BP oil spill hangs over Cameron mission to Washington (Feature)

By Anna Tomforde Jul 18, 2010, 6:01 GMT

London - Unfortunately for David Cameron, Britain's new prime minister, it will not be all smiles when he touches down for his first visit to Washington since taking office two months ago.

Despite signs of a possible breakthrough in the battle to contain the massive BP Plc oil spill in the Gulf of Mexico, the dark clouds of the huge environmental disaster are likely to overshadow Cameron's talks with US President Barack Obama.

It was also confirmed in London that Cameron will travel without his wife, Samantha, who is heavily pregnant with the couple's third child. Her absence - and planned first encounter with US First Lady Michelle Obama - is depriving the visit of a much-needed touch of glamour.

The oil spill, which started three months to the day when Cameron lands in Washington on July 20, has placed a heavy burden on Anglo-US relations.

It has dampened the enthusiasm expressed by Obama being the first foreign leader to congratulate Cameron, and extending the invitation to the White House.

Which is perhaps why Cameron, aware of the gravity and deep sensitivity surrounding the oil issue, has not said much about the disaster in public.

The uncertain future of BP, Britain's biggest company, is likely to trouble him as much as the disaster itself.

At the height of the BP crisis in June, following chief executive Tony Hayward's disastrous Congressional hearing, Cameron was accused by business leaders and some commentators of failing to respond adequately to the 'anti-British hysteria' in the United States.

There were calls for a 'measured intervention' by the prime minister.

But the British leader, well aware both of the importance of BP for Britain and the danger of inflaming the highly charged atmosphere any further, remained restrained in his comments.

He responded to the criticism by saying that he understood the US government's frustration, and that the issue had nothing to with national identity.

'First of all this is an environmental catastrophe. We need to be clear about that,' said Cameron, in the direct and straightforward manner that has become a hallmark of his leadership.

However, commentators in Britain doubt that Cameron's open style will be enough to ease the 'climate of distrust' that has been created by the BP disaster.

Much will, therefore, depend on the 'personal chemistry' the two leaders will be able to build up during their talks, a diplomat said.

'President Obama and I have a very good relationship, we are getting on well,' Cameron said in a Time magazine interview ahead of his trip.

But the talks are not going to be easy.

Speaking after a recent meeting with BP chairman Carl-Henric Svanberg, Cameron said BP wanted 'more certainty' that it would not be held liable for problems it had not caused.

'They want to clean up the mess, they want to pay compensation to the fishermen and the farmers and the hotel owners and everyone who has been affected,' said Cameron.

'But they do need some sort of certainty that the compensation claims won't go into tertiary and sort of further claims which aren't really related to the mistakes that BP made.'

Cameron is also expected to brief his US hosts on the contingency plans prepared by the British government in the event of a collapse of BP - through a possible takeover, break-up or corporate failure.

Officials have stressed that while they do not expect BP to fail under the strain of the oil spill, the government was required to be 'prepared for every eventuality.'

BP, meanwhile, is due to give a 'strategic update' on costs, and on its operational and financial position, on July 27, when the publication of second-quarter results is due.

Up to now, the company has worked on the assumption that it will be able to fund its spill-related liabilities from its strong cash flow and a wide-ranging asset disposal programme.

But it has also always stressed that it is 'far too early' to assess the total costs.

These are, however, expected to escalate, prompting concern that BP could be forced to raise more capital - at vastly increased costs.

With potential liabilities estimated to reach up to 70 billion dollars, reassuring investors of its ability to survive will not be an easy task, analysts said.

Among the lingering doubts, however, one thing seems to be certain: Given the 'reputational damage' BP has suffered from the Gulf of Mexico disaster, the company will have to build a new public image.

'There is no question that top management will have to be changed following the Gulf of Mexico oil spill,' wrote the Financial Times recently - a view that is widely accepted in London.