VIEWPOINT: TWO PROMINENT TEXAS OILMEN IN THE NEWS by Tom Pauken
by Tom Pauken
Mon, Dec 26, 2005, 07:18 PM
Don EvansDon Evans, the former Secretary of Commerce and close friend of President Bush, turned down this past week a personal offer from President Putin of Russia to become Chairman of the Russian state oil company OAO Rosneft. The company is currently headed up by Igor Sechin, deputy chief of staff to Mr. Putin and is expected to go public next year. Evans is an experienced oilman who headed energy companies in Texas and Colorado before joining the Bush Administration as Secretary of Commerce in the first Bush term.
Meanwhile, Texan Rex Tillerson, currently Chief Operating Officer of Irving-based Exxon Mobil Corp., is poised to take over as Chief Executive Officer of Exxon on January 1, 2006. He has a tough act to follow. Tillerson replaces the legendary Lee Rex TillersonRaymond who engineered the merger of Exxon and Mobil in 1998, creating the world’s largest energy company. Raymond served as CEO of Exxon for 12 years. Both Raymond and Tillerson have engineering backgrounds and came up through the Exxon ranks. While Raymond made his mark with the Mobil deal at a time when energy prices were low, Tillerson has been successful in opening up Russian energy sources for Exxon in recent years. He was the chief negotiator on behalf of the company in reaching an agreement with Russian authorities to develop oil and gas on the northeast shelf of Sakhalin Island, off the coast of Russia.
The Sakhalin-1 Project is operated by Exxon Neftgas Limited, an affiliate of Exxon Mobil. The parent company has a 30% interest in the project. It is estimated that potential recoverable resources from this project are 2.3 billion barrels of oil and 17.1 trillion cubic feet of gas. So far, over $4.5 billion has been spent on the project.
Major oil companies like British Petroleum (BP), Chevron and Exxon Mobil have been moving in recent years to reduce their dependence for oil and gas on the politically unstable Middle East. Russia, the Caspian Basin, Africa, Asia and even North America are back on the radar screen as majors and independents searching for new energy reserves which can be profitably developed.
That is why the decision of Don Evans to turn down the Rosneft may be a set back for American policymakers and energy leaders who believe it is in our national interest to develop a better working relationship with a post-Communist Russia. That nation has its own serious problems relating to the growing Islamist threat in Chechyna and other regions within Russia.
Vladimar Putin reportedly made the offer of the Rosneft job to Evans earlier this month as part of a broader effort on the part of the Russian government to improve its business reputation among international investors. When word leaked out that Evans was seriously thinking of accepting Putin’s offer, critics of the Russian regime in the United States were quick to denounce Evans.
Leading neoconservative spokesman, and a resident scholar at the American Enterprise Institute (AEI), Gary Schmidt had this to say: "It would be disgusting. If you want to be a close friend to the president and a trusted adviser in the private sector, you cannot look like you are taking money from what is a state-controlled entity where the country has an immense amount of complicated issues with the U.S. It is extremely bad form if he took the job. There is nothing illegal about it, but it would not do the president any good."
The Wall St. Journal editorialized on the issue urging Evans not to accept the offer, claiming that Mr. Putin was only trying to buy influence with the Bush Administration: "You can bet that Mr. Putin figures that in hiring Mr. Evans he would be buying more than just the American’s energy expertise."
Both Schmidt and the Journal editorialist assume that Don Evans is not saavy enough to figure out how to accept such a position with a very clear understanding in place that (a) Evans has the authority he needs as CEO of Rosneft; and (b) he is not there to "buy influence" with his friend George W. Bush. In my judgment, Evans is nobody’s fool and would have received firm assurances before accepting such a position (and would have been quick to resign had those understandings been violated).
One of the major problems facing Russia (one not of Putin’s making) is that Russian oligarchs made off with hundreds of billions of dollars of state assets in the immediate aftermath of the fall of the Soviet Empire at a time when Boris Yeltsin was President.
This was accomplished through government-controlled auctions in which key state assets were effectively transferred to well-connected insiders for pennies on the dollar. As Anders Aslund wrote in the current issue of Foreign Policy magazine, Putin "has chosen to crusade against that oligarchs under a moral banner that promises to root out corruption among the wealthy few." The Putin government has been using its power to regain control of many of those assets, with the seizure of the assets of the energy company Yuko in 2004 from Mikhail Khodorkovsky, one of the Russian oligarchs, being the latest example.
There is no question that there is a tremendous amount of corruption in the public or private sector, not unexpected in a country which was under Communist rule for most of the 20th century.
The question is: Do we continue our adversarial relationship with the Russian government of Vladimir Putin, a course of action advocated by neoconservative and neoliberal leaders alike? Or, do we recognize that Russia could be a valuable strategic ally in what may be a long and difficult struggle against the forces of militant Islam? Choosing the latter course of building a better relationship with a post-Communist Russia will have its fits and starts. As Ronald Reagan liked to say, "trust, but verify". But, there is a potential of a future Russia for different from its recent communist past – a nation in the throes of rediscovering its rich, religious traditions and a Russia which could become an important ally in the coming showdown with the forces of militant Islam. Don Evans taking that job offered him by President Putin might have been a small step in building a better relationship between our two countries and helping us decrease our reliance on oil from the Middle East. It was not to be.