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‘Conned’: a German view of Ireland

In April the American oil giant ExxonMobil began test drillings in the Dunquin Field southwest of Ireland. Off the west coast, Shell is extracting gas from the Corrib field, a source of often violent confrontations with residents for many years.

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Last week, the German newspaper ‘Süddeutsche Zeitung’ published an article about the ‘conning’ of Ireland – over several decades – by its political masters. We talk to the writer, reprint the article and add some footnotes of our ow. Christian Zaschke’s article claimed that Ireland’s political elite had failed its people, not least over oil rights

Original introduction: Chancellor Merkel has “contempt” for Ireland’s bankers. But they are just one part of an elite that exploits the island shamelessly

Anyone who wants to understand why Ireland could be so rich yet will probably remain poor should learn about Ray Burke. In Ireland, Ray Burke is almost as well known as James Joyce, Samuel Beckett or the U2 singer Bono who, in his sunglasses, always looks like a pudgy fly. People in Ireland don’t have positive thoughts about Ray Burke. After all, he sold their future.

Ireland has been trapped in a never-ending crisis since its gigantic property bubble burst. The banks, above all Anglo Irish Bank, worked ceaselessly to pump fresh money into the already overheated property market – which finally collapsed with the outbreak of the financial crisis of 2008.

The ruined Anglo Irish Bank has just made headlines posthumously after the Irish Independent published transcripts of telephone calls from September 2008. On the tapes you can hear how high-ranking bankers make fun of the crisis. The €7 billion emergency assistance that they demanded from the government would be paid back when they have the money, the bankers agree jokingly – “in other words: never”. That money won’t be enough anyway, says one department head, as he pulled the €7 billion figure “out of my arse”.

The journalist and author Fintan O’Toole says: “The reaction here in Dublin is very interesting. Hearing directly [the bankers’]boundless contempt is shocking. And everyone knows: we are paying for what they left behind.”

In a now legendary all-night sitting on September 29th, 2008 the Irish government agreed to guarantee all bank debts. O’Toole calls this the “most disastrous decision that was ever made by an Irish government”. At least two generations of taxpayers will pay off these debts. O’Toole makes an excellent job of charting the Irish path to disaster in his book Ship of Fools, in which he calls the accounts of Anglo Irish Bank the “most inventive work of Irish fiction since Ulysses”.

The oil off the Irish coast could be the way out of this misery. The oil could be the hope. If the former energy minister Ray Burke hadn’t rewritten the relevant laws as though the oil industry itself held the pen. And if Bertie Ahern hadn’t made an already bad deal for the Irish people even worse.

Burke was energy minister in 1987, when it was decided to change the provisions for oil and gas drilling licence allocation. Until then the state owned 50 per cent of all oil and gas found in Irish waters. In addition, companies had to pay royalties of between 8 and 16 per cent as well as 50 per cent tax. (1, see notes below)

The new rule gave companies 100 per cent of their find and abolished licence fees. In 1992 Bertie Ahern, then finance minister and later prime minister from 1998 to 2008, cut the tax for oil companies to 25 per cent – a provision that remains to this day. (2)

Increasing numbers of Irish people no longer accept this. For instance, the fisherman Joey Murtagh. Standing on the edge of Dublin Bay, with a glorious view over the Irish Sea, he asks: “You know what Ray Burke did?”

Or the psychologist Aisling Murphy. She sits in Dalkey in a pub called The Queen’s, where chicken and tacos are today’s special. Murphy asks: “You know what Ray Burke brought on us?”

The financial adviser Eddie Hobbs has arranged to meet at the motorway restaurant Brown’s Barn, 15km south of Dublin. He asks: “You’re aware of Ray Burke?”

Burke was always surrounded by corruption allegations and went to prison in 2005 because of tax fraud.

The reason this political inheritance is causing such animated discussion now is because of huge oil and gas reserves believed to surround the island. The company Providence estimates the volume of oil it discovered in the Barryroe field, south of Cork, at over 1.7 billion barrels, of which at least 270 million can be pumped. Further test drillings in Irish waters have been similarly promising.

At the moment a barrel of oil costs, depending on grade, between $90 and $100, meaning there could be oil worth many billions of euro in the Irish sea bed. (3) Even the oil companies concede that Ireland is surrounded by massive riches. But the Irish will probably gain none of this thanks to men like Ray Burke and Bertie Ahern.

Screwed over again

Murtagh says: “We are being screwed over again with every trick in the book.” Murphy: “We are a land that lies still while we are bled dry.” Hobbs: “The oil companies won’t succeed on this front. Not this time.” O’Toole: “Under the current conditions, it would be better if the resources stayed in the ground.”

But they aren’t staying there.

In April the American oil giant ExxonMobil began test drillings in the Dunquin Field southwest of Ireland. Off the west coast, Shell is extracting gas from the Corrib field, a source of often violent confrontations with residents for many years.

Two weeks ago the current energy minister Pat Rabbitte urged representatives of 70 companies to invest in gas and oil extraction in Ireland. He said: “It is a priority of the Government to encourage investment in oil and gas extraction off the Irish coast and to optimise the value of the discoveries for Ireland.”

Only the Government isn’t making much progress with the optimisation. In May 2012 an Oireachtas committee appointed by Minister Rabbitte presented a report. After examining the rules introduced by Burke and Ahern, they came to the conclusion that it would be better to leave everything as it is.

Oil companies could scarcely find better terms than in Ireland. In most oil- and gas-producing countries in the world the state taps on average 70 per cent of the profits. In Ireland there is just the 25 per cent tax, though this can rise to 40 per cent on particularly rich fields. But Irish rules allow companies to write off all costs for test drillings over 25 years, regardless of where they were carried out, meaning the Irish State ends up with considerably less than 25 per cent.

Opposition is building through Hobbs’s “Own Our Oil” campaign. It is preparing a report looking into how Ireland could profit from its resources, prepared by experts from Ireland and other oil-producing countries.

He points to Norway, where most of the profits from oil production go to the company Statoil – the majority of which is owned by the state. In this way Norway has become one of the richest countries on Earth. The study is to be presented at a major conference and then handed over to government.

“We’re making good headway,” says Hobbs, “and may be finished this year.”

Hobbs is well-known in Ireland thanks to his 2005 television programme Rip-Off Republic. He is viewed as a consumer champion and is known for his populist, biting attacks on the establishment. He became an enemy of the oil industry after the company Providence made a tactical error.

Last September Providence managed to acquire a licence for test drillings in Dublin Bay. How this was possible is puzzling as the bay is a natural conservation area. The platform was to have stood 10km from the coast and would have been visible from land. The residents of Dalkey were the first to mobilise against the plans. Dalkey is a well-heeled suburb of Dublin in which many celebrities and intellectuals live, resulting in the protest being mocked in many newspapers as a revolt of the rich.

But the well-organised protesters also got a hearing and Hobbs took note. He says: “These people were the first to open my eyes to what happens to the oil.” Murphy and Murtagh are some of these people.

Murtagh says: “We became engaged because this was to take place before our eyes. But then it became bigger.” Murtagh has gone to sea since 1972 and has first-hand experience of how Ireland sold its other big resource: fish. Irish fishing waters are regarded as the best in Europe.

On EU entry in 1973 the Irish negotiated a deal that appeared good, but only at first glance: allowing other EU states into their waters to fish in exchange for money for Irish farmers. Murtagh says: “14.2 per cent of European seas are Irish. But we are allowed to have only 2.6 per cent of the fish.”

Murtagh’s thesis: Ireland has paid back twice in fish every euro of EU aid received. The Dutch, Spanish, French come with industrial ships and empty Irish waters while EU fisheries policy keeps him ashore. As he talks Murtagh, 57, has tears in his eyes. (4)

Murphy says that the protest in Dublin Bay has triggered something among her friends.

“You have to know that we Irish have no experience in confrontation. Here it’s usual not to make a fuss. On top of that is something that, in psychological terms, you call ‘acquired helplessness’. You find this, for example, among abused women. Ireland doesn’t defend itself. Ireland quietly puts up with it.”

But a new fighting spirit is palpable since the group in Dalkey formed, Murphy says.

“This is completely new, even for me,” she says. “I was raised that institutions are always right and that you don’t raise any objection.”

Great diplomats, terrible politicians

Hobbs says the Irish always tried to find a third way. “You never have good and evil here, right or wrong. What you always have is people who are somewhat good or a little bit right. Above all, we are good at compromise out of fear of insulting the other. That’s why we have produced great diplomats and terrible politicians.”

It’s the same in the oil affair: “The position is, don’t start a row with the oil industry. They should find something and then we’ll find a solution. But there are Irish people who know that now is the time to do something. The only question is: will it be done the easy way or the hard way?”

The fighting spirit of the group from Dalkey was given a lift when their protest had an effect. Last February Providence handed back the licence to drill in Dublin Bay. The official reason was that, though they met all environmental requirements, the Government made a mistake in implementing an EU directive on environmental protection. The unofficial speculation in Dalkey is that the firm was weary of the negative publicity.

After the oil finds off Cork in 2012, Providence, in particular its boss Tony O’Reilly jr, was more than happy to be in the public eye. He promised that all of Ireland would profit. But with growing numbers of Irish people asking why the country profits so little from the resources, it has become increasingly difficult to contact Providence.

Emails from the Süddeutsche Zeitung from last November were answered with a question. Who else apart from Providence was the newspaper talking to, a spokeswoman asked, while keeping alive the hope of a meeting. Then no emails were answered for some time after they apparently landed in the spam folder. In February, a request for a meeting was declined as all managers were on the road, but the company would send materials. That never happened. A series of questions posed this week went unanswered.

That may have something to do with the fact that Providence boss O’Reilly jr is not used to critical questions. His father Tony O’Reilly is one of Ireland’s richest men and his company, Independent News & Media, owns more than 130 radio stations, 100 commercial websites and more than 200 newspapers worldwide – including more than 20 in Ireland. (5)

O’Reilly jr prefers to speak in safe surroundings. A week ago he told the oil industry website Rigzone that Ireland’s tax regulations were “appropriate for the current state of the industry”. Ireland doesn’t have enough money to search for oil itself and thus, O’Reilly said, needs investors from abroad – and attracts them with low tax rates.

In fact, Ireland has had good experience with low tax rates: a section of the Irish economy booms because of large international companies like Microsoft and Google, which have settled in Ireland because of the low corporate tax rate of 12.5 per cent. This sector is what the Irish Government points to when it says things are improving.

But since 2008, Ireland’s domestic market has been in the cellar, with dramatic consequences. More than 300,000 Irish people have emigrated in the last four years, 40 per cent aged between 18 and 24. That would be the equivalent of 5.4 million people leaving Germany (population 82 million). The State has to make savings, meaning ever less money is available for education, which means there won’t be enough trained staff for international companies – the only economic sector that is working.

“In countries like Greece or Spain the youth go on the street and protest,” says O’Toole. “In Ireland, they emigrate. Now our young people are also leaving because they don’t want to pay back the debts of our bankers.”

The publication of the Anglo Irish Bank telephone calls has revived the outrage. In one extract a banker says: “The strategy is to pull [the government] in, so that they write a big cheque. If they realise the scale of this from the start, they might say it is too expensive for the taxpayer.”

It demonstrated to the Irish public like never before how they were conned ruthlessly by a shameless elite. Even Chancellor Merkel commented on the case. On Thursday evening she said: “I have nothing but contempt for that.”

O’Toole says: “The interesting question now is whether the fury will focus. Whether the people perhaps choose the issue of oil to say: that’s enough. If even Third World dictators can agree better deals with oil companies, why can’t we?” (6)

He answers his own question: “The Government always views itself in a weak position. All important financial decisions are being taken by the troika of the European Central Bank, European Commission and International Monetary Fund. The Government merely implements. That leads to a situation where they are psychologically incapable of acting independently.”

The fisherman Joey Murtagh, the psychologist Aisling Murphy, the financial adviser Eddie Hobbs and the author Fintan O’Toole want to make sure that, on this matter, the last word has not been spoken. That the Irish people no longer have to pay for institutional stupidity and greed.

“It is completely un-Irish what we’re doing here,” said Murphy, “but perhaps we are the start of something new.”

She laughs very cautiously when she says: “Seen that way, perhaps we’re a kind of avant garde.” – (Copyright: Süddeutsche Zeitung. This is an edited version translated by Derek Scally)

Irish Times notes

1 These terms were laid down by the then minister, Justin Keating, in 1975, at a time when there was general optimism about the potential for major oil and gas finds in Irish waters. The first change to Keating’s tax system was made by Labour Tánaiste and Energy minister Dick Spring in 1985-86, when he reduced State royalties and then abolished State participation in marginal fields.

2 A tax rate of 40 per cent applies to larger finds on licences granted after 2007.

3 The Department of Communications, Energy and Natural Resources has estimated a total potential in the order of 10 billion barrels of oil equivalent beneath the seabed off the west coast of Ireland alone. But it is not clear how much of this can be recovered at an economic cost.

4 The EU Common Fisheries Policy, which permits an estimated 88 per cent of stocks in Irish waters to be caught by other member states, dates from 1983 but the real pressure on Irish stocks came after Spanish accession. The factory ships in these waters tend to be Dutch, but Ireland did produce its own supertrawler for foreign waters, the former Killybegs-owned Atlantic Dawn.

5 INM is no longer controlled by the O’Reilly family. Its largest shareholder is now Denis O’Brien.

6 A 2007 report on oil and gas regimes by the US Government Accounting Office found that Ireland had the second lowest rate of government take of all the countries studied. Cameroon had the lowest.

Interview

Christian Zaschke

It began as a chance conversation during a visit to Ireland last autumn and ended as a full-page article about Ireland in Germany’s best-selling quality newspaper last Saturday. The headline: “Conned”.

Journalist Christian Zaschke, based in London for the Süddeutsche Zeitung since 2011, is a regular visitor to Ireland. When he heard about Dalkey residents protesting against oil drilling in Dublin Bay he thought it would make a small article for the newspaper, with echoes of the 1983 film “Local Hero”, about a Scottish man who takes on an American oil baron.

“The more I talked to people, though, the more I realised it was part of something far bigger and more fundamental,” he says

His article filled the prestigious page three slot, reserved for the best reportage of the day. Mr Zaschke presents his readers with a red thread through modern Irish history, of a political elite taking the country for a ride, and a population lying down and taking it.

The Anglo tapes, and Chancellor Angela Merkel’s “contempt” remark in Brussels, gave it a timely hook.

Mr Zaschke says he found the story of Ireland’s oil “deplorable”. If Norway managed to regulate its undersea oil reserves so that the entire land enjoys the profits, he wondered, why not Ireland?

“It made me wonder what the Irish people have to done to deserve this and whether a few people really could screw their people in that way?”

Despite the challenge of explaining the intricacies of Irish life to a distant German audience, their reaction suggests he managed to keep them on board to the end.

“The people who read the article in Germany are mostly outraged. They told me that people in Ireland have to do something,” he says.

What struck a chord with German readers, he said, is that it turned on its head certain stereotypes they may have about the Irish as rebels who challenge authority.

“I realised that the Irish rebel instinct isn’t as pronounced,” he said, “and that it is matched with a kind of lethargy, a certain fatalism as well as melancholy.”

He senses that these attitudes are shifting. “I had the impression from people I talked to that it was important for them that this story is told beyond Ireland,” he said, “perhaps so it might come back in from outside”.

DEREK SCALLY

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