Date: 9/14/2020
Author: Kent Moors, Ph.D.
This week, we will take a deep dive into my highly specialized work at the intersection of investment, finance, public policy, and geopolitics.
Sit back. Paraphrasing Bette Davis, this is going to be a bumpy ride.
Barr, Switzerland-based Glencore is one of the world’s leading commodity traders, especially in crude oil. It’s so powerful it can make or break markets. My network constantly analyzes it for one primary reason. It’s at the chokepoint between commodity traders and more unsavory global actors. And there’s a major development looming that will once again show Glencore at the center of this shadowy network in energy trading and futures financing.
This will be the subject of the next two Classified Intelligence Brief installments. Over several years, I’ve tracked this story, using my broad network of contacts. Some of these extend back to my time as an American intelligence operative.
I need to set the table by explaining what Glencore has done in the past. Let’s start with a massive paper dump.
On November 5, 2017, the so-called “Paradise Papers” were released. As with the “Panama Papers” of a year earlier, the German newspaper Süddeutsche Zeitung (SJ) became the center of attention. The Paradise leak involved about 13.4 million documents from two offshore service providers – Bermuda-based Appelby and Asiaciti Trust – along with registers of 19 tax havens (or “tax paradises”).
The volume of data was just below that released in the “Panama Papers” leak, the largest breach ever. That breach consisted of documents from Panamanian law firm/corporate service provider Mossack Fonseca.
Due to the vast amount of paperwork requiring review in both the Panama and Paradise releases, SJ brought in hundreds of media and financial forensic investigators under the aegis of the International Consortium of Investigative Journalists (ICIJ).
The “Paradise” breach contained information on how more than 120,000 individuals and companies had utilized offshore tax havens and conduits to move funds, create holdings, and/or circumvent domestic regulations worldwide.
The next two installments of CIB consider only one of these, Glencore. Under a private client contract, I had earlier tracked the trader’s use of arguably unsavory practices to control “phantom barrels” of oil in international exchange.
I then investigated how the company could have been pulling this off. What emerged put me on a collision course with some dangerous people.
Recently, I ran into a former colleague while in Paris. We had been involved in a few energy intelligence operations over the years but had fallen out of touch. Over an afternoon, we compared notes and he told me about some material in the Paradise Papers. He had been part of the ICIJ network reviewing the documents.
This conversation provided some additional intel on what I think is an emerging geopolitical oil scandal. This requires revisiting some recent history.
We begin with a major acquisition in Australia. In 2013, Glencore was defending itself against charges of evading sanctions. At the time, it had obtained government approval to acquire Video Player is loading.
mining giant Xstrata. That buy (valued at more than US$90 billion) turned Glencore into the third largest mining company in the country and one of the largest global coal producers.
Glencore is controversial because it constantly seems to be avoiding US sanctions on rogue regimes and individuals. It was also one of the major players named in the “Paradise Papers.” All the following intel is from documents contained in the Paradise Papers or sources who reviewed those documents.
According to the Paradise Papers, Glencore was, secretly, a major shareholder in SwissMarine Corp. Following the Paradise Papers release, the Australian Financial Review subsequently identified material misstatements and omissions in bank applications and financial agreements prepared by SwissMarine in 2013.
At the time, Greek shipowner Victor Restis, a major SwissMarine shareholder, was facing serious legal charges. Crucially, when SwissMarine applied to join the NASDAQ OMX Commodities Clearing House and applied for a bank account, it didn’t mention the extent of Restis’s involvement. I’ll get into the details a little later.
Copies of the bank applications are contained in files of Bermuda-based law firm Appleby, obtained by SJ and the ICIJ. Those papers reveal Glencore’s hidden links to the sanctions scandal, which unfolded as Western intelligence agencies worked in 2012 and 2013 to identify companies trading with Iran.
The documents showed that Glencore secretly funded and helped operate a “ghost fleet” of 167 bulk cargo ships through SwissMarine. None of this was known in 2012 when Glencore and Xstrata announced merger plans.
Yet investigators quickly ran into a vexing question. Glencore has its own subsidiary, ST Shipping. Why would a commodities trader need or want a secret holding in another shipping fleet?
In its early days Glencore was known as Marc Rich & Co. Rich, to put it mildly, had a shady reputation, notably for buying oil from Iran during the 1979 Teheran hostage crisis. As one of my contacts puts it: “Marc Rich knew how to deliver on time and in massive amounts. You know how hard it is to get tankers of oil in and out of a sanctioned country? Marc Rich knew how to do it. It is all in the shipping.”
In February 2001, Glencore had allegedly begun paying kickbacks to the Iraqi government for oil shipments in a breach of the UN’s Oil for Food program. This was revealed in the 2005 Volcker Report. Glencore denied any knowledge of wrongdoing.
On February 2 and February 28, 2001, two Iraqi oil shipments bound for the US were diverted to Singapore and Croatia, where Glencore stood to make up to $7 million in extra profit. Once again, Glencore denied any intention to breach UN Oil For Food rules.
Between these two diverted shipments, on February 20, 2001, Bermuda law firm Conyers Dill & Pearman lodged an application to register SwissMarine. Glencore declined to say why it decided to launch a shipping venture at that time. Glencore and the Restis Group, then one of the 10 biggest ship-owning businesses in Greece, teamed with four former Cargill commodities traders in the new company.
By 2004 SwissMarine was grossing $1 billion a year in freight revenue.
The Volcker Report detailed the strict instructions Glencore gave to its bankers never to divulge its connection with Iraq oil sales. Glencore imposed similar levels of secrecy on its new shipping company. Glencore held its stake in SwissMarine through a Swiss company, Sidhalu SA. Appleby Bermuda provided three SwissMarine directors to represent Sidhalu.
In November 2012, multiple sources in the shipping market were saying that Dimitris Cambis, a Greek professor with no previous shipping experience, had just bought eight aging supertankers through a web of front companies for $204 million.
On February 27 2013, my long-time contact, Reuters journalist Jonathan Saul, reported that “officials involved with sanctions” had shown him shipping documents which indicated that some of Cambis’s tankers were being used to ship Iranian oil to China to beat US sanctions.
Two days later in New York another Reuters reporter, Louis Charbonneau, broke a story entitled “Glencore bartered with firm linked to Iran nuclear program.” He said he had been shown a report by a Western intelligence agency which revealed that since 2011 Glencore had a barter deal with Iran Aluminium Company (Iralco) to exchange thousands of tons of alumina in exchange for processed aluminium.
The report said that from mid-2012, Iralco had been supplying aluminium to Iran Centrifuge Technology Co (TESA). TESA was on the UN sanctions list and had been making uranium enrichment gas centrifuges for the nuclear program.
I have personally reviewed the underlying documents and can say they are legitimate.
Meanwhile, Glencore told Charbonneau the trade was legal, and that it had no knowledge of the link to Iralco until the EU banned alumina sales in December 2012. At that time, the company declared, it “ceased transactions.”
On March 13, 2013, the US Treasury blacklisted Cambris, 14 of his companies, and his eight tankers for helping Iran avoid oil sanctions.
Thus far, this story has two separate elements: Glencore’s deals in aluminium and Cambris’s tankers. Both revelations are based on Western intelligence reports. They are also linked.
In May 2013, the US interest group United Against Nuclear Iran (UANI) announced that it had documents revealing that Victor Restis, his shipping firm EST, and the failing Greek bank FB Bank (which Restis controlled) had been part of the Iranian tanker scheme.
In a later court filing, UANI would be more specific, claiming that “by at least mid-2010, Restis was conspiring with Cambris to devise a web of business entities and relationships to buy crude oil from Iran and sell it to Chinese buyers.” I have two sources who confirmed this relationship.
Glencore was about to find itself under additional pressure. The Xstrata deal was finalized on May 2. Unfortunately for the Swiss trader, by May 23, Reuters’ Charbonneau had been provided with another bombshell (once again, the substance of this report I can confirm from an intel source). He reported that a confidential UN Panel of Experts finding concluded the aluminium swap deals by Glencore and Trafigura might have been a way to avoid international sanctions against Teheran over its nuclear program.
On July 19, 2013, Restis sued UANI. Four days later Restis himself was arrested by Greek police and charged with bank fraud, embezzlement, and money laundering.
Restis’ lawyers said the Iran sanctions claims had been devastating to Restis’s business, leading to the cancellation of a billion-dollar IPO on Nasdaq. They also accused UANI of attempting to put the company on a “blacklist.”
Glencore now faced both sides of the Iran sanctions story. The aluminium trading on the one hand and the allegations about Restis and the oil tankers on the other had one critical connection – SwissMarine. There was a risk SwissMarine could be blacklisted if its shareholder information became public knowledge.
In June 2013, before Restis’s arrest, SwissMarine had filed a “Know Your Customer” form with Standard Chartered Bank. It showed Restis owning 24.1 percent of the company.
In October 2013, after the arrest, SwissMarine had to apply to join the Nasdaq OMX Commodities Clearing House in Stockholm. This was critical to the bunkerage and forward freight agreement contacts that SwissMarine used. SwissMarine also had to set up a bank account.
Copies of SwissMarine’s application to DNB Bank ASA Caymans branch and to Nasdaq were sent to Glencore’s Appleby nominees on the SwissMarine board (and, as it happened, right into the subsequent Paradise Papers breech).
In the DNB form, Restis’ name had been cut from the list of directors. SwissMarine listed Sidhalu SA as the only shareholder with more than 20 percent. It made no reference to Glencore or to Restis’s holdings.
In contrast, SwissMarine’s Nasdaq application included Restis in the list of directors but didn’t mention him as an “ultimate beneficial owner” despite his holdings. Instead, it listed only Glencore.
This was hardly inadvertent. It seems SwissMarine had revised the way it calculated share capital for the Standard Chartered Bank paperwork. It now included the “cash-settled employee shares,” which allowed it to say Restis’s stake was only 18.15 percent. This meant it did not have to be declared.
The link between Glencore and Restis didn’t publicly emerge until the Paradise Papers leaks.
In 2016, the Greek Supreme Court dismissed all charges against Restis. Restis’s own defamation case against UANI had been dismissed in March 2015 after the US Department of Justice intervened. It said that if UANI disclosed its sources and other details that Restis’ lawyers demanded, it would threaten American national interests. This fueled the belief that the information on Restis’ alleged email accounts had come from US intelligence. I can attest that’s true.
Glencore “downplayed the relationship with Restis,” reported the Evening Standard in 2017, saying he “is one of a number of other shareholders in SwissMarine which is a non- controlled investment of Glencore. Glencore has no other commercial relationship with Mr Restis.”
The Financial Review said this wasn’t the full story. The ICIJ Offshore Leaks Database reported that he was a director of SwissMarine at least through 2014. Restis still owned a considerable amount of SwissMarine stock by in 2017, though less than 20 percent of the shares.
What did this mean? All these complicated legal structures, hidden investors, and allegedly underhanded dealings may have allowed Glencore to evade sanctions for profit. And it gets even more intriguing… because there is a Russian connection. That will be the subject of our next CIB.
Dr. Kent Moors
This is an installment of Classified Intelligence Brief, your guide to what’s really happening behind the headlines… and how to profit from it.
Dr. Kent Moors served the United States for 30 years as one of the most highly decorated intelligence operatives alive today (including THREE Presidential commendations). After moving through the inner circles of royalty, oligarchs, billionaires, and the uber-rich, he discovered some of the most important secrets regarding finance, geo-politics, and business. As a result, he built one of the most impressive rolodexes in the world. His insights and network of contacts took him from a Vietnam veteran to becoming one of the globe’s most sought after consultants, with clients including six of the largest energy companies and the United States government.
Now, Dr. Moors is sharing his proprietary research every week… knowledge filtered through his decades as an internationally recognized professor and scholar, intelligence operative, business consultant, investor, and geo-political “troubleshooter.”
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