The King of Oil: The Secret Lives of Marc Rich

cost28 once it had been transported to Europe via the Cape of Good Hope. 6 At that time the usual route through the Suez Canal was not possible due to Egypt’s closure of the canal from 1967 to 1975.
    Rich gained access to Franco’s government by means of his economist friend Alfredo Santos Blanco. “He was very helpful to me,” Rich said. “He knew everybody and everybody knew him. Thanks to him we came into contact with the Spanish government and the Spanish refineries who eventually became our customers.” Santos Blanco, who in 1974 would become Spain’s minister of industry, even went on to join Rich’s company as a public relations man after leaving office. Rich had won the privilege to supply Spain because he had been able to solve a problem between Spain and Egypt. Egypt owed Spain a substantial sum of money that it was unable to pay back. Rich arranged to buy Egyptian oil for Spain and used part of that credit for the purchase. “As compensation from Spain for this business, they gave me a part of the government quota to supply them,” Rich explains. As is true of many countries, the Spanish government controlled a set percentage of all oil imports. Rich sold the “pipeline oil” for countless years to the Spanish government as part of this government quota of 30 percent.
    “Yes, the pipeline was very important to me,” Rich repeated and closed the door on the topic. The story is evidence of Rich’s close cooperation with Iran, Israel, and Spain. It was a cooperation of great value to all involved, whose importance will be explained in the following chapters. It underscores Rich’s contacts in Israel’s intelligence service Mossad. There were very few deals that had as great an effect on Rich as the pipeline business. It proved to Rich that he could trust his instincts. Once again, Rich was at the right place at the right time and had made the right decision. It was no small risk given the politicalcontroversy surrounding Israel, but the risk proved to be manageable. Most important, however, the deal had paid off. In the early 1970s, Philipp Brothers became one of the world’s largest oil-trading companies almost overnight, and Rich created the beginnings of a spot market for oil that he would later perfect in his own company. He sold most of the oil to Spain, but also to Italy and mid-sized oil companies in the United States. It was a novel development. Oil could now be bought “on the spot” on short notice with no need for long-term contracts or other obligations to the major companies or oil sheiks.
    Rich’s ability to bring together improbable business partners would soon become his trademark. He would repeatedly serve his clients as a discreet go-between—a kind of “crude oil middleman.” It would prove again and again to be the most lucrative kind of deal. In times of crisis, governments were prepared to pay a premium for strategically important commodities such as oil. Rich carved out a niche for himself that would allow him to make contacts and gather experience in the oil trade on a grand scale. The contacts he made would soon allow him to leave Philipp Brothers and found his own company. Thanks to Israel and Spain—and Iran, of course—Rich would soon ascend the throne to become the undisputed King of Oil.
Yom Kippur War
     
    Knowledge is power. This is probably more true of the commodities trade than of any other field—with the exception of the military. The difference between wealth and wreckage usually depends on access to superior information. The contacts that Rich and Green had made in Iran were worth their weight in (black) gold. Thanks to these excellent relations, Rich learned early in the 1970s that the oil-producing countries were incensed. The high inflation rates coupled with the massive devaluation of the dollar made their income from oil sales plummet. In spring 1973 Rich and Green heard of the “new structures” looming inthe oil industry as well as of OPEC’s desire to raise prices before the competition had gotten wind of it. “I wouldn’t call it inside information, but direct information,” one oil trader who was involved in the Iranian deals told me. “Contrary to the other companies, we were on the spot, we were there. Contrary to them, we got all the information available in the market.”
    Rich saw the opportunity that others had failed to see. “We felt the market was changing, the whole world was changing,” he recalls. “We knew more