Home The Washington Diplomat February 2017 Specter of ExxonMobil Hangs Over Tillerson’s as He Becomes Secretary of State

Specter of ExxonMobil Hangs Over Tillerson’s as He Becomes Secretary of State

Specter of ExxonMobil Hangs Over Tillerson’s as He Becomes Secretary of State

NOTE: This article went to press prior to the State Department dissent memo signed by over 1,000 diplomats denouncing President Donald Trump’s executive order banning refugees from seven Muslim-majority nations.

In a crowded field of controversial Cabinet picks, Donald Trump’s choice for secretary of state, Rex Tillerson, stands out for the web of conflicts generated by his leadership of ExxonMobil, the world’s largest public energy company, which spent decades cultivating ties with autocratic regimes and denying the devastating effects of climate change.

Tillerson was officially confirmed to the post on Feb. 1, but Exxon’s questionable track record, along with Tillerson’s lack of government experience and his close ties to Russian President Vladimir Putin, caught the glare of lawmakers during his nine-hour confirmation hearing before the Senate Foreign Relations Committee on Jan. 11. Tillerson’s monotone voice and stony demeanor never wavered despite tough questions and outbursts from protesters. He routinely deflected some questions and seemed uninformed or unwilling to publicly address several thorny international issues.

Photo: By Office of the President-elect – https://greatagain.gov/tillerson-hearing-f9ff57c038ee#.8fpa697gf / Wikimedia Commons via CC BY 4.0
Rex Tillerson, the former CEO of ExxonMobil, speaks on Capitol Hill Jan. 11 at his confirmation hearing to become Donald Trump’s secretary of state.

Tillerson said he wouldn’t call Putin a war criminal, and he wouldn’t say whether Russian and Syrian forces had committed war crimes in Aleppo despite widespread evidence of the slaughter of civilians and medical personnel there. He said the United States should have had a more forceful response to the Russian annexation of Crimea, but he wouldn’t say whether he favored continuing sanctions against Russia. As CEO of ExxonMobil, he opposed sanctions while the company was negotiating major oil deals there, and the company has an optimistically valued $500 billion oil exploration deal with the Russian government within the Arctic Circle that is on hold now unless sanctions are lifted.

Tillerson resigned as CEO of ExxonMobil last December after more than four decades of work there beginning as a production engineer in 1975. He will receive a staggering payout of more than $180 million from the company if he is confirmed as secretary of state, with the funds placed in a blind trust that would be prohibited from investing in the energy sector. While Tillerson’s retirement may seem like a gamble, he already was required to retire in March when he reached 65 years of age under Exxon’s mandatory retirement age for his position. It’s not that surprising he was looking for something else on the horizon when Trump came knocking, and it would be difficult to find a position more prestigious than secretary of state.

At his confirmation hearing, Tillerson echoed some of Trump’s oft-stated foreign policy views. On China, for instance, he criticized the communist government for its “aggressive” territorial expansionism in the South China Sea, its reluctance to rein in nuclear-armed North Korea and trade practices that hurt American businesses. He also insisted that the Trump administration would hold adversaries such as Iran and Cuba accountable for their actions, whether on nuclear proliferation or human rights.

On myriad other issues, however, Tillerson broke rank with some of Trump’s campaign pronouncements. Unlike Trump, he acknowledged that climate change is real, although he dodged questions about Exxon’s track record of denying climate change until recent years. Tillerson said he didn’t oppose the Trans-Pacific Partnership trade agreement even though Trump has called it a disaster and “a rape of our country.” (Hillary Clinton reversed course on the TPP on the campaign trail, stating that she opposed it after calling it the “gold standard” when she was secretary of state.)

He also equivocated on Trump’s calls for a national registry of Muslims; reaffirmed America’s commitment to NATO allies, regardless of their defense contributions; rejected Trump’s suggestion that South Korea and Japan acquire nuclear weapons; and promised a “comprehensive review” of the Iran nuclear agreement but wouldn’t commit to tearing it up, as his boss pledged numerous times on the campaign trail.

It’s unusual that Tillerson and some other Cabinet picks have already contradicted Trump’s own public statements. If that trend continues during Trump’s administration, it could trigger strategic miscalculations with foreign governments not knowing who or what to believe about U.S. foreign policy, said Paul Musgrave, assistant professor of political science at the University of Massachusetts in Amherst.

“The U.S. government has always spent a lot of time and effort to make sure it speaks with one voice on issues,” Musgrave told The Diplomat. “That’s often the goal, and that doesn’t seem to be the way the new president and his Cabinet picks seem to be approaching their time in office.”

Once he starts the job, Tillerson may be in the unenviable position of advocating for U.S. positions that could inexplicably shift with a single tweet from Trump. “Nobody knows how much to discount what Trump says,” Musgrave said. “If we’re in a world where we have to take the president seriously, do we also have to take him literally?” 

Worldwide Connections, or Conflicts?

Some senators weren’t sure whether to take Tillerson seriously when he revealed that he hadn’t yet talked specifics about Russia with Trump, despite the intense scrutiny of Trump and Tillerson’s relations with Moscow.

Photo: By Office of the President-elect – https://greatagain.gov/president-elect-donald-j-trump-intends-to-nominate-rex-tillerson-as-secretary-of-state-65cff8d8d9a6#.lp64ux92m / Wikimedia Commons via CC BY 4.0
Rex Tillerson

The 64-year-old Texan also raised eyebrows when he fumbled over whether ExxonMobil had directly lobbied against sanctions on Moscow, even though records show the energy giant did. Tillerson later tried to clarify that the company “participated in understanding how the sanctions are going to be constructed.”

Tillerson — who was awarded the Order of Friendship by the Kremlin in 2013 — developed a working relationship with Putin following the breakup of the Soviet Union in the 1990s, when he oversaw an Exxon project on Russia’s Sakhalin island. More recently, in 2011, Exxon signed a multibillion-dollar joint venture with the state-controlled oil company, Rosneft, to drill for oil in the Arctic and Siberia.

While economic sanctions on Russia for its actions in Ukraine hurt Exxon’s bottom line, Tillerson told the Senate that he wouldn’t rule out future sanctions to influence Russian behavior. In addition, he called allegations that Putin interfered in the U.S. election — which up until recently Trump had categorically dismissed — “troubling.”

Tillerson explained that he has a pragmatic, “clear-eyed” view about Washington’s relationship with Moscow, arguing that the U.S. should hold Russia accountable when it violates international law while finding common ground on issues such as global terrorism.

“We need to move Russia from being an adversary always, to a partner at times,” he said.

Although Tillerson’s ties to Putin have generated the most concern among Democrats and Republican foreign policy hawks such as Sen. John McCain (R-Ariz.), Tillerson established an extensive network of connections beyond Russia during his 40 years at Exxon.

Over that time, the company has been criticized for courting repressive, corrupt regimes and skirting environmental and labor protections. Conversely, it has been praised for improving safety standards, infrastructure and rules-based operations in developing nations.

Exxon’s detractors and supporters can agree on one thing, however: The energy giant has been single-minded in its pursuit of profits and expanding oil and gas production around the planet.

Under Tillerson’s leadership, Exxon waded into high-risk — and at times high-reward — nations ranging from Equatorial Guinea to Venezuela to Yemen. While some of these ventures paid off for Tillerson’s shareholders, they occasionally came at the expense of America’s strategic interests.

When Tillerson cut an oil deal with the autonomous Kurdistan region in Iraq over Baghdad’s fierce objections, for instance, he undermined U.S. efforts to unify the war-torn nation.

In his 2012 expose of ExxonMobil titled “Private Empire,” Pulitzer Prize-winning author Steve Coll noted that the company was so influential that it essentially was a corporate state that yielded more weight than U.S. foreign policy in some countries, and it often took actions that ignored U.S. goals or initiatives. To protect its overseas investments, ExxonMobil created its own army of security forces in Chad and provided boats to the Nigerian Navy to guard against pirates. In Indonesia, the U.S. government stopped funding counterinsurgency forces that tortured and killed prisoners, but ExxonMobil kept paying them, Coll’s book stated.

Sen. Bob Menendez (D-N.J.) noted that while Tillerson was at the helm of ExxonMobil, the company worked on oil deals with regimes in Syria, Iran and Sudan through a European subsidiary to dodge U.S. sanctions on those countries, which were listed as state sponsors of terrorism.

He challenged Tillerson on his assertion that sanctions should be approached with caution because of how they affect U.S. businesses. “It is not about disadvantaging American businesses. It is about putting patriotism over profit. Diplomacy isn’t the same as deal-making,” the senator declared.

Fellow Democratic Sen. Ben Cardin of Maryland said that “having a view from the C-Suite at Exxon is not at all the same as the view from the seventh floor of the Department of State. And those who suggest that anyone who can run a successful business can, of course, run a government agency do a profound disservice to both.”

Given his record working with checkered regimes, Sen. Marco Rubio (R-Fla.) grilled Tillerson on how he would respond to human rights abuses in nations such as the Philippines and Saudi Arabia. Despite the pointed exchange, Tillerson demurred on both fronts. He said that angering Saudi Arabia by labeling it a human rights violator, despite the tentative progress it has made, might be counterproductive. On the Philippines, Tillerson cited his background as an engineer to say that he needed more evidence before commenting on President Rodrigo Duterte’s bloody crackdown on drug offenders.

Transactional or Transformative Leader?

Despite Rubio’s concerns, the senator did not oppose Tillerson’s nomination. Tillerson stressed to worried lawmakers that he understands the “seriousness of the job” and wouldn’t view America’s foreign policy as a transactional business deal.

Yet some observers say Tillerson’s managerial skills and experience maneuvering in hotspots around the world will suit him well at the State Department, whose bureaucracy could perhaps benefit from some business acumen. As Exxon’s chief executive, Tillerson oversaw a company worth $370 billion with operations in some 50 nations.

“Finding and drilling oil requires elaborate modelling — both of underground geologies and messy aboveground geopolitics — to make money over the long-term,” wrote the Economist in a Dec. 17 editorial.

“Reputedly his engineering background makes him a stickler for evidence-based decision-making. He is also considered ‘patient and unemotional’ on ExxonMobil’s side of the negotiating table. Such traits would make him very different from Mr. Trump, who lives by the gut,” the magazine opined.

A former president of the Boy Scouts of America, Tillerson came highly recommended by foreign policy heavyweights such as former Secretary of State Condoleezza Rice and former Defense Secretary Robert Gates, who first proposed the idea of Tillerson as secretary of state to Trump.

Gates has described the former CEO as a “hard-eyed realist” who will put America’s interests first at the State Department. Speaking at the Senate Foreign Relations Committee, Gates said he considers Tillerson’s knowledge of business in general, and of Russia in particular, “both assets, not liabilities.”

“I look at the world today and every significant international challenge we face has an important business component. It’s true in Ukraine. It’s true in the Middle East,” he said. “Rex Tillerson knows these crucial regions, he knows the leaders and he understands the challenges and the risks.”

Photo: U.S. Navy / by Photographer’s Mate 2nd Class Samuel W. Shavers
Tankers stand at the Iraqi Al Basra Oil Terminal in the Persian Gulf. Under Rex Tillerson’s leadership, ExxonMobil entered into partnerships with the Iraqi government after the U.S.-led war. But he angered officials in Baghdad when he cut deals with the semiautonomous region of Kurdistan, threatening the country’s unity.

While Tillerson is widely seen as a tough, savvy negotiator, Republican Sen. Ted Cruz lavished praise on his fellow Texan’s lesser-known personal attributes. Cruz, noting that Tillerson “has been recognized for his humility and his altruism,” recalled the story of one of his constituents who recently served on a jury with Tillerson.

“Did you know that on that jury, his natural leadership ability and charisma helped them deliver justice in a delicate and difficult case of sexual assault? Following the trial, Mr. Tillerson donated to the nonprofit that helped support and counsel the victim,” Cruz said, adding, “Mr. Tillerson understands how to separate friendships and business. He knows who he works for.”

But others question whether the longtime oil executive can divorce himself from the CEO mindset.

“In his career at ExxonMobil, Tillerson has no doubt honed many of the day-to-day skills that a Secretary of State must exercise: absorbing complex political analysis, evaluating foreign leaders, attending ceremonial events, and negotiating with friends and adversaries,” Coll wrote in a Dec. 11 New Yorker piece. “Yet it is hard to imagine, after four decades at ExxonMobil and a decade leading the corporation, how Tillerson will suddenly develop respect and affection for the American diplomatic service he will now lead, or embrace a vision of America’s place in the world that promotes ideals for their own sake, emphatically privileging national interests over private ones.”

Indeed, Tillerson’s lack of government experience may present its own problems. Trump and other conservatives have argued that government should be run more like a business, even though many of Trump’s own businesses have failed or been mired in lawsuits. That view stems from “a real misunderstanding of why government works the way it does,” Musgrave of the University of Massachusetts argued. “Incoming administrations often think they have more room to maneuver than they really do if they want to maintain the credibility and integrity of U.S. positions,” he said.

Musgrave doesn’t believe Tillerson’s tenure with ExxonMobil may be as problematic because he will be following the directives of the Trump administration, but his terse and evasive responses during his confirmation hearing didn’t alleviate concerns. “It does seem there is a disconnect between the gravity of the situation and the brevity of his responses,” Musgrave said.

As secretary of state, Tillerson’s job will be to “serve the public interest of all Americans,” which will be a big change from serving the financial interests of one company, said Kathy Mulvey, climate accountability campaign manager for the Union of Concerned Scientists.

“The realities of climate change and the impacts we are already experiencing really stress the urgency of continued action,” she said. “Rex Tillerson’s job as CEO of Exxon was to really maximize returns for the company’s shareholders. There are ongoing conflicts for him shifting out of that mindset. He’s been steeped in the oil and gas industry culture for his entire career, and I think we saw that in the hearing.”

Environmental Concerns

Although Tillerson has said climate change does exist, environmentalists such as Mulvey are worried about his commitment to the environment. Indeed, Tillerson hedged on the issue during his hearing, questioning scientists’ ability to predict the effects of greenhouse gas emissions on the earth’s climate. Moreover, ExxonMobil’s environmental track record is less than stellar.

According to internal documents, ExxonMobil and other oil companies knew about the ties between fossil fuels and climate change dating back to the 1970s but didn’t acknowledge the problem for decades. In a 2007 corporate citizenship report, ExxonMobil pledged it would stop contributing to “several public policy research groups whose position on climate change could divert attention” from the seriousness of the issue. But an investigation by the nonprofit NextGen Climate found that ExxonMobil under Tillerson’s leadership had donated more than $6 million from 2008 to 2015 to groups that denied climate change.

“You tell me what those words are worth. I would say nothing,” NextGen founder Tom Steyer told The Diplomat. “I would say it’s a smart, tactical move by a smart, tactical guy.”

After decades of denials about the effects of climate change, Tillerson has been lauded in some circles for belatedly admitting that climate change is detrimental and offering lukewarm support for a carbon tax. But the company’s actions have taken a decidedly different tack, said David Deese, a political science professor at Boston College who has studied energy issues since the 1970s.

“There is all this talk that Tillerson steered the company in a different direction on climate change, but I really don’t see evidence of that. They are taking that line because it’s really no longer respectable to deny climate change,” Deese told The Diplomat. “If you’re looking at where their money is going, that’s probably more of an indicator of what they’re doing rather than what they say.”

Attorneys general in New York and Massachusetts are pursuing fraud investigations claiming that ExxonMobil deceived the public and its shareholders about the damaging effects of climate change, but the company has fought back with countersuits claiming its free speech and other rights are being violated. 

On another front, ExxonMobil has actively lobbied to protect fossil fuel subsidies that cost U.S. taxpayers more than $4 billion per year. Worldwide, fossil fuel subsidies totaled $550 billion in 2013, more than four times the amount of subsidies for renewable energy, the International Energy Agency reported. While there have been some efforts worldwide to curtail subsidies, there probably will be few reforms under a Trump administration, Mulvey said.

“Given the entrenched interests of the fossil fuel industry in this administration, it would be surprising to see action taken counter to those economic interests, or they may be stacked more in favor of fossil fuel companies,” she told The Diplomat.

Tillerson himself has long argued that fossil fuels are a fact of life, at least until better technologies make alternatives more realistic. “Energy is fundamental to economic growth, and oil is fundamental because at this point in time, we have not found, through technology or other means, another fuel that can substitute for the role that oil plays in transportation,” Tillerson said during a 2012 discussion at the Council on Foreign Relations.

He added that fracking to release shale gas and other energy-extraction techniques are often misunderstood and demonized by the public. “Ours is an industry that is built on technology, it’s built on science, it’s built on engineering, and because we have a society that by and large is illiterate in these areas — science, math and engineering — what we do is a mystery to them and they find it scary. And because of that, it creates easy opportunities for opponents of development, activist organizations, to manufacture fear,” he told CFR.

During the panel, Tillerson repeated the assertion he made at his confirmation hearing that while climate change exists, its effects — and consequences — are difficult to predict. He also said that humans will adapt to changing weather patterns.

But most mainstream scientists say the threat is far more dire than Tillerson paints it out to be. Their claims are backed up by reams of evidence, most recently reports confirming that 2016 was the hottest year on record, which marked the fifth time in a dozen years that the globe has set a new annual heat record.

Tillerson’s apparent lack of urgency in addressing the issue has many environmentalist worried that the fate of the groundbreaking climate change accord signed by nearly 200 countries in Paris in 2015 may be in jeopardy, although Trump has shifted from saying he would “cancel” the deal to having an “open mind” about continued U.S. support. The climate deal set a goal of limiting increases in global temperatures to “well below” 2 degrees Celsius and committing $100 billion a year by 2020 for climate change initiatives. But the accord didn’t address fossil fuel subsidies because they are a divisive political issue for many countries. If the U.S. did try to withdraw from the agreement without fulfilling its obligations, it could violate international law and possibly trigger the defection of other countries from the deal.

“Without American leadership, it’s very unlikely there will be coordination and cooperation across the globe that is necessary,” Steyer said.

About the Author

Brendan L. Smith (www.brendanlsmith.com) is a freelance journalist in Washington, D.C.