Oil, aluminum, mercury. You became the most powerful commodity trader because you had a knack for creating new markets and for seizing opportunities. Where would you go today? In what commodities would you invest?
All commodities will be good business. The world will produce more products for more people and will thus need more raw materials.
Which will be, in your opinion, the most sought-after commodities in the twenty-first century?
Energy and water will probably become very important.
How do you see the future of oil?
Oil will play an important role for a long time to come, but there is no denying that it is a finite commodity.
Where do you see the oil price going?
Up and down, but up in the long term. Without any doubt.
Do you see a business opportunity in renewable energies?
As much as I like oil, it’s obvious that oil has to be replaced in the future. Without doubt renewable energy will play an important role in this process. As it will become more expensive to get the remaining oil out of the ground, its price will inevitably go up. Higher oil prices will motivate innovation in the renewable energy sector, and higher prices will motivate people to switch.
Where would you invest?
I would invest in wind energy, but also in nuclear energy. Global warming and the reduction of carbon dioxide emissions will be important issues in the future.
You know the intricacies of the Middle East better than most other Western businessman. What is your opinion of the Iraq War?
The Iraq War was a mistake. It’s mind-boggling that a handful of politicians can lead a nation into full war for such skimpy reasons. Obviously Saddam Hussein was a bad guy, but there are plenty of bad guys in this world and the United States hasn’t bothered to remove them. It would seem that George W. Bush was driven by personal reasons, which makes the whole story worse, of course.
What personal reasons do you think of?
Saddam Hussein provoked Bush. Bush rose to the bait. It was such a foolish thing to do. He didn’t control his emotions. Terrible. Terrible for a president.
Was it a war for oil?
I don’t think so. You could have had the Iraqi oil cheaper simply by lifting the embargo, but the oil argument probably helped to convince some of the decision makers.
Do you think the oil industry had an influence on the decision to invade Iraq?
The oil companies will take business when it’s offered to them, but I don’t believe the oil industry, as you call it, pushed for that war. I think that perception stems from the fact that some of the Republican hawks were connected to that industry.
How do you judge President George W. Bush?
George W. Bush turned out to be a very bad president, disappointingly bad. His father was much better.
What was bad about him?
The Iraq War was the worst, of course, but I don’t know a good thing he did.
What do you think of Barack Obama?
It’s wonderful that there was a change. Barack Obama might be a good president. He already changed the atmosphere in the world. People again anticipate good things to come from America. I hope Obama will be a good president; it would be good for the world.
I would have preferred Hillary Clinton, though.
Did or do you support Hillary Clinton financially?
No, I didn’t and I don’t.
Barack Obama’s unlikely rise to power reminded me of you. You both came from humble origins and made it to the top.
Yes, but I’m not black, I’m only the black sheep.
You both represent the classic American success story. The rest of the world admires the United States for making such opportunities possible.
The United States was an open country and still is an open country. I was able to do many things there that would have taken me longer elsewhere. Business-wise it was a good thing to do, but practically it was terrible. In retrospect I should have never gone with my company to the United States.
What were, in your opinion, the three biggest mistakes of U.S. foreign policy over the last fifty years?
Cuba, Vietnam, Iraq, and the notion of being all-powerful and thus being able to disregard everybody else’s opinion and interests.
And the three biggest successes?
I think the biggest success story of the Americans is their capability of renewal.
Where do you see the roots of the global financial crisis?
Too much credit. Too much lending of money. The banks didn’t control the risk.
Because of short-term thinking?
No question about it.
Are you affected by the crisis?
Everybody is affected by this crisis.
How much money did you lose?
I won’t tell.
But you would say that it is the worst financial crisis ever for you personally?
Yes.
How will we get out of it?
We will get out of it, but not so fast.
How long will it take to overcome the crisis?
Three to five years, I think.
Can the governments be part of the solution?
Probably. They tried. They provided the banks with capital and credits that the banks should pass on, but the banks don’t pass it on, so it was only partly successful.
One of the consequences of the financial crisis will be more regulations and less free markets.
Could be.
Would it be bad?
It goes in the wrong direction. I believe in the free market. Government regulation is often negative, restrictive, and impedes the normal flow of business. Political interventionism is the biggest threat to efficient markets.
Will the world be more free or less free in five years?
Broadly speaking, people will always strive to be free. The quest for freedom is probably as old as humanity.
Let me ask in a different way: Will we see more regulation and less liberalization?
Liberalization and regulation come and go in cycles; they are the product of the economic and political landscape in a given moment. Unfortunately, there seems to exist an underlying trend for more regulation. Whenever there is a problem somewhere, even if it’s a single event affecting few people, as long as it gets enough publicity, some politician will clamor for a new regulation or law.
Will the world be more globalized or less globalized?
The world will be more globalized. Whatever people pretend, globalization is not really a recent invention. Cross-border trade has been around since people started traveling and exchanging goods.
How do you see the Russian policy regarding oil and other commodities?
The Russians are looking firstly for themselves. You can’t really blame them for that.
Foreign energy companies in Russia such as Royal Dutch Shell and British Petroleum were forced to sell their stakes to the state companies. Do we witness a renationalization of the commodity markets in Russia?
We are indeed seeing a renationalization of certain strategic sectors.
How should the West react to this policy?
The West is not in a good position to criticize the Russian policy. You have only to read the newspapers to see that other countries are equally protective of their pet companies and “national champions.”
How do you see Russia’s future?
You have to separate the noise from the music. The music is that Russia will slowly, slowly drift in the same direction—by and large—as most developing nations: toward democracy and market economy. We live in an age of instant and all-encompassing information and relative freedom of movement. This means that politicians can’t fool people like they used to.
China has become both a major supplier and consumer of commodities.
The Chinese government needs to provide a billion people with food, energy, housing, transportation, et cetera, and they want to catch up with the developed countries. This means they will want to control as much oil and other com
modities as they can lay their hands on.
How will this change the commodity markets and politics?
China is a political and strategic player before an economic one. This will clearly have an impact on the market, as most other market participants are guided purely by economic principles.
You were trading with the Chinese much earlier than others. What is special or easy or difficult about doing business with the Chinese?
They play by different rules than the Western companies. Whoever believes he can force his rules and his values on a Chinese business partner will be disappointed by the result. If you can play their game, you can have success.
China’s policy regarding commodities is considered quite aggressive. It is investing billions in Sudan and Zimbabwe, whereas American companies generally steer clear of investment. What is your opinion?
China has the critical mass of a world power. It is simply too big and economically too important to be bullied or boycotted. The Chinese are obviously fully aware of this and use it smartly to their advantage.
Are the Europeans, when it comes to securing the supply of commodities, naive?
They are not naive, but contrary to the centralistic-run China, where the political power is largely in sync with the economic power, the Europeans simply cannot speak with one voice or act as one entity.
Why do you think it is acceptable to do business with countries and governments that are not exactly beacons of democracy and human rights?
Take China or Vietnam as an example. If you sell them computers, mobile phones, and TVs, they will be able to see what is going on in the world. They will be able to form their own independent opinions, which is the most important thing for any democracy. By trading goods with these countries, you actually help their citizens. The more contacts there are, the better the chance for everybody to improve.
One could argue that doing business with such regimes is morally wrong because it only supports them.
The Cubans as a people, for example, are not “bad,” but because of the U.S. embargo many children and old people must suffer unnecessarily. Yet the forty-seven-year-old embargo has not succeeded in removing Fidel Castro.
Can there be democracy without free markets? And vice versa—can there be free markets without democracy?
Free markets can exist temporarily without democracy. However, the combination of free markets and modern means of communication such as the Internet, which free markets always adopt immediately, will slowly convert that country into a democracy. As I was saying before, politicians can’t fool people like they used to.
Are there any deals that you would not make for ethical reasons?
I would not engage in any illegal activity, of course.
Have you ever traded arms—legally, I mean?
We’ve been approached to become involved in the arms business a few times over the years. We’ve always pointed out very clearly that it’s our policy not to get involved in such business. Neither I nor my companies sold, traded, or trafficked in arms for any country—including friendly countries.
You are very active as a philanthropist, not least in Israel. After the Lebanon War of 2006 and the recent conflict in Gaza, will there ever be peace between Israel and the Palestinians?
My foundation has made substantial efforts to foster a better understanding between Israelis and Palestinians. It’s not an easy task, but I believe the two should be able to live together peacefully sometime in the future.
What are the reasons that there has been no peace yet?
The whole situation is hugely complex, but one of the reasons is certainly the settlers.
What has to change in order to give peace a chance?
Peace is a long-term project, in some cases tremendously long-term. It needs a certain economic well-being of the peoples involved. It needs tolerance and the experience that wars and terrorism don’t pay off. All of these need to be learned, and it can take generations until people have accepted it.
Do you see the rise of Islamist fundamentalism in oil-producing countries like Iran or Saudi Arabia as a threat?
Fundamentalism of all colors is a threat.
What would happen to the global oil supply and to the oil price if fundamentalists would take over the power in Saudi Arabia?
The oil price would become even more volatile because of the uncertain and unpredictable behavior natural to fundamentalists and extremists of any type, but even fundamentalists will eventually succumb to the temptation of turning crude oil into easy money to buy themselves the support of their population.
Arabs. Russians. Africans. Chinese. Indians. Europeans. You traded with all of them. How do they differ when it comes to business?
Business everywhere is driven by the same motives, creating and selling things to make an income, but there are differences between different peoples or nations. It’s all about local codes. To know and accept them can make a big difference in business.
Who was your toughest business partner?
My toughest business partners were Pinky [Pincus Green] and Alec [Hackel]. That was one of the reasons we were so successful.
What were your three biggest successes analyzing the world markets?
Crude oil, aluminum, and currencies.
What were your three biggest failures?
Not to have had bigger positions of the three best ones.
EPILOGUE
The Gray Area
T
he snow was falling lightly as I drove along the narrow curved road that led down to the Villa Rose. I stopped in front of the massive wrought-iron gate and assumed a pleasant look for the camera installed on a stone pillar. “Grüezi,” the voice from the speaker called in greeting, before asking for the purpose of my visit. I announced my name, and the iron gate opened slowly in reply. I drove toward the covered parking area next to the villa. It was only then that I noticed the silver Mercedes that had been following me. At the wheel was one of Marc Rich’s bodyguards. He nodded toward me with a smile on his face.
It was 8:30 A.m. on a Thursday. I had arranged to have breakfast with Rich and asked if we could meet in his home. “I don’t mind,” he answered and invited me to meet him at his estate in Meggen on Lake Lucerne, the Villa Rose. A Spanish-speaking servant opened the door and directed me to the living room. I sat waiting on a beige sofa while admiring the valuable cubist works of art hanging on the surrounding walls. There were paintings by the French artists Fernand Léger and Georges Braque and by Rich’s fellow Spaniard Pablo Picasso. In the corner stood a slim bronze sculpture by the Swiss artist Alberto Giacometti. Glenn Gould’s interpretation of a piano piece by Johann Sebastian Bach could be heard from the tiny speakers mounted on the ceiling.
Suddenly Marc Rich appeared and greeted me. As always, he was wearing a dark suit with a white shirt and red tie. He looked me over and said only half-jokingly, “It’s never too early to wear a tie.” As we had arranged to meet for a private breakfast, I had decided to leave my tie at home. Before I could come up with a clever riposte, Rich’s CEO appeared—bare-necked like me. We sat down to a breakfast of scrambled eggs with black truffles, smoked salmon and horse radish, ripe papaya, and freshly squeezed orange juice.
After breakfast Rich gave me a tour of his estate. We strolled in silence through the gardens. The fig trees, vines, and rosebushes were covered in a thin layer of snow. He then led me to a monumental iron sculpture by the Spanish artist Eduardo Chillida. Lake Lucerne sparkled in the pale light of the sun fighting its way through the clouds. It seemed to be the perfect atmosphere for some fundamental questions. “With the benefit of hindsight, what would you have done differently over the course of your life?” I asked Rich, who turned up the collar of his coat to protect himself from the snow. “Do you have any regrets in particular?” He did not take long to answer my question. “I guess I’d have been more careful to avoid the trouble I had in America,” he said. “I didn’t need that business. It wasn’t necessary at all. I had
already made very good business at that time.”
If it had not been for that business—a business deal whose legitimacy or illegality has never been determined in court—Marc Rich would certainly never have been painted as the “biggest devil.” If it had not been for the (economically counterproductive) price controls imposed by President Richard Nixon, Rich would never have acquired a reputation as “the biggest tax evader in U.S. history.” Instead, Rich would still be known today as the “genius in the formerly European dominated metals market,” as he was once regarded.1 Had it not been for Rich’s fall from grace, people would speak of him today as the American hero who broke Big Oil’s cartel and invented the spot market for the trade in crude oil. He would be described as the embodiment of the American dream, the poor immigrant who would later become a billionaire and a generous philanthropist. For it is the American virtues, the American values, and, yes, the American vices Rich embodies that made him the King of Oil. Work harder. Concentrate on your goal. Think big and bold. Be aggressive. Be successful.
Of course, one can criticize Rich for supplying South Africa’s apartheid regime with oil. One can criticize Rich for trading with dictators of every stripe—from Cuba’s Fidel Castro to Nigeria’s Sani Abacha and Iran’s Ayatollah Khomeini—and, of course, one can criticize him for breaking embargos while putting profit above morality. It would be easy to criticize Rich for all of these business dealings were the ways of the world as simple as black and white. The reality, however, is much more complicated than that. Life does not always play out according to preconceived notions; life isn’t always what it seems.
The King of Oil: The Secret Lives of Marc Rich Page 29