[A-List] Global economy: oil business

["Michael Keaney" <michael.keaney@xxxxxx>]

Slick business?

In this online special, Ian Willmore of Friends of the Earth examines the
complex web of ownership and control behind the oil tanker disaster, and
argues that it shows the worst excesses of corporate globalisation in action

Observer online
Sunday November 24, 2002
http://www.observer.co.uk/comment/story/0,6903,846684,00.html

This week the media has been thick with reports of the sinking of the oil
tanker Prestige off the Spanish Galician coast. There have been many
depressing pictures of the damage wreaked by the 3,000 tonnes of viscous
sludge now poisoning local beaches and destroying local livelihoods. There
has been much speculation about if and when the remaining 70,000 tonnes of
oil will come ashore.
Yet very little has been written about the complex web of ownership and
control behind the incident. The story that emerges shows once again that
Governments and international institutions have utterly failed to ensure
proper openness and accountability of the global economy.

The tanker Prestige was owned by a one ship (now more accurately a one
wreck) Liberian company called Mare International. Total accident insurance
on the ship was a paltry £15 million. Liberian law makes it hard to be
certain who really owns Mare but it is believed to be the secretive Greek
Coulouthros shipping dynasty, according to shipping sources.

The Prestige was registered with the Bahamas Maritime Authority. According
to the BMA website "it is the country's goal to become the world's largest
shipping registry over the next decade, and ship owners of all nationalities
are welcome to fly the Bahamas flag". The Authority claims that companies
which fly the flag include Exxon International and Chevron, and that the
advantages of the Bahamas include "a favourable business climate and
world-class banking services" and that "the operations and income associated
with Bahamas Flag vessels are entirely tax-free". You might expect the
Bahamas Maritime Authority to be based in the Bahamas. You would be wrong.
It is based in the City of London, at 16 Minories, London EC3.

The oily sludge now leaching from the Prestige was owned by an oil trading
company called Crown Resources. Crown was formed in Gibraltar in 1996.
According to the company's own website, the Gibraltar office still provides
logistical support to the company, and it is believed to have controlled the
movements of the Prestige which appears to have been ultimately headed for
Singapore. In 1997, Crown opened an office in 33 Cavendish Square London W1,
which is now the company's largest office. In July 2000 the HQ was moved to
Zug, Switzerland. At least five of Crown's Directors are British and one (Mr
Joe Moss) is a former Gibraltar Government Minister. The company's crude oil
turnover increased to 21.5 million metric tonnes in 2000, up from 11.7
million tones in 1998. The UK Government has flatly denied Gibraltar
involvement in the incident.

Crown Resources is in turn owned by a fascinating Russian conglomerate
called the Alfa Group Consortium. The consortium describes itself as "one of
Russia's largest privately owned financial-industrial conglomerates, with
interests in oil, commodities trading, commercial and investment banking,
insurance, retail trade, food processing, and telecommunications". The
Chairman of the Supervisory Board of Alfa Group is Mikhail Fridman. Fridman
founded the Alfa Group Consortium, a holding company which today controls
the Alfa Bank, Alfa Capital, Tyumen Oil, several construction material
firms, food processing businesses and a supermarket chain. Other Alfa
activities include ownership of 40% of all Mongolian meat exports (these
exports are intended to help the country to pay its large debt to Russia)
and a venture to launch communications satellites in Iraq, Iran and Syria.

Mr Fridman's close business associates include Leonard Vid, formerly First
Deputy Head of the Soviet planning commission Gosplan and now Chairman of
the Alfa Bank's Executive Board. The Alfa Group says that "although we
continue to be exposed to the oil markets, it is an exposure with which we
are comfortable because of our perception of a continuing favourable reward
to risk ratio".

Mr Fridman is a super-rich fellow, estimated by Fortune Magazine to be the
ninth richest man in the world aged under 40, with a net worth of more than
$2 billion. He is one of the "new oligarchs" of the new Russian capitalism,
who made their fortunes on the privatisation of former Soviet state assets.

Tyumen Oil (also known as TNK) is certainly a company worth a closer look.
In July this year the Observer newspaper described Tyumen as "a Russian firm
under investigation for mafia connections" - allegations which the company
has strongly denied.

Nowhere have Tyumen's activities caused more of a storm than in the Samotlor
oil field in Western Siberia. Tyumen used to own half the field, with
another oil firm called Chernogreft in possession of the other half. Yet
Chernogreft, which had strong links to BP Amoco, went into bankruptcy and
was acquired at a bankruptcy auction by Tyumen in November 1999 for only
$176 million, a deal branded by the European Bank of Reconstruction and
Development as "a sham" and "wholly contrary to the concept of fairness and
transparency".

The Alfa Group have complained about the treatment of the group's companies
by the EBRD, alleging that its companies have been unfairly placed on a
blacklist of companies with which the EBRD will not do business. Alfa Bank's
President Peter Aven has argued that the EBRD had been unduly influenced by
claims about the company in the Russian press: "All this kompromat
(compromising material) is published about everybody, including ourselves.
But there are Russians and Russian. Not all are mafia". Indeed, says Aven,
Alfa Bank should be a natural partner for the EBRD.

Tyumen certainly seems to be able to make its influence count elsewhere. The
firm was trying to get a half a billion dollars in loan guarantees from the
US Export Import Bank, the equivalent of our Export Credit Guarantee
Department. Most of this was ear-marked for the purchase of equipment from
the US energy giant Halliburton. The White House and State Department
decided to veto the deal because of their concerns about the Alfa Group,
which controls Tyument, and after an unusual pressure campaign to reject the
loan from BP Amoco. Halliburton's CEO, an expert corporate lobbyist, went
into action to overturn these prissy objections. The loan was duly agreed.
The name of the CEO was Richard Cheney, now Vice President of the United
States.

Perhaps not surprisingly, Tyumen now appears keen to acquire respectability
in the West. In June this year, Sir Peter Walters was appointed to the
Tyumen "advisory board". Sir Peter is a former Chairman of BP. Sir William
Purves also joined the "Advisory Board". He is a former Director of the
Shell Transport and Trading Company. In July, James A Harmon was added to
this august body. Between 1997 and 2001, Mr Harmon was the Chairman of none
other than the Export Import Bank of the United States. The UK PR firm for
Tyumen are the Maitland Consultancy

Friends of the Earth rang to speak to the consultant handling their account.
He was in Moscow for "an urgent meeting". The UK PR firm for Crown Resources
is Grandfield At the time of writing, their consultant has yet to return our
call. BP now seem to have made their peace with Tyumen, announcing a joint
venture with the company in October 2001, to develop the Kovytka gas reserve
in Irkutsk, a project that has been heavily criticised by local
environmentalists.

It is not yet clear whether the oil in the Prestige came from Tyumen. And
there is no suggestion that Tyumen would be liable for Prestige disaster
itself even if they did supply the oil. But if Tyumen was the oil company
which produced the Prestige's cargo, the oil may well turn out to have come
from Samotlor oil field. Or it may even turn out that the oil has, believe
it or not, come from Iraq. On the 11th October this year, Alfa announced
that it had signed "one of the largest deals in the history of the six year
oil for food programme" between Iraq and the UN, for 20 million barrels a
year. Russia is believed to have made it a condition of support for the US
resolution on Iraq recently agreed by the UN Security Council that its
existing oil contracts would be honoured in the event of a change of regime.
So it looks as if Tyumen's future, in Iraq at least, is secure.

This story shows some of the worst features of corporate globalisation in
horrid action.

It shows that the oil and shipping industries have largely escaped the
capacity of states and international institutions to control and regulate
them.

It shows that the high flown rhetoric of international diplomacy - even when
concerning matters of war and peace - is often only a cover for commercial
deal-making.

The people of Galicia are only the latest in a long list of communities to
pay a heavy price for these terrible political failures.

There are also some specific questions about this incident, which deserve
urgent answers.

· Why do our Governments continue to tolerate this web of shell companies
and foreign jurisdictions behind the shipment of oil around the globe?

· Why are oil companies not liable if they charter dodgy single hull
vessels?

· Why is it acceptable for a ship to carry oil with clearly inadequate
insurance?

· How can it not be known for certain who really owns an oil tanker?

· How can it not be known for certain where the oil now polluting Galicia
actually came from?

· Where are the politicians seeking to hold the rich men behind all these
deals to public account?

· Ian Willmore is Media Coordinator of Friends of the Earth and writes a
monthly online commentary on environmental issues for the Observer website.