Why the Glencore-Xstrata merger is alarming governments

Too big to succeed?

First it was Qatar, then South Africa followed by the EU and now China. The largest merger deal commodities history is alarming governments all over the world.

The $76 bn Glencore-Xstrata merger was first announced in February 2012. It was to be the largest corporate deal that year, but was successively held up: First there was Qatar Holdings, a shareholder of both commodities giants, who demanded a higher share price and a cap on the vast payments made to board members. To break the deadlock between Qatar and other investors, Tony Blair was roped in at the last minute to negotiate and a deal was made in November 2012.

The merger of the two Anglo-Swiss companies then had to jump through the hoops at Brussels. To meet the EU’s competition laws, Glencore, the world’s largest commodities company, had to sell its stake in the zinc trader, Nyrstar. Approval was granted in late November 2012.

South Africa was next on the list of countries to console. The state’s Competition Tribunal wanted to limit job losses that the merger would inevitably entail in the resource rich nation. Other concerns regarding coal supplies (85 per cent of South Africa’s electricity is from coal fired plants) were smoothed over and the deal was again approved in January 2013.

Deadlines were set and investors raring to go, but one last government had to be satisfied – China. Glencore and Xstrata – when merged – will control over 10 percent of the world’s copper concentrate supplies. China is the world’s largest copper consumer and this has caused the deal’s current delay – China is obviously concerned about an over-reliance on a Swiss company listed in London.  

One of the larger deals in corporate history now hangs in the balance of Mofcom (the Chinese Ministry of Commerce). Whether they will request – like the EU – that certain assets be dropped to reduce the company’s size and dominance, or flounder under pressure of the two commodity giants and approve the deal outright will set the rules for future mega-deals.

The multinational vs. nation state debate has long been a topic pursued by international relations theorists. But here reality trumps theory: A merged Glencore-Xstrata will be the world’s fourth largest diversified mining company and by far the largest commodities trader. As we have seen, the merged company will hold sway over the resources of the EU, South Africa and China, let alone numerous smaller countries. This deal, then, is critical to both the future of commodities trading and multinationals as a whole. Come May 2nd, the latest date for the merger, we could see either a stagnant deal held at ransom by the Chinese government, or a new power to be reckoned with over the world’s resources.       

Glencore. Photograph: Getty Images

Oliver Williams is an analyst at WealthInsight and writes for VRL Financial News

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The problems with ending encryption to fight terrorism

Forcing tech firms to create a "backdoor" to access messages would be a gift to cyber-hackers.

The UK has endured its worst terrorist atrocity since 7 July 2005 and the threat level has been raised to "critical" for the first time in a decade. Though election campaigning has been suspended, the debate over potential new powers has already begun.

Today's Sun reports that the Conservatives will seek to force technology companies to hand over encrypted messages to the police and security services. The new Technical Capability Notices were proposed by Amber Rudd following the Westminster terrorist attack and a month-long consultation closed last week. A Tory minister told the Sun: "We will do this as soon as we can after the election, as long as we get back in. The level of threat clearly proves there is no more time to waste now. The social media companies have been laughing in our faces for too long."

Put that way, the plan sounds reasonable (orders would be approved by the home secretary and a senior judge). But there are irrefutable problems. Encryption means tech firms such as WhatsApp and Apple can't simply "hand over" suspect messages - they can't access them at all. The technology is designed precisely so that conversations are genuinely private (unless a suspect's device is obtained or hacked into). Were companies to create an encryption "backdoor", as the government proposes, they would also create new opportunities for criminals and cyberhackers (as in the case of the recent NHS attack).

Ian Levy, the technical director of the National Cyber Security, told the New Statesman's Will Dunn earlier this year: "Nobody in this organisation or our parent organisation will ever ask for a 'back door' in a large-scale encryption system, because it's dumb."

But there is a more profound problem: once created, a technology cannot be uninvented. Should large tech firms end encryption, terrorists will merely turn to other, lesser-known platforms. The only means of barring UK citizens from using the service would be a Chinese-style "great firewall", cutting Britain off from the rest of the internet. In 2015, before entering the cabinet, Brexit Secretary David Davis warned of ending encryption: "Such a move would have had devastating consequences for all financial transactions and online commerce, not to mention the security of all personal data. Its consequences for the City do not bear thinking about."

Labour's manifesto pledged to "provide our security agencies with the resources and the powers they need to protect our country and keep us all safe." But added: "We will also ensure that such powers do not weaken our individual rights or civil liberties". The Liberal Democrats have vowed to "oppose Conservative attempts to undermine encryption."

But with a large Conservative majority inevitable, according to polls, ministers will be confident of winning parliamentary support for the plan. Only a rebellion led by Davis-esque liberals is likely to stop them.

George Eaton is political editor of the New Statesman.

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