A trader who had dealt in virtually every metal for Marc Rich illustrated this point to me quite clearly. I was speaking to him about commodities trading in a bar in a wintry midtown Manhattan. “Ethics.” He laughed. Then he pointed at my Diet Coke. “Your Coke can is made of aluminum. The bauxite that is needed to make it probably comes from Guinea-Conakry. A terrible dictatorship, believe me,” he said. “The oil that is used to heat this room probably comes from Saudi Arabia. These good friends of the USA hack the hands off of thieves just like in the Middle Ages. Your cell phone? Without coltan there wouldn’t be any cell phones. Let’s not pretend. Coltan was used to finance the civil war in the Congo.” He paused for his words to take effect. “Now, you tell me,” he said and pointed his finger at me. “What’s the alternative? No trade? Without raw materials the economy would collapse. The world would stand still. Do the people who criticize our work want to know any of this? Or would they rather just pick on us so that they can feel better about themselves?”
These are questions for which only ideologues have an easy answer. Everyone else, the commodities traders most of all, of course, make do with some middle way between a sense of reality and self-deception. Sometimes they look reality in the eye, but sometimes they would rather forget about it. They live in a gray area—sometimes dark, sometimes light. Sometimes it is fair, and sometimes it is exploitative. The name for this gray area is capitalism.
Strolling through the snowy gardens of the Villa Rose, I thought of an intriguing question. The John Templeton Foundation had recently asked leading scientists, economists, scholars, and public figures: Does the free market corrode moral character? “It depends,” John Gray, emeritus professor at the London School of Economics, answered. “The traits of character most rewarded by free markets,” he said as if he had been asked to comment on Marc Rich, “are entrepreneurial boldness, the willingness to speculate and gamble, and the ability to seize or create new opportunities.” Gray added, “It is worth noting that these are not the traits most praised by conservative moralists.”2
“Yes,” a senior Marc Rich + Co. director with vast experience all over the world once confessed to me, “sometimes we had to make a Faustian bargain to clinch the deal.” The words resonated in my head for quite some time. A Faustian bargain. Nowadays this phrase is usually used to describe self-serving actions and moral sacrifices—a pact with the devil in order to gain power, wealth, or influence—but in Faust: A Tragedy, Johann Wolfgang von Goethe’s greatest work, the scholar Heinrich Faust is not simply a ruthless egoist. He represents men who strive for achievement and who want to test their own limitations. Faust stands for the scientist who breaks conventions in order to discover “what holds the world together in its innermost.” He is also misled—someone who would purchase short-term profit with long-term pain. We may see Marc Rich as a kind of modern Faust of the commodity age. He is, not unlike Faust, a driven individual who strives for success and recognition. He perfected trading methods precisely because he was willing to push the boundaries and break taboos. His power also came from trading with the “devils” of the world.
The air coming off Lake Lucerne was crisp and clear. I could hear the ringing of the sheep bells from the neighboring farm. A mist rose from the surface of the lake, where—despite the weather—a solitary fisherman made his way across the lake. The snowy hills along the opposite shoreline looked as if they had been sprinkled with powdered sugar. It was all bewitchingly beautiful. “You must be a lucky man,” I said to the most successful and controversial commodities trader the world has ever seen. Rich looked out over the sparkling surface of the lake and remained silent for some time. Then, almost as if he were speaking to himself, the King of Oil quietly replied, “Sometimes.”
NOTES
The following abbreviated citations are used for reports of U.S. House of Representatives committee hearings.
Controversial Pardon
U.S. Congress. House. Committee on Government Reform. The Controversial Pardon of International Fugitive March Rich. HR Report 11, 107th Congress, 1st session (2001).
“Take Jack’s Word”
U.S. Congress. House. Committee on Government Reform. “Take Jack’s Word: The Pardons of International Fugitives Marc Rich and Pincus Green,” chapter 1 of Justice Undone: Clemency Decisions in the Clinton White House. HR Report 454, 107th Congress, 2nd session (2002).
Thataway
U.S. Congress. House. Committee on Government Operations. They Went Thataway: The Strange Case of Marc Rich and Pincus Green. HR Report 537, 102nd Congress, 2nd session (1992).
1: The Undisputed King of Oil
1. Leonardo Maugeri, The Age of Oil: The Mythology, History, and Future of the World’s Most Controversial Resource (Westport, Conn.: Greenwood, 2006). Maugeri is head of strategy and development for the Italian energy company Eni, the sixth-largest publicly listed oil company in the world.
2. Daniel Yergin. The Prize: The Epic Quest for Oil, Money, and Power (New York: Simon & Schuster, 1992).
3. Drivers paid 36 for a gallon of gasoline in 1970 (U.S. national average). Today the gallon costs around 2. The record price for regular unleaded was 4.11 in July 2008 (AAA, www.fuelgaugereport.com).
4. Robert Lenzner, “Candidates Need an Economic Clue,” Forbes, June 9, 2008.
5. Quoted in Controversial Pardon, 5.
6. A. Craig Copetas, Metal Men: How Marc Rich Defrauded the Country, Evaded the Law, and Became the World’s Most Sought-After Corporate Criminal (New York: Putnam, 1985).
7. Rudolph W. Giuliani, the lead prosecutor in the case against Marc Rich, refused to give an interview or even to answer some questions in spite of a very generous time frame.
2: The Biggest Devil
1. The interviews with Marc Rich started in spring 2007.
2. “The 10 Most Notorious Presidential Pardons,” www.time.com/time/2007/presidential_pardons/10.html.
3. Financial Times, September 1, 1988.
4. A. Craig Copetas, “The Sovereign Republic of Marc Rich,” Regardie’s, February 1, 1990.
5. According to the Swiss member of Parliament Josef Lang, who made a political career by attacking Marc Rich’s businesses.
6. “Marc Rich Indicted in Vast Tax Evasion Case,” New York Times, September 20, 1983.
7. The superseding indictment of March 1984 lists sixty-five counts. Indictment, U.S. v. Marc Rich, Pincus Green, et al., March 6, 1984, S 83 Cr. 579.
8. As of January 11, 2009.
9. Controversial Pardon, 109.
10. Salinger managed to buy 1,200 Petit Upmanns, as he recounts in “Kennedy, Cuba and Cigars,” Cigar Aficionado, Autumn 1992.
11. BP, Chevron, Esso, Gulf, Mobil, Shell, and Texaco. Enrico Mattei, the legendary boss of Eni, the then state-owned Italian energy company, coined the term “Seven Sisters” in the 1960s.
12. Rich’s partners were Pincus Green, Jacques Hachuel, Alec Hackel, and John Trafford.
13. Donella H. Meadows, Dennis L. Meadows, Jorgen Randers, and William W. Behrens III, The Limits to Growth (New York: Universe Books, 1992). Marion King Hubbert, a geologist at Shell, coined the term “peak oil” in 1957. The term “Hubbert’s peak” is used as well.
14. James Kerr, senior trader with Elders IXL, quoted in John N. Ingham and Lynne B. Feldman, Contemporary American Business Leaders: A Biographical Dictionary (Westport, Conn.: Greenwood, 1990), 557.
15. Richard M. Auty, (1993). Sustaining Development in Mineral Economies: The Resource Curse Thesis (London: Routledge, 1993); Jeffrey D. Sachs and Andrew M. Warner, Natural resource abundance and economic growth. National Bureau of Economic Research Working Paper 5398, December 1995.
16. “Take Jack’s Word.”
17. Ibid., 16.
18. Ibid., 14.
19. Quoted in Controversial Pardon, 5.
20. “The Billionaires,” Fortune, June 28, 1993. The magazine estimated Rich’s fortune at 2.3 billion.
3: A Jewish Fate
1. Lucy S. Daw
idowicz, The War Against the Jews, 1933–1945 (New York: Bantam, 1986), 33.
2. Fernand Braudel, The Perspective of the World, vol. 3 of Civilization and Capitalism 15th–18th Century (Berkeley: University of California Press, 1992), 143.
3. David S. Landes, The Wealth and Poverty of Nations (New York: Norton, 1998).
4. Eric Laureys, “The Plundering of Antwerp’s Jewish Diamond Dealers, 1940–1944,” in Confiscation of Jewish Property in Europe, 1933–1945 (Washington: Center for Advanced Holocaust Studies, U.S. Holocaust Memorial Museum, 2003), 57–74.
5. Raul Hilberg, The Destruction of the European Jews, 3 vols. (New York: Holmes & Meier, 1985), 600.
6. Antwerp’s remarkable Jewish culture was completely destroyed in World War II. The town was officially Judenrein when the Nazis left in September 1944.
7. U.S. Holocaust Memorial Museum, www.ushmm.org. In the course of two days, September 29–30, 1941, a special team of German Nazi SS supported by other German units, local collaborators, and Ukrainian police shot about 34,000 Jewish civilians. The Babi Yar massacre is considered by historians to be one of the largest single massacres in the history of the Holocaust.
8. Toni Falbo and Denise Polit, “A Quantitative Review of the Only-Child Literature: Research Evidence and Theory Development,” Psychological Bulletin 100 (1986): 176–89.
9. “In KC, Quiet Rich Barely Recalled,” Kansas City Star, March 2, 2001.
10. Calvin Trillin, With All Disrespect: More Uncivil Liberties (New York: Penguin, 1986), 148.
11. Inflation-adjusted purchasing power parity, Bureau of Labor Statistics, www.bls.gov/data/inflation-calculator.htm.
12. Letter from Donald R. Nickerson, then principal of Rhodes School, Fortune, February 20, 1984.
4: The American Dream
1. Francis Fukuyama, Trust: The Social Virtues and the Creation of Prosperity (New York: Free Press, 1995).
2. Quoted in “The Man Behind Marc Rich,” New York Times, August 18, 1983.
3. A. Craig Copetas, Metal Men: How Marc Rich Defrauded the Country, Evaded the Law, and Became the World’s Most Sought-After Corporate Criminal (New York: Putnam, 1985), 71. The same quote appears in “Take Jack’s Word” on page 9.
4. “Cuba Speeds Nuclear Project; Marc Rich Is Said to Assist,” Wall Street Journal Europe, June 4, 1991.
5. Geoffrey Jones, “Multinational Trading Companies in History and Theory,” in The Multinational Traders, ed. Jones (London: Routledge, 1998).
6. John N. Ingham and Lynne B. Feldman, Contemporary American Business Leaders: A Biographical Dictionary (Westport, Conn.: Greenwood, 1990), xxii.
5: The Crude Awakening
1. Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power (New York: Simon & Schuster, 1992), 555.
2. The term “Seven Sisters” was coined by Enrico Mattei, the legendary boss of Eni, the then state-owned Italian energy company.
3. Edith Penrose, The International Petroleum Industry (London: Allen & Unwin, 1968), 78.
4. One gallon was around 35 at the pump.
5. The Iranian oil industry was nationalized in 1951 by Prime Minister Mohammad Mossadegh. In 1953 Mossadegh was deposed by Iranian army officers, supported by the CIA and the British Secret Intelligence Service. Mohammad Reza Shah Pahlevi came back from exile and took power again.
6. United Nations Conference on Trade and Development, World Investment Report, 2007, www.unctad.org.
7. Lucy Dawidowicz, “Babi Yar’s Legacy,” New York Times Magazine, September 27, 1981.
6: Israel and the Shah
1. Professor Uri Bialer of Hebrew University of Jerusalem just recently managed, based on formerly classified documents, to shed some light on the history of the pipeline. His highly interesting study “Fuel Bridge Across the Middle East—Israel, Iran, and the Eilat-Ashkelon Oil Pipeline” was published in Israel Studies 12, no. 3 (Fall 2007). Samuel Segev wrote about the secret pipeline as one of the first in his standard work, The Iranian Triangle (New York: Free Press, 1988).
2. Bialer, “Fuel Bridge Across the Middle East,” 30.
3. Trita Parsi, Treacherous Alliance: The Secret Dealings of Israel, Iran, and the United States (New Haven: Yale University Press, 2007).
4. As of January 16, 2009.
5. Tony Benn, Against the Tide: Diaries, 1973–1976 (London: Arrow, 1989), 488.
6. Bialer, “Fuel Bridge Across the Middle East,” 34.
7: Marc Rich + Company
1. Quoted in “Secrets of Marc Rich,” Fortune, January 23, 1984.
2. Quoted in “Inside Philipp Brothers,” Business Week, September 3, 1979.
3. Helmut Waszkis wrote a brilliant company history, Philipp Brothers: The Rise and Fall of a Trading Giant (Worcester Park, U.K.: Metal Bulletin, 1992). This book was an important inspiration and a valuable source for me. The quotation is from p. 204.
4. “Hide and Seek,” Wall Street Journal, August 5, 1983.
5. U.S. Energy Information Agency, www.eia.doe.gov.
6. Geoffrey Jones, “Multinational Trading Companies in History and Theory,” in The Multinational Traders, ed. Jones (London: Routledge, 1998), 16.
7. Philippe Chalmin, Traders and Merchants: Panorama of International Commodity Trading (Chur, Switzerland: Harwood Academic Publishers, 1987), 282.
8. Francis Fukuyama, Trust: The Social Virtues and the Creation of Prosperity (New York: Free Press, 1995).
9. Kenneth J. Arrow, The Limits of Organization (New York: Norton, 1974), 23.
10. “Secrets of Marc Rich,” Fortune, January 23, 1984.
11. Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power (New York: Simon & Schuster, 1992), 722.
8: Trading with the Ayatollah Khomeini
1. Trita Parsi, Treacherous Alliance: The Secret Dealings of Israel, Iran, and the United States (New Haven: Yale University Press, 2007), 80.
2. Ibid., 83.
3. Figures from OPEC Annual Statistical Bulletins (www.opec.org), U.S. Energy Information Administration (www.eia.doe.gov), and BP Statistical Review of World Energy (www.bp.com).
4. “The Hustling Price Gougers,” Time, March 12, 1979.
5. Exec. Order No. 12170, 44 Fed. Reg. 65729 (1979).
6. U.S. Energy Information Agency, Annual Oil Market Chronology, www.eia.doe.gov/emeu/cabs/AOMC/Overview.html.
7. Exec. Order No. 12205, 45 Fed. Reg. 24099 (1980).
8. See Daniel Yergin, The Prize: The Epic Quest for Oil, Money, and Power (New York: Simon & Schuster, 1992), 700–706.
9. Exec. Order No. 12205, 45 Fed. Reg. 24099 (1980). Even subsidiaries of American companies abroad were allowed to trade with Iran. United Press International, for example, reported on two major U.S. defense contractors and other U.S. firms that continued legally shipping goods to Iran during the hostage crisis (September 28, 1981).
10. Glencore, the former Marc Rich + Co., is still in business with Iran.
11. “Oil Trader,” Washington Post, February 15, 1983.
12. “The Lifestyle of Rich,” Fortune, December 22, 1986.
13. The speech is available at http://www.pbs.org/wgbh/amex/carter/filmmore/ps_crisis.html.
14. The Iranian Consortium was owned as follows: 40 percent BP, 14 percent Royal Dutch Shell, 7 percent Exxon, 7 percent Gulf Oil, 7 percent Mobil (now part of Exxon-Mobil), 7 percent Standard Oil of California (now Chevron, which in the 1980s bought most of Gulf Oil), 7 percent Texaco (now part of Chevron), 6 percent Compagnie Française des Pétroles (now TotalFinaElf), and 5 percent Iricon Agency Ltd. Iricon grouped six U.S. companies, which held the 5 percent as follows: one sixth by each of American Independent Oil, Getty Oil, and Charter Oil; one third by Atlantic Richfield (ARCO—now part of BP); and one twelfth by each of Continental Oil (Conoco) and Standard Oil of Ohio (now part of BP).
15. “Oil Trader,” Washington Post, February 15, 1983.
16. “Shadow of Khomeini Falls on the Mideast Peace Talks,” New York Times, February 25, 1979; Uri Bialer,
“Fuel Bridge Across the Middle East: Israel, Iran, and the Eilat-Ashkelon Oil Pipeline,” Israel Studies 12, no. 3 (Fall 2007): 30.
17. “Shadow of Khomeini Falls on the Mideast Peace Talks,” New York Times, February 25, 1979.
18. “Hearing on the Future of Oil of the House Select Committee on Energy Independence and Global Warming,” Congressional Quarterly, June 11, 2008, 35.
The King of Oil: The Secret Lives of Marc Rich Page 30
