By Justin Scheck, James Marson and Bradley Olson
MOSCOW -- In the spring of 2014, after the U.S. punished Russia
with sanctions for seizing Ukrainian territory, Rex Tillerson made
a major decision. The Exxon Mobil Corp. chief executive, now Donald
Trump's nominee for Secretary of State , would deepen his company's
longstanding partnership with the Kremlin.
During negotiations, the CEO of Rosneft, the Kremlin's
state-controlled oil company, looked over a proposed contract
related to the pair's operations off Sakhalin Island, in Russia's
Far East, and scowled, said a person with knowledge of the meeting.
Exxon, he said, put language in the contract he didn't expect. He
looked at Mr. Tillerson and tore it up.
Mr. Tillerson, the person said, leaned back, put his hands
together, smiled silently -- and waited. With billions of dollars
already invested, the Russians had few other options. Rosneft's
CEO, a former intelligence officer and top Putin ally named Igor
Sechin, eventually backed down, and an agreement was struck.
A look at Mr. Tillerson's negotiating style, honed over years at
the head of one of the world's largest oil companies, shows an
executive determined to hold the course, even when the landscape
shifts dramatically. Personal relationships were often a deciding
factor. So were deliberately theatrical tactics, such as preplanned
temper tantrums and silent stare-offs.
The question for the Senate, which is expected to consider Mr.
Tillerson's nomination on Wednesday, is to what extent this kind of
expertise prepares him for the job of Secretary of State. He has
vast experience hammering out multibillion-dollar deals that
potentially span decades with government leaders of all stripes. On
the other hand, a company is not a country.
The former Exxon chief's dealings with Rosneft are likely to be
a major line of questioning from both Republicans and Democrats,
many of whom have said they are uncomfortable with Mr. Tillerson's
close ties there in the wake of Russia's alleged hacking attack on
figures in the Democratic Party.
The Russia deals added hundreds of millions of dollars to
Exxon's bottom line and billions of barrels of potential reserves
to bolster the company's future production. At the same time, they
ran afoul of State Department priorities at a time when the U.S.
was using sanctions to try to check Russian military interventions
in Ukraine.
For Exxon, one of the world's largest publicly traded oil
companies, the results of the Russia deals are mixed. The deals
struck in 2014, which technically expanded projects already in
operation, didn't violate sanctions, which targeted the spread of
oil and gas technology. But other projects, especially a vast
Arctic investment, ground to a halt, blocking Exxon's access to
rich reserves it hoped would ease its longtime struggle to find new
resources.
"This is an industry with very long timelines," said Alan
Jeffers, an Exxon spokesman. "The current situation prevents us
from activities in the area that are sanctioned, but we see that as
a pause."
Mr. Tillerson declined to comment. Mr. Sechin and Rosneft didn't
respond to emailed questions.
Mr. Tillerson, who joined Exxon in 1975 and became CEO in 2006,
specialized in the types of deals that typified the oil industry in
the run-up to the recent price crash: Giant agreements, sometimes
in unstable places, that cost billions of dollars to develop and
aimed to produce huge volumes of oil and gas over decades.
He spent hours with the company's negotiating teams, preparing
for every potential aspect and plotting tactics, including the
theatrical, according to people he worked with.
In a meeting in Yemen in the 1990s, he threw a book and stormed
out of talks. The tantrum was preplanned, one person said. "Anger
is a strategy, not an emotion," Mr. Tillerson told colleagues.
He negotiated deals worth more than the GDP of some countries
with officials who had vast power but lacked expertise. That meant
he dealt with concerns other than money, such as a leader's desire
for Exxon to educate local workers or help a state-owned oil
company gain technology.
He drank tea with tribal leaders and showed off Exxon facilities
to visiting dignitaries.
In interactions with Russian leaders, Mr. Tillerson avoided
giving any impression of American superiority, especially amid the
post-Cold War tensions of the 1990s.
In a 2004 interview with The Wall Street Journal he described
how when a Russian minister in the 1990s slammed his fist on the
bargaining table in a dispute over a permit, raising images of
former Soviet leader Nikita Khrushchev, he gingerly brought him
back to the discussion.
"You make yourself very aware of it, and almost go out of your
way to make sure there's nothing that conveys" a superior attitude,
he said. At the same time, he rarely budged on terms, seeking to
project strength, said people familiar with his negotiating
style.
Mr. Tillerson arrived in post-Soviet Russia in 1997 to chase the
same prize as every other big Western oil executive: access to the
country's vast stores of untapped crude.
He set up in a suite in the Metropol Hotel, just steps from Red
Square, and tried to make sense of a Kremlin in turmoil. Russia
cycled through six prime ministers in Mr. Tillerson's first 14
months.
Even before the musical chairs ended with Mr. Putin in charge,
in 1999, Exxon realized something its Western rivals didn't.
Joining with the Kremlin could shield the company from hostile
takeovers by other state-owned firms and regulatory obstacles from
the Russian government.
At a time when other Western oil giants dismissed state-owned
companies as too bureaucratic and inflexible, Exxon committed to an
ambitious project with Rosneft to develop an oil and gas field near
Sakhalin Island. It would cost billions of dollars to develop and
be one of the most technically complex projects in Exxon's history,
with oil and gas deep beneath sea ice in an area prone to
earthquakes and 50-foot waves.
Over the years, it would be expanded multiple times. In the past
decade, the partners have produced more than 300 million barrels
from three separate fields, with a potential peak of 200,000
barrels a day, Exxon said.
Mr. Tillerson had a key person on the ground, a personable,
Russian-speaking Croat named Zeljko Runje, who formed close
relationships with Rosneft executives and years later would help
pull off an even bigger Russian deal for Exxon.
When it first partnered with Exxon, Rosneft "had no equipment,
they had no technology," said a former Rosneft executive said.
Exxon's expertise and financing helped build Rosneft into one of
the world's largest producers, which strengthened Russian President
Vladimir Putin's grip on power. Energy revenues allowed him to
boost spending at home and to project power abroad; Rosneft's
dominance gave him control of Russia's most important industry.
In 2004, the Kremlin seized assets from OAO Yukos, then the
country's largest oil company, and Rosneft took control of its main
production unit, becoming the country's second-largest
producer.
Exxon worked closely with Moscow to devise legislation on
taxation and other issues that affected its investment, according
to Igor Yusufov, Russia's energy minister from 2001 to 2004.
Mr. Tillerson met with ministers and gave suggestions for
legislation, Mr. Yusufov said. "He met everyone," the Russian said.
"He helped us to formulate the relationship between the state and
investors."
During a U.S.-Russia energy summit in Houston in 2002, Mr.
Tillerson wooed Mr. Yusufov with a trip to Exxon facilities, where
he showed the Russian minister a 3-D model of the Sakhalin project
as it was at the time and as it would look at peak production.
Mr. Tillerson worked closely with Rosneft executives as the
project began producing in 2005. He and then-Rosneft CEO Sergey
Bogdanchikov landed their private jets at tiny Teterboro Airport,
in suburban New Jersey, in 2006 and discussed Sakhalin and
Rosneft's coming initial public offering, said a person familiar
with the talk.
Mr. Sechin, who had spent years in intelligence in Africa and
elsewhere and later became a Kremlin political operative close to
Mr. Putin, had become chairman of Rosneft in 2004. He took over as
CEO in 2012 with the aim of extending its reach. His underlings
quickly came to fear his 3 a.m. calls ordering them to pack for a
trip to Asia as much as his outbursts at meetings over frustrations
like project delays, former executives said.
He and Mr. Tillerson developed a comfortable rapport, said
people who attended their meetings. Mr. Sechin was careful to show
Mr. Tillerson he had the highest-possible backing. Two or three
times a year or more, Mr. Sechin would ask Mr. Putin to speak, by
phone or in person, with Mr. Tillerson, said one of the people.
Mr. Sechin came to like Mr. Tillerson because he was transparent
and forceful in his communications -- and was one of the few
Western executives strong enough to push back against Mr. Sechin,
said people familiar with the matter.
The relationship helped Exxon land one of its biggest coups. In
2011, Exxon rival BP PLC reached a deal for access to a giant
Rosneft-controlled Arctic field, but BP's oligarch partners in a
separate Russian joint venture blocked the deal.
Exxon's longtime Russia hand, Mr. Runje, who had been key to the
Sakhalin project more than a decade earlier, saw an opening and
sent a message to Mr. Tillerson, said people familiar with the
matter. Mr. Runje declined to comment.
Messrs. Tillerson and Sechin hashed out a $3.2 billion deal that
was to be one of the biggest exploration contracts ever. It gave
Exxon access to the Arctic fields BP lost, as well as basins in
Siberia and in the Black Sea.
Mr. Putin, who had come to trust Mr. Tillerson as a man of his
word, blessed the deal and said investment could eventually reach
$500 billion.
Mr. Putin later awarded Mr. Tillerson the Russian Order of
Friendship, the country's highest honor for foreigners, after a
request by Mr. Sechin, according to a person familiar with the
matter.
By late 2014, when the partners hit oil and gas in the Arctic,
sanctions by the U.S. and other countries were in place barring
companies from sending oil and gas exploration technology to
Russia, bringing operations to a halt.
In Washington, Exxon lobbied against the sanctions. Mr.
Tillerson and others told senior officials that because of the
complexity of the Arctic project Exxon couldn't immediately pull
out without significant safety and environmental risks.
The CEO also said U.S. sanctions applied to an existing project,
unlike European sanctions, which exempted developments already
under way, people familiar with the matter said.
Exxon withdrew from its Arctic project, and Mr. Tillerson stayed
home from a St. Petersburg economic summit in 2014 for the first
time in years. He continued to attend to Russia business, including
efforts to build a gas export plant at Sakhalin and other
operations.
"Over the years, I think we have earned each other's respect,"
Mr. Tillerson told students at an event in March 2015 at Texas Tech
University. When Exxon says "yes," he told them, the Russians would
know that the company would "follow through on that yes. Your
commitment means something. And so I think it's the most important
attribute."
(END) Dow Jones Newswires
January 09, 2017 16:35 ET (21:35 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
Exxon Mobil (NYSE:XOM)
Graphique Historique de l'Action
De Août 2024 à Sept 2024
Exxon Mobil (NYSE:XOM)
Graphique Historique de l'Action
De Sept 2023 à Sept 2024