Harry Swain is a former federal deputy minister of Industry Canada and Indian and Northern Affairs Canada. He was director-general for uranium, coal, electricity and nuclear energy in the Department of Energy, Mines and Resources in 1978-79.
A recent Globe and Mail column on the uranium cartel of the 1970s claims that Canada secretly organized a group of nations and companies to raise the price of uranium, and when its efforts became public, "one of Canada's most authoritarian prime ministers, Pierre Trudeau," made it a crime to discuss the matter in public. It doesn't even hint at why.
In 1971, the United States, its fiscal position in disarray, abruptly declared to the world that its currency would no longer be backed by gold, its companies would enjoy lavish new export subsidies, and of all things, foreign uranium would not be allowed into the U.S. market. This was a huge shock to the world trading system and, not incidentally, a major impetus for the advances in trade law of the coming decades.
For Canada, the blow was sudden and undeserved. As frequently happens, when the U.S. lashes out at enemies overseas, its friends closer to home get sideswiped. In this case, the Canadian uranium industry had been largely developed in response to U.S. demand -- at first for the U.S. nuclear weapons program, then for its rapidly expanding civil nuclear program. Canadian miners from Uranium City to Elliott Lake worked to fuel American reactors and American bombs. Canadian demand was small during this whole period, even when Ontario started to build Candu reactors.
By the late 1960s, competition among U.S. reactor builders such as Gulf Atomic, GE and Westinghouse, had become intense. They invented a new marketing tool: buy our reactor and we'll guarantee you a lifetime supply of enriched uranium at a low, low price!
But they neglected two things: the purchase of forward contracts to support their promises, and the development of a domestic uranium mining industry, principally in Utah and Arizona, whose backers quickly included powerful blocs in the House and Senate.
Thus when President Richard Nixon swung the big bat, his arch-conservative supporters from the Southwest attached what (from a U.S. policy perspective) was a tiny rider -- the closure of the U.S. uranium market. Two groups were aghast. A Canadian industry of strategic importance was crippled overnight, and the American reactor builders were caught with their pants down. They had contractual promises to keep, and only high-cost local producers -- a domestic cartel? -- as suppliers.
Canada, France, South Africa and Gabon, the principal non-U.S. uranium producers, decided to share the remaining non-U.S. world market. They hoped for higher prices, and for a degree of stability in their remaining mining sectors. Not much happened in the initial 12-18 months, as these arrangements are notoriously hard to negotiate. Then suddenly, another and greater cartel, OPEC, decided it was not getting enough for its oil. In 1973 the price of oil (and soon the prices of all energy-related commodities) soared. The uranium cartel's ambitions for the price of its product were quickly overwhelmed by unprecedented prices being offered in open markets. The cartel then collapsed before it ever really got into business.
That would have been the end of the story, save for the other injured party. The U.S. reactor builders were effectively bankrupted by the trade-restrictive actions of their own government. In frustration they looked elsewhere for compensation. They sued the cartel members, notably Canada, for billions of dollars, back when a billion dollars was real money. Complaisant U.S. courts not only allowed the suits to go ahead but threatened the seizure of Canadian assets, and Canadian officials, in the United States. The Canadian government, defending itself against the extra-territorial reach of U.S. law, had little choice but to stanch the flow of information that could help predatory American lawyers.
That's the real story of the brief life of the uranium cartel. It was called into being by outrageous U.S. economic policy and died when circumstances changed. Eventually even the lawsuits met a just end.
Follow us on Twitter: