Laleh Khalili · How to get rich: who owns the oil? LRB September 23, 2021 (2023)

RNurse DammThe city center is a few kilometers inland from the North Sea, its skyscrapers and office buildings lining the Neue Maas, a tributary of the Rhine. A ferry ride takes you past ship-repair yards, silos of grains, terminals that receive coal and iron ore for industry in the Ruhr area, and even a huge warehouse for orange juice that receives its cargo from Latin America. However, if you want to see the larger container terminals, you should take the longer tour, which is only offered in summer. It takes you over the Nieuwe Waterweg and out to sea, where land reclamation has created extensive breakwaters around the deeper harbor ports. Here, towering loading cranes and white bubbles of oil tanks flank refineries operated by Shell, ExxonMobil, Koch, Gunvor and BP. The deposits are owned by companies with name acronyms that disguise their partial ownership of the global oil giants: Aramco, Vitol and Kuwait Petroleum International (also known as Q8).

Rotterdam is the largest port in Europe, the tenth largest in the world. Its position as the gateway to Germany's industrial heartland was secured more than 150 years ago, when the expansion of European heavy industry was fueled by the Ruhr coal mines and raw materials mined in the colonies. Crucial, however, was the transition from coal to oil after World War II, which significantly shaped the port city, as crude oil was imported on a large scale and refineries were built to process it.

Whose oil feeds the Rotterdam refineries? The answer is not easy. Many different companies can be involved in the supply of oil, from the state-owned companies that own the soil under which the oil fields lie, to the oil companies that produce it, and the companies that sell it. Sometimes a multinational company has the rights to the oil, the ability to extract it, and the facilities to refine and market it. The "oil companies" achieved this status because they could do all of these things, with operations that spanned the globe.

In the late 19th century, John D. Rockefeller's Standard Oil had a monopoly on US oil refineries, pipelines, rail transportation and storage facilities, but did not control US oil fields. .and initially relied on British oil merchants to ship its products to Europe. . In 1911, Standard Oil was divided into 34 companies by antitrust law, including those that would later become Amoco, Chevron, Conoco, Exxon, and Mobil. Elsewhere, these startups took joint ownership of companies like Saudi Arabia's Aramco, which was owned by Standard Oil of California (Chevron), Standard Oil of New Jersey (Exxon), Socony Vacuum (Mobil), and Texaco. Aramco provided information to the US government, helped with diplomacy, and literally fueled its war machines. Similarly, oil companies throughout the Gulf Coast were wholly or partly owned by BP, which itself was 51 percent British owned until Thatcher sold it.

The oil companies did not have everything their way. In 1951, Mohammad Mossadegh nationalized the Anglo-Iranian Oil Company, and in response, the companies known as the Seven Sisters—BP, Chevron, Exxon, Gulf, Mobil, Royal Dutch Shell, and Texaco—boycotted Iranian oil. They enlisted the help of the British, whose fighter planes forced itRomero, which was transporting oil from Abadan for an Italian client, to the port of Aden, where it was being held. When the Shah was reinstated in a US-backed coup in 1953, he agreed to share control of Iran's oil with the Seven Sisters and the French company that eventually became Total. Decolonization brought with it the nationalization of oil and the creation of state oil companies that cooperated with the oil companies to varying degrees. By the late 1970s, the Seven Sisters' share of the international oil trade had fallen from 90 percent to 42 percent, and commodity traders swooped in to fill the void. The global spot oil market had (re)born.

Anything can become a commodity. People and their work, flora and fauna, livestock and crops. The ocean produced not only pearls and fish, but also whales, whose oil was used in lamps before a technique was developed to convert oil into kerosene. Everything that is extracted from the earth can be transformed into goods. Oil and all the metals—copper, mercury, lithium—on which industrial production and commerce depended. Colonial goods and the slave trade were the mainstays of early European capitalism. Commercial contracts and financial instruments became tools of conquest, colonization, and commodification. The futures contracts themselves became abstract commodities. In the mid-19th century, futures contracts with the Chicago Board of Trade for grain, lumber, and meat surpassed cash trading. As historian William Cronon wrotemetropolis of nature(1991), "One could buy, sell, and settle price differences without having to worry about whether there really was anything to back the contracts."

Commodity markets are not just about supply and demand. They are protected by government coercion, either by enforcing treaties or at the point of a bayonet. George Hourani, a historian of Arab navigation, has written of the "long stops in hot and humid ports" that traders endured "at the mercy of the local ruler", safe from the threat of piracy only "in the rare waters ". . where a ruler kept a navy to protect shipping. Traders thrived where the integrity of their cargo and contracts could be guaranteed, and where they could obtain reliable information on supply, demand, and prices. In all empires, the protection of land and sea routes, the provision of information about trading rules and tariffs, and the availability and transferability of credit helped merchants establish relationships with local agents.

In the first half of the 20th century, a French merchant, Antonin Besse, opened a shop in Aden and became a Shell Oil agent with a finger in every pie, buying and selling coffee, cattle, furs, oil, timber and incense. Indian Ocean and along the East African coast. Travel writer Freya Stark recalled visiting him in Aden during World War II: "I fled to the old town of Crater about twice a week to see Hilda Besse and Anton overflowing with joy and mischief. King of the Red Sea shores and his trade...he was desperate at the time because during the war he couldn't help but make money he piled updespite my.” Besse and his British and Indian counterparts defended the empire in Aden as fiercely as it protected them, often with overlapping networks and interests. In his old age, a large endowment from Besse led to the founding of St Antony's College, Oxford. In the midst of a bitter anti-colonial struggle in Aden, workers at his company protested against the expatriation of the fruits of their labor to England. After decolonization in 1967, his various interests in the former British colony were nationalized.

Merchants and merchants have always been willingly or unwillingly used as the vanguard of powerful states.the world for salebegins in 2011 with the late Ian Taylor, CEO of Vitol, boarding a private jet to Benghazi, Libya. Vitol, the world's largest oil trading company, had been contracted by the Qatari government to supply diesel, gasoline and heating oil to rebels fighting Gaddafi. In lieu of a cash payment, Taylor had arranged to receive a shipment of crude oil at the Egyptian end of a pipeline from the Libyan oil fields. Of course, he had obtained UK government approval for the deal, along with a US sanctions waiver. Vitol smeared the war in Libya at the behest of foreign powers, but Taylor maintained that his actions were not political. This seems to be the mantra of the titans of commodity trading interviewed by Javier Blas and Jack Farchy: “We're only here for the money; We don't do politics." I guess it all depends on what you mean by "politics".

The myth of the origin of today's merchandise trade dates back to the time of decolonization. But, of course, they can be traced further back to the East India Company and other early merchant capitalist corporations involved in extracting resources from the colonies. A starting point might be in 1592 when merchants from the Venice Company founded the Levant Company in London; Levant Company merchants helped found the East India Company seven years later. Similar family connections exist in modern times as well: many commodity trading companies sprang from the Philipp brothers, who started as scrap metal and mineral dealers and became global metals traders in the 1960s. Philipp Brothers fathered Marc Rich + Co and Marc Rich + Co spawned Glencore and Trafigura and so on.

They are not always happy families. Marc Rich was placed on the FBI's Most Wanted List in 1983 when a junior US Attorney for the Southern District of New York, Rudy Giuliani, charged him with 51 counts, including tax evasion, extortion, conspiracy and "trafficking in the enemy". The latest attack was the latest chapter in a long story. After the nationalization of the Suez Canal in 1956 and the war by Israel and its allies against Egypt, the Israeli government decided to build an oil pipeline from Eilat on the Gulf of Aqaba south to Ashkelon on the Mediterranean coast to bypass the canal. The pipeline, a secret 50:50 joint venture with Iran, was financed by Deutsche Bank in a deal made possible by the bank's CEO Hermann Abs, responsible for the expropriation of Jewish property in Nazi Germany. It was Rich, then still with Philipp Brothers, who secured the oil supply from the pipeline, dispatched tankers to transport oil in Abadan to sail across the Arabian Peninsula and clandestinely dump it in Eilat. From the late 1950s to the 1970s, Israel imported 90 percent of its oil from Iran.

Rich left Philipp Brothers in 1974 and set up his own more aggressive and risky company in Switzerland, which continued to supply Iranian oil to Israel after the 1979 revolution. Ayatollah Khomeini seems to have been as pragmatic in this dealing with little Satan as he would have been. a few years later in the dubious arms deal with the great Satan that went public as the Iran-Contra case. In the US, however, Rich's secret deal with Iran to supply oil to Israel was promoted before the revolution but censored afterwards, leading Giuliani to attack him. Rich's mistake was not getting a waiver of the penalties; Thirty years later, Taylor did not make the same mistake. Rich was ultimately controversially pardoned by Bill Clinton, apparently at the behest of Ehud Barak, in part because he had helped provide information on Iran to the Mossad.

WThey area Ghanaianfirst president, Kwame Nkrumah, publishedNeocolonialism: The Final Stage of ImperialismBy 1965 it was already clear that the newly independent states would have to fight for their economic self-sufficiency. "Decolonization," wrote Nkrumah,

is a word used widely and unctuously by imperialist orators to describe the transfer of political control from colonialist to African sovereignty. However, the driving force of colonialism continues to dominate sovereignty. The young countries remain the suppliers of raw materials, the old ones of manufactured goods... Colonialism has taken a new form... And neo-colonialism is fast entrenching itself in the body of Africa today through the combinations of consortiums and monopolies that turn Africans upside down. in rebellion against colonialism.

New markets for raw materials were created by these rug hunters, the merchants and traders who preyed on the desperation of newly decolonized and impoverished commodity-rich states. Rich maintained ties with Jamaica's Conservative government, offering much-needed oil in exchange for bauxite shipments, and even advancing cash to repay Jamaica's IMF loans. The agreement resulted in a ten-year contract in 1985, under which Jamaica sold alumina to Rich + Co at 25 percent below market price. A lucrative trade ensued: he shipped this cheaply purchased product to Jamaican smelters and received finished aluminum products. With Jamaica on the verge of economic collapse, its politicians welcomed this day of heist.

Rich's companies and the other big commodity traders—Cargill, Glencore, Louis Dreyfus, Mercuria, Phillip Brothers, Trafigura, Vitol, and Xstrata—did not just benefit from decolonization. They also benefited from the end of the Soviet Union and the subsequent emergency sale of their state assets. Commodity traders made deals with the new state-owned companies, as well as the private companies and corporations established by the oligarchs, blurring the lines between the two. According to a commodity trader quoted by Blas and Farchy, when Putin ordered Mikhail Khodorkovsky's jailing, it was because he was trying to sell Yukos Oil to a US company. "You can imagine the anger. These guys got this for free. You didn't pay for it: you got it. And now they're going to sell it to a US multinational?" Trading with the enemy was not just an issue in the courts of the Southern District of New York.

Since the 1970s, trade has been fueled by the availability of cheap credit that came with the financialization of the world economy. Banks loved commodity traders and showered them with lines of credit. Rich used Paribas letters of credit for large shipments that he could not pay for in cash. Derivatives and options allowed traders to hedge their risks when buying commodities, earning money regardless of whether the price of the traded commodity went up or down.

The Boy Club of Commodity Traders is tight-knit and closely connected, which fuels their secretive and aggressively profit-oriented trading methods. Most companies operate as partnerships and none other than Glencore has chosen to go public and face the scrutiny that a listing prospectus entails. Commodity traders don't want an audit. They work with kleptocrats and oligarchs, get some of their best deals in war-torn countries, pour money into the coffers of warlords, and help the secret services. Misconduct prosecutions often fail, particularly in countries where the government has limited reach. In any case, companies can only be effectively prosecuted for bribery and underhanded dealings, such as dumping deadly waste in Côte d'Ivoire neighborhoods, as Trafigura did in 2006, not for their usual predatory tactics.

Any successful prosecution, even in US courts, has almost always been the result of alliances and enmities. Every time the US has failed to prevent commodity traders from trading with its enemies (Iran, Cuba, Sudan, Russia, Venezuela) it imposes billions of dollars in fines on the banks that finance those deals. The US ability to fine and enforce banks is a remarkable feat, made possible by the fact that commodity prices are denominated in dollars and the tremendous power the US wields over global financial infrastructures. Geopolitics have also played a role in deciding which banks and merchants get special treatment and sanction waivers and which don't.

Commodity traders rely on compatible financial and legal systems. But they also need easy access to a vast infrastructure of transportation and market facilities. Because of this, Rotterdam, which has seen public and private investment in its port for the last 75 years, has become an important hub. When the Seven Sisters lost control of world oil in the 1970s, Rotterdam became the clearinghouse for the oil market and sealed its position as Europe's leading hydrocarbon re-export hub. Even the alleged Arab oil embargo of 1973 did not affect its status. An official responsible for the port said it at the time.New York Timesthat "tanker trucks arrived this week at the same rate as the week before and the week before." By the turn of the millennium, Rotterdam was home to seven refineries and the main or regional offices of Vitol, Vanol, Transol, Bulk Oil, Transworld Oil and Mabanaft. The headquarters of Royal Dutch Shell is located nearby in The Hague. Some merchants have moved their headquarters to London for access to banks, looser regulations and more aggressive office cultures, but many more remain in Rotterdam.

In 1986, Marc Rich's company did not need to own the Jamaican alumina smelter from which it made a profit. However, in recent decades, commodity traders have not only acquired factories and refineries, but also mines and oil fields. Vitol has significant deposits in Rotterdam, Singapore, the Caribbean and Fujairah in the United Arab Emirates. Glencore owns 150 mines, smelters and factories around the world. Trafigura has refineries and quarries. Cargill owns feedlots, sugarcane plantations and factory farms on several continents. Its track record is similar to that of the Shell Transport and Trading Company in the early 20th century, when it acquired oil fields through a merger with Royal Dutch. Domestic hydrocarbon producers have also entered the trading business, including Saudi Arabia's Aramco, Russia's Rosneft and Abu Dhabi National Petroleum. Shell, BP, ExxonMobil and Total already control highly successful trading arms, buy and sell oil from other producers and speculate in financial markets. These inside traders make a lot of money with annual pre-tax profits of $4 billion for Shell and $2 or $3 billion for BP and Total. In a time of oversupply in the oil market, production is not as profitable as it used to be, so big companies rely on the magic of financial derivatives to get money out through their trading arms. Even better, they can avoid paying taxes by conducting business from low-tax offshore jurisdictions like the Bahamas.

Today, a middleman role like Marc Rich's, transporting oil from one state to the pipelines of another, may no longer be necessary. The oil that flows through the Eilat-Ashkelon pipeline is now supplied by a company called Med-Red Land Bridge. Med-Red is a consortium between two Israeli hydrocarbon infrastructure companies and Petromal, a quirky little Abu Dhabi-based oil services company whose ownership, once it liquidates its shell companies, can be traced back to two ruling family princes. from the country. Meanwhile, Israel has unilaterally taken over the pipeline and refuses to pay the $1.1 billion (plus interest) it owes to Iran. The pipeline itself is a state secret, and a Knesset committee has ruled that anyone who reveals information about it could be sentenced to fifteen years in prison.

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