As the out of office messages continue to ping back, and the summer holiday season draws on, it's time to share a few more ideas for poolside reading or beachside listening. We cover scandals at sea, murder, corruption ashore, and a 1970s hit single that must be playing in the lobby of a certain oil company in the UK this week.
Matthew Campbell and Kit Chellel of Bloomberg have written the must-read book of 2022 for the entire maritime industry. Dead in the Water describes a shocking scheme to defraud insurers of millions of dollars through the deliberate destruction of a laden tanker in the Gulf of Aden. It is a true story, but it reads like a thriller. The book is only possible because of painstaking and persistent investigation work funded by the insurers, which resulted in a shocking judgement in London's Royal Courts of Justice in 2019. Had there been no public judgement in court, England's oppressive libel laws would likely have kept the horrible saga secret.
After reading Dead in the Water, you might look at the Greek shipping industry, the Greek ferry industry, the Greek salvage industry, and the Greek banking industry very differently. As usual, whistle-blowers put their lives on the line to expose the truth, and as usual, they were threatened and abused, and worse. The authors dig down into a nitty-gritty world of private investigators, meetings at luxury hotel buffets in Manila, and desperate efforts to dispatch private security to protect witnesses in remote villages in Greece, menaced by nameless thugs.
The facts of the case are undisputed. In July 2011, the Liberian-flagged Suezmax tanker Brillante Virtuoso, ultimately owned by the Greek shipowner and rally-car driver Marios Iliopoulos, was underway with a cargo of a million barrels of crude from Ukraine to China. Close to Aden, the ship was boarded at night and set on fire a by group of armed men, who were purported to be Somali pirates. They had arrived in a small boat under the guise of being the security team that the owners had booked to arrive the next day.
The Filipino captain of the tanker, Noe Gonzaga, instructed the crew to let them up the pilots' ladder without checking their credentials at all, or even bestirring himself from his cabin. After being confined at gunpoint in the television room by the armed gang, the crew rescued the captain from the bridge, abandoned the tanker, and were pulled safely from the vessel's lifeboats by the US Navy. The chief engineer, Filipino Nestor Tabares, remained on board and was picked up by the US Navy after jumping from the burning ship in the morning when a helicopter arrived on the scene.
The vessel was salvaged by a consortium of Greek salvors, which would later claim millions for their efforts, and towed to Dubai, where the cargo was offloaded. Brillante Virtuoso was so badly damaged by the fire that it had to be scrapped.
David Mockett, an experienced British surveyor who was based in Aden, was one of the first people on the ship after the attack. He highlighted to the insurers that the damage he had witnessed was not consistent with the narrative that the owners were claiming had taken place. He did not believe that the attackers were Somalis or pirates. He saw no evidence of rocket-propelled grenades (RPGs) being used in the attack. Mockett did not believe that it made sense for the attackers to abandon the ship, set fire to it, and release the crew.
Two weeks later, he was killed after a car bomb blew up underneath his vehicle in Aden. To this date, nobody has been charged for his murder. His laptop disappeared after his killing and the Yemeni police's investigation efforts were as pathetic as you might expect them to be.
A second surveyor who tried to visit the vessel was arrested by the Yemeni authorities and prevented from boarding the tanker to continue Mockett's work. Another Briton in Aden who was pursuing a claim on unpaid bunker invoices for Brillante Virtuoso was also later found dead from a blow to the head. The Yemenis never got to the bottom of that, either.
When the London insurance syndicates faced off against the Greek owners and their bank, Mr Justice Teare had to consider whether the events surrounding the fire on Brillante Virtuoso absolved them from paying out the insured value of US$77 million to the vessel's owner, and to the mortgage holder Piraeus Bank, or not.
Spoiler alert! The judgment of the case concluded that the "orchestrator" of the events that led to the ship's loss was none other than… its owner, Marios Iliopoulos.
Dead in the Water highlights that Mr Iliopoulos had also suffered the loss of an earlier tanker, the Aframax ship Elli, which split in two near the Suez Canal after catching fire then grounding whilst in ballast in August 2009. What an unlucky shipowner!
Even more unlucky would seem to be chief engineer Nestor Tabares, who was also the chief engineer on Elli when it sank in a loss that netted its owner a US$35 million insurance pay-out.
But what lucky salvors! The same dream Greek team of Five Oceans Salvage and Poseidon Salvage International were both fortunately on the scene to assist in the salvage of Elli then as well, as they would be for Brilliante Virtuouso.
"The improbable can happen," Mr Justice Teare observed in his judgement. "But when a number of improbabilities occur consecutively within a short period of time it is very difficult to accept that they are coincidences. Collectively, they are a cogent indication that the improbable did not happen and that the explanation must be that the master and chief engineer, far from being the victims of an attack by Yemeni pirates, were in fact co-conspirators with the armed men in a scheme to damage the vessel by fire."
Paragraph 476 of the judgement is the most damning:
"The orchestrator of these events was the owner of Brilliante Virtuouso, Mr Iliopoulos. It is improbable that the armed men, master, chief engineer and Mr. Vergos [of Poseidon] took part in the conspiracy on their own initiative. By contrast Mr Iliopoulos had a motive to want the vessel to be damaged by fire, namely, the making of a fraudulent claim for the total loss of the vessel in the sum of some US$77 million, which, if successful, would solve the serious financial difficulties in which he and his companies were at the time…
"Only Mr Iliopoulos had reason for the crew to tell an untrue story. Thus, the evidence relating to the loss, the crew's untrue evidence in their early witness statements that the armed men described themselves as the authorities and Mr Iliopoulos' motive for setting fire to his vessel amount to a cogent and compelling case that the events were orchestrated by him. The case against him is strengthened by what is known of his character from the findings made by [a witness] and by the inference that the documents he was unwilling to disclose would have supported the case against him. I have therefore concluded that Mr. Iliopoulos was the instigator of the conspiracy."
I don't need to say any more. The insurers did not pay out on the loss of Brilliante Virtuouso. But Dead in the Water makes it clear no criminal charges have been made against Mr Iliopoulos, who continues to be involved with one of Greece's largest ferry companies.
It's a shocking tale, and a must-read summer book.
What a couple of months for Glencore. In June, the Swiss-headquartered and UK-listed miner and trading house admitted guilt in a wide-ranging corruption scandal, involving both kickbacks to win oil shipments in Nigeria, Equatorial Guinea, Ivory Coast, South Sudan, and Cameroon, and the manipulation of American fuel oil price benchmarks.
Glencore agreed to pay out US$1.5 billion as a settlement with the authorities in Brazil, the US and the UK. The company's new CEO Gary Nagel said he was completely unaware these bribes of over US$25 million were being paid by the company (here). Strange, that. No individuals have been criminally charged for their involvement in the scandal, no directors have stepped down.
Then in July, Glencore was found guilty of supplying contaminated bunkers to ships in Singapore and had its bunkering licence suspended by the Singapore government for two months. Reuters coverage is here.
The World for Sale highlights the long history of mixing cargos and creating exotic blends of both crude and refined product, which several of the trading houses have used to optimise their profit margins, and sell crude in some unusual places.
Last week Glencore reported net income of US$12 billion for the last quarter to June 30, profits even bigger than Chevron, Shell and TotalEnergies. The company's jubilant results presentation is here. Glencore said last Thursday that it would increase its dividends to shareholders by US$1.45 billion, and buy back a further US$3 billion of its own stock. One might comment that as the planet fries, Glencore profits from the coal business more than any other western company.
Bloomberg reported on the Glencore profit here, noting that Glencore is the world's top coal shipper, and "has been one of the biggest winners from the global energy crunch as demand surges for fossil fuels."
To find out how the big global commodity trading houses, and Glencore in particular, became so rich and powerful, I would recommend you read The World for Sale. Authors Blas and Farchy do an incredible job of showing the murky history of Glencore, Trafigura, Gunvor, and Vitol, and how these companies came to have governments in their pockets.
The book exposes their "interesting" approach to legal compliance, highlighting how Glencore was found to have paid kickbacks to Saddam Hussein to obtain access to Iraq's oil shipments in the 1990s. The authors trace the history of the company, which began when a fugitive from justice in America named Marc Rich set up his trading house in Switzerland. It reminds us of Glencore's decidedly risky mining operations in the Democratic Republic of the Congo, and its relationship with some "shady" middlemen there.
Despite the warrant from his arrest for breaking Iranian sanctions in the 1980s, Glencore founder Marc Rich was eventually pardoned by President Bill Clinton just before he left office in 2001. Rich's wife was a major donor to the Democratic Party and the heads of state of Israel and Spain petitioned on his behalf, citing his good character.
The story of how Marc Rich and Co became Glencore is a story of the best justice money can buy. And with US$12 billion in income this quarter, don't expect Glencore to be changing its operating practises soon.
Featuring lyrics about the struggle to work all night and work all day to pay the bills, Money, Money, Money is a classic 1970s chart topper. The female singer Anni-Frid Lyngstad contemplates finding a rich bloke to marry ("In my dreams I have a plan, If I got me a wealthy man, I wouldn't have to work at all, I'd fool around and have a ball") but eventually comes to the conclusion that she should travel to "Las Vegas or Monaco" in order to "win a fortune in a game".
Ms Lyngstad doesn't need to go that far. She could go to Sunbury in the UK, to the headquarters of the oil company BP, which has won a fortune in the oil game, a business which it now refers to as "resilient hydrocarbons".
As we expected when we surveyed the other majors' earnings here, BP announced bumper profits of US$9.2 billion last week (here) and even higher operating cash flow in the quarter, cash flow of US$10.9 billion. This allowed BP to announce a ten per cent increase in the quarterly dividend per ordinary share and a further US$3.5 billion share buyback.
As ABBA observed in another song, The Winner Takes It All (here). The winners of the current high oil and gas price environment are the definitely the oil and gas producers, like BP, and the coal miners like Glencore. Consumers seem to be the losers who have to fall, unfortunately.
Happy holidays.
Background Reading
Our first set of 2022 holiday shorts can be found here.
The full judgement from the English High Court on Brilliante Virtuouso case is here.
BBC coverage of the inquest into David Mockett's death is here.
The Guardian covered Glencore's activities in the Democratic Republic of Congo here.
A second book, The Secret World of Oil, also covers the rise of the trading houses here.
The music video for Money, Money, Money is here.