In the last article it was discussed how geopolitical uncertainties effect business companies. Let us now look how some business companies exploit geopolitical instabilities and make profits out of crisis. Corporations take advantage of armed conflicts, sanctions, regime changes etc to do deals that are not in accordance with the international norms and rake in profits.
In 2012, Iran was under the sanctions put by the US and the EU over its uranium enrichment program. It faced great difficulties to trade oil and natural gas, of which it is a major exporter. Due to the ban, Iran’s four biggest oil buyers – China, India, Japan and South Korea – had reduced their imports by at least a fifth to secure exemptions from the threat of U.S. financial sanctions on their companies.During that time Iran was helped by a company named Vitol group to trade its oil to Chinese traders. Vitol bought 2 million barrels of fuel oil, used for power generation and supplied them to the Chinese. Now who is this Vitol group? How did they manage to pull of something under the radar. Well Vitol group is the world’s largest independent energy trader. It is the biggest private company in the world by sales. It is the ninth largest corporation in the world by revenue. It controls roughly 6.5% of the world’s oil market. It has more than 200 supertankers to ferry oil across the globe. On a single day, it handles more than 5 million barrels of oil. The tale of the cargo of Iranian fuel oil involves tanker tracking systems being switched off, two ship-to-ship transfers, and blending of the oil with fuel from another source to alter the cargo’s physical specification. Well, it just sounds like a scene out of a Bond-movie, doesn’t it? Not only Iran, Vitol also had dealings with Kurdish Regional Government, which controls the semi-autonomous Kurdish region of Iraq. The Kurdish Regional Government(KRG)was facing a lot of financial crisis due to budge disputes with Baghdad. On top of that it needed money not only to pay its employees but also in its fight against the ISIS. So, in 2012, KRG with the assistance of Vitol bypassed Baghdad and sold oil independently in the global market. Vitol took delivery of a 12,000-tonne shipment of condensate, a light crude oil, worth more than $10m and helped its sale.
Other traders such as Glencore, Gunvor and Trafigura in oil and Louis Dreyfus and Bunge in grains use the chaos arising out of geopolitical uncertainties to their advantages and make profitable deals.