Snap analysis: Politics trumps business as Canada blocks BHP bid

By David Ljunggren

OTTAWA (BestGrowthStock) – Canada let politics trump the business community’s interests when it rejected a foreign bid for Potash Corp on Wednesday and instead put efforts to stay in power at the top of the government’s agenda.

The decision to block Anglo-Australian mining giant BHP Billiton’s $39 billion bid came as a surprise, given how methodically Prime Minister Stephen Harper and his government have broadcast a pro-business, anti-protectionist message.

Yet regardless of the damage that vetoing the bid could do to Canada’s reputation in the international business community, Harper preferred to neutralize political pressures ahead of an election expected in the first half of next year.

Industry Minister Tony Clement insisted the decision was his, but Harper’s famously tight control over government means he certainly had significant impact on the decision.

Killing the bid removes two political obstacles for the minority Conservative government.

It sidelines two opposition parties, who wanted a “no” vote and would have used approval as a campaign weapon.

And it helps maintain support for the Conservatives in their heartland in the west of Canada.

Harper was clearly taken aback by ferocious opposition from the ruling Saskatchewan Party in the Prairie province of Saskatchewan, where Potash is based. The party shares its roots with the federal Conservatives and is usually very friendly.

The 13 federal Conservative legislators from Saskatchewan also began to worry. Had even a few of them lost their seats in the next election, it could have made a difference between Harper maintaining or losing power.

Harper, in power since early 2006, knows the pitfalls of crossing a friendly provincial leader.

In the run-up to the 2008 election, the populist premier of Newfoundland and Labrador was so angry with Harper about a dispute over oil revenues that he urged the province to vote against the federal Conservatives. Support for the party collapsed and it lost all of its three seats in the province.

Few believe that Saskatchewan premier Brad Wall — the most vociferous opponent of the deal — would have taken such a dramatic step, given his close ties with Harper.

But a tepid backing for the Conservatives from Wall in the next election could have had a political price.

The affair could also have become a national unity issue — always a sensitive concept in a country which has spent three decades trying to deal with separatists in French-speaking Quebec, one of five provinces worried about the BHP bid.

Harper is a masterful political operator who exceeded all expectations after coming to power in early 2006 with a weak minority government, which relied on the support of opposition legislators to pass budgets and survive confidence votes.

He has used guile, skill and threats to stay in power and twice had Parliament shut down to avoid the threat of defeat.

Yet he remained vulnerable to opposition campaigns to paint him as arrogant and controlling, and he never attracted the support of enough Canadians to make a majority win likely.

Blocking the BHP bid may improve his short-term chances of staying in office.

(Editing by Janet Guttsman)

Snap analysis: Politics trumps business as Canada blocks BHP bid