The Story Of Glencore — The Controversial Trading Firm That Controls The World's Commodities

glencore protestor

Glencore — an incredibly powerful and clandestine commodities trading firm — has a global network spanning 40 countries.

Reuters once called it “the biggest company you’ve never heard of.”

But Glencore is the legacy of someone you have heard of, controversial businessman exile Marc Rich, who passed away last week.

Rich had a life story a Bond villain would envy: Plush villas, fine art, the requisite business deals with unsavory foreign regimes, and even a presidential pardon.

Glencore Xstrata came out of a firm that he founded in the 1970s after making a killing trading oil during the 1973 embargo.

From that day to now, Glencore has been controversial, to say the least — from allegations of kickbacks for Iraqi oil, to doing business in apartheid South Africa, to contributing to serious pollution in Zambia.

One thing is without question, though. With almost $240 billion in revenue last year, Glencore is filthy rich.

Glencore mines and trades commodities like oil, coal, and copper. With 150 mines, they encompass every link in the supply chain. Last year Glencore netted $236 billion in revenue.

It takes control of these commodities by going into resource-rich, politically-unstable states and forging relationships. In the Congo, Glencore employs the help of Israeli businessman Dan Gertler, a commodities magnate with ties to the country's president. Gertler provides the political cover and Glencore includes him in profitable deals, according to a 2012 Foreign Policy report.

Source: Foreign Policy

This technique originated with the company's founder, late billionaire exile Marc Rich, the man who created the spot oil market. Rich made a fortune during the 1973 oil embargo by purchasing crude oil before the price hike and selling on demand when the embargo took effect. Afterwards, Rich went to Switzerland to open up a new brokerage firm, Marc Rich + Co AG.

Rich's company ignored the UN trade ban with apartheid-era South Africa. Instead, Rich imported tons of Iranian oil into the country. Then, in 1979, Rich violated a U.S. embargo by trading with Iran during the hostage crisis.

For his work, he was eventually charged with 51 counts of tax fraud and $48 million in tax evasion. Rich fled to Switzerland and avoided U.S. attempts at extradition. His company, however, had to fork over $171 million in fines.

Source: New Statesman

Ultimately, Rich made a huge blunder trying to get ahold of the zinc market. He lost the firm $172 million and pushed it near collapse. Rich was forced to sell his shares in 1994, and the company rebranded.

Source: Reuters

The company renamed itself Glencore and continued its shady practices, this time working with Saddam Hussein in Iraq. Under the 1996-2003 UN Oil-for-Food Program, Saddam would trade oil for humanitarian supplies. Turns out he was rewarding companies, like Glencore, that were friendly to his regime.

From a 2012 Foreign Policy article:

The Iraq Survey Group, the U.S.-led fact-finding mission sent after the invasion, concluded that Glencore was 'one of the most active purchasers' of oil under the Oil-for-Food Program and had paid $3,222,780 in 'illegal surcharges.' Yet Glencore was not charged in the scandal after claiming it was unaware surcharges were being paid and that Lakhani's high fees reflected the extra risk of doing business with Iraq, not slush money for bribes.

Glencore reportedly avoided paying taxes in Zambia, according to a cadre of NGOs.

Zambian officials also believe Glencore's pollution is causing acid rain and health problems for 5 million people near its mines.

Source: Reuters

In the Congo, Glencore has been accused of profiting from child labour. The BBC filmed children as young as 10 working in a Glencore-owned mine last year.

Source: BBC

Source: BBC

In 2011, Glencore went public, effectively revealing that they control everything, like more than half of the global copper and zinc markets.

Source: Foreign Policy

Their current CEO Ivan Glasenberg is worth an estimated $7.3 billion thanks to their 2011 IPO. One of Rich's early proteges, Glasenberg took over the company in 2002.

Source: Foreign Policy

Glencore recently acquired Xstrata, a large mining company, in a $30 billion takeover. Together, the new venture has a vast network of mines, 130,000 employees, and more ships than the British Royal Navy.

Source: Reuters

It's newest scandal: Glencore reportedly supplied thousands of tons of aluminium to an Iranian company that provided the metal to the country's nuclear program. The metals swap deals could have been Glencore's way of avoiding international sanctions against Iran over its nuclear program.

Source: Reuters

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