A Giant Among Giants

When Glencore, the world’s biggest commodities brokerage firm, went public in May 2011, the initial public offering (IPO) on the London and Hong Kong stock exchanges made headlines for weeks in the Financial Times and the trade-industry press, which devoted endless columns to the company’s astonishing valuation of nearly $60 billion — higher than Boeing or Ford Motor Co. The massive new wealth turned nearly 500 employees into overnight multimillionaires and made billionaires of at least five senior executives, including CEO Ivan Glasenberg. “We are not going to change the way we operate,” vowed Glasenberg, who had started as a lowly coal trader for the Swiss firm nearly three decades earlier and, with the IPO, immediately became one of Europe’s richest men. “Being public will have absolutely no effect on the business.”

And what a business it is. The firm was forced to pull back the curtain on its famously secretive doings to go public, and what it revealed shocked even seasoned commodities traders. Glencore, which Reuters once called “the biggest company you never heard of,” turned out to be far more globally dominant than analysts had realized. According to its 1,637-page IPO prospectus, the company controlled more than half the international tradable market in zinc and copper and about a third of the world’s seaborne coal; was one of the world’s largest grain exporters, with about 9 percent of the global market; and handled 3 percent of daily global oil consumption for customers ranging from state-owned energy companies in Brazil and India to American multinationals like ExxonMobil and Chevron. All of which, the prospectus said, helped the firm post revenues of $186 billion in 2011 and employ some 55,000 people in at least 40 countries, generating an average return on equity of 38 percent, about three times higher than that of the gold-standard investment bank Goldman Sachs in 2010. Since then, the company has only gotten vaster in scale. It recently announced a $90 billion takeover of Xstrata, a global mining giant in which it already holds a 34 percent stake; if the deal goes through, Glencore will rule over an “empire stretching from the Sahara to South Africa,” as the Africa Confidential newsletter put it. As it is, Glencore already trades, manufactures, refines, ships, or stores at least 90 commodities in some three dozen countries. “Glencore is at the center of the raw material world,” said Peter Brandt, a longtime commodities trader. “Within this world there are giants, and Glencore is becoming a giant among giants.”

What the IPO filing did not make clear was just how Glencore, founded four decades ago by Marc Rich, a defiant friend of dictators and spies who later became one of the world’s richest fugitives, achieved this kind of global dominance. The answer — pieced together for this article over a year of reporting that included numerous interviews with past and current Glencore employees and a review of leaked corporate records, dossiers prepared by private investigative firms, court documents, and various international investigations — is at once simpler and far more complicated than it appears. Like all traders, Glencore makes its money at the margins, but Glencore, even more so than its competitors, profits by working in the globe’s most marginal business regions and often, investigators have found, at the margins of what is legal.

This means operating in countries where many multinationals fear to tread; building walls made of shell corporations, complex partnerships, and offshore accounts to obscure transactions; and working with shady intermediaries who help the company gain access to resources and curry favor with the corrupt, resource-rich regimes that have made Glencore so fabulously wealthy. “We conduct whatever due diligence is appropriate in each situation to ensure we operate in line with Glencore Corporate Practice,” said spokesman Simon Buerk, when asked how the firm chooses business partners and local representatives.

But to experts, there’s simply no other way for a company like Glencore to thrive. “Unlike the case with many industries, minerals and energy are often owned by the state in Third World countries,” said Michael Ross, author of The Oil Curse and a professor at the University of California, Los Angeles. “And in a number of countries where Glencore operates, doing business means putting money into the pockets of repressive governments and corrupt rulers. In some of those places … it’s hard to draw a line between what’s legally corrupt and what’s not.”

Indeed, going public, according to the sources I spoke with, means building on the business model created and perfected by Rich, who, before his controversial pardon by U.S. President Bill Clinton, was a legendary fugitive, a regular fixture (along with Osama bin Laden) on the FBI’s Most Wanted list. The new Glencore, these sources say, will be like the Glencore of old — only much, much bigger. In today’s superheated market for natural resources driven by booming emerging markets such as Brazil, China, and India, Glencore wants to grow — and in a major way. Already the world’s biggest middleman, it now wants to control the entire business chain, from mines and smelters to storage facilities for finished products, and from pumping oil to shipping it to refineries, while trading and hedging all along the way, industry experts say. “That’s one way that Glencore makes so much money,” a Geneva-based industry source told me. “When you are vertically integrated you make more at every step. The money stays in the same pocket.”

Another way Glencore makes so much money is by leveraging information to take advantage of the wild swings that have marked global commodity prices in recent years, with oil yo-yoing from $147 a barrel in mid-2008 down to $40 later that year and more recently back up over $100. Poor countries that sell commodities often end up losers when prices go down — like Zambia, which in recent years has been intermittently walloped by a combination of rising prices for agricultural products and sharply falling prices for copper and the other mineral exports on which it depends. But Glencore, like a casino where the house always wins, “benefits directly from the volatility,” as Deutsche Bank noted cheerfully in a report on the IPO for potential investors.

Still, the real secret to Glencore’s success is operating in markets that scare off more risk-averse companies that fear running afoul of corporate governance laws in the United States and the European Union. In fact, those markets are precisely where the future of the company lies. Consider what Deutsche Bank identified as Glencore’s “key drivers” of growth: copper in the Democratic Republic of the Congo, coal in Colombia, oil and natural gas in Equatorial Guinea, and gold in Kazakhstan. All are places with a heady, dangerous mix of extraordinary natural wealth and various degrees of instability, violence, and strongman leaders. Glencore’s experience and adeptness operating in these “frontier regions” and “challenging political jurisdictions” — Deutsche Bank’s delicate euphemisms for countries known for corruption, autocracy, and human rights abuses — is central, the investment firm wrote, to Glencore’s “significant growth potential.”

LEVERAGING TIES TO DICTATORS has always been at the heart of the business empire built by Rich, the Belgian-born U.S. citizen who founded what would become Glencore in Switzerland in 1974. “Focus your analysis on Marc Rich,” the Geneva source advised me when I first mentioned I was researching Glencore. “He knew that you have to deal with governments and ministers, and you have to service those people. You can call it corruption, but it’s part of the system.”

Undeniably brilliant, Rich started in 1954 as a mail clerk at Philipp Brothers, then the world’s dominant commodities firm, and within two years had worked his way into the position of junior trader. His own politics were conservative, but money trumped ideology for Rich; he was just as willing to cut deals in fascist Spain — where he worked for a time at the company’s Madrid office, which specialized in handling business in rough countries in Africa and the Middle East — as in communist Cuba, where Philipp Brothers had dispatched him soon after Fidel Castro took power. He went on to travel frequently to Havana, where, in addition to picking up a lifelong fondness for Cohiba cigars, he did business in pyrite, copper, and nickel.

He and Pincus “Pinky” Green left Philipp Brothers in 1974 and established Marc Rich & Co. in the canton of Zug, Switzerland’s most business-friendly tax and secrecy haven. From early on, Rich cultivated ties to monarchs and presidents, diplomats and intelligence agencies, especially Iran’s SAVAK under the shah and Israel’s Mossad. He periodically lent a hand to the latter’s clandestine operations, among them the evacuation of Ethiopian Jews to Israel in the 1980s.

Rich made a fortune by buying oil from Iran during the hostage crisis and Libya when Ronald Reagan’s administration imposed a trade embargo on Muammar al-Qaddafi’s regime, as well as supplying oil to apartheid South Africa. An inveterate sanctions-buster, Rich used offshore front companies and corporate cutouts to try to stay below the radar. He also pioneered the practice of commodity swaps, like the uranium-for-oil deals he brokered in the 1980s between apartheid South Africa and Islamic Iran and Soviet Russia. Such deals frequently caused him trouble with U.S. authorities, and in 1983 Rich fled his home in New York to Switzerland just before the Justice Department issued an indictment against him and Green on charges of racketeering, illegal trading with Iran, and tax evasion. A House committee later described his business as “based largely on systematic bribes and kickbacks to corrupt local officials.”

Still, Rich continued to thrive, until he unsuccessfully tried to corner the global zinc market in 1992 and nearly bankrupted the firm with $172 million in losses, at which point he was forced out in a management buyout. The new directors renamed the company Glencore, which is reportedly — though even this is a secret — short for Global Energy Commodities and Resources.

Rich’s forced exit from Glencore and the U.S. indictment hanging over his head had little impact on his business success. He created a new, independent firm and within a decade was trading 1.5 million barrels of oil a day, with an annual turnover of $30 billion. Then in 2001, on Clinton’s last day in office, the president granted Rich a controversial pardon stemming from the 18-year-old indictment; critics argued that the pardon was connected to the generous contributions that Rich’s ex-wife, Denise, made to a variety of Democratic causes, including Hillary Clinton’s successful 2000 Senate campaign and the Clinton Presidential Library fund. A number of prominent American Jews and Israelis, including then-Prime Minister Ehud Barak and former Mossad Director General Shabtai Shavit, also pressed the White House on Rich’s behalf.

Rich retired to a lavish estate, “La Villa Rose,” on the shores of Lake Lucerne, but his influence continues to be felt at Glencore and throughout the industry. Glasenberg, the company’s CEO since 2002, got his start under Rich as a coal trader and, like the man who mentored him, was a quick study. By the late 1980s, just a few years after he was hired, he was managing the firm’s China and Hong Kong offices and had become one of Rich’s most trusted lieutenants. At least four other of today’s top Glencore executives joined the firm in the Marc Rich era; they’ve preserved a workaholic ethic at the top of the company and — as a London law firm representing the company warned in a letter sent to major British news outlets soon after the IPO — consider themselves “extremely private individuals.” This new leadership at Glencore wasn’t about to go messing with the formula of Rich’s success. Even today, insiders routinely call the firm and a number of other successful trading companies run by Glencore alumni “Marc Rich’s children.”

In one post-Rich example, the company profited handsomely by dealing with Saddam Hussein under the 1996-2003 U.N. Oil-for-Food Program, which allowed the Iraqi dictator to trade limited quantities of oil in exchange for humanitarian supplies. The U.N.’s Independent Inquiry Committee reported in 2005 that Hussein had awarded special “allocations” to companies and individuals who were friendly to the regime. A Glencore agent, Pakistani businessman Murtaza Lakhani, was a conspicuous regime sycophant who hosted a peace concert at his local villa just weeks before the 2003 U.S. invasion. The U.N. committee determined that Glencore had paid surcharges and raised questions about lavish commissions Lakhani received. 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 still does business in Iraq, though not with Lakhani, and recently was approved by the government to bid on oil blocks scheduled to be sold this year.

This is the heart of the Marc Rich formula: Access is money, and contacts on the ground mean access. The new Glencore, like the old one, relies on a network of fixers, middlemen, and business partners who might make other companies squeamish, among them the Uzbek-born oligarch Michael Cherney, now living in Israel and wanted by Interpol on a Spanish warrant connected to organized crime charges and with whom Glencore traded oil (through an offshore vehicle affiliated with Cherney) in Romania in the mid-2000s. (Bell Pottinger, Cherney’s blue-chip London public relations shop, denied that Cherney had ties to organized crime but declined to “comment at this time on his business relationship to Glencore.”) In Congo-Brazzaville, to take another example, Glencore bought oil from shell companies set up by the state oil company’s head, Denis Gokana (conveniently trained at its London office), according to a lawsuit by Kensington International, a Cayman Islands-based corporation.

Rich has admitted that the old Glencore paid bribes. The new Glencore, however, denies doing so: “We will not be complicit in any third party’s violation of the law in any country, nor the payment nor receipt of bribes, nor participate in any other criminal, fraudulent or corrupt practice,” reads the company’s corporate practice statement. Nonetheless, investigations over the past decade have alleged that Glencore’s agents and employees made illegal payments to secure market access in Bahrain, Belgium, Iraq, and Panama. (Criminal charges have been filed only in the Belgian case, and a trial is ongoing.)

It is business partners like these, enmeshed in a web of deals though not always employed by Glencore, that help the company prosper in those “frontier regions” and “challenging political jurisdictions.”

THE FRONTIERS ARE GLENCORE’S GROWTH engine, and nowhere more so than the Democratic Republic of the Congo, the poster child of the resource-cursed failed state. Doing business there is all but impossible without a well-connected political patron, and Glencore’s partner in Kinshasa is perhaps the most wired of them all: Dan Gertler, an Israeli businessman known for his intimate ties to President Joseph Kabila.

The grandson of the founder of the Israel Diamond Exchange, Gertler turned up in Congo in 1997 at age 23, as the country was descending into a hellish war that left at least 4 million dead. Gertler had few contacts when he arrived in Congo, and a confidential report by the international investigative firm Kroll that I obtained described him as having a “poor record in fulfilling promised investments.” But he did have something that a government at war desperately needed: cash. Three years after he arrived in Congo, the government — then headed by Laurent Kabila, Joseph’s father, who was assassinated in 2001 — sold Gertler a monopoly on diamond sales for $20 million, though it was reportedly worth hundreds of millions of dollars. Gertler denied charges of promising to provide military aid to Congo in a 2004 Israeli court case brought by Yossi Kamisa, a former Israeli anti-terrorism police official who maintains that he accompanied Gertler to Congo — even meeting with Laurent Kabila — to train and equip Congolese forces in exchange for diamond concessions. Gertler severed relations with Kamisa, reportedly over negative press regarding the diamonds-for-arms deals; both Kamisa’s suit and a subsequent appeal were dismissed.

In Congo, Gertler’s diamond monopoly became politically controversial and was cancelled months after Joseph Kabila came to power. Still, he has continued to land profitable deals ever since. Shimon Cohen, Gertler’s London-based public relations advisor, told me that his “family trusts have invested or brought over $2 billion of investment into the mining sector” in Congo over the past 15 years. Public records and documents released late last year by a British parliamentarian show that in the past several years the Congolese government secretly sold vast mining assets on the cheap (Cohen denies that they were undervalued) to various British Virgin Islands-registered shell companies, several of which are linked to Gertler. “Gertler’s philosophy is that everyone has a price and can be bought,” the Kroll report said.

Today, Gertler is the best-connected foreigner in Congo, enjoying “a close friendship with the president,” according to Cohen. He was one of the few Westerners invited to Joseph Kabila’s 2006 wedding, and in June 2011 he joined the president on the VIP tribune during Independence Day celebrations. “Dan Gertler is a friend,” Antoine Ghonda, a close aide to Kabila, told the Sunday Times. “The way our president works, he has close contacts and protects them.” For his part, Gertler has called Kabila “the most promising new president in the world — a new Mandela.” That’s not a view shared by most observers. “[S]tate security forces continued to act with impunity throughout the year, committing many serious abuses, including unlawful killings, disappearances, torture, rape and engaging in arbitrary arrests and detention,” the U.S. State Department’s 2010 human rights report, released last year, says of Kabila’s Congo. “Government corruption remained pervasive.”

With vast mineral deposits worth an estimated $24 trillion, though, including enormous amounts of cobalt, copper, and gold, Congo has irresistible appeal to companies like Glencore, which has around $4.5 billion at stake there in three holdings.

Operating in the country is simply not possible without high-level political protection, and Gertler offers it for Glencore, according to sources and public accounts. One former Glencore employee described the company and Gertler as “totally enmeshed” in Congo. Gertler, this person told me, “managed the entire relationship between Glencore and Kabila and the Congolese government,” with Glasenberg, the CEO, flying into Kinshasa or Lubumbashi on a private jet to meet with him. Gertler’s spokesman Cohen says that his client “has never been personally engaged in business enterprises with Glencore.” However, records I examined show an extensive set of financial dealings between firms in which Glencore and Gertler hold significant stakes, a fact confirmed by Buerk, Glencore’s spokesman. Cohen acknowledges that Gertler is “an advisor” to a private consulting company called Fleurette, registered in Gibraltar and “owned by a trust for the benefit of the [Gertler] family,” which happens to have a “long-standing business relationship with Glencore.” Glencore and Gertler are shareholders in Katanga Mining; Glencore’s stake alone was worth around $2.7 billion at the time of its IPO — Glencore’s fourth-largest equity holding. They both held stakes as well in Nikanor, a copper and cobalt company that Glencore provided most of the financing to purchase in exchange for exclusive rights to sell all the mineral output. (Nikanor was acquired by Katanga in January 2008 for $452 million.)

Glencore has not been keen to advertise its relationship with Gertler. It has, however, offered him a series of discreet, complex, and remarkably profitable deals. In one case, Glencore sold stock in Katanga Mining at roughly 60 percent of its market value to Ellesmere Global Limited, a British Virgin Islands firm whose “ultimate owner is a trust for the benefit of the family members of Dan Gertler,” according to Canadian insider-trading records. Ellesmere quickly sold it back to Glencore at close to full market price, netting a profit of about $26 million. “These purchases turned out to be good investments,” Buerk said. Corporate records I obtained show that in another deal, a subsidiary 50 percent owned by Glencore waived its rights of first refusal to acquire an additional stake in Mutanda Mining, a copper and cobalt producer, from Gecamines, Congo’s state-owned mining company, and instead recommended that the shares be sold to one of the offshore firms owned by Gertler’s family trust. It’s not clear why Glencore’s subsidiary would have passed on the offer, because business records and documents suggest that Gertler’s trust picked up the Mutanda shares for a fraction of their value. “We preferred to invest our money in developing Mutanda — building the mines and the plant,” Buerk said in an email explaining why Glencore did not buy the shares.

However much Gertler has made through his firms’ deals with Glencore, Glencore has clearly profited too, given the huge portfolio it has accumulated in Congo. That, my sources told me, is exactly the point.

“Glencore has a Gertler everywhere,” the former Glencore employee says. “That’s standard.”

FOR GLENCORE, PARTNERING with operators like Gertler is not a chance occurrence. On the contrary, it reflects the company’s modus operandi: gaining access to resources through gatekeepers who have intimate connections to senior-level decision-makers. Such gatekeepers, whether agents, business partners, or the heads of service companies it uses, offer a way to navigate life on the frontier, a place where, Glencore warned investors, they should not be surprised by what happens. After all, the company’s IPO prospectus notes dryly, “[S]ome of Glencore’s industrial activities are located in countries where corruption is generally understood to exist.”

The gatekeepers “could do all the things I couldn’t do or didn’t want to do,” a former Glencore trader, speaking on condition of anonymity, told me.

In Russia, Glencore’s chief sponsor has been oilman Mikhail Gutseriev, who in 1995 was elected to the Duma as a member of right-wing nationalist Vladimir Zhirinovsky’s party, which he also lavishly financed. Gutseriev also owned a bank and casino, and he was running a newly created tax-free business zone in Ingushetia, a small, violence-ridden republic bordering soon-to-be-war-torn Chechnya. In her book Sale of the Century, Chrystia Freeland describes his Moscow offices as decorated in gold, crystal, and floral designs that “an eight-year-old girl with a princess fantasy and a gold credit card might concoct” and the casino’s décor as “oil paintings of naked women wrapped in furs” and private bedrooms with mirrored ceilings and Jacuzzis. “Sometimes we have special guests and they like to be entertained,” Gutseriev explained to her. Later, Gutseriev went into the energy business — he was understatedly described in a U.S. diplomatic cable released by WikiLeaks as “not known for his transparent corporate governance.” He did well. Today he regularly appears on Forbes‘s list of the richest Russians, with a fortune estimated at around $6.7 billion.

A decade ago, though, Gutseriev was down and seemingly out. In 2002, the Kremlin fired him as the head of state-owned oil firm Slavneft for resisting the company’s privatization, according to the WikiLeaked cable. That same year, however, he sought to regain his position at Slavneft by arranging for three busloads of armed guards to take over its Moscow offices. They withdrew after occupying the building for several days, according to an account in the Russian press.

But Gutseriev soon staged a comeback. Within a few years, he had bought a number of small energy firms and had patched them together into RussNeft, which by 2006 had become one of Russia’s biggest oil companies. But Gutseriev’s meteoric rise to full-fledged oligarch status was only possible due to massive assistance from Glencore’s hidden hand, according to my sources. Business contracts I obtained show the company financed RussNeft’s “spectacular growth” and “aggressive acquisition strategy” — as one confidential 2005 Glencore document put it — at every step. Total funding was around $2 billion, much of it funneled to offshore companies owned by Gutseriev through a Cypriot-registered company of Glencore’s called Interseal.

The 2005 document said that thanks to Glencore’s financial backing, RussNeft’s assets had increased 14 times over the previous three years. Glencore had “been working closely with M. Gutseriyev since his time at Slavneft,” the document said, and “appreciates his acquisitive nature and ability to identify good assets in a short space of time.” A well-placed source familiar with the deals echoed that assessment, though in blunter terms: “Glencore associated with him because he could buy physical assets in Russia and it couldn’t. The deal was sheer balls, but that’s the type of thing Glencore does.”

In return for its funding, Glencore got an exclusive deal to market RussNeft’s oil, won the right to appoint senior personnel, and ended up with about half the equity in four oil production subsidiaries. But even financial analysts have trouble figuring out RussNeft’s “opaque” accounting, making it difficult to calculate Glencore’s current stake in the company and its subsidiaries.

KEEPING OLIGARCHS HAPPY has been a Glencore specialty fully on display in Kazakhstan, another of those “challenging political jurisdictions” with vast energy and mineral resources.

In April 2011, President Nursultan Nazarbayev, who has ruled for more than 20 years, won 95.5 percent of the vote in an election widely seen as rigged. Under Nazarbayev, the country’s economy has boomed over the past decade with the discovery of minerals and vast natural gas fields, but the new gains haven’t trickled down; meanwhile, a money-soaked new elite has joined the ranks of the planet’s biggest spenders. A WikiLeaked U.S. diplomatic cable noted that the country’s leaders “are able to indulge in their hobbies on a grand scale, whether flying Elton John to Kazakhstan for a concert or trading domestic property for a palace in the United Arab Emirates.”

Glencore’s prospects are also booming in Kazakhstan, where it owns slightly more than half of Kazzinc, a huge gold, lead, and zinc producer worth up to $7.6 billion to Glencore at the time of its IPO. Glencore owns several other assets in Kazakhstan, and its gold production in the country is expected to double by 2015, according to Deutsche Bank. In a sign of Glencore’s ambitions there, CEO Glasenberg traveled to Kazakhstan last year to attend an investment meeting with top government officials and businessmen.

Still, Kazakhstan can be treacherous terrain for foreign investors. A U.S. Commerce Department report warns of “burdensome regulations that often reflect a way of doing business that is reminiscent of the Soviet Union.” The Heritage Foundation think tank notes similar problems in Kazakhstan: “[C]orruption remains endemic, eroding the rule of law.”

For these reasons — and especially because major mineral deals in Kazakhstan often need Nazarbayev’s personal approval — investors require a powerful local sponsor with close contacts to the president. Glencore’s is one of the best: oligarch Bulat Utemuratov, a major investor in Verny Capital, Kazzinc’s second-largest shareholder (after Glencore), with a 42 percent stake.

Glencore’s Kazakh partner founded ATF Bank early in the post-communist era and became a billionaire when he sold out in 2007 to Italy’s UniCredit. An old-school ex-Soviet power broker, he owns through Verny the Ritz-Carlton properties in Moscow and Vienna. Thanks to Glencore, Utemuratov, who is now Nazarbayev’s special envoy to neighboring Kyrgyzstan, is about to become far richer: According to its IPO prospectus, Glencore plans to pay Verny $3.2 billion for its holding in Kazzinc, which would up Glencore’s stake in the company to about 93 percent, making Kazzinc the firm’s largest single equity holding after Xstrata.

A former head of Kazakhstan’s powerful National Security Committee who once held a top position in the ruling party and served as chief of staff to Nazarbayev between 2006 and 2008, Utemuratov is known among insiders as the president’s “consigliere.” He is one of the few people in the country who can dependably get a meeting or phone call with Nazarbayev at any time, a Western expert on Kazakhstan told me. “You can’t do any large-scale business in Kazakhstan without the president’s approval, and you can’t get that without direct access to the president, which Utemuratov gets for you,” the person said. “If you need something, you can have your CEO go over a number of times to meet with the president and that might work, and you might get help if you can get the head of state from your home country to exert influence on him. But the most efficient and surest way to get what you need is to have support from someone local who is extremely close to Nazarbayev, and Utemuratov is one of very few people on that list.”

In May 2011, a group of opposition politicians issued a public letter complaining that Kazzinc and other former state firms had been privatized under murky conditions that allowed Utemuratov and other insiders to pick up vast stakes thanks to their ties to the ruling family. Glencore could be stripped of its assets in the country, said the letter, adding, “Upon any change of regime in Kazakhstan to a democratic one, any acquisition of any shares in Kazzinc … will be subject to review.”

ONE NIGHT LAST JUNE, I had dinner in Geneva with two men with deep ties to the oil-trading business. The food at Au P’tit Bonheur was rich and expensive; the temperature was mild and the sky clear. We sat on a terrace, which afforded a splendid view of the city’s famous lake and the Alps.

“We’re all bandits here,” one of the men told me when I asked what made Switzerland such an attractive base for traders. “You can be accepted as long as you bring a lot of money.”

His friend heartily agreed, saying, “You have to pay your parking and your taxes and respect your neighbors, but if you want to cut a deal with a bandit, it’s OK.”

It’s hard to imagine bandits holing up in Glencore’s gleaming white steel-and-glass headquarters in Zug, a charming canton a few hours from Geneva and just north of the Alps, near where Marc Rich founded the firm. Here the population of residents and registered companies both hover around 27,000, and the corporate tax rate averages around 15 percent, low even by Swiss standards. Income taxes are also low — in Rueschlikon, the town where Glasenberg lives not far from the Glencore headquarters, citizens recently voted to drop them further because of a recent windfall. Glasenberg’s post-IPO fortune of an estimated $7.3 billion is so huge that his taxes alone are sufficient to fund the town’s entire budget.

It’s not a surprise that Rich chose to start his firm in Switzerland, which protects businesses with strict bank and corporate secrecy rules. Another draw, particularly for commodities traders, is Switzerland’s political neutrality and corresponding aversion to enforcing international sanctions. The country only joined the United Nations in 2002; until then, companies headquartered there could supply regimes subject to U.N. embargoes, as a number of oil traders did in the case of the South African apartheid state. Switzerland is not a member of the European Union, though, so Swiss-based oil traders are not required, for example, to abide by a new EU ban on importing or marketing Iranian crude.

Why, then, did Glencore decide to go public last year, trading away some of that precious Swiss secrecy and opening itself to so much more scrutiny? Various theories have been floated, in addition to the obvious explanation that the move made dozens of its senior executives unimaginably rich — among them that the firm needed more capital from the markets to fuel its global growth plans, money it is now putting to use with pending deals to take over giant companies like Xstrata. There are even those optimists, like Patrick Smith of Africa Confidential, who has tracked Glencore and other traders for years, who think the move reflects a profound transition as the old model in commodities — whereby companies and individuals built empires by leveraging relationships with top government officials — is slowly giving way to a rule-based system. Then again, Smith told me, “You can be damn sure that Glencore wouldn’t have gone public if it didn’t have structures in place to keep making money. It must have calculated that it can still come out ahead despite having very ambitious targets.”

Even if Smith is right about the slow emergence of a more rule-based global business system, commodities trading for now remains one of the world’s most opaque, secretive, corrupt — and globally consequential — industries. While outright bribery has become largely passé as a business practice — due to banking restrictions on large cash movements and tighter enforcement of the U.S. Foreign Corrupt Practices Act and similar legislation passed in Europe — traders told me there are ever more sophisticated forms of payoffs that may skirt the spirit of anti-bribery laws but are often technically legal. “Ten years ago, I’d get on a plane with money straight from the bank to spread around; that’s how deals were done,” one longtime Swiss trader who worked mostly in Africa told me. “Now you sign a contract with an offshore company that’s owned by the relative of some government official you need. The company may not be strictly legitimate or conduct any real business for you, but everybody’s happy.”

Another trading-industry source explained to me, “You can be the smartest trader in the world and you can’t make money without access to production.” Winning such access has always been Glencore’s great strength. After all, lining up local allies whose chief credentials are their political connections has been a remarkably successful strategy for making money, even if in practice it serves to entrench dictators, empower business oligarchs, or facilitate corruption.

Still, like all good businesses, even Glencore has to keep up with the times. Marc Rich seems to agree. “Discretion is an important factor of success in the commodity business,” he told an interviewer when Glencore announced it would go public. “They probably don’t have a choice. Transparency is requested today. It limits your activity, to be sure, but it’s just a new strategy to which they have to adapt.”