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Issue #1653      August 27, 2014

The real Clive Palmer

Last week Clive Palmer described “the Chinese” as “mongrels” and “bastards”, who “shoot their people”. His party’s Senate representative, Jacqui Lambie, declared Australia risked becoming “slaves to an aggressive, anti-democratic, totalitarian power”, and must massively re-arm itself against Chinese invasion.

Palmer later claimed he was only talking about the Chinese government and one Chinese company, adding “I feel for the Chinese people that live under such tyranny”.

The Chinese government described Palmer’s words as absurd, irresponsible and full of prejudice. West Australian Premier Colin Barnet described the statements as racist and Foreign Minister Julie Bishop apologised.

Labor and liberal politicians all declared that Palmer’s statements would damage Australia’s trade with China, our biggest trading partner. But the future of Australian trade with China will be determined by his business dealings far more than by his verbal outbursts.

A very big deal

Palmer acquired the rights to vast iron ore deposits in the Pilbara in 1985, and in 2002 won state government mining approval.

In March 2006 his firm Mineralogy entered into the Sino Iron partnership with Citic Pacific, the 27 percent Chinese government-owned division of Citic, the parent company fully owned by the Chinese government.

Citic Pacific would build the mine and infrastructure, and act as shipping port operator. Mineralogy would manage port security and get royalties of 10 percent of the benchmark ore price plus 35 cents per tonne, as well as $600 million in fees, paid over 30 months.

To sidestep Foreign Investment Review Board objections Mineralogy would buy all the necessary land, including the port.

Construction proceeded very slowly. In October 2008 Citic Pacific executives admitted they had lost $2 billion of the company’s money in unauthorised trading on the Australian dollar. Palmer received the final instalment of the $600 million two days later, leaving Citic Pacific flat broke.

Citic subsequently bailed out Citic Pacific, making the Chinese government the company’s major shareholder.

In 2010 Palmer discovered that during construction Citic Pacific had virtually destroyed a small island near the port, despite Mineralogy’s previous assurances concerning environmental protection. Incensed, Palmer then demanded rent from Citic for use of Mineralogy’s land.

Citic refused, adding they could not pay the ore benchmark royalty component because the mining industry had abandoned the benchmark in favour of spot price royalties. In a subsequent voice-mail message to Citic, Palmer is recorded shouting: “… we are not changing the royalty for you at all. Tell your chairman to stick it up his arse.”

In March 2013 the court ordered Citic Pacific to pay $152 million in royalties to Mineralogy. However, it appealed, claiming that the change in method of royalty calculation made it impossible to justify the figure.

The courts subsequently ordered Citic Pacific to pay the 35 cents per tonne royalty component, but a further decision on replacing the former benchmark royalty could take years.

Mining finally commenced in December 2013. By then Citic Pacific had spent $10 billion on construction and was virtually penniless again.

In February this year the Chinese government injected another $2 billion into Citic Pacific. The courts confirmed Mineralogy’s entitlement to act as port security manager, prompting Palmer’s ABC Q&A outburst that “The Chinese government wants … to take over our ports and get our resources for free!”

Mineralogy attempted to have Citic Pacific shut down, but they countered with accusations that Palmer had diverted $12 million from a fund allocated to port operations, in order to contest the Western Australian Senate elections.

In June Palmer claimed $11.2 million in outstanding royalties. The disputes over royalties and election funding will be decided by the courts.

Last year Australia’s exports to China were worth $94 billion, but the Sino Iron project is now the biggest loss-making venture in Chinese history.

Not surprisingly, the Chinese government has concluded that it cannot work with Palmer, and Citic Pacific’s chairman has indicated that the China/Australia trading relationship now rests on the outcome of the court case over Palmer’s royalty payments.

Palmer in the House

By June 2013 Palmer’s company Queensland Nickel had amassed a $6.3 million carbon tax bill. Palmer refused to pay, and launched a High Court action to declare the tax unconstitutional. Subsequent penalties and charges have brought the debt to $35.8 million.

In the last federal elections Palmer won a Lower House seat, and candidates in his party won seats in the WA Senate re-election. Their avowed intention was to introduce retrospective legislation to force the government to return all the carbon taxes.

But this was too much, even for the Abbott government. Palmer now faces a financial crash because of his mounting carbon tax debt and because Citic is stalling on anything that would return a profit to Palmer, in order to force him out of the Sino Iron project.

Palmer’s rhetoric that contained progressive positions on some issues has gained him an electoral advantage. But would his party still oppose the proposed Medicare co-payment if the Abbott government offered to help him offset his carbon tax debt, in return for his support over the co-payment?

Palmer has loudly rejected the idea of imported low-cost labour. But if the government green-lighted Gina Rhinehart’s idea of a special economic zone in the north of Australia for mining corporations, and if it also approved the import of overseas workers to work for a pittance, would Palmer give employment only to Australian workers at award rates?

Significantly, Palmer’s party has focused on the north, winning parliamentary seats in Western Australia, the Northern Territory and Queensland with massive election campaign funding.

Until he became involved in bitter legal disputes Palmer was making a fortune from Sino Iron. He sang the praises of the Chinese government so loudly he earned the nickname “Mr China”, and named his huge proposed coal mine in Queensland’s Galilee Basin “China First”.

But his verbal attack on the Chinese government indicates unreliability on issues like the co-payment, deregulation of university fees and changes to aged pensions.

Have no illusions about Palmer’s intentions. His party’s primary task now is to scrap or modify any government activity that might adversely affect his business interests, including climate change initiatives. All other considerations are secondary.

Next article – Obituary – Wally Stubbings: wharfie, communist, veteran athlete

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