Mining giants merge to form FrankenCorp

November 24, 2012
Bolivian workers protest against Glencorop over a pay dispute, 2011.

Wasn’t it somewhere in Switzerland where a mad scheme was hatched to join disparate parts together to create a new composite monster?

In Mary Shelley’s 1818 gothic novel, the resulting creature has become popularly known as Frankenstein (actually the name of the monster’s creator). Today another Swiss monster has come into being: Frankencorp (a.k.a. “Glenstrata”).

Swiss-based Glencore, the world’s largest commodities trading firm, and Swiss-based Xstrata, one of the largest mining companies, merged after shareholders voted overwhelmingly in favour on November 20.

The Zug merger, which formalises a longstanding de facto union between the two companies, creates the fourth-largest natural resources corporation in the world. It is worth roughly US$80 billion, with a network of assets spanning several continents.

To address a question left largely untouched by the capitalist business press, what can we expect in terms of issues like business transparency, the environment and human rights from the new Glencore-Xstrata entity?

If the track record of both companies is anything to go by, we can expect an upsurge of appalling abuses on these fronts. The resource-rich areas of the Global South under their joint control will inevitably be the subject of renewed assault.

Not every Glencore-Xstrata stakeholder is a shareholder with voting rights. In fact, the vast majority are not.

The poor of the Congo, Peru and the Philippines, the landless peasants of Zambia, Colombia and central Asia, were not given the opportunity to express their view about whether two oppressors should merge to form one “vertically integrated” super-parasite.

Their assigned role is not to rubberstamp multi-billion dollar acquisitions in refined Swiss surroundings, but to silently disappear. Their lot is to be extinguished as a people over the course of several generations, as the land they depend on is expropriated by profit-seeking corporations supplying the cheap raw materials that underpin consumerist First-World lifestyles.

For these stakeholders in the developing world, the scattered and imperilled population groups who have been adversely impacted by Glencore-Xstrata extractive operations, there will be a dramatic escalation of neo-colonial exploitation.

After all, this is the same Glencore that has repeatedly engaged in tax evasion on a huge scale. It has cheated host governments and populations out of the mining-based revenue that supposedly justifies the enormous social costs of expanded mining operations.

The case of Glencore’s activities in Zambia is illustrative. Last year, a leaked audit revealed it artificial inflated production costs. This was combined with fraudulently writing down the value of copper exports, enabling the company to cry poor and dodge corporation taxes.

Glencore’s brazen rort cost Zambia — where two-thirds live in desperate poverty and only ₤15 (A$23) is available per child for annual education costs — an estimated ₤76 million in one year alone, ActionAid says.

Multinational tax evasion is estimated to cost developing nations US$500 billion annually. Glencore’s CEO Ivan Glasenberg is reaping the reward of such swindles. His personal fortune of $7 billion makes him Australia’s second-richest individual.

Glasenberg resides in a low-tax Swiss canton, not too far from Glencore founder Marc Rich, who fled the US on major tax evasion charges in the late 80s. Rich was controversially pardoned by Bill Clinton during the outgoing president’s final hours in office.

It was subsequently disclosed that Rich had made large donations to the Democrats and Clinton’s presidential library.

Glencore and its shadowy network of subsidiaries also specialise in paramilitary land grabs, environmental destruction, anti-worker practices and booting peasants of their land.

Xstrata is not far behind in these predatory stakes. One of Xstrata’s most valuable copper mines — Tintaya — is located high in the southern sierra of Peru.

New Internationalist said in May that Peruvian National Police officers openly double as private security guards for the mine, which has severely contaminated two rivers relied on by small-scale indigenous graziers.

Local protesters were killed and injured in clashes with security forces this year after it became clear that the company’s environmental assurances were meaningless “greenwashing”.

On November 14, at Xstrata’s Kroondal operations in South Africa, police attacked striking workers who were protesting about the abusive treatment of a Black employee by a white manager.

“Xstrata calls in the police to do their dirty work, who without even assessing the situation, shoots at workers and chases them,” says Steve Nhlapo of Numsa (South African Metal Workers’ Union). “Workers were not undisciplined in their protest but police are using excessive force and trying to intimidate them into submission.”

The sociopathic tendencies exhibited by Glencore and Xstrata will only be exacerbated with the acquisition of more bullying power — or “leverage” — that comes with the merger. The result will be an even more unequal power relationship between the new monster company and the vulnerable people it exploits.

Finding methods to counteract the rise of progressive social movements in developing nations has long been a concern of the chiefs of natural resource conglomerates.

The formation of monopolies with absolute control over extraction and distribution is a key tactic. It helps force Third World governments, seeking to develop their natural resources, to accept whatever terms are offered to them.

By acquiring Xstrata, Glencore will now exert even more dominance, using its monopolistic power to resist demands for higher royalties, social compensation packages and environmental protection.
The union of these two companies is not only a problem for their often faceless and nameless victims in the Global South. One of Glencore-Xstrata’s key objectives is to expand fossil fuel extraction, a proven problem — and a stubborn addiction — for the entire world.

Xstrata made close to $6 billion profit last year, the bulk of it derived from increased coal sales. The BBC said on September 30: “About half of [Xstrata’s] revenues came from its copper business in 2011, while coal contributed the most to its profit growth.”

Xstrata’s CEO Mark Davis earned close to $30 million last year, making him one of the highest paid mining executives in the world. Workers’ oppression, climate vandalism equals big bucks in the rigged capitalist casino.

With the merger, Glencore-Xstrata will be the world’s largest supplier of thermal coal for power stations. As the recent “Frankenstorm” on the Atlantic seaboard of the US suggests, the last thing the world needs is rising carbon emissions. The rise of the GlenstrataFrankencorp means the threat of plenty more Frankenstorms.

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