November update

With the Scottish Independence vote less than 12 months away, it was not surprising to hear leader of the Scottish National Party (SNP) Alex Salmond, talking forthrightly about the recent strike in Grangemouth, at his party’s Annual Conference in October. In a keynote speech otherwise heavily laden with symbolism around “Scotland’s destiny,” the focus on practical issues around Grangemouth, seemed rather incongruous. But the Grangemouth strike and the Grangemouth complex in general are so vital to the Scottish economy – not to mention an independent Scottish economy – that it is no wonder that it was on the mind of the First Minister.

Monumental importance to the Scottish economy

In fuel terms, Grangemouth is Scotland, with over 75% of supply north of the border coming from this one source. Its importance to the British economy is large, but to the Scottish economy it is monumental. Nonetheless, with the present integrated UK fuel supply chain, the loss of Grangemouth Refinery is costly but not disastrous. Sea-fed depots in Aberdeen and Inverness can receive fuel from other refineries in the UK, whilst the central belt can be supplied from import facilities on the Clyde and Forth. If any strike were to persist for significant amounts of time, then further volume requirements could be trucked in or supplied by rail from the North of England. But what would the “reserve” supply-chain look like in an Independent Scotland? Admittedly even the most rampant (Unionist) No campaigner could claim that Scotland would no longer receive fuel from England or elsewhere once the country broke free – that is after all, the nature of globalised markets. But in a debate that has focused heavily on the idea of “going it alone”, how many Scots will vote next year fully understanding the impact of living in a country where (virtually) all fuel supplies are reliant on a single refinery, which according to its owners loses £10m per month and will shut by 2017 – unless a “radical survival plan” is accepted by workers, local authorities and the national government?

In addition, how many voters in next year’s referendum will be aware of who actually owns the site? In the good old days, Grangemouth was a BP facility, a company which for many years was almost as Scottish as it was British (Petroleum), with its operating bases in Grangemouth and Aberdeen. But BP sold Grangemouth several years ago and it is now is a 50/50 joint venture between PetroChina (China’s state oil company) and Ineos – a Swiss based conglomerate, largely funded by private equity money from London. Only the most delusional will consider it likely that the Chinese mandarins and money-men from the city will have anything but the most scant regard for Scotland’s fuel resilience and so it may transpire in 2017, that the Scottish Government will be faced with the prospect of either subsidising or nationalising. One has to ask at what cost this will be to the Scottish tax-payer and furthermore, whether this is the kind of economic socialism that SNP voters really believe in. Also, what other key assets would the new Scottish Government choose to nationalise, under similar circumstances? Of course, few would blame the SNP prospectus for avoiding the subject of nationalising key industries (rarely a vote winner amongst the coveted “middle ground” electorate), but the fact remains that within the lifetime of the first Independent Scottish Parliament, this could be the reality. It’s either that or running the country without a refinery and relying 100% on fuel imports – a situation that no other country in the EU faces.

Emergency oil stocks

Scotland’s automatic membership of the EU post-independence, is a moot point, but it is also very relevant to the Grangemouth situation, as it provides one further reason why any strike at Grangemouth is currently manageable. Why? Because of the EU’s emergency oil stocking rules, which dictate that all EU members must hold between 60 and 90 days of emergency oil stocks. Now significantly for Scotland, most emergency stocks are held outside of their country and this would mean that on day 1 of independence, they could not meet their oil stocking requirements (quite perverse really, considering Scotland’s North Sea treasure but EU rules are EU rules!). So whilst nobody is suggesting that emergency stocking will be a major agenda item for Scotland’s independent accession to the EU, the issue does highlight why the Unionists are right to state that Scotland’s automatic entry cannot be taken for granted, as on many technicalities, the new nation will simply fail the national entry criteria. Meeting the criteria will not be a quick process either. In the case of emergency oil stocks, Scotland will have rely on business to hold the stock (as Britain currently does) or it must build scores of new fuel storage tanks (= massive cost) and set-up an oil stocking agency (as for example Belgium does). With the mortal problems currently facing Grangemouth, relying on the likes of Ineos to meet Scotland’s emergency fuel requirements is a total non-starter, which therefore means the new Scottish Administration will have to build a stock agency from scratch. To put that project into perspective, an identical exercise in Belgium (the creation of APETRA) took 10 years to complete!

So there we have it – a whole article on the oil industry’s place within Scottish Independence, that doesn’t even touch the breathtakingly difficult issues around North Sea Oil (which also will affect the CSO mechanism!). But the issues around refined oil – Grangemouth, Scotland’s place within the UK’s inter-connected supply-chain and Scotland’s future fuel resilience – should all serve as a reminder that the issues at stake in “breaking free” are complex and cannot be addressed through superficial, spin-doctored debate. It is on practical issues that the independence vote should (but won’t) be based because successful countries in the modern world are not defined by flags and concepts of nationhood, but rather on the workings and impacts of unglamorous places like Grangemouth.

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