ‘surrogate’ of the cartel participants and the Attorney-General had consistently appeared incapable of understanding the main issues in the Westinghouse case.

As a consequence of the Government muddying the ‘national interest’ waters for foreign-owned uranium producers, the role of US courts in a range of other issues that could be more defensibly brought under the ‘national interest’ label were put under a cloud – the shipping conference of which Australia was a member (exempted under the Australian Trade Practices Act); possible action by the US multinational Dillingham regarding the terms on which the Fraser Government truncated sand mining on Fraser Island; and the contemporary action by West Australian green groups in US courts against bauxite companies Alcoa and Reynolds regarding their activities on Australian soil.

The Australian Attorney-General actually filed a suit in the US hearings in June 1981 in support of the two American companies (and de facto the West Australian Coalition Government) and against the Australian green groups. This action was at least consistent with its behaviour over Westinghouse, and ideologically consistent – the national interest is to be defined in terms of corporate profits. As it turned out, the Judge ruled against the green groups on narrow grounds, declining to make a stance on the issue of extraterritoriality. As a consequence, the Westinghouse phenomenon remained in the wings.

The prospect that US courts might make an adverse judgment on the shipping conference had the Government race to strengthen its ‘blocking legislation’, the 1979 Foreign Antitrust Judgments Act, in June 1981.

In introducing the Amendment Bill, Attorney-General Durack engaged in magnificent hyperbole. In seeking to defend the Government’s actions in the Westinghouse case, he referred cryptically to ‘principles’ that had been established in the 1970s in the ‘orderly marketing’ of lead and zinc. Venturini, having been one of the inaugural Commissioners on the Murphy Trade Practices Commission, knew the lead and zinc story intimately.

The lead and zinc global cartel, centred on Australian-based producers, had acquired unofficial (and thus illegal) authorisation of the arrangement by the wink and a nod of the TPC Chairman, Ron Bannerman. This private action by the Chairman had, from the earliest moments of the operation of the new Act, destroyed the integrity of the regulatory body overseeing the Act. It was all down hill from then on.

Some of the key companies in the uranium cartel had been members the lead and zinc cartel; the former drew on the experience of the latter. Thus did Senator Durack unashamedly highlight the long history of official support for cartelisation of key mineral commodities, in the face of statute prohibition of the practices and condemnation of the associated culture.

Venturini, of Latin origins and classically trained, and incensed by his debilitating experience as a Trade Practices Commissioner attempting to enforce an historically unprecedented statute of substance, finishes his account of the uranium cartel and its political surrogates thus:
In the hands of such custodians as Australia has, this is best characterised … with the Russian word poshlost, which implies a frightening, debasing and interminable vulgarity.

* * *

Venturini’s Paratners in Ecocide ended in late 1981, missing the denouement of the uranium cartel saga, of which this scribe is wholly ignorant. But the book documents in fine detail a decade of duplicity, in which none of the participants in the cartel - producers or governments – displayed not a scrap of contrition. Business as usual. The only people who come through this episode with any integrity intact are to be found in the US Justice Department and judiciary.

But uranium is a special case. The rules underpinning the hard won and tenuous civility of law and of politics evidently do not apply when it comes to uranium. Uranium smells. It appears that it carries skullduggery inexorably.

The prospects are not good that the current eruption of propaganda for a uranium enriched economic utopia will do anything but hide another murky agenda behind the scenes. There will never be transparency when it comes to uranium.

2 Comments:

Neale said...

Alan Roberts and others have pointed out that uranium extraction is increasingly from low grade ores, requiring huge amounts of energy to get, let alone actually use. Using in power stations is also incredibly expensive and generates huge amounts of CO2 in building stations and getting the ore there.

And it will run out anyway. Thus all the rubbish about it being a solution to global warming falls away and we see, as the current price rise demonstrates, that is all about big bikkies for CRA etc etc etc.

As Ian Lowe has said, if nuclear power is the answer it must be a stupid question

3:25 PM  
Anonymous said...

The real global power base is Arabian oil. The push towards uranium is driven by the mortal enemy of the Arab in order to uncouple the world's reliance upon them.

11:01 AM  

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