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July 2, 2013 9:45 AM   Subscribe

Buried Secrets How an Israeli billionaire wrested control of one of Africa’s biggest prizes.
posted by JPD (18 comments total) 9 users marked this as a favorite

 
Agh. I lived in Guinea in 2008. The potential for wealth is evident. The international exploitation is even more evident. It's a painful place with more potential than it is capable of recognizing... at all.
posted by eenagy at 10:02 AM on July 2, 2013


My friend worked at the US embassy in Conakry from 2010-2012 and had a similar opinion to eenagy. A sad place with lots of potential, but so broken it is hard to imagine how it will be fixed.
posted by Falconetti at 10:19 AM on July 2, 2013


Beny Steinmetz Group Resources says there was no corrupt behaviour in its acquisition of licences to one of the world’s largest iron ore concessions, in the West African nation of Guinea. It asserts that the wife of a former Guinean dictator had no involvement in its business dealings. All such allegations, it says, are part of a smear campaign.
Global Witness has seen evidence to the contrary.
posted by adamvasco at 10:22 AM on July 2, 2013 [1 favorite]


Great article. Thanks for posting it. Africa is a complex and fascinating continent; I used to do work there and this makes me miss that very much.
posted by Aizkolari at 11:10 AM on July 2, 2013


thanks. I think its a great look inside how western companies are able to sign absurdly uneconomic terms via graft and kleptocratic governments and how difficult it is for governments who want to be clean to go back and adjust the terms of the relationship to something more equitable.



Its also something to keep in mind whenever you see some country unilaterally re-pricing a contract with a western company. I just think it speaks to the idea that capital investment should earn some reward commensurate with risk and the rest of the money should go to the resource country,

That and the idea of Soros as an anti-semite seeking to smear Steinmetz for being a Jew is just so wonderfully preposterous it made me laugh out loud. I also love the details of the notarized bribery contracts and the idea that Steinmetz might litigate Guinean Matrimonial Law to avoid the charges against him.
posted by JPD at 11:34 AM on July 2, 2013 [1 favorite]


Yeah, I was doing work with telecoms in Africa and elsewhere in the developing world and a lot of the business practices rang pretty true to me. I can't wait to see what Sub-Saharan Africa looks like in 10 and 30 years. The last line of the article really hits on the incredible opportunity for human development in Africa and the huge challenges in the way of realizing it.
posted by Aizkolari at 11:40 AM on July 2, 2013 [1 favorite]


Collier told me. Like the silver mine in Joseph Conrad’s novel “Nostromo,” the Simandou deposit holds the promise of supplying what Guinea needs most: “law, good faith, order, security.”
Now, there's a man keeping a firm eye on a future paycheck.... list the countries where "there is little industry and scarce electricity, and there are few navigable roads. Public institutions hardly function. More than half the population can’t read." where resource extraction led to law, order and security? Collier knows full well this is bullshit but wants to make a buck off the "scramble for resources" and there are an army of glib, greedy people like Collier who think their hands are clean.

I just think it speaks to the idea that capital investment should earn some reward commensurate with risk and the rest of the money should go to the resource country...

wouldn't putting that *should* into practice amount to some fairly radical international capital controls?
posted by ennui.bz at 12:08 PM on July 2, 2013 [1 favorite]


wouldn't putting that *should* into practice amount to some fairly radical international capital controls?

Would not remotely require capital controls. Really has nothing to do with it.
posted by JPD at 12:25 PM on July 2, 2013


wouldn't putting that *should* into practice amount to some fairly radical international capital controls?

Not really, oil and gas work like that almost everywhere. Even in Nigeria, which is hardly a model of good governance, the Western oil majors operating there make a few dollars per barrel and the state receives all the rest.
posted by atrazine at 12:27 PM on July 2, 2013


related. And unfortunate.
posted by JPD at 12:28 PM on July 2, 2013


Even in Nigeria, which is hardly a model of good governance, the Western oil majors operating there make a few dollars per barrel and the state receives all the rest.

Maybe I'm missing the irony here, but if this is true - where does this money end up? I'm guessing government friends and relatives, and foreign companies via wasteful govenment spending.
posted by Dr Dracator at 1:27 PM on July 2, 2013


Not really, oil and gas work like that almost everywhere. Even in Nigeria, which is hardly a model of good governance, the Western oil majors operating there make a few dollars per barrel and the state receives all the rest.

Oil is a single commodity and it is explicitly cartelized, without OPEC I doubt that would be the case. Do you create a cartel for each mineral commodity, one big mineral mining cartel? Otherwise, how else do you regulate mining interests except by controlling the money, i.e. capital controls?

But even then, OPEC is not a creation of the invisible hand. Look at diamonds, the business practically cartelized due to de Beers but you wouldn't argue that diamond mining is lifting up Africa...
posted by ennui.bz at 1:28 PM on July 2, 2013


Now, there's a man keeping a firm eye on a future paycheck.... list the countries where "there is little industry and scarce electricity, and there are few navigable roads. Public institutions hardly function. More than half the population can’t read." where resource extraction led to law, order and security? Collier knows full well this is bullshit but wants to make a buck off the "scramble for resources" and there are an army of glib, greedy people like Collier who think their hands are clean.

Uh...this is Paul Collier. Author of The Bottom Billion. He's literally dedicated his entire career to advocating ways for developing nations to utilize their own resources to pull themselves out of poverty and avoid being exploited by the developed world. There are a lot of assholes in this story, and you're going after one of the very small number of people described here who aren't jerks.
posted by protocoach at 1:53 PM on July 2, 2013 [1 favorite]


E. bz. I think you have a fundamental misunderstanding of how these projects work. OPEC like cartels have nothing to do with it. The way a commodity prices also isn't very relevant. You can't just say "I want to develop this mine". You have to negotiate a transaction with the government. "We will pay you x for the rights and x % of our profits given x price for the commodity". Usually structured so that investors get a decent return given the risks and the rest goes to the country"
posted by JPD at 2:28 PM on July 2, 2013


The de beers example is really weird. It's like the exact opposite of what we are talking about.
posted by JPD at 2:31 PM on July 2, 2013


Maybe I'm missing the irony here, but if this is true - where does this money end up? I'm guessing government friends and relatives, and foreign companies via wasteful govenment spending.

Some of it, certainly. At least money diverted by Nigerian politicians into construction projects to serve their political clients is spent in Nigeria. It's better for the local economy for some of the money to be stolen by corrupt politicians and spent locally than it is for the money to never even pass through the country.

Even in Nigeria, a very large percentage of the oil money does genuinely get through to the government. Whether the government infrastructure projects and welfare spending funded with that money are procured and run in an honest and transparent way is another question.
posted by atrazine at 2:48 PM on July 2, 2013


In developing this ambitious agenda, Cameron had been closely advised by Paul Collier. “This is Africa’s big opportunity,” Collier told me.
Paul is currently Advisor to the Strategy and Policy Department of the IMF, advisor to the Africa Region of the World Bank.
As an economist, Collier's call to arms is founded on hard-headed cost-benefit analysis, not post-colonial guilt or emotional hand-wringing. He calculates, for example, that the cost of a badly governed 'failing state' to itself and its neighbours in lost economic growth is a staggering $100bn. On that basis, spending a few million on parachuting in skilled administrators to support the government, bankrolling infrastructure projects or even sending in troops to put down an incipient coup looks like a bargain.
Collier's job looks to me to be to whitewash resource extraction to meet the IMF/World Bank agenda for developing nation "growth." The agenda is to ratchet down foreign aid while increasing export GDP with an implicit appeal to soft controls on local governance, the sort of colonialism with a friendly face which appeals to a certain type. For you see, even after two decades of globalization, the problem for the bottom billion is that they aren't integrated enough into the global economy. That's an appealing message to certain kind of policy consumer, and if Collier doesn't sell it, someone else will. Being high-minded about it is part of the appeal and he's a utilitarian: an ideological pragmatist. The lesson of Reinhart-Rogoff is that academic prestige and a legitimate career doesn't make you any less of a shill.

In the end, someone is going to be making bank on that iron: Vale, Rio Tinto, BSGR or someone else entirely. Steinmetz makes the whole business look bad. He has blood on his hands from the diamond business, he's a pushy jew who resembles a Bond super-villain. There's nothing sympathetic about him and no one is going to have any sympathy for him. But I'm not seeing any good guys here.

. I think you have a fundamental misunderstanding of how these projects work. OPEC like cartels have nothing to do with it. The way a commodity prices also isn't very relevant.

It isn't? The fact that OPEC has quite a bit of control over the price certainly changes the terms of whatever investment deals are going on. But, you're right, I actually don't know. I think this article gives a good sense of why reasonable deals don't occur in places like Guinea. But it seems to me that, structurally, you have little reason to expect anything different. Nigeria is often trotted out as an example of a failed state. I'm not sure it's a good example of the possible.

Also, I think Britain would have been happy to conduct the oil business in the middle east following the template you see in this article. If it's different, I would put a lot of that on the politics of the "post-colonial" ascendancy of the US after WWII.
posted by ennui.bz at 3:42 PM on July 2, 2013


If she agreed to this plan, Cilins told her, she would be paid a million dollars. He had brought along an attestation—a legal document, in French—for her to sign. (Cilins’s comfort with formal legal agreements appears to have extended even into the realm of the coverup.) “I have never signed a single contract with B.S.G.R.,” the attestation read. “I have never received any money from B.S.G.R.” The arrangement included a possible bonus, Cilins said. If she signed the attestation, destroyed the documents, and lied to the grand jury, and if B.S.G.R. succeeded in holding on to its asset at Simandou—“if they’re still part of the project”—she would receive five million dollars.

That's just ... holy shit, what balls; what poetically ironic stupidity.
posted by crayz at 5:44 PM on July 2, 2013


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