Rhodesian chromite embargo and laundering

Embargoes don't usually work, but forty or fifty years ago they had a civil war in Rhodesia, and Rhodesia has the world's best chromium ore. It is so good, so much better than anyone else's, anyone can tell if it came from Rhodesia because no one has anything this good anywhere else in the world. They put an embargo because they were having this civil war, and you were not supposed to be able to use Rhodesian chromite. So you'd buy your chromium ore from somewhere else, but where did they get it from? They got it from Rhodesia, and they were just passing it through. When it got to the steel mill they knew this was Rhodesian chromium ore, but according to the paperwork it came from another country. Most people will find a way around embargoes, and they rarely work.

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Rhodesian chrome ore was so uniquely clean it could go straight into steel furnaces. The international embargo was widely circumvented; steel mills knew, but laundered through third countries.

Chromium is not a very good structural material by itself. It melts at over 2000 degrees, makes it a little pricey to process. But it's brittle by itself as a metal. You can take a hammer to it — no fracture. But it's a very important metal. It only comes from a few places in the world. Before you were born, there were all kinds of problems in Rhodesia, and Rhodesia has a chromite ore that you don't even have to clean up. You can just take that rock out of the ground and throw it in a steel-melting furnace. There was an embargo on Rhodesian chrome. You've heard of blood diamonds nowadays — there's a certain type of element where some country has sort of a control, and then they have a civil war. There's the diamonds in Angola, but before that, it was the chromium in Rhodesia. They had a worldwide embargo on Rhodesian chrome, except it was all leaking and getting to the steel mills anyway. Everybody knew it was Rhodesian chrome. It might have come through some other country and been laundered, but you could tell — no one else in the world had that quality of chromite ore. But it comes from India and parts of Russia. It's a strategic material in the sense that we don't have any good US source. We actually have lots of minerals, but we can't extract it cheaply enough compared to these other good deposits.

Forty-year-old example of political externality. Rhodesian chrome ore is the world's best; embargo on it could be defeated by laundering through other countries, but quality was distinctive enough that buyers knew the source.

Go back forty years ago — Rhodesian chrome, in Africa. Chrome ore — Rhodesian chrome ore is the best in the world. We can get chromium from a lot of other sources, but none of it's as good and as economical as Rhodesian chrome. They were trying — same type of thing we're trying to do in the Ukraine right now — politically, get the former Soviets to do what they should be doing, in our opinion. They tried to have an embargo on Rhodesian chrome, except you could always tell it was very decent chrome. They'd launder it through some other country, but no one else had that kind of chrome ore, so they knew they were really selling Rhodesian chrome.

Another externality is embargoes. From time to time we impose embargoes on different countries. I talked about the Japanese and the oil and steel embargo trying to get them to behave in Nanking and China and not murder all the people. We thought we were doing a good thing. We have embargoes against the North Koreans. We just ended some of our embargoes against Iran. Well, back when I was in elementary school and high school, in the '60s, they had a civil war in Rhodesia — Zimbabwe now is what Rhodesia was. And it turns out Rhodesian chrome ore is the best in the world. This is sort of like the conflict diamonds. This chrome ore is so good you can basically just stick it in the furnace, you don't have to do any processing to upgrade it. It's the richest in the world. It's unmistakable in its appearance.

Embargo workaround case. Rhodesian chrome ore was uniquely high-grade — crushable directly into a steel furnace for stainless. Embargo was nominally enforced; black-market laundering through third countries was tacitly tolerated by customs.

Embargoes. There were blood diamonds in Angola back longer ago than — actually, when your parents were in diapers. Rhodesia, which is now part of Zimbabwe, just northeast of South Africa — they had the world's best chromium ore reserves. They had a civil war going on, and the world tried to put pressure on them, just like we try to put pressure on North Korea and Iran and other countries to not build nuclear weapons. Rhodesia wasn't building nuclear weapons, but it was a lot of pain and suffering for a lot of people there. So we basically said we're going to put an embargo on Rhodesian chrome. They had the best chrome ore in the world — it was so good you could basically just take that rock and crush it and throw it into your steel furnace to make stainless steel. That's how good it was. No one else had chromium that good. We used to have iron ore that good — it was called the Mesabi Range in Minnesota, and it ran out about 1948, but it was so good we could crush the rock and put it right into the blast furnace to make steel. We didn't have to process it. We had the world's cheapest iron ore in the United States, but we used it all up.

Political externality. The world's best chrome ore subjected to embargo during the civil war. Tom notes it's "a lot easier to detect Rhodesian chrome than blood diamonds" — visual identification rather than impurity analysis.

Before that, about the time you were born, there was Rhodesian chrome. Anybody heard of Rhodesia? Rhodesia was an east African nation just north of South Africa, and they have the world's best chrome ore. It's so good you can't reproduce it. It's the most economical. But they were having a civil war in Rhodesia, and the rest of the world was trying to pressure them, just like we're trying to pressure Syria right now because of their civil war. So they put an embargo on Rhodesian chrome. It's a lot easier to detect Rhodesian chrome than it is blood diamonds. Blood diamonds you've got to go in with some pretty sophisticated instrument. Rhodesian chrome you can sort of look at.