The authors of ‘The World for Sale: Money, Power and the Traders Who Barter the Earth’s Resources’ reflect on the power concentrated in the hands of a small number of commodity trading houses, with some warnings for investors
- A large share of the world’s traded resources is handled by just a few companies, many of them owned by just a few people
- The authors of the book argue their influence is not limited to the economy: the commodity traders’ control over the flow of the world strategic resources has also made them powerful political actors
- There are numerous tales of corruption and misdeeds, and investors are unwittingly involved. Will things change?
“As journalists covering natural resources over the past two decades, we have been struck by the power and influence that is concentrated in just a few commodity traders’ hands, and equally surprised by how little is known about them,” write Farchy and Blas, authors of ‘The World for Sale’.
This would appear to be about to change. The authors have interviewed more than 100 active and retired commodity traders, including key figures at the main houses Glencore, Trafigura, and Vitol. “An extraordinary cast of characters manically hard working, fiercely smart, disarmingly personable, and singularly focused on making money.”
Notably, none of them are women. As the pair say “the commodity trading companies make Wall Street banks look progressive on gender diversity”. Apparently, some of the largest commodity traders don’t have a single woman among the top executives.
Their power is shocking. “A large share of the world’s traded resources is handled by just a few companies, many of them owned by just a few people,” says the book.
The five largest oil trading houses handle 24 million barrels a day, almost a quarter of the world’s petroleum demand. The seven leading agricultural traders handle just under half of the world’s grains and oilseeds. Glencore, the largest metals trader, accounts for a third of the world supply of cobalt, a crucial raw material for electric vehicles.
Crucially, the book argues, their influence is not limited to the economy, adding “the commodity traders’ control over the flow of the world strategic resources has also made them powerful political actors”. We learn about various changes in government policy, or indeed of governments, allegedly engineered for their own interests.
In a chapter entitled ‘Hunger and Profit’, the authors allege that the head of Glencore’s Russian grain business publicly called for an export ban just weeks after “Glencore had been quietly placing a bet that grain prices would rise”. They authors note that Glencore reported earnings of $659 million in 2010.
Wielding this power often seems entwined with corrupt practices. Torbjorn Tornqvist, a founder of oil trader Gunvor told the authors that corruption is something that unfortunately “has plagued the commodity industry. There’s a lot of skeletons and most of them will never be surfaced”. The authors have a good try though.
In the midst of the bloody conflict in Bosnia, Vitol allegedly paid the infamous Serbian warlord Arkan $1m to sit in on a meeting as a security precaution, without apparently knowing who he was. One Glencore executive, who was stopped at London’s Heathrow airport with half a million pounds in cash, told the authors there are countries where bribes are simply not possible, such as Japan and most of Western Europe, but “in China it was very corrupt”.
It was only in 2016, that Switzerland declared that “bribery payments to private individuals should no longer be allowed as expenses that are justified for business purposes”, the book notes.
Warnings for investors
Tut, tut…but does this matter for impact investors?
Well, yes. Investors are often unwitting funders. The authors recount how the public workers’ pension funds of Pennsylvania, South Carolina and West Virginia were all drawn into high-risk investments in Kurdistan. “A parable for the modern-day financial system, where money is passed between anonymous vehicles in low tax, low scrutiny, jurisdictions.”
And, the book adds, “in a world waking up to the reality of climate change, the traders have been slow to reform a business that still relies heavily on commodities that pollute the environment”. And they decry that “consumers increasingly care about traceability and ethical sourcing of their products”.
This together with other headwinds, including the democratisation of information, and the reversal of globalisation are cramping the traders’ style.
The US government has also increasingly tightened the net on corruption using sanctions as a tool on foreign policy. “Many trading houses have announced they will stop using agents, the third-party fixers who in some cases had become a means about sourcing bribe paying.”
But predictions of the death of the commodity trading industry “are almost certainly premature”. The authors argue there will continue to be a role for traders and newcomers. “As American sanctions have proliferated and western commodity traders have been forced to step back from certain markets, the Chinese traders have benefited.” The likes of Cofco, China Oil and Zuhai Zenrong.
And a lot of roads lead back to Russia. In 2017, Glencore’s old CEO Ivan Glasenberg was awarded a medal by Vladimir Putin for his services to the Russian state. In 2014, the US treasury noted Putin himself “has investments in Gunvor and may have access to Gunvor funds”.
With the invasion of Ukraine leading to the biggest disruption in energy and food supplies in a generation, it may be time for the authors to write a sequel.