The Hillary supporters I know are in a tizzy because King Donald I (a.k.a. Prince of Darkness) has appointed Rex Tillerson to be Secretary of State. They love John Kerry (because he exemplifies the American dream of living off someone else’s labor? Kerry tapping into wealth created by Henry J. Heinz and son/grandson by marrying a rich widow is inspirational?) and they already hate Tillerson.
A few years ago I read Private Empire: ExxonMobil and American Power and, if you’re curious to know more about Mr. Tillerson, I would recommend the book. What did Tillerson actually do in Russia? Here’s a sample:
It was not until 1996 that ExxonMobil closed on terms for what became known as the Sakhalin-1 project. It was an undertaking that would test the corporation’s engineering prowess like no other. Hurricane winds swept the Sakhalin region each autumn, and ice packs up to six feet thick built up during the winter. After the spring, melting ice floes threatened to knock down any offshore oil rig in their way. Exxon decided on a plan to drill a seven-mile horizontal well from mainland Russia underneath the ocean waters. It was the only well of its kind in the world. Sakhalin-1 suggested some of the appeal of Western oil technology and engineering skill to Russia. But to make the deal on terms acceptable to Exxon, Russia’s government had had to set aside its nationalism and share oil ownership.
Tillerson formed a friendship with the Sakhalin governor and decided to rope in a state-owned Russian oil firm as a project partner, so that ExxonMobil and the Russian government would be “on the same side of the table,” as Tillerson put it later, if disputes over the project arose. ExxonMobil had connections at Rosneft, one of the smaller state-owned oil and gas companies, with about 10 percent of the country’s reserves, a company widely regarded as a bureaucratic mess even by Russia’s standards. Around 1995, Lee Raymond had met with Rosneft executives to talk about a possible acquisition of the firm. The Russian company’s leaders had said they were willing to merge into Exxon, and “begged and pleaded” to be acquired, as an executive involved recalled it, but Raymond declined because even Rosneft’s leaders seemed unsure about what their company legally owned.
[a few years into the project] Under pressure, Tillerson applied the Exxon formula: no surrender. “We jacked this all the way to the top,” recalled one of his colleagues. “We brought the issue up with the president [Putin] and we said, ‘Look, we have got the contract signed, we are doing everything we are supposed to do—here are the rules. And these guys don’t want to follow the rules. What are you going to do about it?’” Putin offered to write out an executive order saying that Sakhalin-1 could proceed, but Tillerson refused. Putin did not have enough legal authority to satisfy ExxonMobil; Tillerson said he did not want to operate by decree, but by durable laws. Tillerson wanted to have “all the t’s crossed and i’s dotted exactly according to Russian law and regulation, and if we couldn’t get it done, then we were not going to do it,” the former executive remembered. Ultimately, after Putin “blew his stack” at ExxonMobil’s affront, the Russian president agreed.
Tillerson is also characterized in the book as taking an actuarial approach to climate change. Upon taking over as CEO he assembled a team of experts to try to figure out how much could be predicted. Then Exxon tried to sit down with people who made a living as climate change alarmists:
On climate change, Cohen and Stuewer flashed PowerPoint slides outlining draft language of a new formulation of ExxonMobil’s position. “They were really dancing around the question of certainty” about the risks of global warming and the evidence that man-made activity contributed, recalled Leslie Lowe, one of the participants. Lowe introduced the metaphor of having insurance against fire: Why not work against man-made contributions to climate change, even if there remained uncertainty about every last detail of cause and effect? Yes, the ExxonMobil side responded, but you don’t spend all of your money in life on insurance. You calculate how large and valuable an asset you are trying to insure, and how big a risk you face. Climate was like everything else ExxonMobil did: It was a matter of risk management, Cohen emphasized.
Exxon under Tillerson agrees with the rest of the engineering world:
Battery technology interested ExxonMobil’s corporate strategists most of all. If there was one emerging energy technology that seemed to have the practical potential to disrupt the oil industry’s assumptions about the transportation economy, this was it. “I always put batteries in the category of game changers,” an ExxonMobil executive involved in the strategic technology review recalled. The most important questions involved the potential for breakthroughs in the “energy intensity” …
Other than the money he presumably takes for himself, Tillerson tries to be conservative:
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’.”
The most damning part of the book is that in 2009 Tillerson spent $41 billion to acquire XTO, a shale gas company, just in time for the complete collapse of natural gas prices (XOM has a market cap of $380 billion today). Maybe it will pay off in the long run?
The author of the book seems to be primarily in sympathy with Obama and other Democrats. Nonetheless he gives Tillerson some credit on financial performance:
On July 28, 2011, ExxonMobil announced its profits for the first half of the year. The total came in at $21.3 billion, a whisker under the amount the corporation reported during the same period in 2008, when it set a record for the most nominal profit earned by any corporation in American history. Eight days later, on August 5, 2011, Standard & Poor’s announced the first-ever ratings downgrade of the bonds issued by the United States Treasury, marking them down from a AAA rating to AA-plus. The Standard & Poor’s downgrade meant that ExxonMobil, one of only four American corporations to maintain the AAA mark, now possessed a credit rating superior to that of the United States.
Standard & Poor’s received intense criticism for its judgment that the American government’s ability to repay its lenders might be in any doubt. Yet the fiscal trajectories of the United States Treasury and ExxonMobil had certainly diverged. In 1999, the year that Exxon’s acquisition of Mobil closed, the federal government and the corporation each took in more money annually than was required to meet expenses. Their paths then divided. In an era of terrorism, expeditionary wars, and upheaval abroad, coupled with tax cutting and reckless financial speculation at home, one navigated confidently, while the other foundered. From the day of the Mobil merger closing until the day of the S&P downgrade, the net cash flow of the United States—receipts minus expenditures—was approximately negative $5.7 trillion. ExxonMobil’s net cash flow from operations and asset sales during the same period was a positive $493 billion.
Read three articles about Rex Tillerson this morning: The New York Times, the Wall Street Journal, and Phil Greenspun’s. Yours was the fairest and most informative of the three.
@Brian
No Brian you’re wrong, if it didn’t come from NYT/WSJ/WAPO/etc it is Fake News. 😉
Phil is getting paid by the russians to post articles to discredit our democracy.
Come on, you knew all along Phil is in bed with the Russians…
1995 Putin wasn’t the Russian president thought.
The part about Putin is complete bullshit. From 1990 to 1996 Putin was going up through the Наш дом party machinery in Saint Petersburg, and had no connection whatsoever with making deals with Exxon, Sakhalin, or Rex Tillerson. He went to be director of FSB in the late nineties, and was only in 1999 that he became prime minister, at that time a role very much in the shadow of Yeltsin. His first recorded meeting with Tillerson was in 1999, in Sakhalin (more than three years after the Sakhalin-1 deal was struck).
You failed to mention that Tillerson has a huge stake with Russia, given that US/EU sanctions against Russia forced ExxonMobil to cease offshore operations in the Russian arctic. ExxonMobil has complained of losing more than $1 billion with the sanctions. If you cannot see this obvious conflict of interest with Tillerson controlling US foreign policy, then you are as gullible as the Trump-voting rust belt hobos that think that Trump’s team of billionaires is actually going to fight for the right of the middle class.
Tillerson might be a tenacious and skilled CEO, but ultimately the objective of public service should be to serve the country, which is arguably difficult for the CEO class, which is so disconnected from the problems of most people, and so focused on the world of the upper echelons.
GermanL: keep smiling, but the joke is on you. Just wait until the fake news catches on a topic that concerns you, and then you will see how difficult it is to turn back the tide.
@Tiago:
“you are as gullible as the Trump-voting rust belt hobos that think that Trump’s team of billionaires is actually going to fight for the right of the middle class.”
I don’t dispute that there are huge conflicts of interest. The Trump cabinet is just building another swamp. Your statement however, implies that some relatively poor millionaires (eg. any alternative provided by Hillary or others like her) wouldn’t also have ambitions to use their powerful positions to make money, which is also delusion.
Regarding fake news, is there any neutral body of review (perhaps a Consumer Reports like publication) that rates news sources on their neutrality and sticking to the facts? I think these days opinion pieces get more attention than actual news. Mixed in with that are blogs and various aggregators. It’s a complete mess. I don’t doubt the problem of Fake News. I also think the mainstream media is a culprit as well for drifting away from real journalism. Everybody is in their own echo chamber these days and we are breaking off into polarized factions.
Those paragraphs about Russia are not all together in the book. They were meant to be a sample. There were apparently some disputes regarding this project in 2000 and 2001 and Putin comes up in those. I clarified the original posting.
“Delays, arguments, and disputes over environmental issues, pipeline routes, and other subjects stalked Sakhalin-1 from its inception.” Sound familiar?
“rust belt hobos”
I think this is the key to Democrat victory in 2020. The coastal elites did not insult Midwesterners sufficiently in 2016. Instead they merely ignored them. Yes Hillary called them deplorable, but that was only one time (that we know of). It is well known that if you insult people often enough, they will be converted to your point of view.
>Yes, the ExxonMobil side responded, but you don’t
>spend all of your money in life on insurance.
>You calculate how large and valuable an asset
>you are trying to insure, and how big a risk you face.
The question is whose assets and whose risk are you talking about (Exxon Mobil’s vs. the broader society). In the case of climate change those interests diverge (extremely) because Exxon Mobil happens to be able to profit by pushing risk on to the rest of us. If you have ever walked through an oil refinery you 100% understand why the owners would want to wring every last dollar of return from the massive investment, but that doesn’t mean that doing so is a good idea for society as a whole.
Similarly, Exxon Mobil’s interest in continuing sanctions against Russia diverge from the interest of the country as a whole.
I am very skeptical that a man who has spent his career (appropriately) promoting Exxon Mobil’s interests can really set that aside and effectively promote US interests when those interests happen to be so different in these important areas.
When you add the need to avoid any appearance of rewarding Putin for meddling in our election, it is hard for me to see how Tillerson (who is “close” to Putin) is a good choice for Secretary of State even if he is a great CEO (no opinion, haven’t read the book).
I would feel better about throwing rocks at Exxon and Mr. Tillerson if we kept our house at 50 degrees all winter. Individuals seem to think of themselves first and the planet second. Why do we demand more altruistic behavior of a corporation? Econ 101 says that if there are externalities to a person’s or a company’s behavior we need to tax that externality. If taxes on fossil fuels aren’t high enough to get ExxonMobil and its customers (including us!) to behave optimally, shouldn’t we blame ourselves first? We are the ones who voted for the politicians who failed to establish the correct taxes.
I didn’t throw rocks at Mr. Tillerson; I questioned whether he is a good fit for Secretary of State. I agree that a (globally coordinated) carbon tax is by far the best approach to addressing global warming. I have supported a carbon tax for a long time and have never (to my knowledge) voted for a politician who vociferously opposed a carbon tax. A carbon tax has been blocked all these years by people I would consider my political opposition. Therefore, I am unwilling to blame myself first. I blame the people who have stood in the way of a carbon tax first. I know Mr. Tillerson supports a carbon tax and that is a point in his favor, but it doesn’t fully address his potential conflict of mindset.
Re: “Rust belt hobos” One thing that’s really interesting about hobos is that the original meaning of hobo wasn’t equivalent to bum. The implication that provided the distinction was that a hobo was a worker (albeit an unfortunate and generally migratory or homeless one). So the hundred-thousandaire young engineers camped out in the google parking lot are tech hobos.
The Tim Newman blog re Rex Tillerson:
http://www.desertsun.co.uk/blog/?p=3814
btw, look at Exxon’s rate of return with dividends compounded since 1976. Until Rex Tillerson bought XTO it was at the Berkshire Hathaway/Ed Thorp level. I think Tillerson was decidedly mediocre during his tenure as CEO of one of the consistently best-run companies in history, but that doesn’t mean he won’t be better than the recent average for Secretary of State.
superMike: thanks. My meaning of “hobo” was precisely that of a worker who, out of a stable job, worked around in several odd jobs. I think it fits the description of many rust belt Trump voters, who believe Trump will bring back their blue-collar jobs that were made redundant by technological change. The sad thing is that Trump will screw them, and they probably won’t even notice. No offence meant at Midwesterners, most of which did not vote Trump.
> ExxonMobil has been the most profitable U.S. oil company in the past, it suffered its worst year on record.
https://srsroccoreport.com/end-of-the-u-s-major-oil-industry-era-big-trouble-at-exxonmobil/