They move close to a third of the global economy, they are practically unknown and escape any type of regulation, they are the hidden face of the business of premium materials. A business capable of shaping world politics. An exciting book with narrative material for various thriller, written by two specialized journalists: Javier Blas and Jack Farchy. Interview with Javier Blas, expert in the energy-raw materials sector and columnist at Bloomberg. 1/2
RFI: How did you come up with the idea to write this book with your colleague Jack Farchy?
Xavier Blas: The idea of writing “The world is for sale” comes from our curiosity about the commodity trading sector, which we believe is key to understanding how the world works. Both economically and politically, and realizing that very few people knew how those commodities were traded. The price of oil, soybeans, wheat or aluminum is known, but very few people know anything beyond the price. How are these commodities bought and sold, who makes money buying and selling? How do intermediaries work, who are they, who earn and what are their motivations?
Especially when we realized that, sometimes, these entrepreneurs from the trade of raw materials, with their businesses, had an impact that went beyond economics, earning money and doing business. That they shaped world politics, because they supported governments, intervened in wars, took sides in civil conflicts; they were the last lender some countries could turn to. And sometimes, they practically decided who was in power. That was the reason we wrote this book.
Sometimes they practically decided who was in power.
RFI: The subtitle of the book is, “The Dark Side of Commodities.” What are those raw materials?
J.B: Commodities are the building blocks of global trade and economy. It is oil and its refined products, agricultural raw materials such as wheat, soybeans, corn. Metals from steel to aluminum, copper…, and other raw materials such as coffee, cocoa, cotton. The people who trade them, who buy and sell them, are the most important intermediaries, I believe, in the world economy. They are the oil that greases the gears of that machine that is the world economy, and they are generally relatively small companies, practically anonymous, of which people in the street have barely heard, not even by name.
RFI: Commodities are very well known and are of direct concern to everyone. On the other hand, those who market them are practically invisible, it is somewhat paradoxical…
J. B: Yes, it is paradoxical that the raw materials, the producers and the consumers of those raw materials are so well known. If we think of oil, we immediately think of companies like Exxon Mobil, like British Petroleum, Royal Dutch Shell and countries like Venezuela, Brazil, Saudi Arabia… But instead, we don’t know who are the ones who buy and sell them, those companies are practically invisible. I’m talking about companies like Vitol, like Trafigura, Mercuria, Glencord… companies that have very little name, hardly any publicity, and yet they are at the center of that trade and are very little known.
RFI: What accounts for this discretion or this “secrecy” on the part of these merchants?
J. B: I think secrecy is the word that best defines it. It is an industry that moves in the shadows and the reason is partly historical. These companies preferred to remain in the shadows, because they believed that any information was power, and the less information there was about their activities, the better for their business. It is also an industry that, in general, operates in places where remaining invisible is more economically profitable, because they do not want to attract the attention or gaze of regulators or governments. If you are buying and selling Russian oil, or helping Iran to escape American sanctions, moving in the shadows, staying hidden, is better; Nobody wants the United States Department of Justice to come knocking on their door one fine day. And because also historically, it is a world in which paying bribes was a practically daily economic activity. And also in that case, being hidden, remaining in the shadow and practicing secrecy are tools that help.
Very few companies control most of the world’s commodity trade
RFI: Thanks to this book we found out that they are practically family companies, controlled by a small number of people.
J.B: One of the most surprising things about this industry is that very few companies control most of the world’s commodity trade. We are talking about maybe ten or twelve companies that are running the business. And each of these companies, for the most part, is controlled either by a family or by a group of businessmen who work in the company, that is, managers who are also the largest shareholders of said companies. Very few of the commodity companies are publicly traded, as is the case, for example, with mining companies or oil companies, which are either publicly traded or owned by a government. In the commodity trading industry, the norm is a family business with a single shareholder, or a couple of families as shareholders, or 15-20 managers of a company controlling most of the shares of that company.
RFI: Which means that the profits are shared among few hands.
J.B: The benefits of that company are distributed among very few and what we have are billionaires in many of these companies. An example, two families that were united by marriage several decades ago, control the largest commodity trading company in the world called Cargill, in the United States. The two families behind this company are the Cargills and the McMillans. In these two families there are 14 people, 14 members of the Cargill-McMillan family, each of whom has a fortune of several billion dollars. It is the largest concentration of billionaires in any family in the world outside of the royal families of the Middle East.
RFI: Some of these leaders have quite a unique profile, worthy of an adventure movie. How he describes it at the beginning of the book, the arrival in Libya in his private plane, the leader of Vitol, a company that few people know about.
J.B: Vitol is the largest oil and refined products trader, its former manager Ian Taylor, who passed away a couple of years ago, was to me the prototype of the commodity trader. He was a member of the British establishment: educated, refined and at the same time adventurous, for whom going to a country at war was not a problem for him, he loved to take risks. He had something very familiar with those born politicians, Bill Clinton type, with that charisma. He was someone who could show up at a party, hotel or reception and knew everyone by his name. He remembered the name of the wife of such, the birthday of another, or what University was the son of an executive who was around. The ability to make any of his interlocutors think that he was the most important person in the world and thus manage to close deals. He was a character for whom traveling to Iran, Iraq or Libya in the midst of war, or Venezuela in the midst of social conflicts, was part of making money every day. A fan of modern art, a benefactor of the opera, and at the same time a person who ran a company that, today we know, was paying bribes in several Latin American countries to do business. All of that, to me, put together, defines the archetype of the commodity trader.
A benefactor of the opera, and at the same time he ran a company that paid bribes in several Latin American countries to do business
RFI: Regarding bribery, before the US court, Vitol publicly acknowledged having paid bribes, in the case of Latin America in three countries: Mexico, Brazil, Ecuador, for practically ten years.
J.B: Perhaps most importantly, Vitol admitted in a US court that it had done so until July 2020, which is pretty much, in business terms, until yesterday. One of the things that has always been said is that the image that journalists sometimes gave of the industry, of secrecy and the payment of bribes, had some truth, but that it was something from the 70s and 80s and that business they weren’t done like that anymore. What this case in the United States the court demonstrated is that on some occasions the companies continued to operate as they did in the 1970s, paying bribes to get business.
RFI: How can you explain that these companies, which are not on the stock market, do not publish their accounts, handle astronomical figures, are practically not subject to any type of regulatory mechanism??
J.B: One of the reasons these companies are not subject to regulation is that global trade in raw materials sometimes takes place on the high seas. Ships that are on the high seas are bought and sold, outside the scope of any national legislation. Many of these companies are located in tax havens or business centers, where regulations are very lax and tax rates are also low. We are talking about places like Switzerland, Singapore, Cyprus, or some tax havens in the Caribbean. That makes it easy for them to do business so easily, with so little regulation and without any kind of scrutiny from the authorities of any country. And the fact that they are so hidden, that they operate in the shadows, helps them, because there are many governments —and it is something that caught our attention, me and my co-author. When, for example, sometimes a high-ranking official from a European government called us to ask us for information about one of these companies. It caught my attention, how was it possible that senior government officials from that European country knew so little about the industry? Because the first step to be able to regulate something is to know it, and the big problem in the raw materials industry is that there is a great lack of knowledge about that industry. High officials and rulers do not know about this industry and therefore cannot regulate it.
End of the first part