Tony Blair has been accused by his political opponents of undermining British interests by helping Indian billionaire Lakshmi Mittal acquire Sidex, a huge, loss-making Romanian steel company that belches toxic gases all over the Balkans. Is he guilty as charged? The Daily Telegraph columnist Robert Harris says the affair, dismissed by Blair as "Garbagegate", may not be scandalous in itself but illustrates "how influence passes through the [political] system; money courted, favours returned, interests conflated, misinformation spread." But when wasn't politics defined by such practices? And how does Mittal's £125,000 donation to the Labour Party last May, and Blair's subsequent letter of hearty congratulations to Romania's President Adrian Nastase for choosing Mittal over a French rival, compromise British interests? What are those British steel interests, and how have they been harmed?
The UK Steel Association represents Britain's 44 steel-manufacturing companies. LMN Group, Lakshmi Mittal's company, is not among them. Corus is by far the largest member of the association, even if it's an Anglo-Dutch company, founded after the merger of British Steel and Holland's well-regarded and highly productive Hoogovens in 1999. Corus was briefly the biggest producer of steel in Europe. Now it runs third, behind the French, Spanish, and Luxembourg giant Arcelor (which traded its first shares on Monday and is now the biggest steel company in the world) and Germany's ThyssenKrupp. Last year, Corus lost £230 million. Sidex lost £200 million in the same period, although these losses were absorbed by the Romanian government. Corus has many explanations for its poor performance. The high price of gas and electricity in Britain, two essential elements in steel production, makes British steel more expensive than on the continent. Demand for steel is at a 20-year low—The Financial Times calls the industry in "meltdown" mode—and Corus believes an overbearing pound deters new customers. The company, championed by the Conservative anti-European press as a beleaguered British firm, is in fact an enthusiastic supporter of the euro.
There's more bad news. George Bush has threatened to impose restrictions on steel imports to protect US steel companies, 18 of which have filed for bankruptcy in the last four years. This could lose Corus about 12 per cent of its sales. But worse than that, the company fears that steel mills in Eastern Europe and Asia, many of which rely on state subsidies, will flood Britain and Europe with cheap steel if the American market is closed to them. Mittal, who owns Chicago's Ispat Inland, the fourth-largest steel company in the US, supports Bush' s import restrictions and has lobbied politicians and made campaign contributions to those who support the cause. Efforts to curb financial losses by Corus have included job cuts, closures, and reducing output. Since 1999, 10,000 people have been made redundant at its British plants, and the Government has handed out £90 million to retrain workers for other occupations. Union leaders fear more redundancies are to come. In an ideal world, British interests would have been much better served by the closure of Sidex than by its sale to Mittal. But Sidex is Romania's biggest employer with 600,000 workers and has already had to put up with Mittal's abrupt dismissal of 28,000 of its workers.
On the other hand, it is in British interests that Corus, as a privately owned company, should not have to compete with state-subsidised companies abroad. In that sense, the sale of Sidex to Mittal is of benefit to Britain, because the Romanian company is now subject to the same market forces as Corus. But Mittal's support for American import restrictions is clearly not to Britain's advantage, even if it is consistent with the principle, espoused by both New Labour and the Conservatives, that international businessmen should be free to promote their own interests around the world in whatever ways they want. Mittal's financial contributions to Britain's political parties raise a different issue. Unless they agree to limit the size of such donations, they will inevitably grow in dependency on them. It may well turn out that Garbagegate is less about New Labour than it is about the power of New Money.