Difficulty awaits platinum cartel

THE world has changed since the Organisation of the Petroleum Exporting Countries (Opec) held us to ransom over the price of crude oil — not once, by the way, but on many occasions.

Established in 1960, its first major act was to raise prices in response to the Yom Kippur War, essentially between Israel and Egypt, of 1973. Though its power has been sharply restricted by world economic conditions and the shale oil revolution in the US, there’s not much doubt that it has acted as a cartel when it has felt it appropriate.

I was not surprised then to learn that during the recent Brics (Brazil, Russia, India, China, SA) summit in Durban, Russia and SA planned to co-ordinate their supplies of platinum to world markets for their mutual benefit. That must mean they want to control the flow of platinum and, therefore, its price.

SA is the world’s biggest producer of platinum by a long way (about 70%). Russia holds a similar position when it comes to palladium (about 40%) but the action seems to be concentrated on platinum.

And there’s been very little word on how this would work in practice. Would a state agency buy the platinum from the producers and then sell it into world markets? If that’s the case, what about the contracts already in place between end users and producers?

And how would a state-managed cartel system avoid the probing these days of competition authorities around the world?

It’s not as though this sort of thing has escaped attention. I see that a 2009 American University Law Review makes it clear that no party to the General Agreement on Tariff and Trade (Gatt) can withhold supplies of a commodity — although it can impose duties and taxes. The critical prohibition on quantitative export restrictions is contained in Article XI of Gatt. Though the Law Review recommends that a dispute settlement with Opec should be avoided, that’s only because it thinks there are preferable alternatives.

This is going to be an intriguing nut for Brics to crack.