Up against the Red ShieldPublished by MAC on 2003-07-15
Up against the Red Shield*
A study of the rise, minor falls, and astonishing persistence of the world's most "respected" banking dynasty.
"The Rothschilds are the creators of the international bond market as we know it today. They were the first multinationals"
[Niall Ferguson, cited in The Business, London, Feb 16-17 2003]
[NB For shorthand purposes the name "Rothschild" - as opposed to "Rothschilds" or "the Rothschild family" - denotes the NM Rothschild Bank in London].
Today's minor news
Two hundred years of global banking history - during which the London Rothschilds rose to dominate mercantile and money trade, while their French confreres were central to promoting the colonial interests of the French state - may not be coming to an end. But it's reached a definite bend in the road.
Baron David de Rothschild , head of Rothschild et Cie Banque in Paris (the bank was nationalised in 1981 but returned to private hands two years later) is now taking the helm at the Rothschild Bank in London from his relative Sir Evelyn de Rothshild. David will assume the chair of Rothschild's Continuation Holdings (RCH) .
This Swiss holding company is the key agency that brings together the three main strands of the Rothschild businesses (in Britain, France and US) - and of course in concealing transactions the partners don't particularly want publicised.
In the new move, other French Rothshilds are also taking stakes in Sir Evelyn's holdings in the Rothschild Bank However, existing joint participation in global banking investment, between the French and the English branches of the family, is not expected to change in the short term.
RCH controls NM Rothschild, the London Bank which was the first major financial undertaking by its eponymous founder in the 18th century. NM Rothschild is the only segment of the empire to have survived without interruption since the five sons of the Frankfurter Mayer Amschel joined the European Jewish diaspora two hundred years ago, as they were sent out to make the family fortunes. [Financial Times (FT) 10/2/03].
What now, Rothschild?
This summer's re-organisation will be an attempt to further "beef up" Rothschild's competency as a cross-border financial wheeler-dealer, a role which had been slipping during the nineties [FT 8-9/1/2000] - though there were highlights along the route.
A major coup of the French arm was to effect a merger between Havas, the French media company, and Compagnie Generale des Eaux. The resulting Vivendi Universal is one of the world's biggest media empires. However, it nearly collapsed in 2002, soon after the merger, [FT 2/3/2003].
Sir Evelyn himself is credited with "growing" the London Bank's capital from a modest 160 million in 1970 to around seven billion pounds today (about enough to give a quid to every child, woman and man on the planet).
Margaret Thatcher loves Evelyn Rothschild (true!)
It was also Evelyn who, in 1983, bought up the brokers Smith Brothers and transformed the company into Smith New Court (New Court in London City having been the Rothschild headquarters for around two hundred years)
Smith New Court (ie Rothshild) played the leading role in effecting Margaret Thatcher's ignominious privatisation programme in the 1980s, - a period when BP, British Airways, British Telecom, British Rail, and all the gas and electricity utilities, were ripped from (at least nominal) public ownership [The Business, February 16- 17 2003], with disastrous consequences for services and people. .
In 1984, Rothschild financed Rio Tinto's bid to take control of the Thatcher government's oil "privatisation flagship", Enterprise Oil, (nearly confounding her plan to offer it to the great British public),. The audacious gambit came to nought [see "Plunder!" Partizans and Cafca, London and Christchurch, 1991, page 159]
Striving to stay relevant
The new Anglo-French partnership is a strategy born partly of necessity as the Rothschild clan has experienced a number of personal misfortunes over the past decade. The heir apparent to the London Bank committed suicide in 1996; then Sir Evelyn's cousin, Jacob (now Lord Rothschild) - after trying to effect a merger with the family's chief rival, SG Warburg - took off on his own to form J Rothschild Holdings. Another prospective candidate politely declined Sir Evelyn's offer, instead joining Cazenove, a prominent London-based private bank.
Despite its impressive capital base, Rothschild 's currently available finance
(liquidity) is only US$1.3 billion - a pittance compared (say) with Credit Suisse First Boston's US$295 billion, or the US$49 billion with which Goldman Sachs can play around. How can the Rothschilds begin to challenge the commanding position of what the energetic Baron David de Rothshild (he looks 45 but is actually 72) calls "powerhouse firms"?'
What they offer
Essentially the Rothshilds offer the benefits of hands-on personal service, grouping their clients by industry [The Business op cit], rather than country; and gathering valuable intelligence so as to advise on mergers and acquisition in each sector. They engender a personal relationship with their clients, assuring them of courtesy, confidentiality and consistency. The secrets - where there are any - are safely locked up in Switzerland. While much larger investment banks have lately been rocked by scandal (think of Merrill Lynch, Morgan Stanley, Citigroup) the Rothschild boat blissfully sails on.
Why break the rules of international finance, when your family has been pre-eminent in formulating them?
If we're baffled at why the mere name "Rothschild" continues to bewitch so many people, surely it's little different from the magic conjured up by gold and gem diamonds - useless though they might be for most utilitarian purposes. The family understood this first and perhaps better than anyone else, when it began investing in these two minerals.
It is hardly surprising that the Rothschilds to this day chair the twice-daily meetings of the London Bullion Market Association (LBMA) which fixes the global price of gold.
From 14th position in global M&As (mergers and acquisitions) in 1998, NM Rothschild rose to 12th in 2001, even though - in line with other investment banks - its pre-tax earnings fell about 30% that year (down to US$250 million) [The Business ibid]
As we shall see, the Rothschilds on both sides of the "English" Channel/ la Manche have an unrivalled historical experience in brokering mining deals, even though - in post-war France - they were forced to massively reduce their influence.
A little bit of history
Was Hitler right? He once referred to the "rapacity of the Rothschild (sic), who financed war and revolution and brought the peoples into interest-servitude through loans". [quoted in Robert Sidelsky "Family Values", New York Review of Books, December 16 1999, page 24].
But, as with everything else, the Nazi dictator got it wrong; or only partially - and perversely - correct. For, as the politically centre-right intelligentsia they have been for most of their reign, the Rothschilds favour poltical stability. This, even while they were quite prepared to profit from the consequences of bloody conflict and provide loans to the warring parties.
The Rothschild Bank has been longer, and more closely, associated with investments in mining than virtually every other financial institution.
Iy occupies an important position in the sector today - specifically through NM Rothschild Australia, the affiliate of NM Rothschild in London. In terms of direct equity investment in world-class mineral resource extraction, the Rothschild role has diminished compared to what it was in the nineteenth and early twentieth century. (NM Rothschild Australia in 2000 lay at number 409 in Asiaweek's Financial 500 list of biggest banks in the Asia-Pacific region, putting it behind the Philippine Bank of Communications.)
However, the bank has now made a rapid recovery from the doldrums of the late 1990s, especially through its growing role as an arranger of mergers and acquisitions in the mining industry. Last year (2002) it ranked as the leading British arranger of M&As overall - putting it ahead of the much richer investment banks, Deutsche Bank and Citigroup, UBS Warburg, Merrill Lynch, Goldman Sachs, Dresdner Kleinwort Wasserstein and JP Morgan . It also ranked first for M&As in France and Italy and third in Asia. [information from NM Rothschild Australia web site].
Furthermore, Rothschild has a genuinely global spread of "alternative" unit trust investment funds [see list ]. And, while its pre-eminent role in promoting 1980's privatisation of Britain's public companies has not been equaled since, the bank is still in the game. Along with Credit Suisse First Boston Bank, NM Rotshchild was an advisor to the Philippine government on the off-loading of the Philippine National Power Corp - NAPOCOR [Oil, Gas and Energy Law Intelligence Service, Newsletter, 12/2/2002].
For nearly two hundred years, until the second world war, the Rothschilds were the quintessential providers of mercantile capital and the oldest in the business. Little wonder they have been called "the world's banker"; they are the only bank which could ever earn such a dubious accolade. Nineteenth century Europe lay (almost literally) at their feet: this was a period when they not only significantly underwrote the vast expansion of western industrial economies, but also financed the acquisition and exploitation of much of its essential minerals resources base, railways, [Wilson, op cit, page 174], and canals [Wilson page 176] - including the world's most strategically important,. the Suez canal. .
Of course the Rothschilds were not the only ones taking this route. As the nineteenth wore on into the twentieth century, they had to compete with a new aggressive breed of US capitalists, dubbed the "robber barons" [see Matthew Josephson's classic work "The Robber Barons", Eyre & Spottiswoode, London 1962]). These were men like J Pierrepoint Morgan, bankroller of US Steel, the moneybag Vanderbilts, the Rockefellers, Andrew Carnegie - who underwrote US copper, iron and steel - and the Mellons who financed the rise of Alcoa and its then affiliate, Alcan.
If most of these US names remain familiar today, it is probably only to lovers of the arts or the ostentatious buildings in which they invested generously. (Not that the Rothschilds were to be outdone on this score: the OECD's headquarters is a Rothschild family mansion in Paris [FT 3/3/2003]). Globally the private investment banks have been supplanted by commercial banks. While the merchant banks remain, most of their former functions are now in the hands of a variety of investment institutions, using a bewildering set of financial instruments . In Britain, Morgan Grenfell, SJ Warburg, Charterhouse , Hill Samuel and many others have, over the past two decades, been absorbed into much larger groupings. Baring's was Rothschild's nineteenth century closest rival, though its capital base in 1844 was only a tenth of its competitor's. Baring's was finally brought down by the archetypal " rogue trader" Nick Leeson, and recently merged with the Netherland's ING Bank.
Only the Rothschild writ ran relatively unaltered (though far from unscathed or uncontested) throughout this turbulent period. "The family is everything: it is the only course of happiness it is our unity" wrote James Rothschild in 1851 [Ferguson]. It took another century and a half before this touching, but tenacious, faith in the perfectability of accidents of birth, was seriously challenged.
From the outset, the Rothschilds had no doubt: they were among "the Chosen People" The five sons of Mayer Amschel (apparently quite willingly) took this as their patrimonial cue when setting out to establish Rothschild banking houses in London, Paris, Vienna and Naples, as well reaffirm their presence back home in Frankfurt. Nathan (the original NM) Rothschild ended up in the British capital city.
The sons bore with them the family's crest (it can hardly be called a coat of arms) - a red shield or "Rote Schild" with fist clutching five arrows. (Today, any fund or project carrying the name "Arrow" may have a Rothschild connection). The family rapidly expanded its influence to become the key providers of loans to European princelings and petty royalty. They fought strenuously, and with undoubted courage, to assert their Jewish origins and identity, in the face of mounting and virulent anti-semitism.
Sons of Zion
Indeed, Edmond de Rothschild, a successor to NM Rothschild, was the first businessman to finance Jewish settlements in Palestine (from 1882 ) as the precursor of a Zionist state. [Derek Wilson , "Rothschild: A sotry of wealth and power". Andre Deutsch, London 1988, page 293],. When the imperialist Ottoman (Turkish) occupation forces were thrown out of the Arab territory towards the end of the first world war, Nathaniel Rothschild in London was by then the recognised leader of international Jewry [Wilson, page 339]. His sons, James de Rothschild and Walter, followed his path; the latter assuming his father's peerage .and becoming the Zionist Federation figurehead.
It was Walter to whom Arthur Balfour addressed what has since become known as the "historic' (many would maintain "infamous") "Balfour Declaration" by which the British Foreign Secretary announced his government's support for "the establishment in Palestine of a national home for the Jewish people". Albeit this carried a rider that resettled Jews should do nothing "which may prejudice the civil and religious rights or existing non-Jewish communities" [Wilson, ibid, page 341] - a caveat which, as bloody post-1947 history has shown , is more honoured in the breach than the undertaking.
Let's examine in a little more detail just how the Rothschilds operated from those early days. Their first expedition into banking outside the Frankfurt ghetto occurred during the 1770s and 1780s as they began buying "bills of exchange:" - an early form of derivative (futures marketing). A borrower would promise to pay back his debt at a fixed price on a future date. But in practice (as today) he often defaulted, opening the way for intermediaries to buy up these notes at a discounted price, thus profiting, not only from the discount, but also a charge for performing the service. The practice also bypassed the need to transport large quantities of physical gold for monetary transactions : ironic, perhaps, in view of the later investments of the Rothschilds in mining, including precious metals [Wilson, op cit, page 13].
From these modest beginnings the Rothschild family (by now the ostentatiously - but comfortingly -- labelled "House of Rothschild") was on its way to achieving what one author has called, "a transformation which may be unique in the annals of commercial history" First they chose political, rather than trading, centres in which to exert their influence (London, Paris, Frankfurt, Naples and Vienna). Then they utilised a contemporary form of e-mail commerce to cement their deals: sending personal couriers throughout the continent. [Ferguson op cit].
In 1810, as he sat poring over innocent-looking ledgers at number 2 New Court in the City of London, Rothschild was only one among several London-based financial entrepreneurs. But, within five years, Nathan had become the chief financial advisor to the British government, and "the man behind Wellington's successful peninsular campaign [against the French], the man who provided the money which made possible the greatest of all British victories - Waterloo". This of course was where Napoleon literally met his Waterloo and the French empire brought crashing down [Wilson op cit, page 38].
Nathan effected the coup by using money entrusted to him in Frankfurt by a local (now largely forgotten) potentate, Elector William of Hesse-Kasel, so as to speculate in various financial deals. Rothschild also - quite illegally - smuggled, or ran blockades imposed against, gold bullion, textiles and other goods [Wilson op cit, page 42].
The name's Bond - Bearer Bond!
The Rothschilds "emerged from the [Napoleonic wars] as millionaires and celebrities." [Wilson, ibid page 59]. Despite growing suspicions about, and disgruntlement at, the family, by the early 1830s it had become "immensely more powerful than any financial empire that had ever preceded it. It commanded vast wealth. It was international. It was independent" [Ferguson op cit]. And its key tool, according to Niall Ferguson (in his massive two works: "The House of Rothschild, The World's Bankers, 1849-1999" Viking 1999, and "The House of Rothschild: Money's Prophets, 1798-1848", Penguin ) was the creation of an international bond market which " enabl[ed] British (and other Western European) capitalists ".. to "invest in the debts of states by purchasing internationally tradable , fixed-interest bearer (that is, transferable) bonds." Declares Ferguson: "The significance of this cannot be overestimated." [Ferguson op cit]
The Rothschilds did not try to usurp or overthrow governments, whatever their political hue, but to profit from - and influence - them. They made loans, and also withheld them; they appointed their own unofficial "diplomats" [Wilson, op cit, page 99]; they set up their own intelligence agency. They became the supreme - and eventually inviolable - middlemen of traded capital.
Into the "New World"
By the second half of the 19th century, the Rothschilds' tentacles were all over the colonies of Africa and South America, as well as deep within . Europe. A Rothschild representative sat in every leading mercantile capital city, from Mexico City to Cape Town, New York to Singapore. The family owned, or secured, major shareholdings in the Central American Ironworks, and rapidly became the leading importer of gold bullion from the New World and the "dark" continent. In 1852 Rothschild set up its own gold refinery within an axe's throw of Traitor's Gate on London's Tower Hill. The Royal Mint, as it was known, operated for over a hundred years under Rothschild auspices , supplying gold bullion to the Bank of England and overseas customers [Rotschild website]
Meanwhile the De Rothschild Freres in Paris helped the Banque de France out of a serious monetary crisis by providing it with a large consignment of gold to back the failing franc [Wilson, op cit, [page 176]
During the last quarter of the nineteenth century, the House engineered a number of startling coups; perhaps the most spectacular of which occurred when the British Rothschilds pulled the rug from under their French brothers by advancing the British government a loan to purchase a key stake in the Suez Canal [Wilson, op cit pages 236-237].
But, as Ferguson points out, there was a price to be paid for such advancement. After the nation-state re-constructions which followed the 1848 European revolutions, improvements to state financing, deposit and joint stock banking, along with the growth of domestic capital markets, saw a slowing of demand for the Rothshilds' unique financial services [Sidelsky, New York Review of Books, op cit, page 26] . The family tried - and with some success - to regroup, by changing from court financing to investment (inter alia) in railways and minerals.
It certainly had the wherewithal. Accrued capital reached 34 million pounds in 1874 - an unprecedented pile for any bank.. But, from that point until the close of first decade of the twentieth century, profits declined by nearly two thirds. ( Baring's, profits by contrast rose to 27.1. per cent between 1900 and 1909 - nine times the increase in those accruing to Rothschild). [Ferguson op cit]..
Mines, all mine!
Nonetheless the Rothschilds knew better than any other investors how to play safe. To a marked extent they did so by buying up vital minerals for which there was an assured market."Mercury, gold, copper, lead, diamonds and oil: by 1900 the Rothschilds occupied a remarkable position in the world market for non-ferrous metals, precious stones and petroleum" [Ferguson op cit]
After the "discovery:" of alluvial and diluvial diamonds in South Africa's Orange and Vaal rivers in 1867 - concentrated around the "rush" town (originally farm) of Kimberley - conflicts broke out over ownership of claims, and between the English and Boer mine-owners. The violence and discord threatened both access to, and supply of, what was undoubtedly the biggest single deposit of high class sparklers ever located. It mightily worried the London Rothschilds too. For they already had their agents in the field and had acquired the biggest single stake in the Anglo American Diamond Mining Company Ltd; using this (especially after 1882) as a vehicle for buying out smaller claim-holders in the area. [Wilson, op cit, page 303]
The two biggest operators had emerged as Barney Barnato and Cecil Rhodes; the latter being the archetypal nineteenth century imperialist with a proclaimed aim to create "a British dominion from the Cape to Cairo."
Rhodes approached the London Rothschilds in 1887 for investment backing, and they coughed up a million pound guarantee. Using this, Rhodes quickly swamped the opposition, purchasing the rival French Diamond Company) and establishing De Beers Consolidated Mines Ltd (with Lord Nathaniel Rothschild on the board). Until the dawn of the twenty first century De Beers was to supply of eighty per cent of the world's gem diamonds.
However, even if a financial colonist, Nathaniel was not an
Imperialist; rather he looked to maintain political stability and avoid civil conflict. When Cecil Rhodes asked him to agree that company funds be used to service territorial expansion in the face of Boer resistance, Rothschild strongly demurred. (Indeed, in 892, he actually floated a loan for the Boer government in the Transvaal [Wilson, op cit, [page 305]).
Wheeling the Oils
1912 saw one of the most spectacular of Rothschild's many deals. The bank purchased four million shares in Royal Dutch Petroleum and just a quarter of a million pounds worth of Shell Trading company shares, at a risible price.
These were sold before the Bolshevik regime confiscated Royal Dutch Shell's Russian assets after 1917. The bank made a killing
on the proceeds [Wilson, ibid, pages 323 - 324]
Whatever their political cachet the Rothschilds found a different world before them after the "Great" (and Bloody) War of 1914-1918.
It was one where, to quote Derek Wilson, they were no longer "the automatic, confidants and advisers of (sic) prime ministers and princes [I]n the world of international commerce was now much more complex, Europe's private banking houses, no matter how prestigious,. had a changed and reduced role to play. America and Japan had emerged as powerful economic centres." [Wilson, op cit, page 349].
In the immediate aftermath of the Second - even bloodier - world conflict, Rothschild was slimmed-down further. 1947 saw it transforming its family partnership into a private company (Rothschild Continuation, based in Switzerland), with Anthony Rothschild holding the biggest share. This opened the way to bring into the Rothshild inner circle City financiers who had no previous connections with the family [Wilson, op cit, page 395]. But it was not until 1960 that an "outsider" was finally admitted as a partner - David Colville, the brother of Winston Churchll's private secretary [Wilson, op cit, [page 397]
Anthony Rothshchild also set out to "internationalise" operations, primarily in the USA, where New Court Securities became an important investment bank. He "modernised" the movement of money in a world now considerably complicated by foreign exchange restrictions. And his bank began forming consortiums for major engineering, mining and construction projects while "establishing subsidiaries all over the world". [Wilson, op cit, page 397]
Edmund Rotshchild took the lead in this strategy, though other Rothschilds were not far behind: Leopold, for example, is credited with conceiving and financing the impressive Niteroi-Rio de Janeiro bridge in Brazil [Wilson, ibid, page 398]. By the late sixties, the London Rothschilds were taking "a leading role in the new, aggressive, commercial world of takeovers and mergers, multinational companies and supranational organisations, like the European Coal and Steel Community (for which NM Rothschild helped raise finance. [Wilson, op cit page 426]). Patriarch Lord Rothschild, who had adopted a hands-off position to the day to day running of the bank, moved sideways: in 1958 by joining Royal Dutch Shell as the oil company's research coordinator, a post he held until 1970. [Wilson, op cit page 421].
The RioTinto Canadian connection
"But undoubtedly" declares Wilson "the most impressive scheme Rothschilds initiated in the 1950s was Brinco, the British Newfoundland Corporation. " This was planned as the trojan horse of entry into the timber, mineral and hydro-electricity resources of the vast wildernesses of Newfoundland at a time when they were British Crown lands. The project was put together by Joseph Smallwood, the premier of Newfoundland, along with Winston Churchill, then Prime Minister of Britain. "This is a grand imperial concept but not imperialistic" declared Churchill.
Premier Smallwood rolled out the red carpet to the Red Shield.:.
"Newfoundland is", he trumpeted, "probably the greatest storehouse of undeveloped natural wealth left in the world, and it's ours It's British and we want it to remain British. Here in London you have the headquarters of more companies than anywhere else in the world; companies that have gone out to all the remote corners of the earth, into the jungle, to the frozen wastes, and built railways and opened mines we want you [Rothschilds] to come and develop it. We don't want you to sit on it; we're not interested in that - it's been sat on by time [sic] for centuries. What we could do is begin by giving you twenty, thirty, sixty thousand square miles, seventy or eighty thousand - there's lots of it" [quoted in Wilson, op cit, page 399]
Though Anthony had been honoured with this evocative and outrageous hype, it was Edmund de Rothschild who bit the bullet. He formed Brinco with Rio Tinto, Bowaters (the paper manufacturer), Anglo-American of South Africa, English Electric (then the main provider of British electrical "white goods") and others. There was no doubt who was the project's prime mover - Edmund, of whom Smallwood in his memoirs said:
"The one supremely great name in the whole Brinco-Churchll Falls saga is Rothschild, in particular Edmund. Never was a project from its first inception the beneficiary of such endless advice and dedication as that given to it by that modest patriotic Englishman"
Newfoundland was soon the target of massive incursions by loggers, miners and construction outfits which built the hydro-power station at Hamilton Falls (later renamed Churchill Falls in memory of the late British war leader) [Wilson op cit page 400].
Although the first Churchill falls project couldn't be stopped, there were disastrous consequences for many of the Indigenous Inuit; a successor project (on the Lower Churchill falls) failed in the face of renewed opposition..
In 1980. Brinco - then the biggest miner of asbestos in Canada and majority-owned by Rio Tinto - had to write off its investment in the Abitibi asbestos mines, although it hung on to the Cassiar mines [Roger Moody "The Gulliver File", Minewatch, et al, London pages 166-167].
A few years later Brinco was also prevented in opening a uranium mine in Labrador (part of Newfoundland). A remarkable coalition of the Inuit communities in Postville and Makkovik scuppered the company's prospects [see "Plunder!", Partizans and Cafca, London and Christchurch 1991, pages 142-143].
An awful lot of R and R
Rio Tinto and the Rothschilds had started connecting a hundred years earlier, when the Societe des Metaux, headed by the French banker Hyacinthe Secretan, began buying huge quantities of European copper, in order to fix the world price. Behind this rudimentary exercise in monopolisation were a number of European banks, including the London and Paris Rothschilds and their comradely British rival, Baring's [Charles E Harvey, "The Rio Tinto Company: An economic history of a leading international mining concern, 1973-1954", Alison Hodge, London, 1981, page 70.]. Rio Tinto was by then the most important copper miner in the Iberian peninsular (Spain and Portugal) - indeed the world. Whether or not the banks held key shares in the copper companies at this time is open to question. In any event, a proposal by investors to buy out the mining companies was abandoned. An attempt at a compromise was made in 1888, when Rio Tinto and the banks, including the Rothschilds, decided to establish a new joint venture copper marketing company in England. Rio Tinto's founder, Hugh Matheson, became the chair, while half the directors were appointed by the banks. This so-called "Secretan copper corner" also collapsed for reasons which are not clear [Harvey, op cit pages 72-73].
But the financial dependence of Rio Tinto on the Rothschilds was becoming obvious. According to RTZ historian, Charles Harvey, in his assiduous history of the mining company's formative years: "The Rothschilds would seem from their involvement in various financial schemes to have become substantial shareholders in the Rio Tinto Company in the aftermath of the Secretan copper corner [A Rio Tiinto company] entry of 9 November 1905 indicates that their holding at that date amounted to 30.8 per cent of the Company's issued share capital" [Harvey ibid, footnote 73, page 110].
The first world war had a damaging impact on Rio Tinto's profits as copper pyrites (and by-product sulphur) prices slumped . Demonstrating their financial clout over the company, in June 1920 the London and Paris Rothschilds met with the Rio Tinto board and insisted on a major reshuffle: the directors duly fell into line [Harvey, op cit, page 171}. "The extent to which the Rothschilds directed Rio Tinto's development is difficult to determine" comments Harvey " Nonetheless it seems certain that the directorate's outlook was considerably influenced through its association with these financiers" [Harvey, ibid, page 188]
The growing mutual dependence of Rio Tinto and the Rothshild's became more obvious when the mining company moved into central Africa during the 1920s. The Rothschilds encouraged their British confreres to buy a major - and strategically invaluable - stake in the Northern Rhodesian (Zimbabwean) copper belt. They viewed the investment not just as a source of revenue but, says Harvey, " as a vehicle for capital accumulation in its own right" [Harvey, ibid, page 221]. By 1932, three outfits - collectively known as "the Rio Tinto Group" - controlled the biggest stake in what was potentially the world's richest copper field,. One was Rio Tinto itself, the second a company partly owned by Rio Tinto - and third came the Rothschilds. [Harvey, op cit, page 231].
Pennies for the Guy
Just how much of Rio Tinto did the Rothschilds continue to own during the heady fifties, sixties and early seventies - a period of enormous neo-colonial expansion for the world's most powerful mining company? We can only speculate. Though firmly from the French branch of the family Guy de Rothschild sat on the board of the London-based miner, while amassing his own mining interests into IMETAL by a stupendous process of acquisition (see below).
In his 1985 autobiography, Guy claimed that, until the old Rio Tinto evolved into RTZ (Rio Tinto Zinc) in 1962, through its acquisition of Consolidated Zince in Australia, the Rothschilds held no less than half the shares of the British company. At an unspecified time, Anglo American (one of the Rothschild's partners in the Brinco confection) also acquired 10% of RTZ, through its London-based subsidiary, Charter Consolidated and a Rothschild sat on the Charter board.
Certainly RTZ and the French Rothschilds connived closely to form the notorious "uranium cartel" in the early 1970s, in order to outflank the United States, then the prime supplier of the deadly metal. During US Congressional investigation of the cartel in 1975, one Congressman McDonald lambasted the Rothschilds in no uncertain terms:
"As suggested by the fist clenching five arrows in the family crest, the Rothschilds of France and England have an interest in nearly every uranium mine in the world The Rothschild presence is everything" [ US Congressional Record, Extension of Remarks, Washington DC 4/3/1975].`
It is fair to conclude that the Bank (certainly the French arm) is no longer "everything" in the manifold manoeuvres of what is now the world's second largest mining company. In its latest Annual Report, Rio Tinto plc lists its twenty largest shareholders; between them controlling 32.47% of the company's share capital. All are "nominees" (ie investing on behalf of unnamed investors which could include themselves), led by the Bank of New York (7.63%), followed closely by Chase (7.58%) and with HSBC coming third (2.06%).
Rio Tinto Ltd, the company's Australian arm, is 37.60% owned by Rio Tinto in London, with Chase Manhatten Nominees second (9.18%).
Neither of the dual-listed companies are officially the beneficiaries of any important Rothschild stake. [Rio Tinto 2001: Annual Report and financial stat ements (according to US General Accounting principles), London and Melbourne, 2002, page 131].
Nonetheless, during the 1980s and early 1990s Rothschild and Rio Tinto continued to do deals. The bank was associated with the mining company when Rio Tinto planned to purchase the huge Cerro Colorado copper project in Pinochset's Chile, through its subsidiary, Rio Algom. (The project was delayed and Rio Tinto late sold off Rio Algom ["Plunder!" page 137]). And Rio Tinto bought up 40% of the vast - and hugely rich - Neves Corvo copper mine in Portugal in 1984 from two IMETAL subsidiaries.
But the nineties yielded nothing of the type and scale of investment brokered between the partners over the previous century. Two mining projects have brought the company and bank together recently (Lihir and Richards Bay) but these are relatively minor, conventional plays (see appendix). Rio Tinto and Rothschild do not seem to be currently wheeling and dealing in Australia, where the bank is concentrating its attention on the minerals sector
It is certainly reasonable to suggest that Rothshild's newfound interest in the mining company Lepanto may be partly motivated by Rio Tinto's former hands-on involvement with the Philippine company in the same area (It would not be unreasonable to speculate that the two parties consulted beforehand). But this is probably less important than the fact that it is partly through their 120 year association with Rio Tinto that the Rothschilds have acquired an expertise in mine finance which is unrivalled.
La rennassiance (et echecs) des Rothschilds francaises:
The rise and fall of IMETAL
Forty years ago De Rothschild Freres changed its role from that of a merchant bank to a financial conglomerate, greedy for investments in oil, mining, shipping, and real estate. In 1967 the Bank merged its family concerns with that of their other major company, the Compagnie du Nord (railway) [Wilson, op cit page 401].
"If the 1960's really were 'swinging'" writes Derek Wilson, "no one swung with more vigour than the French Rothschilds. Not since the 1920s had they had so much disposable wealth. Not since the end of the last century had they wielded so much power". It was not only moneymaking which measurably advanced but also the Rothschilds political influence , especially with French prime minister Georges Pompidou.
But, within living memory, the story had been very different. Nor, after nationalisation in the 1980s, has the earlier euphoria been regained.
During the late 1930's the left-wing Popular Front government "robbed" the family of its extensive railway holdings. Adding insult to injury, in 1940 the anti-semitic, Nazi puppet Vichy government stripped the French Rothschilds of their citizenship, confiscated their fortunes and forcedthem into exile.
They returned home after the war to recover their assets and some of their pre-war status . After re-establishing their business they began "cleaning up" in nickel by forming the Societe Metallurgique le Nickel (SLN) to further exploit the vast deposits in French-colonised New Caledonia. The family also built Penarroya - through its mines in Spain and France - into the leading European source of lead and zinc. In 1971, the family added Mokta, the Gabonese uranium miner, to their clutch of interests and, three years later, tied the three companies up in the huge IMETAL conglomerate.
Six years later, IMETAL took over the steel products manufacturer Copperweld, marking an important Rothshild entrée into the USA; a Texas-based refinery followed [Roger Moody "The Gulliver File" op cit, page 425].
While the good times of the '70s lasted, they were extremely profitable for the Rothschilds. Ranked in 1980 as thirty-eighth largest multinational in terms of annual sales, IMETAL was raking in more profits from its overseas operations than virtually any other global company ["The Gullvier File" op cit, page 426].
But then the Mitterand government nationalised the Rothschild banking interests and IMETAL, along with SLN, began to slip out of the family's hands. A tortuous decade followed and, by 1990, the company had virtually withdrawn from mining.
Guy de Rothschild in his 1985 autobiography, "The Whims of Fortune" asked himself: "What was the final balance of those hectic twenty years?"
He answered: "Today I find it doubly sad to see Imetal, now government-controlled, staggering under the weight of the slump. All that remains for me is the remembrance of our efforts, our difficulties, our dreams" [Guy de Rothschild "The Whims of Fortune", Granada Publishing, Manchester, 1985]
And it seems likely that any Rothschild aspirations, to regain influence over the French mining industry, will remain exactly that - dreams.
Roger Moody, Nostromo Research, London, July 2003.
Copyright: Nostromo Research and Philippine Indigenous Peoples Links
[This paper can be quoted from, provided acknowledgment is given to sources used. It may not be reproduced in its entirety without permission from the copyright holders].
See also The Rothschild Files (3 August 2003)