The King of Oil: The Secret Lives of Marc Rich

deliveries. Jamaica was saved; IMF officials accepted the government’s accounts and approved the new credit.
    Critics maintain that Rich was thus essentially able to buy Manley and effectively take Jamaica hostage. However, the reality of the situation was that no bank, no international organization, and certainly no other company would have been prepared at that time to lend Jamaica a single cent. The country was over4 billion in debt and was not even remotely creditworthy. “In any other company it would have been considered crazy to give Jamaica money under such circumstances,” a Rich employee who played an important role in the Jamaican negotiations told me, “but we never let down the people who do business with us. We sometimes even took on losses.” Of course, Rich’s people were not helping Jamaica out of a sense of charity: “For us every situation was an opportunity. We weren’t looking for fast money. We were looking for an ongoing relationship.”
    Rich’s companies were willing to accept the smallest of profit margins—and ready to take an occasional temporary loss—in order to break into a market or enlarge their market share. The trade in commodities—and this is particularly true of aluminum—is a cyclical business. A one-or two-year period of high prices can be followed by longer periods of low prices. Those traders who are prepared to operate against the cycle, hold out during dry spells, and even invest during hard times can reap good profits when the prices again begin to rise. There is no better example of this strategy than Rich’s Jamaican aluminum trades.
    Rich had already helped Jamaica out of trouble four years prior to the island’s troubles with the IMF. In 1985 aluminum prices had hit a low of1,080 per metric ton—the lowest price in years. 12 At the same time, oil prices had skyrocketed, making the complicated and energy-intensive production of aluminum even more expensive. The American aluminum producer Alcoa, which mainly made money as a supplier of aluminum to the aircraft and automobile industry, wanted to shut down its Jamaican production facilities for converting bauxite into aluminum oxide due to increasing production costs. It had become cheaper for Alcoa to purchase aluminum oxide from a third party.
    The closing of the Alcoa facility was a catastrophe for the country, which lived mainly from tourism and bauxite. It was a golden opportunity for Rich, and his people immediately approached the prime minister, Edward Seaga. “We knew exactly what we wanted. We had a plan that covered everything from A to Z,” Rich’s employee explained. “We told the minister of industry, Hugh Hart, he should suggest to Alcoa that they lease the facility to the government instead of shutting it down. We knew Alcoa would agree, as even a closed facility would have cost them a lot of money. We simultaneously guaranteed Jamaica that we would continue to purchase their yields at fixed prices for a period of ten years. We told the government that we would take care of everything; all they had to do was maintain production.” Clarendon, the Marc Rich company, even supplied Jamaica with cheap oil.
    In early 1986 Seaga’s government signed a ten-year contract with Clarendon for the Alcoa facility’s entire annual yield of 750,000 metric tons of aluminum oxide. 13 It was risky for the company to commit itself to a long-term contract while prefinancing the facility’s yield in the midst of a crisis. Metals experts assumed that prices would continue to fall. It was a risk that might pay off only to those who could wait. Marc Rich was someone who knew how to wait.
    Two years after Clarendon had signed the ten-year contract at fixed prices, the demand for aluminum began to increase rapidly, and prices began to skyrocket. In 1988 the price for a metric ton of aluminum was at2,430—more than twice the price at the time of the contract. Rich made a fortune as a result of the simple fact that he had had the patience and the money to wait out the slump in the aluminum market. Jamaica also profited from the rise in prices because the price agreed with Rich was a mix of fixed prices, London Metals Exchange–linked prices, and barter of oil for alumina. Between 1980 and 1990 Rich advanced Jamaica’s government almost320 million in order to secure annual yields of aluminum oxide. Critics bemoaned the exploitation of the nation’s natural resources by “assorted private individuals.” 14