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HERITAGE/PETROTRIN TRADES WITH CORRUPT TRAFIGURA By David Walker

posted 18 Dec 2018, 17:36 by Gerry Kangalee   [ updated 18 Dec 2018, 18:02 ]
Many commentators, myself included, have attempted to satisfy ourselves that the financial and economic arguments justifying the closure of the Petrotrin Refinery could withstand scrutiny. A decision with such grave consequences should only be made after the most rigorous appraisals. I think we could all agree on that.

The lack of supporting information is palpable. Today, after the closure has been effected, we do not know how much money the refinery was losing as opposed to other parts of Petrotrin. We have no idea of what financial performance we should now expect. We therefore have nothing against which to measure the “success” of the new regime other than the status quo of the two billion dollar composite loss as stated.

Yet even that argument is fallacious as the annual interest payments still remain. That commitment has not changed as a result of the closure. Any comparison between before and after must either ignore the 1.2 billion dollars or include it in both the before and after figures. The comparison must also include the cost of the termination which we know runs into billions of dollars. A thorough summary should be given. One assumes, based on public statements by the authorities that it is in excess of 5 billion dollars.

With such flimsy financial justification for the closure, there are those who suggested all manner of nefarious reasons other than the country’s economic well being: everything from the famous 1% and their interest to possible corruption and underhand dealing. This latter possibility has intrigued me and has been the focus of some of my attention recently.

I have written previously about the sharp contrast between how Brazil has dealt with the failures at Petrobras and our reaction to failures at Petrotrin. There, former directors and government ministers have been sent to prison. Here, workers have been sent home and directors continue to enjoy the fruits of their lavish salaries and bonuses.

There is one area however, where we have copied them. In a recent speech Minister Khan is reported to have said “I am pleased to
announce to date three spot sales have been awarded”
. He went on to say that one of the sales was to Trafigura. This is the same Trafigura who have recently been in the news as follows: “Leading global oil traders Vitol, Trafigura and Glencore paid more than $30m in bribes to employees at state-owned Brazilian company Petrobras in a scheme that may still be going on, prosecutors said on Wednesday”.

The energy industry is well known internationally for corruption and bribes, particularly in small developing states. It is all too easy to amass a fortune by means of negotiations “on behalf of the country”. To be fair, the international majors play a huge role in promoting and facilitating corruption. Furthermore, it is exceedingly difficult to detect.

That is why one must use every weapon available to the country in its defence against such corrupt practice that deprives the nation it is suggested in some instances of 20-30% of revenues that should otherwise accrue. One such weapon is the blacklisting of companies that are found guilty of, or even reasonably accused of, such practices.

In that vein I find it remarkable that at the very moment that Trafigura is being accused in the courts of Brazil, we should be entering a new sales regime with said company. Brazil is at the forefront internationally of holding corrupt energy executives and traders to account. What motivation could our executives possibly have for dealing with such a company?

A little further searching reveals that Trafigura has a reputation for being a less than stellar corporate citizen. They have been found guilty of dumping toxic waste at dumps in the Ivory Coast with devastating health and environmental consequences.

There is this statement from international environmental media: “The media have linked Trafigura to corruption scandals such as the Oil for Food Programme in Iraq, as well as to incidents that have had serious consequences for human health and the environment. The most outstanding one certainly was the so called Probo Koala incident (another name for the Ivory Coast incident).”

What we have with Trafigura is a company well known for corrupt financial practices in addition to a total disregard for environmental and health issues in countries it considers to be unable or unwilling to call them to account. Such companies naturally gravitate to countries where politicians and their appointees are self serving and pliable.

Some people might argue that Trafigura’s history does not necessarily mean that their actions here are of that ilk. I hold a different view. I believe that we must screen each of these international companies that we are doing business with in the same way that we and our citizens are being screened by the banking sector. We must stop doing business with every company that comes knocking until we conduct a thorough evaluation of their bona fides.

This is little different from the argument about gang membership. If I belong to a group that includes known deviants doing business with them, I should not be surprised if I am treated like them and suffer loss of business, criminal conviction, or imprisonment as a result. Why are we keeping company with an organisation as tainted as Trafigura?

It begs the question – does our leadership do any background checks on the international companies with whom we do such important transactions running to billions of dollars? Is there no pre-qualification for these companies with whom we trade, similar to the pre-qualification local companies must navigate before getting the most insignificant of contracts?

I am concerned, and I suggest that we should all be as well. The dealings with Trafigura lend credence to the concerns expressed by many that the new regime is designed to better facilitate corrupt practice, not reduce it. I know that many experts in the energy field are keeping an eagle eye on decisions that are being made. I urge every one of you, to pay particular attention to the track records of the companies and individuals with whom these new companies choose to do business. Let us heed the red flag.
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