Jeff Hirsh Read: October 2024
Inspiration: Recommended by a friend; wanted to understand the history of the modern oil trading market
Summary
Written with the help of ChatGPT, below is a brief summary to understand what is covered in the book.
“The King of Oil”, published in 2009 by journalist and author Daniel Ammann, offers a detailed biography of Marc Rich, a controversial and influential figure in the oil trading industry. The book chronicles Rich’s rise from a Jewish immigrant in post-World War II Europe to a billionaire trader who founded Marc Rich & Co., known for its groundbreaking strategies in the commodities market. Ammann explores Rich’s involvement in dodging international sanctions and his eventual indictment in the United States, which added to his notoriety. Through interviews and extensive research, the author examines Rich’s complex personality and the ethical dilemmas surrounding his business practices. Ultimately, the book presents a captivating portrait of a man who shaped the oil industry while navigating the fine line between success and legality.
Unedited Notes
Direct from my original book log, below are my unedited notes (abbreviations and misspellings included) to show how I take notes as I read.
Marc Rich born in Belgium amidst Nazi march thru Europe, born into Jewish family with entrepreneurial father who kept family afloat and fled the Nazis ultimately making their way to the US, father worked in materials trading as moved around europe given limitations on where jews could work, this determination/desire to survive from his father and inspired Marc once landed in the US to be scrappy, spoke many languages and continued to study, Marc enrolled NYU 1952 but soon wanted practical experience—first job at Philipp Brothers 1954 which was worlds largest trader in raw materials at the time, Philipp Bros make everyone start in mail room regardless of education/background, european jews historically only could find jobs via metals trading and lending given discrimination, lending history gave jews leg up on international connections required for materials trading, goal of commodities trader is to “create a market”—see trends in demand before everyone else and find supply to facilitate, Marc created his first market as junior trader at PB in Mercury mid 1950s, mercury used for batteries, detonators only at the time and Rich saw war/geopolitics would increase demand, cold war esclation, mao seizing china 1949, korean war erupted 1950, soviets in east germany 1953, 1956 suez canal nationalization by gamal abdel nasser in egypt, Rich connect with spanish mining company, eisenhower demand more armament requiring 50% increase in mercury stock—good for equipment batteries, Rich experienced in politically fraught regions, Cuba 1958 NYE Che Guevara and Castro coup of Fulgencio Batista (in power with US help since 1933), castro and che nationalize much of cuba and froze foreign investment—PB hurt by these moves and sent Rich to strike deal with Castro regime and did so despite US embargo as Rich ran PB Madrid Office, Rich oversaw in Madrid all happenings in key/volatile markets in Africa, middle east, cuba, well connected within Spanish gvt, first notable crude trade 1969 with tunisia sale of crude oil to PB Milan office (not Rich) and PB trader sold to Milan refinery (“back to back trade”), oil was never traded in open mkt pre 1969 but Rich wanted to find a way, Six Day War 1967 egypt vs israel led to first oil embargo as egypt allies (algeria, iraq, kuwait, libya, saudi) pledge stop sending allies of israel oil (US, britain) but US went to non arabs for oil (venezuela, iran, indonesia) and 2 month embargo simply lose money for boycotters, facist Spain in 60s had good relations with oil rich arab nations and Rich well connect to ministers in Spain, pre 1960s Seven Sisters control oil market (chevron, esso, gulf, mobil, texaco, BP, anglo dutch shell), oil producing nations sold nearly all their oil to seven sisters at fixed prices agreed upon up to 2 yrs in advance (5% supply freely trade), seven sisters took huge markups as profit, prices more or less flat 1948-70, then OPEC formed 1960 to combat (iran iraq kuwait saudi venezuela) and increase prices and get profit from seven sisters, OPEC call for nationalization of member states oil fields and while slow at start it accelerated 70s, one driver was Nixon move US off gold standard—dollar lost 20-40% value so given oil trade in $ then opec nations traded their oil for now much less valuable dollars, algeria first to nationalize 1971 then libya then iraq and others follow across middle east, by 2009 ten state oil co’s control 75% global oil reserves—saudi aramco, russia’s gazprom, iran’s NOIC as top 3, requirement to work was oil nations needed indep traders like Marc Rich to facilitate deal/transport, Rich spot trend on horizon 1969 and plan for logistics via his network and partner at PB Pincus Green, 1960s israel got 90% of oil via iran but iran not recognize israel, 1965 golda meir to tehran and shah discuss pipeline with NOIC for israel-iran oil supply, set up 50/50 jv for pipeline completed 1969–big state secret, Rich wanted to get involved to find buyers for iranian oil that passed thru israel—Rich became connected to the shah and NOIC via Pincus Green connections, Rich took iran oil and sold to spain but disguised origins in transport given spanish fascist leader Franco didnt recognize israel, spain bought given Rich’s connections in spain gvt, 1973 NOIC then want to sell oil on free mkt and Rich leverage connections from israel pipeline dealings to execute, Rich left Phillips soon after this deal bc didnt give him enough bonus so started Marc Rich & Co out of Switzerland, leveraged NOIC ties and sold iranian oil to US and others, 1974 Oil Shock prices rise 50% and with embargos/war supply shortage—Rich had supply connections globally and leverage, year 1 his company did 50mm profit then 200mm next year, Rich/Green deployed tactics such as take russian oil say for cuba but deliver venezuela oil to cuba and sell russia elsewhere to get benefit of discount prices russia thought giving cuba and save on transport, kill seven sisters oligopoly given quickness and connections in mkt, Rich company have 30 office globally as 70s end, then Jan 1979 persian monarch reza shah pahlavi fall in Iran and Ayatollah come in, nov 4 1979 Iran Hostage Crisis and muslim students stormed US embassy in tehran and take 9 hostages while ayatollah offer support as natural reaction given hatred for US lifting of shah into power and support for israel, demand shah returned and US stop their “plots” such as 1953 coup, Pres Carter react with sanctions and freezing of assets, cut ties april 1980, hostages not freed til jan 20 1981 (444 days), huge US failure, Iran oil supply diminish as iran transition and opec increase prices, gas prices in US 2x in 1979, despite all this given Rich was swiss based company and not american based as sanctions prohibited, ayatollah and NOIC honored shah’s contracts with Rich for 60-75mm barrels per year, even in hostage crisis Rich never stopped selling iranian oil, iran had supplied 6% of US oil at time of crisis and caused huge disruptions, Rich had oil deals with Nigeria and Angola as well to feed US demand, case against mark rich led by guiliani and his team in nyc who were so focused on PR wins that sacrificed actually arresting Rich as Rich remain in Switzerland, Swiss gvt go cold on assisting US as US disrespect their laws, Rich maintain as swiss entity did no wrong in conducting biz with iran/others and properly accounted for all vs guiliani say biggest tax fraud case ever, Rich’s team repeatedly tried to settle but each sdny attorney refuse to negotiate with fugitives, remained on most wanted list for 20 yrs until Clinton pardon 2001, all the while rich’s business persist, Rich focus on long term contracts with countries—connect sensitive suppliers with sensitive buyers, Rich had a 50-50 JV with burundi gvt, worked with Angola after 1975 indep from Portugal as angola second largest african oil supplier—angola was in proxy war bw soviet/cuba vs US backed factions and even as soviet backed faction take over still work with Rich for oil knowledge via another JV with the gvt oil co, rich helped connect these countries to banks/financing and global mkts where rich make massive profits, similar in Jamaica with new Pres Manley who spoke out against Rich on bauxite/aluminum trade but then jaimaca need $45mm cash to pass IMF audit 1989 since so much debt and rich provide in exchange for 10yr deal to take alumiunum output at fixed price (huge profits as prices rise, jamaica passed imf audit so credit continued keeping economy afloat), Marc also work with South Africa apartheid regime via oil from iran even as iran denounce publicly—south africa needed iranian oil and paid premium to rich to get which netted 2bn profit to rich 1979-94 as deliver oil from iran but also other middle east countries who denounced SA (plus soviets, ecuador), Rich agreed to leave his company 1992 and fully sold out 1994 all in $600mm—Marc Rich & Co was doing 30bn revenue and 200-400mm profit per year, marc had $172mm loss on zinc mkt cornering trade just prior to stepping down and faced pressure, handed over company to former trader he fired but respected and renamed the company Glencore—one of the biggest commod trading firms today but no mention of Marc Rich, separately rich was central figure in aiding israel peace talk thru the 80s/90s—close with all israel PMs—started with israe/iran oil but Rich would assist lots of israeli talks on hostages, energy, etc with adversaries (US used rich to assist even), instrumental to Rich’s pardon was advocacy to Clinton from Ehud Barak, Shimon Peres, Shlomo Ben Ami and other israeli leaders—peres tout Rich’s instrumental investment in palestinian asks/infra that assisted in Oslo Accords 1993/4, Barak pressed Clinton multiple times, Peres as well—viewed Rich as financier of Oslo Accords and valuable to Mossad/Israel security,
