World Development Vol. 6 pp.

837-849
0 Pergamon Press Ltd. 1978. Printed in Great Britain
0305-750X/78/0601-0837 $02.00/O
Multinational Corporations
and Economic Nationalism:
Conflict over Resource Development
in Canada
JEANNE KIRK LAUX*
University of Ottawa
and
MAUREEN APPEL MOLOT
Carleton University, Ottawa
Summary. - Faced with rising Third World nationalism, multinational corporations engaged in
resource exploitation are turning back to higher cost but apparently politically more secure
investments in the industrialized states. To what extent does the dynamic of government-
resource industry relations in an industrialized setting differ from the pattern observed in the
Third World? To answer this question the article analyses the decision to nationalize the potash
industry in the Canadian province of Saskatchewan using models of host government-MNC
conflict developed by Vernon, Mikesell and Moran to study Third World cases. The research
suggests that the dynamic logic of government-industry conflict in a developed country setting
is very similar to the pattern observed in the Third World. The decentralized Canadian
federation, the ideology of the party in power in Saskatchewan and the nature of the potash
industry combine to structure a situation in which coercive nationalization of a resource
industry was seen as the only policy option.
1. INTRODUCTION
The record of past decades, Vernon argued
in 1970, has shown an increasing effort on the
part of less developed countries to extend their
control over the exploitation of the raw
materials that originate in their borders.
Economic nationalism takes many forms, but
the United Nations reports a clear trend toward
the most radical form of state intervention -
nationalization. Although nationalization of
foreign assets rarely took place outside the
centrally planned economies before 1960, the
UN recorded an average of 45.5 nationaliza-
tions annually for the period 1960-69, rising
to 93.3 per year during 1970-74 - all in Third
World countries.
Faced with this rising Third World national-
ism, some have argued that the multinational
corporations (MNCs) engaged in resource
exploitation will increasingly turn back to
higher cost but politically more secure areas,
i.e. the industrialized states, with Canada being
an oft-cited example.3 In this context, the
recent manifestations of economic nationalism
in Canada - for example the Quebec govern-
ments threat to nationalize the asbestos
industry (197 7) or the Saskatchewan govem-
ments decision to take over mining companies
owned by several of the worlds largest multi-
national corporations (197.5) calls into question
the security of resource investments in a
developed economy and invites an analysis of
host-government-MNC relations in this
setting.4
To what extent does the dynamic of govern-
ment-resource industry conflict in an indus-
* The authors wish to acknowledge the research
assistance of Mr. Roger Charles and to thank the
Faculty of Social Sciences (University of Ottawa) for
granting financial assistance.
837
trialized country differ from the pattern natural resources, and generally to determine
observed in the Third World? With a view to the conditions under which resource develop-
answering this question, we will analyse the ment will take place. In a federation in which
decision to nationalize the potash industry in fiscal disputes between the two levels of govern-
the Canadian province of Saskatchewan using ment have been complex and heated, access to
models of host government-MNC conflict revenue generated by resource taxation has
developed by Vernon, Mikesell and Moran to made an important contribution to the
study Third World cases. Because, as elsewhere, financial independence of the resource rich
the decision to nationalize comes at the end of provinces.
a long and escalating bargaining relationship, Foreign investment has always been crucial
the analysis presented here first seeks to explain to the general growth of the Canadian economy
the shift in government-industry relations and, within it, to resource development. Until
from collaboration to contention over the the early part of the twentieth century, British
division of risks and rewards and from con- portfolio capital was the main source of foreign
tention over rewards to conflict over control. investment in Canada. By the end of World War
We then attempt to identify those condi- I, this capital source had been supplanted by
tions under which government in a developed, American dol1ars.s The important difference
capitalist setting would opt for the most between the two was that much American
extreme form of state intervention - the investment in Canada was direct, carrying with
takeover of a profitable industry - in order to it control of the enterprises in which the
resolve the conflict over resource development. investment was made. From the outset,
The explanation of outcome requires us to American investment in Canada was concen-
situate those factors which influence govem- trated in two sectors, raw materials and secon-
ment first, to turn to direct intervention in dary manufacturing. The establishment of
production (statism), rather than indirect inter- American-owned manufacturing companies was
vention (regulation), and second, to undertake designed to permit American firms to supply
direct intervention of a coercive (takeover) the Canadian market from inside the Canadian
nature rather than enter into a collusive relation- tariff wall, whereas American investment in
ship (joint ventures) when cooperation with resources was intended to ensure the export of
state capitalism appears to be the new modus
vivendi for MNCs in so many countries today.6
unprocessed resources to the United States.
After World War II, and in response to new
demands for access to secure supplies of strategic
natural resources, American investment in
the Canadian resource sector rose dramati-
2. THE POLITICAL ECONOMY OF POTASH
cally. Prior to 1945, the bulk of foreign
IN SASKATCHEWAN
resource investment was in Ontario and
Quebec. However, the years since 1945 have
The continuing decentralization of the seen the exploitation of mineral resources in
Canadian federation and the division of respon- the Western provinces and the creation of new
sibilities under the British North America Act resource-dependent provincial economies.
constitute the broader parameters within which The importance of the potash industry to
the politics of resource development in Saskat- the Saskatchewan economy is, as we shall see
chewan occur. The past two decades in Canada below, a crucial factor in the government-
have witnessed a change in the power balance industry conflict. To a proyince whose
between Ottawa and the provinces, as the economy had been dominated by and depen-
latter, dissatisfied with many federal economic dent upon one major crop, wheat, the discovery
and social welfare programmes, have aggres- of natural resources in the 1940s provided
sively sought to increase their authority vi&vis much sought after opportunities for secure
the central government and to involve them- economic diversification. Of the resources
selves actively in the total development of their found in Saskatchewan in the post-World War II
jurisdictions. Section 109 of the BNA Act, period, potash has turned out to be the most
which gives power over natural resources to the important. The initial development of the
provinces, has become a key factor in the potash deposits constituted, in fact, the first
augmentation of provincial status, since under major diversification of the provinces
it provincial governments have the authority to economy, and the disappointing performance
grant licenses for mineral exploration, to of other components of the resource sector
demand the payment of royalties for the increased the economic significance of the
privilege of
. .
exploiting provincially-owned almost limitless supplies of high quality potash
838 WORLD DEVELOPMENT
CONFLICT OVER RESOURCE DEVELOPMENT IN CANADA 839
reserves. The discovery of oil and natural gas in
Saskatchewan had raised hopes of additional
economic development. However, the rather
poor quality of the petroleum, plus its clearly
finite quantities, meant that its contribution to
the provincial economy, though significant in
dollar amounts up to the present, would neces-
sarily be of short duration. Uranium was also
found in Saskatchewan, but the uncertain
nature of the international uranium market has
kept production of this mineral low; after
reduced output for a decade, the 1975 value of
Saskatchewan uranium production approxi-
mated that of 1965.
A few statistics will underline the signifi-
cance of the potash industry for Saskatchewan
in 1975. The potash industry directly employed
about 3500 people while the jobs of another
8500 members of the provincial work-force
indirectly depended on it. Potash output
constituted about 10% of the net value of total
commodity production in Saskatchewan and
approximately 41% of the value of all minerals
produced in the province. The value of 1975
potash production was 355 million dollars. By
way of comparison, the value of oil and gas
output for the same year was 415.3 million
dollars or 48% of total mineral production.
With the introduction of the potash reserve tax,
government revenue from the potash sector for
1974-75 amounted to slightly over 53 million
dollars; again, by comparison, revenue from
petroleum and natural gas taxes was 54 million
dollars. 3 Since the bulk of potash (90%) is
sold outside Canada, potash sales also contri-
bute significantly to the Canadian balance of
trade. In little over a decade, potash has come
to rank fifth among non-mineral fuels produced
in Canada. 4
The importance of Saskatchewan to the
world potash industry is immense. The province
contains an estimated 40% of the worlds
reserves of potash - a key component (along
with nitrogen and phosphates) in commercial
fertilizers. Saskatchewan potash reserves are
among the highest grade in the world -
averaging some 24-30% K7 0 (potassium oxide
equivalent) as compared to 15-20% in the
United States or Western Europe. In 1975 when
the decision to nationalize the potash industry
was announced, no other Canadian province
had proven reserves of commercial calibre.
Of the nine companies operating potash
mines in Saskatchewan in 1975, five were
American subsidiaries; two majority-owned by
Canadian-based multinational corporations; and
two controlled by South African, German and
French interests. Their production accounted
for 24% of world potash production (1974/75).
Given low domestic consumption (just 1% of
world production), the province supplied some
40% of all potash consumed outside Canada.
Only seven other countries in the world
produced more than they consumed - the most
important exporters after Canada being the
Soviet Union and the German Democratic
Republic. Nearly 70% of Saskatchewans potash
is sold in the United States which produces
only half as much potash as it consumes
annually. In 1974/1975 the US consumed 9.3
million short tons of which 6.2 million short
tons came from Saskatchewan.
(a) The pattern.of conflict
In November 1975 the Government of
Saskatchewan announced its intent to take
control of the potash industry by expropriating
the assets of some of the worlds largest
multinational corporations. This dramatic
decision brought into sharp reliefsbasic conflicts
underlying resource development in Canada. As
the first instance in which a large, profitable
and nonessential industry would be nationa-
lized in North America, it also put into ques-
tion the presumption that resource investment
in the highly industrialized countries offered
secure alternatives to the risks of Third World
nationalism.
Why should government in an advanced
capitalist country choose nationalization as part
of its economic strategy? Is it simply, as Mr.
Malone, leader of the Saskatchewan Liberal
opposition party, argued in the Legislature, that
There is one reason and one reason only, Mr.
Speaker, that the government is taking over the
potash companies - and that is because they
believe in socialism - they believe that the
means of PEoduction should be controlled by
the state. Or is it rather, as premier Allan
Blakeney explained, the inevitable outcome
after years of negotiation had failed to achieve
the objectives of assured revenues and orderly
expansion through normal fiscal and regulatory
means - thus leaving his government with little
choice but to move into a position of effective
control of the potash industry. The answer
will be found in an analysis of the escalating
government -industry conflict over resource
development from a comparative perspective
provided by using models based on Third World
experience.
By their very nature, Mikesell argues,
mineral and petroleum production arrange-
ments are productive of conflict. a Why
840 WORLD DEVELOPMENT
should this be so? After all, at the initial stage
in the development of a resource there is
virtually no contentious issue. The state invites
in foreign companies to explore and exploit
natural resources precisely because it lacks the
basic geological or technological knowledge, the
capital or marketing resources to do so itself.
Concession and licensing agreements set out
terms which at the time are mutually accep-
table to industry and state. In Saskatchewan it
was in fact a socialist (CCF) government which
invited private, largely foreign companies to
develop potash reserves after having failed in
the late 1940s in its efforts to create a
provincial potash venture with British
backing. 9 The CCF government guaranteed
low fixed royalty payments (21/S) to the first
two potash companies until 1981 and to the
latecomers until 1974. Companies benefited
from a three-year grace period without federal
taxes for start-up and from special defleciation
write-off rates for a period thereafter. Models
of government-industry conflict drawn from
Third World cases suggest that the shift from
collaboration to conflict begins once produc-
tion is successfully under way:
Rents of various kids are created by the act of
production; by almost any concession system prior
claims would be established to them, and given any
substantial profitability, one party would even-
tually begin to feel cheated. Necessarily, it is the
host country that develops this feeling and seeks to
assuage it by raising the domestic share of profits
at the expense of the foreign enterprise.
With successful production, the perceived
level of risk associated with the enterprise
declines precipitately, and with reduced
uncertainty, the bargaining strength inevitably
shifts from the foreigners to the host govern-
ment.2 3 Contention over the proper division
of risks and rewards stems from a government
attempt either to change the original conditions
for entry or to impose additional conditions
not explicitly precluded ln the agreements, such
as a new form of tax.2 4
Thus the two fundamental conditions
required for passage from collaboration to
contention are reduced uncertainty and profita-
bility. Together they alter governmental percep-
tions of the proper division of risks and rewards
associated with resource development. In
Saskatchewan the technical difficulties of
sinking deep shafts through high pressure water
zones led to the failure of several ventures and
stalled successful start up until 1962 when
International Minerals and Chemicals began
continuous production. Other mines came into
commercial production only in the period
1964-70 when it can be said that the condition
of reduced uncertainty applies. The second
condition of profitability, however, applies
only as of 1970-71 when world potash prices
began to rise after a four-year decline. It is only
then that the New Democratic Party (NDP)
government sought to reapportion rents by
imposing a new form of taxation in 1972 - the
proration fee - which was doubled a year later.
Still another form of taxation - the reserve tax
- was imposed in 1974.25
The NDP government made its new percep-
tions of the risks involved in resource develop-
ment very clear in choosing to impose two new
taxes which were determined not by a com-
panys profitability, but by its share of total
production (proration fee) or by a composite
index based on the selling price of potash and
on the amount of capital investment, the rate
of production, and the value of the potash
reserves of the individual companies (the
reserve tax).26 A government publication
explained the new view of risks and rewards by
using a hypothetical example. If the world price
were $10 at the time of start-up, a 50-50
profit split giving government and industry $5
each might be acceptable. But if world prices
should then jump to $300 a ton, the same
SO-50 split now giving each side $150 would
not be viewed as just. Why? Because it is not a
cost increase, nor any action by the company
which has caused the profit rise. It is simply an
increase in the value of the resource itself and
that resource belongs to the people . . . This is
what happened in Potash.
Generalizing from Third World experience
with resource industry-host government con-
flicts, Vernon and Mikesell assert that there will
be an initial inclination on the part of industry
to accede to marginal pressure - particularly
in the raw materials industry where executives
are in a sense hosta es of their very large fixed
capital investment.
fs
Nonetheless, once suc-
cessful production has changed government
perceptions of the acceptable division of risks
and rewards, conflict and the evolving claims
of government and company have a dynamic
logic.ss In the fist place, government is a
political hostage to budgetary commitments
needed to assure a level of social services
provided in the past. As Vernon concludes,
governmental efforts constantly to raise their
share of the profits from raw material exploita-
tion can be cited as a near-immutable law of
governmental behaviour. After all, once
governments have experienced a given level of
revenue, the risk of interruption becomes
intolerable to bear.30 In the second place,
CONFLICT OVER RESOURCE DEVELOPMENT IN CANADA 841
there is a point beyond which industry will not
tolerate further reduction of its share of the
rewards. At this point the logic of conflict
could lead either to accommodation or to
further escalation depending on company alter-
natives and on government perceptions of its
economic vulnerability.
Faced with an unacceptable tax burden,
industry will, where feasible, look to alternative
sources of supply and/or refuse to reinvest. In
consequence, output may fall even with a
rising world demand for the product thus
undermining the revenue base for all govern-
mental development policies.3 Where govem-
ment sees itself as vulnerable - i.e. heavily
reliant on the industry in question for revenues
-
contention over total revenues will lead to
conflict over the factors accou$ing for that
total such as industry investment, marketing
and pricing policies. These disputes over the
means of maximizing profits may, in Mikesells
view, even extend to the objective of profit
maximization itself, particularly in the case of
multinational corporations which seek to
maximize the post-tax revenues of the parent
company and may use practices such as transfer
pricing to minimize taxes locally. 2
In Saskatchewan, contention over the
division of rewards and government efforts to
control the policies affecting the level of total
revenues took place simultaneously rather than
sequentially. Given initial industry acquiescence
to government demands, however, it would be
inaccurate to speak of an escalation of conflict
to issues of control before November 1974.33
At the same time as the government introduced
its first tax, the proration fee in 1972, it also
moved to prod the potash industry to adopt a
more aggressive marketing strategy. The NDP
government enjoined all companies to become
members of the marketing agency set up for
overseas sales by the Liberal government and
threatened the recalcitrant with a reduction in
their state allocated production quota. All
complied. In proposing its reserves tax in April
1974, the government simultaneously sought to
increase revenues and to influence the means of
profit maximation by taking into account such
factors as the rate of company production.
Negative industry reaction induced the govern-
ment to modify the level of the tax by 28%
before it was finalized in November 1974 but
not to change the basis of its calculation -
confirming government intent to influence
company behaviour likely to affect future levels
of revenues rather than simply to improve its
immediate share of rewards.
Exactly where the dynamic logic of company-
-government bargaining over potash develop-
ment might have led - ceteris paribus - cannot
be known since at this juncture an independent
fiscal decision by the federal government in
Ottawa radically altered industry perceptions of
the tolerable level of taxation in Saskatchewan.
As part of a broader struggle over revenues with
all ten provincial governments, the federal Liberal
government had introduced a provision into
its May 1974 budget prohibiting the deduction
of provincial mining royalties and taxes when
calculating deductions from federal corporate
income tax. Despite Saskatchewans effort to
compensate for federal action by allowing these
royalties and taxes as a deduction for purposes
of provincial income taxes, the federal Liberals
re-election and approval of their budget in
November 1974 created a situation of double
taxation which made the level of Saskatchewan
taxes intolerable to the potash industry.
As predicted in the Third World models,
perceived tax injustices prompted the potash
industry to question the desirability of profit
maximization through investment and expan-
sion. In November Hudson Bay Mining and
Smelting was the first to announce deferment
of plans for a $40 million expansion. Central
Canada Potash followed suit in January 1975
with an $8 million cancellation after which the
Potash Corporation of America shelved its $40
million project. Through the press, industry
spokesmen let it be known that, despite the
highest world prices on record, the industry was
stagnating after postponement of some $200
million of new investment.34 The Saskat-
chewan governments economic vulnerability to
shifts in potash company performance was
perceived to be very high, given the increasing
importance of revenues from potash. The
Department of Mineral Resources reported the
information which appears in Table 1 (overleaf,J .
Having increased its reliance on revenues
derived from potash production, having sought
to influence the conditions affecting the total
level of those revenues - such as marketing and
investment - and now faced with industry
refusal to expand despite rising world demand,
the Saskatchewan government found itself in
conflict with the multinationals over the very
objective of profit maximization, a conflict in
which the issue of control becomes more
important than that of the sharing of the
revenues.3
To this point the pattern of conflict between
the government and the potash industry in
Saskatchewan - from collaboration to conten-
tion over the division of the rewards and from
there to conflict over control - largely dupli-
842 WORLD DEVELOPMENT
Table 1.
Fiscal Years
Potash
*Source. Department of Mineral Resources, Annual Report 1974-75,
p. 7. In terms of the share of Gross Domestic Product at market prices
this rise in potash revenues represents a six-fold increase.
cates the experience of Third World countries.
Our case study of conflict in a developed
country setting thus reinforces the conclusion
of others that an inherent contradiction of
interests exists between host government and
raw materials producers after successful exploi-
tation of the resource takes place. Once the
point of conflict over control is reached,
however, the sparse two-actor bargaining model
proves inadequate to an understanding of the
outcome in the Saskatchewan case. Why, to use
Mikesells terminology, should government and
industry pursue brinkmanship to a warfare
outcome (nationalization or industry with-
drawal) rather than accommodating to reach a
joint maximization solution?
Initially, after all, the government in Saskat-
chewan did react to industrys refusal to rein-
vest by making an attempt at conciliation.
After conferring with executives of several
companies, it established a Committee of
Industry and Government to discuss alter-
natives to the reserves tax and made several
short-term tax concessions to enable the
industry to cope with the new Federal income
tax burden. This joint committee met in May
1975 and adjourned with an understanding on
the governments side that industry would
submit written proposals for a revised tax
framework as a basis for further negotiations.
Why then, just after June elections returned the
NDP to power, did all but one potash company
join in a court action challenging the legality of
the reserve tax and simultaneously announce
the withholding of their quarterly tax install-
ment? Why should the government, rather than
moving to compromise, choose to nationalize?
As announced in the speech from the throne in
November 1975:
My Government is faced with three options.
First, it could retreat from its objectives, accom-
modate its policies to the willingness of the
industry to comply, and surrender for future
generations of Saskatchewan people their heritage
from this vast resource.
This course is unacceptable.
Second, my Government could stand still,
permit present uncertainties to continue and,
through attrition, delay the expansion of potash
production. This course involves serious risks for
Saskatchewan:
- a risk of loss of Saskatchewans key position in
world potash production,
-
a risk of huge losses in future tax revenues,
-
a risk of being ordered by a Court at some time
in the future to repay hundreds of millions of
dollars already collected.
These are risks my Government is not prepared
to take.
The third option is to regain provincial control
of our potash resource by taking decisive action.
This is the course my Government proposes to
pursue.
You will therefore be asked at this Session to
approve legislation which will enable my Govern-
ment to acquire the assets of some or all of the
producing potash mines in the province.36
(b) The outcome
To explain this warfare outcome - coercive
nationalization - to the conflict between
government and industry over control of potash
development in Saskatchewan requires us to
extend the model to include those political
economy variables which structure perceptions
of objective bargaining positions.37 Whether or
not government will move toward accommoda-
tion rather than seek to assume control through
direct intervention in production (statism), and
whether this direct intervention is collusive or
coercive should, we hypothesized, depend on
the political salience of the foreign ownership
issue, the domestic balance of political forces,
the nature of the resource industry (i.e. both
the attributes of the resource and the structure
of the global industry), and party ideology.
CONFLICT OVER RESOURCE DEVELOPMENT IN CANADA 843
Whether or not the companies will prefer
accommodation or all-out confrontation with
government will similarly depend on their
appreciation of the dominant party ideology,
their assessment of the political balance of
forces, and the nature of the resource industry
in question.
Can party ideology - democratic socialism
-
account for the ultimate decision to
nationalize the potash industry? Reacting to
the press just after the takeover announcement,
Premier Allan Blakeney denied it. The reasons
are not any devotion to public enterprise. We
simply must have control of production and the
rate of return to the public treasury.3s Yet the
state in modem capitalist society possesses
multiple means of achieving some control over
economic development - ranging from fiscal
policy to regulation to indirect intervention in
production. Even once the state comes to
regard indirect intervention as inadequate and
chooses to take a direct role in production
(statism), there remains a choice of possibilities
short of coercive expropriation. The state may
establish public enterprises to enter a given
industry either by investing alongside private
companies or by forming joint state-private
ventures which may create new assets or result
from divestment - itself either voluntary or
mandatory. Have then ideological considera-
tions structured the extreme policy choice
made in Saskatchewan?
At the level of theory it is clear that the
CCF-NDP ideology always promoted public
ownership. The 197 1 NDP electoral programme
promised that where feasible, we will reclaim
ownership and control of foreign-owned
resources. The following year Premier
Blakeney reported that public ownership
possibilities were under study and in 1973 the
Minister of Mineral Resources prohibited any
new mining permits until government lans for
public participation were finalized.
38
But if
theoretical commitment to public ownership is
consistent, at the level of practice, experimenta-
tion with forms of intervention appears to have
been guided by pragmatism. The NDP govern-
ment favoured collaborative rather then
coercive forms of direct intervention. If we
compare the socialist NDP performance to the
practice of other Canadian governments of
more conservative persuasion, party ideology
does not appear to be a determining factor in
the shift to direct rather than indirect state
intervention to influence resource development.
The NDP government experimented with
several forms of collaborative statism well prior
to the 1975 stand-off with the potash industry
over profit maximization. New provincial
crown corporations were established as vehicles
for state participation in resource development:
the Saskatchewan Mining Development Cor-
poration (uranium); Saskoil (petroleum) and
the Potash Corporation of Saskatchewan. The
governments April 1974 statement of its
potash policy made majority state ownership
obligatory for any new mines while, in cases of
existing companies planning to expand, the
government would offer risk capital in return
for equity. Critical industry reaction to these
proposals brought clarification in two major
areas before the legislation was adopted in
October: only where new expansion exceeded
an investment of $10,000 would the firm be
required to give the government a right of first
refusal before going ahead alone; in so far as
new mineral exploration ventures were
concerned, government participation would be
limited to 5O%.4o The Potash Corporation of
Saskatchewan began operations in February
1975 with a mandate covering three forms of
direct state intervention: to undertake mining
developments, joint ventures with others and to
acquire interests in potash operations.4 The
crown corporation first sought to develop a
new, wholly government-owned potash mine at
Bredenbury, but the project was eventually
abandoned after feasibility studies revealed the
enormous start-up cost.42
If we compare NDP government experimen-
tation with collaborative forms of state inter-
vention in the potash industry to the practice
of governments of different ideological per-
suasion elsewhere in the developed world, we
have to conclude that NDP practice merely
followed already established norms of capitalist
development. In all advanced capitalist
societies, apart from the United States, there
has been an impressive post-war trend towards
direct state intervention in production - no
longer restricted to salvaging non-profitable, but
essential industries such as transport, power or
steel.4 3 In Canada, which has a long-standing
acceptance of a positive role for the state in
economic development, statism is today a
trans-ideological practice.44 The federal
Liberal government has consolidated diverse
state ventures under the wing of a new crown
conglomerate, the Canada Development
Corporation, able to buy into or buy out
foreign-owned companies. (The CDC ranked
38th among the top 200 industrial enterprises
in Canada in 1976.) Even the Conservative
party in the province of Alberta has turned to
direct state intervention - creating crown
corporations to participate in joint ventures for
844 WORLDDEVELOPMENT
oil and gas exploration and, in collaboration
with Japanese MNCs, for the establishment of a
petrochemical complex.45
These comparative observations reduce the
potency of party ideology as an explanatory
factor in the Saskatchewan case - it alone
cannot explain the shift from regulation to
direct state intervention in the potash industry.
Within the confines of the case study, more
over, ideology appears to be a constant.
Without variation in other of our conditioning
factors, therefore, it cannot account for the
outcome of conflict. Nevertheless, we will
conclude that party ideology is a necessary, if
not sufficient, element in any explanation for
the choice to move from collaborative to
coercive forms of statism (takeover). Party
ideology acted in synergism with perceptions of
the balance of political forces so as to affect
both industry and government evaluation of the
costs and benefits of confrontation versus
accommodation in the spring and summer of
1975.
Potash industry perceptions of the NDP as a
socialist party hostile to private enterprise
meant that a basic mistrust underlay
company-government negotiations. This
mistrust, combined with industry perceptions
of the balance of political forces, contributed
heavily to the companies collective decision
not to seek further accommodation but to push
the government to the political brink by public
confrontation in the courts and by fiscal
blackmail. Already in October 1973, when the
government announced regulations requiring
detailed company financial statements in order
to establish their real earnings for tax purposes
(to pre-empt the subsidiaries manipulation of
pre-tax profits in the province through transfer
pricing), companies decided to refuse on the
suspicion that the government would use this
information to set up a state co oration with
g6
an unfair competitive advantage. It was this
reluctance that provoked the government to
insist upon applying the reserves tax formula in
1974 to circumvent profits as the sole basis for
tax calculation. The wrestling over financial
data continued throughout 1975 and embit-
tered relations, as the President of the Canadian
Potash Producers Association later implicitly
recognized, saying that In retrospect, perhaps
the companies should have disclosed their
financial data.4 7
Given industry appreciation of the NDP
ideology, its assessment of the balance of
political forces in the province encouraged
entrenchment in the hope of political change.
In contrast to Third World countries such as
Peru or pre-Allende Chile,48 government
pressures on industry were not made more
tolerable by the apprehension that more radical
political forces were waiting in the wings. On
the contrary, the main opposition (Liberal)
party in Saskatchewan had been clearly identi-
fied since 1945 as a free enterprise party.4g
The possibility of an NDP defeat incited the
potash companies to virtually withdraw from
negotiations with the government in the month
prior to June elections. Nine days after the
election confirmed the NDP in power for
another four years, the potash industry pushed
the NDP government to the political brink by
challenging the reserves tax in court and with-
holding the quarterly tax installment due.
Retreat from the brink at this juncture would
clearly have been awkward for any political
leadership. By putting into question government
access to some $30 million of expected revenues,
and by moving conflict into the public
courts, the potash industry had dramatically
heightened the political salience of the foreign
ownership issue and the role of the state in
economic development. The elections them-
selves had also altered the governments percep-
tions of the political balance of power in the
province, inciting a reassessment of its resource
conflict strategy. Although the NDP had been
returned to power, nonetheless its number of
seats had been reduced in favour of the
minority opposition party, the Conservatives,
whose share of the popular vote rose from 2 to
28%. This shift in the balance of political forces
has been attributed to setbacks in the govern-
ments programme to control petroleum deve-
lopment through joint ventures between private
companies and the crown corporation, Saskoil.
Conflicts over royalty payments had provoked
oil company cutbacks in production, which
Saskoil was as yet unable to supplement, and
consequent unemployment in the service
industry - two of the five constituencies so
affected were lost to the Tories.so It is at this
moment of crisis that party ideology produces a
synergistic effect - acting with changed percep-
tions of the balance of political forces and of
the political salience of the ownership issue to
bring about an unexpected outcome. The con-
clusion drawn by the NDP leadership, as we
have seen in the throne speech cited above, was
not to counsel caution but to advocate radical
action in order to assure direct state control of
potash production. The government could
choose to nationalize rather than compromise
because it had the full knowledge that not only
was public ownership acceptable to its sup-
porters, but that even the coercive takeover of a
CONFLICT OVER RESOURCE DEVELOPMENT IN CANADA 845
profitable industry would be regarded as cause
for celebration, the fulfillment of a lo;?-
standing mandate, by the NDP rank and file.
The final outcome in the conflict over
potash development - threatened expropria-
tion and, ultimately, nationalization with
compensation - nonetheless contrasts with the
same NDP governments retreat in the case of
petroleum or accommodation in the case of
uranium during 1975-76. Other multinational
corporations operating in the province likewise
managed to adjust rapidly to state demands for
participation. Thus public-private collabora-
tion has proved workable in the uranium
industry where some 20 joint ventures persist
despite revenue and control conflicts with the
government. These differential outcomes
appear to hinge on the attributes of the
resource and the structure of the global potash
industry which affected both industry and
government perceptions of their relative
vulnerability to pressures from the other. As
Vernon reminds us:
The most important factor determining the effects
of any subsidiary or branch of a foreign-owned
enterprise . . . is the nature of the multinational
system of which it is a part. A foreign-owned
copper mine, for instance, is much more than a
mining facility; it is a link in an internatidnal
system. 1 .53
When we review the principal criteria used
by Vernon and others to evaluate the relative
vulnerability of an industry to government
pressures - both for higher revenues and for
control - we find the potash industry to be
eminently susceptible to state takeover. These
criteria are: (a) degree of vertical integration;
(b) stability of technology; (c) availability of
alternative sources of supply (d) substituta-
bility; (e) price elasticity; (f) significance and
locus of barriers to entry. 4
The greater the degree of vertical integra-
tion, the greater the invulnerability to govern-
ment revenue pressures, since the highly inte-
grated companies may shift the greatest bene-
fits . . . away from the production stage over
which they are losing control to other stages
over which they exercise more influence.
Vertical integration is, however, very limited in
the potash industry so that profits must be
made at the production stage in Saskatchewan.
Volatile technology tends to enhance the power
and the perceived indispensability of MNCs
which have a near monopoly of the com-
mercialization of new industrial technology. In
the potash industry, however, the technology
necessary to conventional potash mining and
refining has not been subject to patents for
quite some time.*(j Global dispersion of
activities gives MNCs the bargaining advantage
of being able to shift production to another
country when confronted with unacceptable
government demands. In the potash industry,
however, with half the worlds reserves located
in the state socialist economies, with US opera-
tions already reduced in the 1960s in favour of
investment in Canada after the exhaustion of
high caliber deposits, and with potential
deposits in other Canadian provinces as yet
unexplored, these alternatives did not exist in
the short run.
The final three criteria - substitutability,
price elasticity, barriers to entry - were
favourable to industry in the earlier stages of
bargaining over the division of rewards, but
after the stand-off on issues of control, these
same considerations made nationalization a
highly feasible government option. The fact
that there is no substitute for potash in the
manufacture of commercial fertilizers and the
fact that potash demand is usually regarded as
an inelastic function of an already inelastic
fertilizer demand schedule, means that price
increases theoretically can be passed on to the
foreign consumer. Likelihood of competition
from new entrants to the industry is also
improbable given the very high barriers to entry
(such as high capital requirement; scarcity of
suitable deposits; or government discretion in
allocating mineral rights) located at the produc-
tion stage.s
These same considerations reduced govem-
ment vulnerability to industry pressures in the
event of nationalization, making it highly prac-
ticable for the government to contemplate the
takeover and future operation of potash mines
as state corporations. After a feasibility study
for a new state-owned mine had revealed the
high barriers to entry, takeover of existing
assets became all the more attractive. With few
alternative sources of supply, no substitution,
inelastic demand, stable technology and insigni-
ficant vertical integration, a state corporation
would be at one and the same time in an
excellent position to take its place among the
oligopolists in the international markets and
relatively immune to retaliation - provided, of
course, that the state possessed two key capa-
bilities: the technical personnel and the
financial wherewithal.
Saskatchewan did possess both the requisite
technical competence and the financial
resources to make takeover plausible. The
creation of the Potash Corporation of Saskat-
chewan served the purpose of training
specialized geologists and engineers. The
846 WORLD DEVELOPMENT
Department of Mineral Resources expertise
was refined after the creation of a Potash
Management Branch to undertake research on
the global Industry with two divisions for
Production Planning and Development and
Marketing and Revenue Analysis. Moran
observes that as the host country moves up a
learning curve of bargaining skills and operating
experience . . . the cost of nationalism
diminishes.s 9
In sharp contrast to the Third WorKd, where
nationalization may be foreclosed as an option
by the dependence of developing countries
upon external public and private capital,60
Saskatchewan was highly solvent in 1975. The
government ran consistent budget surpluses and
had also put aside an Energy and Resource
Fund amounting to some $400 million.61
Saskatchewans international credit rating was
excellent - A on the New York money markets
-
and it had not borrowed abroad on the open
market since 1930.62 This enviable financial
situation in particular gave the government the
foreknowledge that it could offer excellent
compensation - thus probably acquiring assets
relatively rapidly, without court battles - and
that it would avoid retaliation from inter-
national financial circles.
The nature of the industry in question - the
attributes of the resource itself and the situa-
tion of the companies within an international
corporate structure - thus critically affected
the last minute cost/benefit analyses made by
both companies and government and produced
a final outcome quite different from the
outcome of conflict over petroleum or uranium
development in the same political setting. The
potash companies, we have seen, had few
alternatives if they were unable to recapture
adequate post-tax profits within Saskatchewan.
Unable to compensate for poor returns either
by maximizing profits at a higher stage of
production or by relocating outside the province,
they opted for all-out confrontation in the
courts in June 1975. From the governments
perspective, the particular characteristics of the
potash industry made state takeover appear to
be highly practicable (given requisite financial
wherewithal1 and technical competence).
Any serious assessment of the governments
performance as entrepreneur must await the
availability of time series data. Nevertheless the
Saskatchewan governments purchase of an
American-owned mining company in 1976, its
participation in the producer-run overseas
marketing agency Canpotex, and its purchase of
two additional foreign-controlled mining
companies in 1977 demonstrate that the state
has at least successfully entered the potash
industry.6 3
3. CONCLUSIONS
Our analysis of government-resource
industry conflict leading up to the nationaliza-
tion of potash companies in Saskatchewan has
relied on models derived from Third World
experience by Vernon, Mikesell and Moran in
particular. In a developed country setting, we
found the dynamic logic of conflict - leading
from collaboration to contention over rewards
and from there to conflict over control - very
similar to the pattern observed in the Third
World. Should we then expect more instances
of conflict over control of resource develop-
ment in the industrialized world as more MNCs
turn to invest in raw materials outside the Third
World? Not necessarily. A critical factor contri-
buting to conflict escalation, it will be recalled,
was government perception of economic
vulnerability to changes in MNC performance -
given the political need to assure on overall
level of revenues to meet policy commitments.
Only those economies where the resource
industry in question accounts for a politically
visible share of revenues would thus be truly
comparable to Saskatchewan. This implies an
economy with a concentrated production struc-
ture - i.e. a resource-specific economy with
limited diversification. Outside the Third
World, this condition indisputably applies to
only two developed countries - Canada and
Australia where the peculiarities of decentra-
lized federalism, the distribution of natural
resources, and the pattern of foreign investment
have created resource-specific economies.
Canada and Australia are also, as it happens, the
two principal countries, outside the Third
World and the Soviet Union, which are
important net exporters of industrial raw
materials with still enormous potential.
Once conflict over resource development
escalates to the point of preoccupation with
issues of control, we then tried to situate the
factors which may explain the outcome of
conflict. Will government move to take a direct
role in production (statism) and will this
statism take collaborative or coercive form? We
argued that party ideology cannot explain the
choice to intervene directly in production since
experimentation with collaborative forms of
statism today transects ideological boundaries
in advanced capitalist countries. New state
enterprises or joint public-private ventures do
not necessarily stem from conflict with
industry but are vehicles for state economic
CONFLICT OVER RESOURCE
development policy which are now used simul-
taneously with fiscal and regulatory mstru-
ments of public policy. In the presence of other
factors (see our above discussion on political
salience and the balance of political forces), we
found that party ideology nonetheless increases
the likelihood that coercive statism (e.g. expro-
priation) will be considered a viable instrument
of economic policy. Ultimately, however, the
probability that a government which may not a
priori exclude coercive nationalization will
actually move to that solution depends on the
nature of the resource industry involved - both
the attributes of the resource and the structure
of the global industry.
DEVELOPMENT IN CANADA 847
After having isolated and analysed the
principal factors influencing the nationalization
decision in Saskatchewan, we will close with a
final question. Is is not possible that radical
public policy-making in one case might become
part of a learning experience for political elites
elsewhere? The Finance Minister for the
Government of Quebec has, in a sense, already
answered this rhetorical question for us by
posing another:
Why, for instance, could Ottawa reasonably
embark on the reorganization of the aircraft
industry or in Petro-Canada, Saskatchewan in the
control of potash mining, while an analogous
operation with respect to asbestos in Quebec
would be considered as dangerously Bolshevik?64
NOTES
1. Raymond Vernon, Foreign enterprises and deve-
lopment in the raw materials industries, ,bWiCQn
Economic Review, Vol. 60, No. 2 (May 1970), p. 124.
2. United Nations, ECOSOC, A/9716 (1974),
Permanent Sovereignty over NQtUrQi Resources.
Nationalization does not always conflict with private
industrys interests. The significance of nationalization
varies according to the socio-economic setting in
which it takes place. Today nationalization of non-
profitable but essential industries is accepted in all
advanced capitalist countries - either to salvage a vital
sector (e.g., steel) or to subsidize services (e.g.,
hydroelectric power: transport) for the entire private
sector. James F. Petras has constructed a helpful
typology by determining who controls and benefits
from nationalized property in his Seminar paper
presented to the Institute of International Coopera-
tion, Ottawa University, 1976.
3. Vernon, op. cit.
4. ibid.; Theodore H. Moran, Transnational strate-
gies .of protection and defence by multinational
corporations: spreading the risk and raising the cost of
nationalization in natural resources, I nternational
Organization, Vol. 27, No. 2 (Spring 1973), pp.
273-287. Policy-makers have also promoted this
strategy. The French Government Inter-ministerial
Council, for example, decided to encourage large
companies to redirect investment to non-Third World
countries such as Canada and Australia: See Le Monde
(12 May 1972). The successful exploitation of North
Sea oil has encouraged further offshore exploration in
Europe and North America (e.g., Canadas East Coast).
5. Vernon, op. cit.
6. Norman Girvan, Economic nationalists v. multi-
national corporations: revolutionary or evolutionary
change?, in Carl Widstrand (ed.), Multinational Firms
in Africa (Dakar and Uppsala: 1975) argues that
security of supplies may override the desire for 100%
ownership so that collusion replaces confrontation
between MNCs and host governments in several
developing countries.
7. For an interesting and important discussion of the
implications of resource development for Canadian
federalism and for Canada-US relations, see Garth
Stevenson, Continental integration and Canadian
unity, in A. Axline et al., Continental Community?
I ndependence and integration in North America
(Toronto: M cclelland and Stewart, 1974),
pp.194-220.
8. A description, with statistical data, of the early
growth of American investment in Canada can be
found in Hugh G. J. Aitken, American Capital and
Canadian Resources (Cambridge: Harvard University
Press, 1961), Chapter 2.
9. Saskatchewan, Bureau of Statistics, &skatchewan
Economic Review (1976), Table 24, page 20.
10. Saskatchewan, Department of Mineral Resources,
Potash: Challenge for Development (1976), p. 58.
11. Richard Shaffner, New Risks in Resource Deve-
lopment: The Potash Case (Montreal: C. D. Howe
Research Institute, 1976), p. 11; Saskatchewan,
Economic Review, op. cit.
12. Saskatchewan, Economic Review, op. cit.
13. Saskatchewan, Department of Mineral Resources,
Annual Report (1974-75), p, 7.
14. Shaffner, op. cit., p. 9, citing Statistics Canada,
cbnadas Mineral Production (Ottawa: Jnformation
Canada, 1975).
15. Data on potash production and trade may be
found in Saskatchewan, Department of Mineral
848 WORLD DEVELOPMENT
Resources, op. cit. and in the Canadian Mineral
Yearbook.
16. Ted Malone, The Potash Development Act, 1975
(27 November 1975). mimeograph, p. 12. At the time
Malone was Liberal energy critic.
17. GI obeandMail (Toronto), (6 March 1976).
18. Raymond Mikesell, Contlict in foreign investor-
host country relations: a preliminary analysis, in
Raymond Mikesell (ed.), Foreign I nvestmenf in the
Petroleum and Mineral I ndustries: Case Studies of
I nvestor-Host Country Relations (Baltimore: Johns
Hopkins Press, 1971), p. 54.
19. Premier Douglas actually received tacit British
Labour Government support but it was predicated
upon Canadian federal government approval of the
project. Both Prime Minister St. Laurent and Mines
and Resources Minister Alison Glen opposed the
Saskatchewan undertaking with the result that the
proposed crown development scheme was abandoned.
20. Saskatchewan, Department of Mineral Resources,
op. cit., p. 24.
21. Mikesell, op. cit.
22. Vernon, op. cit., p. 124.
23. Theodore H. Moran, Multinational Corporations
and the Politics of Dependence: Copper in Chile
(Princeton: Princeton University Press, 1974), p. 161.
24. Mikesell, op. cit., p. 31.
25. The New Democratic Party superseded the CCF in
1961. The NDP was defeated by the Liberal Party in
1964 and regained provincial power in 1971. It is
tempting to test the hypothesis that party ideology
determined the decision to take over the potash
industry by comparing NDP performance to that of
the Liberals - a party committed to private enterprise.
Unfortunately Liberal tenure corresponds to the
period of exploration and start up for most com-
panies, rather than successful production, and to a
slump in world potash markets, rather than to a time
of profitability. Both conditions predicting conflict in
Third World models were thus absent. Liberal govern-
ment concern, therefore, focused at first on moving
companies into production (by threatening to raise
royalty schedules) and then, when faced with excess
capacity, on salvaging the industry as a whole (by
imposing sales quotas and a floor price arranged with
the cooperation of the Governor of New Mexico to
avoid sabotage of the scheme by US based companies).
There is, however, some evidence to suggest that
Liberal perceptions of the proper division of risks and
rewards also changed after the industry entered
profitable production in 1970-71. Liberal leader Dave
Steuart, proposing an alternative resource policy while
castigating the NDP takeover decision, admitted that
even under his governorship, the level of taxation
would, of course, be much higher than it was a few
years ago because the ability of the industry to pay is
much better than it was then and the resource does
belong to the people. D. G. Steuart, Remarks on the
Throne Speech (12 November 1975). p. 16.
26. Shaffner, op. cit., p. 15.
27. Saskatchewan, Potash Report, No. 6 (n.d.). This
new view of risks and rewards was certainly influenced
both by the OPECs success and by the challenges to
conventional wisdom about resource development
coming from newly elected NDP governments in
British Columbia and Manitoba.
28. Vernon, op. cit., p. 124: Mikesell, op. cit.
29. Mikesell, op. cit.
30. Vernon, op. cit., p. 124.
31. Mikesell, op. cit., p. 37.
32. Mikesell, op. cit., p. 30.
33. There is one exception to this generalization.
Central Canada Potash, minority-owned by C.F.
Industries, a grouping of both American and Canadian
farmer cooperatives which purchased all of CCPs
potash output, deeply resented NDP adjustments to
the Liberal partys production allotment plan because
CCP was thereby prevented from meeting its delivery
commitments. CCP went to the courts in July 1972,
and although initially unsuccessful, it broadened its
case to challenge the constitutionality of the entire
production rationing scheme. Court battles with
appeals continued into 1977. At the outset, however,
no other company shared the CCPs situation (a
captive market for potash) and no other joined in its
court action.
34. Financrirl Post (15 February 197.5).
35. Mikesell, op. cit., 30.
36. Saskatchewan, Debates and Proceedings, 18th
Legislature, 1st Session (12 November 1975) p. 8.
37. In his study of the nationalization of copper in
Chile, Moran, op. cit., demonstrates the limits of the
Mikesell bargining model to explain outcomes and
supplements it with a more elaborate analysis of
domestic and international coalitions. He identifies
these three key elements - policy influencers;
industry and government cost/benefit perceptions; and
the salience of foreign control (both its real size and
its political visibility). George Philip, in The limita-
tions of bargaining theory: a case study of the
International Petroleum Company in Peru, World
Development9 Vol. 4, No. 3 (March 1976), pp.
231-239, singles out the influence of ideology
suggesting that Peruvian leaders placed high value on
state control versus free enterprise (unlike Mikesell!)
and were sensitive to the presence of more radical
CONFLICT OVER RESOURCE DEVELOPMENT IN CANADA 849
political groups anxious to replace them in power.
Both studies were extremely helpful to us but we
found a different combination of factors best
explained the Saskatchewan case.
38. Ottawa Citizen (14 November 1975).
39. Saskatchewan, Department of Mineral Resources,
op. cit., p. 70.
40. FinancialPost (8 March 1975).
41. Saskatchewan, Department of Mineral Resources,
op. cit., p. 71.
42. Financial Post (24 January 1976).
43. Stuart Holland, State entrepreneurship and state
intervention, in Holland (ed.), The State as Enfre-
preneur (London: Weidenfeld and Nicolson, 1972).
44. A classic article on this subject is Hugh G. Aitken,
Defensive expansionism: the state and economic
growth in Canada, in Aitken (ed.), The Store and
Economic Growth (New York: Social Science
Research Council, 1959), pp. 79-114.
45. An analysis of Canadian statism in the 1970s is
found in Jeanne Kirk Laux, Global interdependence
and state intervention, in Brian Tomlin (ed.),
Canadas Fore& Policy (Toronto: Methuen, 1978).
46. Shaffner, op. cit., p. 17.
47. Globe and Mail (14 May 1976).
48. Philip, op. cit.; Moran (1974), op. cit.
49. David E. Smith, Prairie Liberalism, The Liberal
Parry in Saskatchewan 1905-I 971 (Toronto: Univer-
sity of Toronto Press, 1975), p. 17.
50. John Richards, Potash: from the election to
nationalization, The Commonwealth (2 June 1976),
p. 8.
51. Those in the Blakeney government represented
the dominant, more moderate wing of the New
Democratic Party. See Desmond Morton, NDP. the
Dream of Power (Toronto: Hakkert, 1974), p. 114.
52. Escalating disagreements over royalty structures
and a uranium reserve tax resulted in company refusals
to proceed with new investment in February 1976.
The solution, however, was accommodation. New
private investment has continued alongside state-
private joint ventures: most notably a tripartite
venture brings together the Saskatchewan government,
a German and an American multinational to develop
both nickel and uranium near Key Lake. Financial
Times (2 February 1976); Ottawa J ournal (29 June
1976).
53. Vernon, Restrictive Business Practices, the Opera-
tions of Multinational US Enterprises in Developing
Countries, Their Role in Trade and Development (New
York: United Nations, 1972), TD/B/399 1.
54. Vernon, ibid.; Moran, New deal or raw dealin raw
materials, Foreign Policy, No. 5 (winter 1971-72),
pp. 119- 134; Girvan, Multinational corporations and
dependent underdevelopment in mineral export
economies, Social and Economic Studies (December
1970), pp. 490-526; Mikesell, op. cit.
$5. Moran, ibid., p. 121.
56. W. E. Koepke, Structure, Behaviour and Perfor-
mance of rhe World Potash I ndustry (Ottawa: Depart-
ment of Energy, Mines and Resources, 1973), p. 52.
57.
58.
59.
60.
61.
62.
the
Koepke, ibid., p. 91.
Koepke, ibid., p. 92.
Moran (1974), op. cit., pp. 166-167.
Mikesell, op. cit., p. 54.
Globe and Mail (25 March 1976).
After the nationalization policy was announced,
province was reevaluated and its rating on the
New York market raised from A to AA. ln summer
1976 the NDP government floated $50 million in
bonds in New York and $75 million on the Eurodollar
market. Globe and Mail (28 July 1976 and 12 August
1976).
63. The price was right in all instances - the
Saskatchewan government purchased the Duval mine
for $118.5 million and $10 million in promissory
notes; the Alwinsal mine for $56.5 million, $20
million in promissory notes and $10 million tax credit
while it paid $144 million entirely in cash for the
Sylvite mine. Duvals President Attwood concluded
that negotiations were conducted in an amicable and
highly professional business-like way, and under the
circumstances I am satisfied with the outcome.
Financial Post (21 August 1976).
64. Speech to the Board of Trade of Canada and to
the Empire Club of Canada as reported in the Globe
and Mail (18 March 1977). Indeed, in October 1977
the Quebec Government announced its plan to buy up
the 54.6% of public shares in Asbestos Corp. Ltd. now
held by the US firm, General Dynamics Corp., and to
move to expropriation if unsuccessful (ibid., 25
October 1977).