Rex Tillerson’s official nomination by Donald Trump to be the next secretary of state has led to predictable outcry about having the former Exxon CEO in the White House. But most of this commentary is as malodorously confused as smoke emitted by a Texan oil refinery.
Just about the only person who hasn’t expressed an opinion is Nigel Farage, the mini-Donald, who for some reason has felt it unnecessary to give one of his warnings about Big Business influencing politics. Or have I missed it?
Tillerson isn’t necessarily a good candidate. But the confused outbursts are yet another example of how, in 2016, truth is sometimes the first casualty of politics.
I used to work in the oil industry. I don’t know Tillerson but I do know people who do. His trouble is not his supposed closeness to Putin, but his record as CEO.
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First up, nobody sensible really thinks he is a Putin stooge. Anyone who works in the oil industry in Russia is used to surveillance, low-grade harassment, tax investigations, visa problems and the like. Exxon is no exception. Its Moscow office has a wire cage so they can have private conversations away from the inquisitive ears of the FSB.
Tillerson might have managed to navigate his way through the Kremlin better than others, and received the Order of Friendship for his pains, but that is principally because nobody in their right minds, not even the Kremlin, wants to mess with America’s biggest oil company.
Exxon is simply bigger, wilier and more efficient than any of its peers. Apart from anything else, when Russia was looking for a partner to explore in Siberia and the Arctic, it would obviously choose the company with the deepest pockets and most technical know-how.
Interestingly, Jon Sopel on the BBC seems to agree that Tillerson is no Putin stooge. In his reports from Washington he has repeated that Tillerson is publicly supported by Jim Baker, Bob Gates and Condoleeza Rice, none of whom are Russo-philes. (Mind you, they do reportedly have commercial links with Exxon.)
Far from being a dangerous friend of America’s enemies, Tillerson undoubtedly has the connections, experience and skills to be Secretary of State.
But that does not mean he should be. There is a second thing that oil industry analysts say about him.
Exxon might have a reputation as one of the world’s most brutally efficient companies, but unfortunately Tillerson has not been one of its great CEOs. He is regarded as not as good as his predecessor, Lee Raymond.
Tillerson’s big strategic moves haven’t gone so well. In 2009, he spent $35 billion acquiring shale gas company XTO. In retrospect, that was right at the top of the market and natural gas prices have since evaporated.
Then in 2011, he effectively gatecrashed an attempt by BP to forge an Arctic alliance with Rosneft. But that was put on ice after Russia invaded the Ukraine and sanctions were imposed in 2014.
Since then, questions have been asked as to whether Exxon’s 25 billion reserve number is totally reliable. Both the SEC and the New York Attorney General (a political appointee, so also with an axe to grind) are now investigating Exxon’s accounting practices. In 2015, Exxon did not replace its production with new discoveries for the first time in many years.
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Just about every other oil company has had to respond to the declining oil price by writing down asset values, how come Exxon has not? At its latest earnings number in October, Exxon said that if the oil price stays below $50, it might well reduce its realisable reserves number after all.
None of this to say that there is something dodgy about Exxon (unlike Shell, when it misstated its reserves in 2004). Far from it. Exxon executives are told to ensure projects are economic, even at low prices. As Tillerson himself once told an interviewer: “We don’t do write-downs. We are not going to bail you out by writing it down. That is the message to our organisation.” What it does mean is a write down, if and when it came, would be doubly embarrassing if the CEO responsible was now sitting in the State Department.
Third, despite what some might claim, Tillerson is not likely to be a stooge to Mr Trump either. Exxon executives are notorious for being tough, somewhat arrogant and inflexible. This is frequently mixed with a generous dollop of religion (usually Wesleyan or non-conformist of some kind) and good works. Tillerson himself was a volunteer scout master years ago. He and Trump could easily fall out.
When Tillerson appears before the Senate Foreign Relations Committee for approval, the argument may shift from him being a stooge, to a more subtle sense that he is carrying around with him a great oily barrel of history from 40 years in the energy industry and, despite his evident abilities, it all feels too slippery and complicated.
The irony is that, despite it all, Tillerson might actually be just the man to get the better of Russia’s mercurial President Putin.
