How Exxon under CEO won Iraqi oil fields and nearly lost Iraq
WHEN Ashti Hawrami, the oil minister from Iraq’s largely autonomous Kurdistan region, unfurled a map of untapped oil fields for a team of ExxonMobil officials in the spring of 2011, they saw possibility and profit.
The minister pointed to the blocks that had already been taken by other foreign firms as Kurdistan, long at odds with Iraq’s central government over oil and territory, raced to establish itself as a player on world oil markets. He also showed them the fields that were still up for grabs. Tell me what you want, and we can start negotiating, Hawrami said, according to one former Exxon official who attended the meeting.
It was the start of months of hurried talks blessed by ExxonMobil’s chief executive, Rex Tillerson, and other senior executives back in Dallas. The company was making a high- stakes gamble that new agreements would pay off handsomely if the northern region held billions of barrels of accessible oil.
But the deal overseen by Tillerson, whose confirmation hearings to become secretary of state began last Wednesday, defied US foreign policy aims, placing the company’s financial interests above the American goal of creating a stable, cohesive Iraq.
US diplomats had asked Exxon and other firms to wait, fearing that such deals would undermine their credibility with Iraqi authorities and worsen ethnic tensions that had led Iraq to the brink of civil war. A law governing nationwide oil investments was tied up in parliament, and Iraqi officials were rejecting Kurdistan’s authority to export oil or cut its own deals.
When word of Exxon’s partnership with the Kurds reached Washington, the State Department chided the oil firm: “When Exxon has sought our advice about this, we asked them to wait for national legislation. We told them we thought that was the best course of action,” then- spokeswoman Victoria Nuland said.
Exxon’s 2011 exploration deal with the Kurdistan region provides a window into how Tillerson, President- elect Donald Trump’s nominee to be the next secretary of state, has approached doing business in one of the world’s most risky, complicated places, where giant energy deals can have farreaching political effects.
The episode of petro- diplomacy illustrates Exxon’s willingness to blaze its own course in pursuit of corporate interests, even when it threatens to collide with US foreign policy.
When Iraq’s central government threatened to throw Exxon out of much larger, established operations in the south, Tillerson personally intervened, using his executive clout to smooth things over with authorities in Baghdad while making clear his company would weather the political fallout in pursuit of its central goal: A profitable deal.
“It’s a big company that looks for ways to make money like all big companies,” Philip Gordon, a former White House coordinator for Middle East policy, said of Exxon.
He said the controversial Kurdistan contracts reflected a natural corporate instinct to act in the interest of shareholders, not the US government.
If Tillerson is confirmed, “I would hope that he’d realise that he’s serving the interests of the country and not the interests of Exxon,” said Gordon, who is now a fellow at the Council on Foreign Relations. Law makers will weigh Tillerson’s decadeslong track record at Exxon this week when they convene to consider his nomination to be the next US foreign policy chief.
The world’s largest oil firm, Exxon has long exercised formidable clout in countries where it does business. The company hasn’t shied away from controversy, inking deals with autocratic governments and speaking out against sanctions, like those the United States has imposed on Russia, that hurt its bottom line.
Exxon was one of the firms hungry to do business in Iraq, closed to outside investors for decades, after the ouster of Saddam Hussein in 2003. — WPBloomberg