Mittal, The Sovereign State

BY LEE HAN SHIH
Mar 02, 2009
*Special to asia!

The steel billionaire now turns to international political intrigue to further his business gains. How far will he go?

 

In 1973 the British author, Anthony Sampson, caused a stir when he published “The Sovereign State”, an exposé on multinationals. He claimed the MNCs had grown so powerful that they often behave like sovereign nations and sometimes act against the interest of their own countries.

Sampson named the American firm International Telephone and Telegraph (ITT) as the epitome of an MNC-turned-rogue. ITT was the archetypal conglomerate that collected a few hundred businesses in its heyday – from energy firms to the Sheraton hotel chain – and pursued profits in all of them. 

Under a string of anything-for-profit CEOs, ITT cut deals with dictators and tyrants, and carried out its own version of foreign policies at odds to those of the US State Department’s. It worked closely with Adolf Hitler until the second world war. In 1973 it supported the right-wing opponent of President Salvador Allende of Chile and financed a coup that killed Allende.

A powerful book, Sampson’s revelations focused attention on ITT and in some ways led to the conglomerate’s eventual break-up and the resignation of Harold Geneen, the man behind the Chilean coup. Today ITT is a mid-size defence contractor with a water treatment business in the side, a pale shadow of its former self.


“Supranationals”

Thirty-four years on, MNCs are no longer the 300-pound gorillas on the world stage.

Instead they have been replaced by “supranationals” – companies that are so big and internationalised that national boundaries no longer really matter to them. They have the power of sovereign states and their actions influence international policies (just look at how countries bow to the demands of the global bond market and the World Economic Forum).

Their CEOs are accorded the respect normally reserved only for heads of state. When President Hu Jintao visited the United States last year, his first appointment was not with Bush, but a dinner date with Bill Gates. In xenophobic Japan, Carlos Ghosn, the Brazilian CEO of Renault who turned around Nissan, is more widely respected than the prime minister. All over Latin America, the words of Carlos Slim, the Mexican tycoon whose wealth rivals Gates’s, is law. There are others: Rupert Murdoch of News Corp, Wang Yung-ching of Formosa Plastic, the Agnelli family of Fiat (perhaps), Lord Brown of BP (retired), and then there’s Lakshmi Mittal.


Labour financier

lakshmi mittal

Lakshmi Mittal, the steel billionaire

Mittal was a poor boy made good. For years he enjoyed his wealth and dabbled in playing local politics for his own benefit. It was in 2002 that he had his first taste of using a sovereign government to do his bidding.

The London-based Mittal is a major financial backer of the British Labour Party, donating millions of pounds to Tony Blair and his gang. The payback time came when Mittal asked Blair to intervene on his behalf in the purchase of a Romanian state-own steel firm. Blair did and Mittal won the deal.

Three years later, he took a giant step forward in international politics when opportunity presented him the chance to play power broker in Kazakhstan.


Russia

By 2005 Mittal Steel was the largest employer in the Central Asian republic with 50,000 workers. It was also the only domestic buyer of iron ore produced by Sokolov Sarybay State Industrial Corporation, Kazakhstan’s largest mining and enrichment enterprise.

For some time, Sokolov had been engaged in a fight on ore price with Russia’s Magnitogorsk Metallurgical Combine (MMK). Sokolov had been supplying 70% of MMK’s ore requirement, and was an important raw material source for Russian steel.

The dispute between Sokolov and MKK became so acrimonious that in May, days before Russian President Vladimir Putin was due to meet his Kazakh counterpart, Nursultan Nazarbayev, Sokolov abruptly stopped supplying ore to MMK.

Concerned, Putin enlisted the help of Mittal, who took the side of MMK and threatened to stop buying ores from Sokolov if prices remained high. The Kazakh firm capitulated. After some negotiations, Sokolov actually raised its ore supply to MMK.

In helping MMK against Sokolov, Mittal was playing a dangerous game. Sokolov was a major source of private funds for President Nazarbayev who used it to keep himself in power. Mittal was now in his bad books. But Nazarbayev could not move against Mittal for fear of spooking away much-needed foreign investments. In any case, Putin now owes Mittal a favour.

Indian intervention?

In 2006 Mittal was at it again. He was pushing the Indian government to help him in his hostile bid for France’s Arcelor. The move irritated many Indians. Amongst them was Ratan Tata, head of the oldest and most respected Indian conglomerate Tata.

“(Mittal Steel) is not an Indian company. (Lakshmi Mittal) is an Indian national but has lived overseas for many years. His company is registered in Rotterdam. The Indian government should ideally not be involved or take sides,” he said in an interview.

Mittal eventually bagged Arcelor. It is not known whether the Indian government had secretly intervened on his behalf.

Today, with a company producing 120 million tonnes of steel annually and 320,000 employees worldwide, Mittal is an international power in his own right. More so because the resources-rich Kazakhstan has become the must-have supplier for both Russia and the European Union. In Kazakhstan he is the big cheese – Arcelor Mittal employs 50,000 people and contributes 4% of the country’s GDP. The Indian billionaire is also Kazakhstan’s special envoy to Britain.

By circumstances or by intention, Mittal is now in the position where he has to play politics with the big boys. It remains to be seen whether he has what it takes to do it well.

 

Related Stories:

Heart of Steel

Death by Mining - A Third World Affair

 

lee han shihLee Han Shih is the founder, publisher and editor of asia! Magazine.

 

Contact Han Shih