Trafigura Raises Disclosure Bar as Traders Face Greater Scrutiny

Nov. 19 (Bloomberg) — Trafigura Beheer BV, whose chairman once spent five months in an Ivory Coast prison in a legal dispute over toxic-waste dumping, is betting more transparency will help the commodity trader reassure lenders and attract new investors.

The world’s third-largest oil trader has joined the Extractive Industries Transparency Initiative, a voluntary program set up in 2003 under which resource companies disclose payments, taxes and license fees paid to foreign governments and state-owned enterprises. The greater disclosure comes as Trafigura seeks to lure investors by selling bonds, said Andrew Gowers, a spokesman for the Amsterdam-based company.

Following U.S. sanctions imposed against Russian companies, including the largest oil producer OAO Rosneft, and an $8.97 billion penalty for BNP Paribas SA for violating U.S. sanctions with Iran, Sudan and Cuba, some banks have reduced financing for commodity traders or increased loan due diligence. BNP cut commodity trade finance to Trafigura earlier this year, according to two people familiar with the matter.

Trafigura, whose founders include Marc Rich protege Claude Dauphin, hopes that rivals will follow its lead and join the EITI.

“There is only a limited point in one company doing this,” Gowers said by phone. “We hope to encourage other companies to come along.”

Opposing Disclosure

The decision by Trafigura to join the EITI program marks a schism in the united front presented by Switzerland’s $21 billion commodity-trading industry. The Swiss Trading and Shipping Association, which represents firms including Trafigura, Vitol Group, and Gunvor Group Ltd., has opposed proposals that would require the same level of disclosure as EITI.

“One of the companies with quite a mixed track record when it comes to transparency and accountability is moving forward,” said Urs Rybi, an analyst with Swiss NGO the Berne Declaration. “The Swiss government should require all companies to disclose payments related to the resource business.”

Trafigura is the first major trading house to commit to disclosing all oil-related payments to EITI-member country governments. The disclosure won’t cover metals trading or product swaps, such as those in Nigeria where Trafigura exchanges gasoline for crude exports, the company said.

EU Rules

The company’s move comes five months after Switzerland said it would only require trading firms to disclose payments to foreign governments if similar rules are adopted by the European Union and the U.S.

Stephane Graber, head of the Swiss Trading and Shipping Association in Geneva, didn’t respond to an e-mail and telephone message seeking comment.

Glencore Plc, Royal Dutch Shell Plc and BP Plc, listed companies that trade resources alongside their extractive businesses, have already agreed to make disclosures under the EITI program.

Trading firms often make payments to foreign governments and state-oil companies as part of their business and have long been criticized for a lack of transparency in their dealings.

Commodity traders can improve their reputations through increased transparency, said Alexandra Gilles, the New York- based head of governance at the Natural Resource Governance Institute.

Trafigura’s move shows that “these kind of disclosures are commercially viable,” Gilles said by phone.

Considering Program

Gunvor, which got its start trading Russian oil produced by Rosneft, is “considering joining the EITI,” said Seth Pietras, a Geneva-based spokesman for the company.

Vitol, the world’s largest oil trader, said in a statement that all its counterparties are subjected to strict scrutiny and due diligence policies that ensure “that all payments to governments and government-owned entities are legitimate and in line with international anti-bribery and corruption legislation.”

Vitol, based in the Netherlands, will comply with the Dutch authorities’ implementation of the EU’s Accounting Directive, which requires transparency of payments to governments by large corporates, spokeswoman Andrea Schlaepfer said in the statement.

Trafigura’s decision was welcomed by Peter Eiger, the founder of Berlin-based Transparency International, who hopes it might inspire changes in the industry.

“I am now keen to see how this move brings reputational and competitive benefit to Trafigura and how long before other Swiss-based commodity traders follow,” said Eiger.

To contact the reporter on this story: Andy Hoffman in Geneva at [e-mail] To contact the editors responsible for this story: Will Kennedy at [e-mail] Dylan Griffiths, Alex Devine