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Big Oil behind Putin

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It probably wouldn't be fair to call it a moment of humility. It was more like a little hitch in the swagger. The man himself would never show he was awed or intimidated, but even he paused to appreciate the magnitude of what was being done. "The scale of the investment is large," said Russian President Vladimir Putin. "It is scary to utter such huge figures."

That scary-large 2011 deal -- the mother of all oil deals -- was sealed in the living room of Putin's vacation home in Sochi. It knitted together Exxon Mobil, the most profitable U.S. corporation in the history of U.S. corporations, with the mostly state-owned Russian firm Rosneft, the largest oil company in the world.

In the half-trillion-dollar deal, the two companies agreed to frack in Siberia, to drill parcels of the Arctic Ocean larger than the state of Texas and to build a huge natural gas terminal in Russia's far east. In North America, Rosneft and its subsidiaries got big stakes in Exxon parcels in west Texas, the Alberta oilfields, deep-water drilling sites in the Gulf of Mexico and a huge stake in Alaskan natural gas.

No wonder Putin professed to being a little scared of the size of this thing.

But the Exxon deal isn't the only one. Two weeks ago, on the same day national security adviser Susan Rice threatened sanctions on "very significant sectors" of the Russian economy would be the price of Putin pushing further into Ukraine, the CEO of Royal Dutch Shell was visiting Putin's residence saying, "We are very keen to grow our position in the Russian Federation."

The British company BP had previously gone a little shy on its Russian exposure: Its American chief executive fled Russia in 2008, fearing what had started as a dispute over BP's operations in that country had led to an attempt on his life (poison!). Still, more than a third of BP's oil and gas reserves are in Russia, and that same executive who not so long ago fled in fear assured BP stockholders this month the company's Russian exposure is so large BP could "play an important role as a bridge" between Russia and the West in the Ukraine crisis. "The mutual dependency between Russia as an energy supplier and Europe as an energy consumer has been an important source of security and engagement for both parties," he said. "That has got to continue."

Talking about the relationship between energy interests and war always upsets everyone. Sen. Rand Paul, R-Ky., was denounced on the Wall Street Journal op-ed page this month for "bark-at-the-moon lunacy" after Mother Jones magazine dug up tape of him linking the Iraq war with former vice-president Dick Cheney's tenure at the oil services firm Halliburton. The oil motive is still considered very impolite conversation in either political party, and Paul has tried to walk back the Cheney accusation. But like it or lump it, some of the Pentagon planning for post-invasion Iraq was conducted at the Houston offices of Halliburton subsidiary KBR. In the years since the war, it has become clear there was so much pre-9/11 planning for a war in Iraq because of fear and frustration that, under Saddam Hussein, Iraq's oil was being bottlenecked off the world market due to politics and an inefficient, state-run oil company.

In the end, the war may not have turned Iraq into a beacon of Jeffersonian democracy, but the country's oil exports did surge to a 30-year high this spring. The Iraq war happened for a lot of reasons, but it's past time to admit that one of them was to get Iraq's oil flowing freely to market by getting private industry's capable hands on all that pent-up supply.

Now, in Russia, the world's energy giants already have their capable hands all over Russia's vast supplies of both oil and gas. As such, the energy industry's acute economic interest is in a Russia that is not so at odds with the world that it can't freely trade its oil and gas. What role will the industry play in achieving that end?

So far, the companies are acting as a counterweight against U.S. and European diplomatic pressure. Exxon's new geophysical surveys of the eastern Arctic with Rosneft were announced three days after NATO said it was suspending "all practical civilian and military co-operation" with Russia and three days before thinly disguised Russian forces started taking over government buildings in eastern Ukraine. Why would Putin fear U.S. threats of economic isolation while the biggest U.S. oil company is jumping into his lap?

If Europe and the United States decide to pressure Russia with sanctions targeting the energy sector, which accounts for more than 50 per cent of the Russian economy, will the big American and western oil companies stand in the way? As Putin increasingly acts out his dreams of grandeur -- his ridiculous Eurasian Union idea, his fantasies of restoring czarist novorossiya or the U.S.S.R. -- he is testing the edges of his power. He wants to be seen as too big to fail. Big Oil siding with him could make those dreams come true.

Demanding other countries choose to be "with us or against us" was one of the Bush administration's many regrettable failures after Sept. 11. But if we asked the big western oil companies the same question now, how would they answer?


Maddow hosts MSNBC's The Rachel Maddow Show and writes a monthly column for the Post.


-- The Washington Post

Republished from the Winnipeg Free Press print edition April 28, 2014 0

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