Across the other side of the Atlantic, in the Geneva headquarters of Metal-Exx, Max Eisenstadt was metaphorically scratching his head over the same issue. Long-time aluminium trader, CEO of Metal-Exx since Serck had taken it over, Eisenstadt had seen pretty much everything in his long career. He was way beyond the age where most traders had retired and bowed out, and had made more money than he could ever dream of spending; nevertheless, he stuck in there at Metal-Exx, his fascination with the business keeping him right at the forefront, even though his colleagues and competitors were a generation or more younger. Duties, tariffs, sanctions - all these were creators of the sort of friction in the markets that it was his job to exploit. His mantra had always been that if it were straightforward, then anybody could do it. So although dispassionately, from the outside, he viewed the sanctions and tariffs as stupid and counter-productive - and likely to damage US domestic industry in the long run - as a trader, he was looking for ways in which he could use the situation to his advantage.
The problem he had, though, was that he hadn’t believed that the President would follow all the rhetoric with action. Eisenstadt had got it wrong, his strategy based on the fact that the President’s aggressive words were all bluster. So rather than put down as much metal on the ground in the US - duty-paid at the then prevailing rates - he had anticipated that, with the President’s words proving empty, the market if anything would soften, enabling him to come in much later and benefit. Bad mistake. He had plenty of sales marked in the US, and now the metal to satisfy those sales was going to have to come through the new duty regime. It was a missed opportunity rather than a loss-maker, but nevertheless it irked the veteran trader that he had misread the picture so completely. A further wrinkle was that one of his biggest sources of supply - and metal that had been destined for the US - was Russia; that wasn’t just a question of tariff changes - that’s where the sanctions came into the game.
Now, that wasn’t unsolvable, by any means. Indeed, as he sat pondering his tactics, his team were following his instructions to swap Russian metal for other origins. Theoretically, such swaps should offer opportunities to the smart Metal-Exx traders, but this time, they were in a weak position. The whole market knew (or at least could guess) that they needed US-deliverable material, so by and large, the swaps were favouring the counterparties, not Metal-Exx. Frankly, Eisenstadt thought sourly as he pondered, the boot was on the wrong foot.
Back in New York, Vassiliev continued his attempt to interest Serck.
“So we have a large quantity of Russian aluminium metal which is already duty paid in the United States; it was shipped here before the sanctions came in, so it is completely legitimate. The seller will secure an extra benefit equal to the value of the the new tariff imposed on imported metal. You know the rules; new shipments of Russian metal are blocked by the sanctions, but anything that was here before the cut-off date is perfectly legal and able to be sold on the free market.”
Serck eventually spoke. “Mr Vassiliev, this is all common knowledge. I don’t understand why you think it is of interest to me that you tell me about what is after all a lucky windfall for Mr Puschkin. You have the metal; you can take the benefit. That’s it.”
“Well, it could be. But it is always worth considering the fact that all people do not always have the same range of competences. Arctic Mining draws nickel and palladium out of the tundra of northern Siberia. We then smelt it into metal which is ready for use. Some of this we sell ourselves, it is true, but much of it we sell to merchants and traders for onward sale to consumers. Indeed, until recent events caused some friction between us, we sold a large quantity to your own Metal-Exx company. We do it this way because we know our own limitations. We are a mining company, not a sales company, and we do not have the reach or the expertise to handle the distribution of our products to end consumers. We deliver to main ports, we do not get involved in logistics beyond that. I believe the expression in English is ‘horses for courses’.” He chuckled.
“OK,” said Serck, “so you want to use Metal-Exx to sell your material for you. Well, maybe we could, but it’s frankly not really a big deal. It’s not really something to excite Leopard-Star; for us, the amounts involved are hardly likely to even create a bubble in our value. But I’m happy to pass your comments on to my guys at Metal-Exx and let them see if there is something they could work out for you. But I’m afraid selling aluminium to car companies or washing-machine makers is not really what I do. But I appreciate the goodwill you - and Mr Puschkin - have shown in coming to talk to me after our last bit of interaction.” But for sure I’m not naïve enough to think you have just shrugged that off, he thought to himself. I’m not going to stop looking over my shoulder just because of a meeting.
“Yes, I understand your point of view; but we believe there is more potential here, in seeing a further dimension to this deal. Mr Puschkin would like to have a face to face meeting with you to explain what else he can offer.”
Now Serck was really confused. This was nickel and dime stuff for Puschkin just as much as for him. Why should two billionaires bother to meet to talk about something that could easily be handled by a couple of junior traders?
Vassiliev continued: “Mr Puschkin needs to be in Switzerland next week, so perhaps it would be possible to meet you at the Metal-Exx headquarters?” He smiled. “Maybe you are a little sceptical about this. Well, why not? You are an important man, and this seems like a minor matter. But don’t forget, Mr Puschkin is also a big name; and yet he sees it as worthwhile. Perhaps you could too.”
'Endgame', Chapter III, will be available here tomorrow.