A man with no government experience, Rex Tillerson is not your average choice for Secretary of State. But this isn’t your average President. Despite question marks over Tillerson’s diplomatic credentials, he is undeniably a shrewd operator. He was at the helm of the sixth largest company in the world, which operates in more than 50 countries and is large enough to be its own nation-state – ExxonMobil’s annual turnover is around $300 billion, approximately the size of South Africa’s economy. In Tillerson, Trump has found himself a dealmaker; someone who can stick it out with the most hostile governments and forge relationships with leaders of all backgrounds, from autocrats and despots to well-respected U.S. government officials (Condoleezza Rice and Robert Gates nominated him).
After assuming the top spot at ExxonMobil in 2006, Tillerson led the company on into emerging exploration markets – from Angola and Chad to the Arctic and Russia – while competitors were content with staying closer to home. ExxonMobil’s ties with Russia have developed in large part thanks to Tillerson’s work in the region, and he has since been rewarded through joint ventures in the Arctic with state-owned gas giant Rosneft, and an award of Russia’s Order of Friendship from the Kremlin in 2013.
Tillerson’s loyalties to ExxonMobil have often come in direct conflict with the interests of Washington. When sanctions were placed on Russia following the invasion of Crimea in 2014, the Obama administration tried to discourage corporate leaders from attending certain economic conferences that Putin’s government hosted. Not only did Tillerson defy the government’s stance and show up at the World Petroleum Congress in Moscow that summer, he also shared the stage with Igor Sechin, head of Russian energy giant Rosneft and a close confidant of the Russian President.
In 2013 ExxonMobil cut an independent oil deal with the Kurdistan Regional Government, disregarding the Obama Administration’s ‘one Iraq’ policy – designed to encourage corporations to conduct business through the central government in Baghdad and prevent a fragile Iraq from fragmenting – without bothering to tell the State Department in advance. And back in 2008, ExxonMobil (along with many oil companies) urged Congress to exempt Libya from a law allowing the families of US victims to sue foreign sponsors of terrorism, having spent years collaborating with dictator Muammar al-Qaddafi.
While the U.S. government has worked hard for many years to avoid giving off the impression of being associated with resource conquests in countries like Iraq, Libya and Syria, the current structure of the oil industry has arguably made it more important than ever for multinationals to pursue independent foreign policies. Governments, not private companies, own the world’s 13 largest oil-and-gas firms and around 75% of the world’s known oil reserves, while ExxonMobil, by comparison, owns less than 1% of the world’s oil reserves. Tillerson has thus been forced to play the diplomat in the name of ExxonMobil’s interests, dealing with governments that are partners on some projects and better-funded rivals on others.
Some have criticised Tillerson over his cautious approach to foreign policy, favouring political stability at the expense of democracy and human rights while striking lucrative deals that prop up autocratic regimes in oil-rich nations such as Angola, Chad and Equatorial Guinea. This is an industry-wide view, as long investment horizons (often upwards of 20 or 30 years) and huge amounts of money invested in oil fields require long periods of political stability to reach their potential. Billions of dollars are at stake if a hostile, nationalist government seizes power, as Tillerson found out when Hugo Chavez tried to take over ExxonMobil ventures in Venezuela; while many oil companies accepted the new terms, ExxonMobil took Venezuela to the international arbitration courts and won a reduced settlement of $1.6 billion.
U.S. Secretary of State Rex Tillerson delivers welcome remarks to State Department employees in the main lobby of the Department’s Harry S. Truman building on his first day as Secretary of State in Washington, D.C., on February 2, 2017. (Picture: US State Department; Wikimedia Commons)
Another aspect of Tillerson’s diplomatic credentials under the spotlight is his willingness to use economic incentives to project American influence. He was critical of the Obama administration’s use of sanctions after Russia’s invasion of Crimea in 2014, saying “we do not support sanctions, generally because we don’t find them to be effective unless they are implemented comprehensively and that’s very hard to do”. However, ExxonMobil has billions of dollars invested in deals that will only go forward if U.S. sanctions on Russia are lifted – in fact, they own more exploration holdings in Russia than they do in the U.S. – so he would have been a terrible CEO had he not done what was in ExxonMobil’s best interests. Tillerson is pragmatic, and will surely recognise that sanctions are an effective addition to the toolbox; they have spared the U.S. from a military intervention in Iran, for example, and are likely to be of growing importance in an administration facing rising tensions on the Korean Peninsula and in the South China Sea.
Although Tillerson may be able to adjust his foreign policy stance to fit his new role, a major concern is his personal ties to the company – while his $180 million shares in the company may have been sold and the proceeds placed in a blind trust, there is undoubtedly a big question mark over his loyalty to a company that he has served for 41 years. Then there is his stance on climate change that, while considerably more modern than his predecessor at ExxonMobil, is still very unconvincing. Historically, ExxonMobil has had a miserable record on climate change; former CEO Lee Raymond was a climate change denier who claimed that global warming is a giant hoax, and recently the “Exxon Knew” scandal has further tarnished their reputation. Tillerson at least recognises the threat posed by global warming as “real” and “serious”, and has supported both a carbon tax (albeit as a replacement for regulation) and the Paris Climate Agreement, which makes him more reasonable on this issue than his boss, Donald Trump. But so far, his words have been nothing more than hot air. The carbon tax stance was bred from a Congress emissions trading bill that would impose a price on carbon fuels, which Tillerson rejected, instead supporting a carbon tax. And despite being in support of the Paris Agreement, ExxonMobil has stepped back rather than taking the lead in the industry, so no meaningful action has taken place. Given Trump’s aims to further deregulate the energy sector to create jobs and achieve energy independence, it is unlikely that the U.S. will be leading on climate issues in the next four years.
Trump’s foreign policy is foreign to just about everyone, including himself, but if he is to achieve his goals of rapprochement with Russia, global stability and an America that puts domestic interests first, then it seems that Tillerson is the right man for the job. However there are still serious question marks over his conflict of interests, particularly his close ties to Russia and his loyalty to ExxonMobil. The extent to which these can be overcome will determine Tillerson’s competence as Secretary of State.
James Davies
