November 26, 2002

Prestige Oil Spill: The Story Behind The Story

This week the media has been thick with reports of the sinking of the oil tanker Prestige off the Spanish Galician coast. There have been many depressing pictures of the damage wreaked by the 3,000 tonnes of viscous sludge now poisoning local beaches and destroying local livelihoods. There has been much speculation about if and when the remaining 70,000 tonnes of oil will come ashore.

Yet very little has been written about the complex web of ownership and control behind the incident. The story that emerges shows once again that Governments and international institutions have utterly failed to ensure proper regulation of the global economy.

The tanker Prestige was owned by a one ship (more accurately a one wreck) Liberian company called Mare International. Total accident insurance on the ship was a paltry £15 million. Liberian law makes it hard to be certain who really owns Mare, but according to the Independent newspaper it is believed to be the secretive Greek Coulouthros shipping dynasty
[See http://www.independent.co.uk/story.jsp?story=353909].

The Prestige was registered with the Bahamas Maritime Authority. According to the BMA website "it is the country’s goal to become the world’s largest shipping registry over the next decade, and ship owners of all nationalities are welcome to fly the Bahamas flag". The Authority claims that companies which fly the flag include Exxon International and Chevron, and that the advantages of the Bahamas include "a favourable business climate and world-class banking services" and that "the operations and income associated with Bahamas Flag vessels are entirely tax-free". You might expect the Bahamas Maritime Authority to be based in the Bahamas. You would be wrong. It is based in the City of London, at 16 Minories, London EC3. [See: http://www.bahamasmaritime.com/content.html]

The oily sludge now leaching from the Prestige was owned by an oil trading company called Crown Resources. Crown was formed in Gibraltar in 1996. The Gibraltar office still provides logistical support to the company and is believed to have controlled the movements of the Prestige, which appears to have been ultimately headed for Singapore. In 1997, Crown opened an office in 33 Cavendish Square London W1, which is now the company's largest. In July 2000 the HQ was moved to Zug, Switzerland. At least five of Crown¹s Directors are British and one (Mr Joe Moss) is a former Gibraltar Government Minister. Crude oil turnover increased to 21.5 million metric tonnes in 2000, up from 11.7 million tones in 1998. [Source: http://www.crownresourcesag.com/homepage.shtml]

The UK Government has flatly denied Gibraltar involvement in the incident.Crown Resources is in turn owned by a fascinating Russian conglomerate called the Alfa Group Consortium. The consortium describes itself as "one of Russia’s largest privately owned financial-industrial conglomerates, with interests in oil, commodities trading, commercial and investment banking, insurance, retail trade, food processing, and telecommunications". The Chairman of the Supervisory Board of Alfa Group is Mikhail Fridman. Fridman founded the Alfa Group Consortium, a holding company which today controls the Alfa Bank, Alfa Capital, Tyumen Oil, several construction material firms, food processing businesses and a supermarket chain. Other Alfa activities include ownership of 40% of all Mongolian meat exports (these exports are intended to help the country pay its large debt to Russia), and a venture to launch communications satellites in Iraq, Iran and Syria. Mr Fridman¹s close business associates include Leonard Vid, formerly First Deputy Head of the Soviet planning commission Gosplan. The Alfa Group says that "although we continue to be exposed to the oil markets, it is an exposure with which we are comfortable because of our perception of a continuing favourable reward to risk ratio". [Source: the Alfa Group website http://www.alfagroup.org]

Mr Fridman is a super-rich fellow, estimated by Fortune Magazine to be the ninth richest man in the world aged under 40, with a net worth of more than $2 billion.
[Source: http://www.fortune.com/lists/40under40/global40] He is one of the "new oligarchs" of Russian capitalism, who made their fortunes on the privatisation of former Soviet state assets.

Tyumen Oil (also known as TNK) is certainly a company worth a closer look. In July this year the Observer newspaper described Tyumen as "a Russian firm under investigation for mafia connections" allegations which the company has strongly denied.
[Source: http://www.observer.co.uk/bush/story/0,8224,759141,00.html]

Nowhere have Tyumen¹s activities caused more of a storm than in the Samotlor oil field in Western Siberia. Tyumen used to own half the field, with another oil firm called Chernogreft in possession of the other half. Yet, mysteriously, Chernogreft, which had close ties with BP Amoco, was forced into bankruptcy. The billion dollar firm was knocked down to Tyumen in November 1999 for only $176 million, a deal branded by the European Bank of Reconstruction and Development as "a sham" and "wholly contrary to the concept of fairness and transparency".

The Alfa Group have complained about the treatment of the group's companies by the EBRD, alleging that its companies have been unfairly placed on a blacklist of companies with which the EBRD will not do business. Alfa Bank's President Peter Aven has argued that the EBRD had been unduly influenced by claims about the company in the Russian press: "All this kompromat (compromising material) is published about everybody, including ourselves. But there are Russians and Russian. Not all are mafia". Indeed, says Aven, Alfa Bank should be a natural partner for the EBRD.

Three years ago, Tyumen was trying to get a half a billion dollars in loan guarantees from the US Export Import Bank, the equivalent of our Export Credit Guarantee Department. Most of this was ear-marked for the purchase of equipment from the US energy giant Halliburton.. Halliburton’s CEO, an expert corporate lobbyist, went into action to overturn these prissy objections. The loan was duly agreed. The name of the CEO was Richard Cheney, now Vice President of the United States. [Source: http://www.tnr.com/080700/kaplan080700.html] Perhaps not surprisingly, Tyumen now appears keen to acquire respectability in the West. In June this year, Sir Peter Walters was appointed to the Tyumen "Advisory Board". Sir Peter is a former Chairman of BP. Sir William Purves also joined the "Advisory Board". He is a former Director of the Shell Transport and Trading Company. In July, James A Harmon was added to this august body. Between 1997 and 2001, Mr Harmon was the Chairman of ­ you’ve guessed it ­ the Export Import Bank of the United States.
[Source: press releases from http://www.tnk.ru, Tyumen official website.]

The UK PR firm for Tyumen is the Maitland Consultancy [See http://www.maitland.co.uk]. Friends of the Earth rang to speak to the consultant handling their account. He was in Moscow for "an urgent meeting". The UK PR firm for Crown Resources is Grandfield [see http://www.grandfield.com]. At the time of writing, their consultant has yet to return our call.

BP now seem to have made their peace with Tyumen, announcing a joint venture with the company in October 2001, to develop the Kovytka gas reserve in Irkutsk, a project that has been heavily criticised by local environmentalists [see http://www.pacificenvironment.org/articles/kovykta.htm].

It is not yet clear whether the oil in the Prestige came from Tyumen. And there is no suggestion that Tyumen would be liable for the Prestige disaster even if it did. But if Tyumen was the oil company which produced the Prestige¹s cargo, it may well have come from Samotlor oil field. Or it may have come, believe it or not, from Iraq. On the 11th October this year, Alfa announced that it had signed "one of the largest deals in the history of the six year oil for food programme" between Iraq and the UN, for 20 million barrels a year. [Source: http://www.alfagroup.org/presscentre/news/issue.html?id=370]
Russia is believed to have made it a condition of support for the US resolution on Iraq recently agreed by the UN Security Council that its existing oil contracts would be honoured in the event of a change of regime [Source:
http://www.cacianalyst.org/2002-11-06/20021106_RUSSIA_AQCUIESCENCE_IRAQ.htm].

So it looks as if Tyumen¹s future, in Iraq at least, is secure. This story shows some of the worst features of corporate globalisation in horrid action. It shows that the oil and shipping industries have largely escaped the capacity of states and international institutions to control and regulate them. It shows that the high flown rhetoric of international diplomacy ­ even when concerning matters of war and peace - is often only a cover for squalid commercial deals. The people of Galicia are only the latest in a long list of communities to pay a heavy price for these terrible political failures.

There are also some specific questions about this incident, which deserve urgent answers.

• Why do our Governments continue to tolerate this web of shell companies and foreign jurisdictions behind the shipment of oil around the globe?
  
• Why are oil companies not liable if they charter dodgy single hull vessels?
  
• Why is it acceptable for a ship to carry oil with frankly inadequate insurance?
  
• How can it not be known for certain who really owns an oil tanker?
  
• How can it not be known for certain where the oil now polluting Galicia actually came from?
  
• Where are the politicians seeking to hold the rich men behind all these deals to public account?

About the Author:

Ian Willmore is Media Coordinator of Friends of the Earth and writes a monthly online commentary on environmental issues for the Observer website.

Further Material

1. Ships which appear to be part of the Coulouthros dynasty¹s holdings have faced recent actions for debt in Malta, China, and Singapore, involving the Chase Manhattan Bank and other creditors.
[See: http://www.uctshiplaw.com/seaviews.htm and
http://today.beijingportal.com.cn/5369/2002-5-22/49@252294.htm]
2. In February 2002 Norex Petroleum filed suit in the New York District Court against various Alfa companies, including Tyumen, as well as key individuals in the Alfa Group. Norex is seeking $1.5 billion dollars under the anti-organised crime RICO legislation. Tyumen and the named defendants strongly deny the Norex claims. [See:
http://ia.ita.doc.gov/download/russia-nme-status/posthearing/marks-sokolov/norex-complaint-040802.pdf]
3. According to the Washington Post, US Export Import Bank support for Tyumen was originally blocked by the CIA as well the State Department.
http://www.davidignatius.com/010900WashingtonPost.html
4. In November 2001 the UK High Court gave judgement in a case where Crown Resources was seeking to recover secret payments made by its customers to former employees. In the course of his judgement, Mr Justice Garland said that "Crown had a sister company in the Russian Federation, Alfa Eco, the International Department of which was concerned with servicing the trade outside the Russian Federation conducted by CTFL as a commodities trader. A substantial part of Crown¹s business comprised importing Russian crude oil and oil products into Western Europe; the extent of this activity was to the value of US$ 80- 90 million per month. Alfa Eco and Crown used three Isle of Man companies - Eastmount Properties, Lamport and Fulbrook - to make legitimate payments to staff in respect of offshore work. The oil was bought from Tyumen Oil Company, referred to as TNK."
[Source:
http://www.law.cam.ac.uk/restitution/archive/englcases/crown_resources.htm]