Japan Is the New Leader of Asia’s Liberal Order
Washington Must Learn to Follow Its Longtime Ally in the Indo-Pacific
After weeks of suspense, U.S. President-elect Donald Trump has finally chosen a secretary of state. On Tuesday morning, he named ExxonMobil CEO Rex Tillerson to the position, taking to Twitter shortly after the announcement to tout his pick’s “vast experience at dealing successfully with all types of foreign governments.”
Tillerson is clearly a dealmaker. Under his leadership, Exxon, which has operations on six continents and a stock market value of more than $390 billion, has inked over a hundred merger and acquisition deals. The next secretary’s negotiating style, much like the next commander-in-chief’s, also suggests a flair for the dramatic. The New York Times recounts one particularly colorful episode in Yemen where Tillerson, on hand to negotiate a natural gas export plant and exhausted by the government’s stonewalling, “flew into a rage, throwing a five-inch-thick book across the room and storming out.”
Temperament aside, what distinguishes Tillerson as the next face of U.S. foreign policy is his clear understanding of how economic incentives shape government decisions around the world. Optimistically, Tillerson could therefore catalyze a return of what I call geoeconomics—the use of economics as an instrument of statecraft—to U.S. foreign policy, after 15 years in which Washington has relied too heavily on military force. But geoeconomics is ultimately just a set of tools. The question, then, concerns what the new secretary’s aims—and those of his president—will be. Tillerson’s background at Exxon provides some clues, not all of them reassuring.
Tillerson is a lifelong Exxon employee, having led the oil company, the United States’ largest, since 2006. During that time, there was often considerable daylight between Exxon’s interests and those of the United States. In 2013, for instance, Tillerson cut an independent oil deal with the Kurdistan Regional Government, directly defying the State Department’s “one Iraq” policy, which sought to unify the country under a strong, centralized authority in Baghdad. In 2008, after years of coddling former Libyan dictator Muammar al-Qaddafi, Exxon joined a long list of oil companies urging Congress to exempt Libya from a law allowing the families of U.S. victims to sue foreign sponsors of terrorism. Under Tillerson’s leadership, Exxon has also cut lucrative deals with dictators in oil-rich pockets of Africa, extending the lifespans of autocratic regimes in places such as Angola, Chad, the Democratic Republic of the Congo, and Equatorial Guinea.
There is a long history in the United States of oil majors pursuing their own foreign policies, often in ways that run counter to U.S. interests.
Of course, there is a long history in the United States of oil majors pursuing their own foreign policies, often in ways that run counter to U.S. interests. As the historian Adam Hochschild has documented, the oil company Texaco violated U.S. neutrality agreements during the Spanish Civil War in order to supply the nationalist faction with discounted fuel, all because the company’s then-CEO, Torkild Rieber, was a great admirer of Spanish Nationalist leader Francisco Franco and his ally Adolf Hitler.
Rieber belongs to the past. But the need for oil companies to pursue independent foreign policies has arguably grown in recent years, as more and more of the world’s energy resources have reverted to sovereign hands. For all the fleeting privatization attempts of the 1990s, governments, not private shareholders, now own the world’s 13 largest oil-and-gas firms and three-quarters of the world’s known oil reserves. Privately owned multinationals such as Exxon produce just ten percent of the world’s oil and hold only three percent of its reserves. CEOs such as Tillerson have thus had to play the diplomat, managing relationships with governments that are business partners on some days and larger, better-funded rivals on others. When those governments are not allies of the United States, as is the case with Russia, it is little wonder that what’s good for Exxon isn’t necessarily good for Washington. As former Exxon CEO Lee Raymond once admitted, the company does not “make decisions based on what’s good for the U.S.”
The real problem, however, is not this divergence of interests, but rather that U.S. adversaries often regard Exxon and other Western oil majors as potential conduits for exerting influence in Washington. Witness Russia’s encroachment in Ukraine, where, according to the journalist Peter Pomerantsev, Russian President Vladimir Putin wagered that “old alliances like the EU and NATO mean less in the 21st century than the new commercial ties [Russia] has established with nominally ‘Western’ companies, such as BP, Exxon, Mercedes, and BASF.” Essentially, Putin calculated that he had Exxon on his side and that any sanctions by the West would meet with fierce resistance from the energy sector.
It was not a bad bet. Exxon has billions of dollars invested in deals that will only go forward if U.S. sanctions on Russia are lifted, and in 2014 the company spent millions lobbying in Washington, with Russian sanctions as one of its major issues. Were it not for Russia’s role in the July 2014 downing of a Malaysian airliner, shot down by Russian-linked militants operating inside Eastern Ukraine, it is hardly clear that Washington and Brussels would have toughened sanctions in the way they ultimately did.
Whether or not Tillerson will trade his interests, as a corporate diplomat, for the broader concerns of the United States is unclear. Not only does he lack formal experience in government or foreign policy, but has spent his entire career at Exxon. Indeed, Tillerson has succeeded precisely because he has done well within Exxon’s corporate culture. This cannot help but influence how he understands the world and the various interests he is likely to pursue.
Exxon’s culture is notoriously insular and opaque. The company is known to put a premium on safety: executives are protected by secret service-like security details, and papercuts are recorded in annual safety statistics, according to investigative reporter Steve Coll’s book Private Empire. But perhaps the strongest of the company’s institutional biases is toward order. Given the long investment horizons and huge amounts of capital that characterize deal-making in the oil business, Exxon has long favored political stability above all else. But in many parts of the world, stability comes in the form of autocratic rule, with obvious costs to human rights and democracy. And the preference for continuity can also lead to wishful thinking, in the form of sticking with established regimes beyond the point at which it is rational to do so. For example, having made extensive investments in Venezuela in the late 1990s, Exxon continued to operate in the country despite growing evidence of economic dysfunction and political turmoil. Finally, in 2007, the Venezuelan government, under then-President Hugo Chávez, expropriated the company’s assets, initiating seven years of litigation and ultimately forcing Tillerson to settle for pennies on the dollar.
U.S. adversaries often regard Exxon and other Western oil majors as potential conduits for exerting influence in Washington.
Even if Tillerson is somehow able to break with this overly cautious approach, moreover, he will also have to overcome his own economic interests, which appear to be inextricable from those of Exxon. Much of Tillerson’s $150 million stake in the company is held in stock options that do not mature for several years, meaning he cannot easily divest from the company or put everything in a blind trust. He could therefore find it hard to avoid thinking of Exxon—which spans some 50 countries and six continents—as he negotiates on behalf of the United States.
One can hope that Tillerson will prioritize U.S. interests, but one shouldn’t count on it. That is why during his confirmation hearings, the Senate should foreground areas in which Exxon’s interests diverge with those of the United States. Russia is obviously the first on this list, but there are others, such as Iraq and Syria, where the U.S. government has worked for over a decade to avoid giving off the impression that it is engaged in a resource conquest.
Another point of friction could come from Tillerson’s stated dislike of sanctions. In 2014, he told Exxon shareholders that “we do not support sanctions, generally because we don’t find them to be effective unless they are implemented comprehensibly and that’s a very hard thing to do.” But sanctions have proven to be a powerful addition to Washington’s modern diplomatic arsenal, sparing the United States, in the case of Iran, of the need for another military foray into the Middle East. If President-elect Trump is serious about avoiding U.S. interventions, an allergy to sanctions could deprive policymakers of a critical tool, especially with rising tensions on the Korean Peninsula and in the South and East China Seas.
There is, finally, the question of whether an oil executive can be trusted on climate change. And indeed, Tillerson, who has called the threat posed by global warming “real” and “serious,” may be better on this issue than his soon-to-be boss—under Tillerson’s watch, Exxon has supported a carbon tax (albeit as a replacement for regulation) and the Paris climate agreement. Yet the company’s climate record should not be exaggerated: Exxon is currently under investigation for having knowingly concealed evidence that linked the burning of fossil fuels to global warming. Meanwhile, growing ranks of U.S. military and intelligence officials now cite climate change as one of the United States’ gravest national security threats. Even ambivalence on the subject would therefore sit uncomfortably with the national interest.
As a CEO, Tillerson told reporters in 2014 that “we [at Exxon] don’t take sides in any geopolitical events.” But as the chief diplomat of the world’s most powerful country, he will have to learn to see things differently. It remains to be seen whether he can.