The World According to Glencore

COLOMBIA

Glencore owns Prodeco, a giant coal-mining operator worth an estimated $4.4 billion — so big that it maintains its own port to speed exports to the United States and Europe. Prodeco has been accused of everything from strike-busting with military help to relying on paramilitaries to seize land and has been fined for illegal waste-dumping and other environmental violations.
Key business: Coal

EQUATORIAL GUINEA

Glencore has stakes in two oil fields in Equatorial Guinea and an exploration contract in partnership with little-known Starc Limited. The Bermuda-registered Starc is a joint venture whose chief partners include Stag Energy, which for many years had an exclusive contract to market the government’s share of crude oil. Stag has a simple business model, according to one well-placed source: “Keep President Obiang happy.” Glencore’s holdings in Equatorial Guinea were worth about $1 billion at the time of its initial public offering in May 2011. Deutsche Bank estimates that the firm’s annual crude oil production there will rise from near zero today to 24 million barrels by 2015.
Key business: Oil

IVORY COAST

Until embattled strongman Laurent Gbagbo was forced from power last year, Glencore was the “favorite trader” of Petroci, the state oil company, according to the Africa Energy Intelligence newsletter. In 2007, Glencore Energy UK provided cash-strapped Petroci with an $80 million loan to be repaid with future exports. At the time of Gbagbo’s overthrow, the loan had been renewed three times and Petroci still owed Glencore around 650,000 barrels, worth about $70 million.
Key business: Oil

ZAMBIA

A Glencore subsidiary owns a 73 percent stake in Mopani Copper Mines, Zambia’s second-largest mining company. In 2000, Zambia granted Glencore and other foreign firms special development deals with royalty rates of just 0.6 percent (versus the normal rate of 3 percent) and a corporate tax rate capped at 25 percent. Glencore has been accused of colluding to artificially reduce taxable profits from Mopani; international auditors reported that Mopani sold copper to Glencore, its parent company, at as little as one-quarter the official price on the London Metal Exchange. Now Zambia’s government has sought to collect roughly $160 million in back taxes it says Glencore owes. The firm denies the charges.
Key business: Copper

BAHRAIN

In 2009, U.S. and Bahraini prosecutors investigated allegations that Glencore’s employees had made $4.6 million in improper payments to executives at Aluminium Bahrain, a state-owned smelter, to secure below-market prices on aluminum products. Glencore denied the allegations; in 2009 it paid Aluminium Bahrain an out-of-court settlement of $20 million.
Key business: Aluminum

THE NETHERLANDS

Glencore’s effective global tax rate for 2010 was just 9.3 percent, in large part because nearly half its 46 subsidiaries are incorporated in “secrecy jurisdictions,” opaque financial havens like the Netherlands, according to a report by the NGO Publish What You Pay. Glencore’s Rotterdam-registered Finges Investment is worth $18 billion, but doesn’t have a single employee, according to corporate records filed in the Netherlands. Finges, a Dutch financial expert told me, is “nothing more than a piece of financial engineering.”
Key business: Tax haven

LIECHTENSTEIN

A 2008 U.S. Senate report revealed that an unidentified client of the LGT Group, a bank owned by Liechtenstein’s royal family, discussed setting up a Panamanian shell corporation and bogus foundation to pay bribes on Glencore’s behalf. “A small portion of the payments go … to the USA and Panama and may be classified as bribes,” read an internal LGT memo. The client, a Glencore agent, had set up the account in 2002; prior to that, Glencore had made such payments directly, the memo said. An LGT executive refused to testify to the Senate about whether the bank had set up the Panamanian corporation or foundation as requested.
Key business: Financial services

IRAN

Glencore’s relationship with Tehran dates to the regime of the shah, with whom founder Marc Rich enjoyed a close relationship. During the early 1970s Arab oil embargo, Rich brokered a deal to trade oil that Iran was supplying to Israel through a secret pipeline. Glencore continued to do business with Iran after the 1979 Islamic Revolution and in recent years was a regular supplier of gasoline to the country. It halted deliveries in late 2009 under pressure from Washington.
Key business: Oil and refined products

RUSSIA

Glencore funneled roughly $2 billion through an offshore company to the oligarch Mikhail Gutseriev, described in a WikiLeaked cable as “not known for his transparent corporate governance.” Reportedly booted by the Kremlin as chief of the state-owned oil firm Slavneft for resisting the company’s privatization, Gutseriev made a comeback with Glencore’s help. The cash infusion allowed Gutseriev to establish RussNeft, now one of Russia’s largest oil companies. Glencore owns nearly half the equity of four of RussNeft’s oil production subsidiaries and has sole rights to market its oil.
Key business: Oil

ROMANIA

In the mid-2000s, Glencore used an Israeli agent named Yoav Stern, who also represented the Romanian interests of Yakov Goldovsky, who had previously been convicted in Russia for asset-stripping state-run enterprises. Another Glencore business partner here was Romanian businessman Marian Iancu. Glencore sold him crude oil through an offshore company he controlled, Faber Invest & Trade, for processing at the Rafo refinery in Romania. Iancu was indicted for tax evasion and money laundering in 2006 and convicted in late 2011. A WikiLeaked U.S. State Department cable described Rafo as “embroiled in a web of corruption, money laundering, fraud and criminal charges” and included Faber among its “shady entities.”
Key business: Oil and refined products