Private Empire: ExxonMobil and American Power (75 page)

The corporation’s representatives also pointed out that the public did not understand cap and trade very well. Among those who had heard of the policy proposal at all, more than twice as many of those surveyed had negative as positive assessments. During 2009, ExxonMobil lobbyists left behind in congressional offices PowerPoint slides documenting a private Hart Research Associates poll, “Energy and Climate Change Policy,” that had been commissioned by the U.S. Climate Task Force, the pro–carbon tax coalition. The poll showed that Americans preferred a carbon tax to cap and trade, and they strongly favored a tax when educated about the arguments in favor of each approach.
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n the morning of September 23, 2009, Rex Tillerson arrived at the Sheraton on Seventh Avenue to participate in the “Investing in Girls and Women” Plenary Session at the Clinton Global Initiative. Delegates in the ballroom sat with name tags dangling from their necks. The decor was tinted blue, purple, and red; two large screens on the sides of a stage flashed photographs of dignified Third World poor.

Bill Clinton took the stage wearing a brown suit; it was an early hour, and his baggy eyes and raspy voice hinted at a late night. “It was very important to me that this issue of women and girls be highlighted” at this year’s initiative, he told the audience. He invited a number of “commitment makers” to the stage to congratulate them on their philanthropy before the audience. Muhammad Yunus, the Nobel laureate and founder of Grameen Bank, was among the honored; so was Lorie Jackson of ExxonMobil.

Clinton introduced Diane Sawyer. She summoned to the stage members of a panel to talk about women’s issues; the panel included Tillerson and Lloyd Blankfein, the chief executive of Goldman Sachs, the investment bank with a public reputation as much in need of repair as ExxonMobil’s. The ballroom atmosphere suggested the laying on of liberal, globalized hands to cleanse sinful multinational corporations. “These are some of the power hitters,” Sawyer said of Tillerson and Blankfein.

Tillerson talked about ExxonMobil’s charitable initiatives to support girls and women in some of the poor countries where the corporation extracted oil. “Technology comes very natural to ExxonMobil,” he said. “What are the technologies that will provide them [girls and women] capabilities to undertake their daily activities in a more effective and efficient way?”

Sawyer later asked him: What is the responsibility of a multinational corporation to make the world better through charitable activity? Is it a tithe of 10 percent? How much?

“Ultimately,” Tillerson said, “this is our shareholders’ money we’re spending. It’s not my money to tithe. It’s not the corporation’s. It’s our shareholders’.”
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y late 2009, whatever anxieties Tillerson and Cohen might have possessed as the Obama administration took office, it had become apparent that ExxonMobil would prevail, again, on the public policy issues that mattered most to the corporation. Cap-and-trade legislation died a slow death in the U.S. Senate; its proponents could not construct a filibuster-proof majority. In Copenhagen, in December, representatives of the world’s major economies failed to agree on post-Kyoto rules that would deliver serious reductions in greenhouse gas emissions. (ExxonMobil sent its astrophysicist and climate policy advocate, Brian Flannery, to attend the Copenhagen negotiations; Flannery sought to educate media and delegates about the issues, as the corporation saw them.)

In Irving, ExxonMobil’s corporate forecasters monitored the Copenhagen talks, but they had by now concluded that even if some sort of international protocol on climate were reached, it would not actually affect emissions very much. “The implementation becomes extremely complicated, extremely political, and it’s hard to see that expanding on a really, really wide scale,” one of the executives involved said. Transformations as China industrialized further would do much more to determine the world’s climate future than negotiations such as those at Copenhagen, ExxonMobil’s analysts concluded.

Tillerson and his colleagues shifted their image advertising and lobbying messages to emphasize jobs, which their internal polling showed resonated strongly. Tillerson returned to Washington in October to speak at the Economic Club, at the luxury Ritz-Carlton hotel.

On ExxonMobil’s carbon tax proposal, which Tillerson had unveiled in Washington almost a year earlier, the chairman said, “I hope you see it shows how serious we are about this issue. . . . We’re engaged heavily. . . . We need to get this as right as we can.”
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Twenty-six

“We’re Confident You Can Book the Reserves”

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efore 2003, the marble floor in the entrance lobby of Baghdad’s flagship Al-Rashid Hotel contained an inlaid tile mosaic of America’s forty-first president—not a convincing likeness, but a recognizable one. The mosaic rendered George Herbert Walker Bush in a suit, tie, and pocket chief, accompanied by a caption: “Bush Is Criminal.” After the invasion of Iraq led by America’s forty-third president, George W. Bush, the Al-Rashid’s ownership redecorated.

The hotel was a tall, rectangular building with concrete balconies, surrounded by green lawns and palm trees; it presented an inviting target to the mortar squads of the anti-American insurgents who embroiled Baghdad in violence after the invasion. The Al-Rashid lay within the walled Green Zone, where American and Iraqi authorities sought to govern and stabilize the country. Rocket attacks, parades of demanding international visitors on tight schedules, and repetitive conferences aimed at arresting Iraq’s downward spiral took a toll on the Al-Rashid’s staff and ambience.

On June 29, 2009, Richard Vierbuchen, an ExxonMobil vice president in charge of upstream operations in the Middle East, made his way to the Al-Rashid’s ballroom, which had been decorated emphatically in green, the color of Islam. Rows of green cloth chairs faced a stage backed by a green curtain; on the stage, officials from Iraq’s oil ministry sat at a long table draped with shiny green bunting. To one side, propped on a stand, stood an empty glass box about the size of an aquarium. Television lights saturated the room in brightness.

Vierbuchen was a tall, slim, athletic-looking man in his fifties. He held a doctoral degree in applied geophysics from Princeton University and had worked in the Arab world and Central Asia for the corporation for many years. After 2003, ExxonMobil’s Global Security and political risk analysts had advised Tillerson that the corporation’s executives should stay away from Iraq, as the threats of kidnapping and violence were too great. Vierbuchen and his colleagues had talked with Iraqi government officials about the possibility of ExxonMobil’s bidding for work in Iraqi oil and gas fields, but these meetings took place outside the country—in Jordan, Turkey, the United Arab Emirates, Europe, or the United States.

Now, at last, a somewhat calmer Iraq was on the verge of putting some of its immense reserves—the second- or third-largest combined oil and gas bounty on the planet, after Saudi Arabia and alongside Russia—up for bids by international oil companies. Iraqi politics and pride demanded that companies wishing to participate in the auction send executives in person to Baghdad. Vierbuchen could be assured, at least, that thousands of American soldiers still remained in the Iraqi capital, providing security to the Green Zone and other critical installations.

After the Second World War and before the rise of resource nationalism in the Middle East, ExxonMobil had shared in a lucrative oil concession in Iraq. The corporation had owned and produced some of the country’s richest, sweetest reserves, located near the head of the Persian Gulf. Saddam Hussein had thrown Exxon out in 1972.

The Al-Rashid auction had the trappings of a game show. Prime Minister Nouri Al-Maliki delivered a speech. The American ambassador, Christopher Hill, came to listen and watch. Live on national television, one by one, oil executives and Iraqi officials dropped envelopes of varying colors into the square glass box onstage. Screens in the ballroom tabulated certain scores for each bid, using guidelines issued by the Iraqi Ministry of Oil. The scores sought to measure which oil company offers would most benefit Iraq. The large, invited ballroom audience applauded when Iraqi officials opened some of the envelopes.

The day’s purpose was to provide Iraq a much greater reward from its oil wealth. Six years after the American invasion, despite the Bush administration’s investment of $4 billion of U.S. taxpayer funds to rehabilitate the country’s oil infrastructure, and the loss of countless lives, Iraqi crude production remained stuck at about 2.5 million barrels per day, below its peak during the Saddam years.
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Moreover, Iraq’s anti-American insurgency had evolved by 2006 into a vicious civil war along Iraq’s Sunni-Shia sectarian fault line. The war was one reason why the oil industry had underperformed. Decrepit pipelines dating to the Saddam era, inadequate electricity, and field production technologies that had barely been updated since the 1970s meant that even when violence gradually subsided, after the “surge” of U.S. forces President Bush ordered into Baghdad in 2007, Iraq still lacked the means, on its own, to raise oil production quickly. Outside estimates of the investments needed to bring Iraqi production up to 6 million barrels per day or more—a target easily within reach, if geology were the only factor—ranged from $25 billion to $75 billion. Iraq had organized the Al-Rashid auction to accept bids from potential foreign investment and technology partners—not only oil corporations from the free-market West, but state-owned companies from Russia, China, and India as well. The glass box and the television cameras were intended to assure the public that the outcome would be transparent and not subject to the sort of corruption and official theft that was otherwise prevalent in the country.

Richard Vierbuchen had been involved in the negotiations and paperwork to “prequalify” ExxonMobil for the auction. He regarded the reopening of Iraqi oil to outside investment as one of the world’s great oil opportunities—a unique prospect, given the undeveloped size and proximity to sea-lanes that Iraq’s big southern fields offered. The oil was of exceptionally high quality, “almost like engine oil,” as an American government official who worked with Iraq on its oil industry put it.
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Vierbuchen rose from his chair when ExxonMobil’s turn arrived. He ascended the stage and walked toward the glass box. He carried a tan envelope. The bid inside contained, in accordance with rules set by the Iraqi oil ministry, just two numbers: a target for increased production in the particular oil field for which ExxonMobil was bidding, and the price per barrel, in U.S. dollars, that the corporation wanted to be paid. Vierbuchen smiled awkwardly for the cameras and dropped his envelope in the box.

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xxonMobil’s bid on that summer’s day in 2009 was the product of six years of patience, lobbying, and a willingness within the corporation’s leadership to work at times outside of the normal ExxonMobil playbook. The uniqueness of Iraq’s position as a war-scarred oil giant that had vast reserves and easy export routes demanded creativity. It also required a subtle understanding of the ways that Iraq’s oil future would run through Washington.

On July 26, 2006, a typically hot and muggy summer’s day in the American capital, Oliver Zandona, who followed Iraq oil issues in ExxonMobil’s K Street office, arrived at 1000 Independence Avenue, the headquarters of the United States Department of Energy. George W. Bush’s friend and secretary of energy, Sam Bodman, had arranged a meeting between Iraq’s visiting minister of oil, Hussain Al-Shahristani, a gray-bearded Shia politician, and representatives of major oil companies, both American and European.

Zandona and other oil company representatives peppered Shahristani with questions about when Iraq might finally pass a law specifying the legal rights of international companies and when it might be in a position to provide adequate security. They advocated production-sharing agreements and “stressed that certainty and consistency in laws and stable taxing regimes are important,” according to minutes of the session.

Shahristani said he was hopeful that partnerships with international oil giants might soon be possible. He had a message, however. The oil companies should not talk about contracts to anyone in the Iraqi government or in Iraq’s diverse political parties but him, the ministry official in charge. Companies should not attempt to cut side deals that were not directly negotiated by the oil ministry.

Shahristani raised his index finger in the air. “Clean games, gentlemen,” he told the company lobbyists and executives. “Clean games.”
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It was an aspiration, at least.

Zandona helped to shape ExxonMobil’s basic strategy for Iraq after the 2003 invasion. Essentially, the strategy was to wait out the war and maintain a healthy public distance from the tainted Bush administration, while also remaining in close private contact with American officials to stay up to date and to push for policy that would lead to foreign investment in Iraq’s oil fields. “From Exxon’s perspective, Iraq is the last of the easy oil,” said a State Department official who interacted with the corporation frequently.
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Immediately after the U.S.-led invasion, ExxonMobil and other international companies bought or “lifted” Iraqi crude at southern terminals, at the head of the Persian Gulf. These direct oil sales to well-known international oil companies were designed and authorized by the Bush administration’s occupation authority in Baghdad, the Coalition Provisional Authority. Saddam Hussein’s regime had sold oil legally under the United Nations Oil-for-Food Programme (although many of these deals were compromised by payoffs and corruption) and also off the books, by smuggling through middlemen. When the United States established power in Baghdad, its occupation leaders wanted to assure Iraqis that the days of Saddam Hussein’s shady oil smuggling and corruption were over, and that profits from Iraqi crude would not be skimmed off by fly-by-night traders and middlemen. Iraq did not have the capacity to ship its own oil to spot markets in Europe, where cargoes of oil were bought and sold for cash, or to refinery customers in Asia; its oil had to be sold to middlemen, for onward sale. The postwar oil sales to well-known Western oil companies benefited ExxonMobil’s downstream and oil-trading operations, but the margins on such trades were thin, and the deals were a far cry from the big and profitable prize of owning a piece of Iraq’s upstream oil production over the long run.
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As it sold ExxonMobil Iraqi crude in 2003, the Bush administration also urged the corporation to open a Baghdad office to lend support and credibility to what its occupation leaders hoped, naively, would be a rapidly normalizing country. Lee Raymond declined. By October of that year, violence was spreading across Iraq. The Coalition Provisional Authority increasingly was not in a position to make international oil deals; it was struggling to provide Iraq with adequate supplies of gasoline and electricity. An Iraqi government that would be credible enough with the Iraqi people to bargain on a subject of such symbolic and material importance as oil production partnerships with foreign companies looked a long way off.

“If you don’t feel like you can protect your people, [if] you put them in a position where they are really vulnerable, then you don’t have any business being there,” recalled Lee Raymond. “It just seemed for a time, with everything going on in Iraq, [it would be] a long time before anybody could meet the threshold of putting people in there.”

The corporation ran a regional office in Amman, Jordan, where Iraqi businessmen and refugees gathered as the war darkened, and another in Dubai. ExxonMobil used this forward position to monitor events and meet with Iraqi officials and executives from its historically state-owned oil companies. The corporation hired a retired U.S. Army colonel who had run security for the oil policy section of the Coalition Provisional Authority to help advise on security decisions. In Houston, Scott Ingersol, who ran ExxonMobil’s Iraq program, assembled a team of experts, including former Bush administration officials who had learned about Iraq’s oil during the war—lawyers, business development specialists, and political risk analysts. If and when there was a way in, they would be ready to move quickly.

ExxonMobil had scant knowledge about the leading executives and managers in Iraq’s decaying oil industry. Aging technocrats—many trained in the United States, the United Kingdom, and Europe before Saddam Hussein’s coup—ran oil production, but they had been isolated and monitored by Saddam, who distrusted all but his most loyal clansmen. The corporation gradually rebuilt personal contacts within the Iraqi oil sector, particularly with senior technicians trained in the West and with promising younger engineers who wanted up-to-date training on technologies. In 2005, spurred by the Bush administration, Iraq signed memoranda of understanding with about thirty international oil companies, including ExxonMobil. The companies agreed to provide training to Iraqi oil technicians and to carry out studies.

“Basically,” said an American official involved in constructing these initial deals, ExxonMobil and its American and European peers told the Iraqis, “we’re going to spend $20 million on you guys over the next years. All you need to give us is people. What’s in it for us? Well, hopefully, we can develop a relationship with you, impress you with what we’ve got, and do business in the future.”

In Washington, Oliver Zandona, Robert Haines, and others in the K Street office met continuously with American officials working on Iraq economic and oil policy.

“Your job is to promote U.S. companies” was the essence of ExxonMobil’s message, recalled a State Department official who heard it regularly. “Do your best to create a level playing field. If you put us up against any state-run company” from Russia or China, “on a level playing field, we’ll win.” Beyond that, the corporation wanted the Bush administration to “stay as far away from the oil sector as possible,” the official recalled, because otherwise, the United States would be “perceived as meddling, and [would] be a P.R. problem.”
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