Rex Tillerson as Secretary of State: Canada Wins and Russia May Lose
There’s hand wringing south of the border over the nomination of ExxonMobil CEO Rex Tillerson as U.S. Secretary of State.
But north of the border there should be celebration.
That is because he, like Exxon, admires and understands Canada, and has continued to support pioneer innovations in the Canadian oil industry. Exxon has invested here for more than a century – through its 69.6 per cent owned Imperial Oil — with the result that today 20 per cent of Exxon’s worldwide oil reserves are in Canada.
This is Exxon’s biggest bet in the world, dramatically larger than the recent long-term Arctic deal with Russian President Vladimir Putin that has created such a flap in the press. Frankly, the Russian deal is chump change compared with the vast holdings the company has across Canada, in the oil sands and the Canadian Arctic.
As Secretary of State, his first act will be to approve the Keystone XL Pipeline – a project that represents a US$17.5 billion export windfall for Canada this year alone and for decades based on today’s oil prices.
And there are likely to be more Keystones, which will insure Canada’s pre-eminence as the world’s only gigantic oil producer that is an American ally and that operates in a safe jurisdiction.
Russia, by contrast, is neither.
Putin is predatory. Its economy is in tatters. It’s totally dependent on oil exports. And its war in Ukraine has cost 10,000 lives, displaced 1.4 million people and abrogated every international treaty in existence, notably the Budapest Memorandum when the United States, United Kingdom — and Russia — guaranteed the sanctity of Ukraine’s borders in return for its agreement to dismantle and hand over its gigantic nuclear arsenal. Now Russia occupies 9 per cent of the country and is poised to seize more territory and countries.
The fuss over Tillerson’s “friendship” with Russian President Vladimir Putin is overblown.
Identical “friendships” — between Russia and other oil CEOs – have always ended in treachery, theft, financial losses and threats. For instance, American oil man Robert Dudley, who is now Chair of BP PLC, fled Moscow in the middle of night in 2008 after poison was found in his blood.
Multinational CEOs know more about geopolitics than any ten U.S. senators. They know more about skullduggery and corruption than does the FBI. They understand Putin’s agenda, Iran’s theocrats, the Saudi Arabians and how these contribute to roiling Middle Eastern religious, political and tribal wars.
They also know where the bodies are buried and what dangers lurk because their job is to risk other people’s money to find and produce oil in jurisdictions where no sane person would choose to live. They do not have armies to protect their assets so their only defence is strategy rooted in facts, charm and so-called “friendships” with despots like Putin.
Obviously, he must agree to cash out his ExxonMobil stock, worth $150 million, and is able to do this tax free under a special section of the tax code. This is what Goldman Sachs CEO Hank Paulson did in 2006 in order to become Secretary of the Treasury, and is a requirement for those with potential conflicts of interest who are willing to serve in high public service.
By selling, his interests will be aligned with the best interests of his new shareholders, the American public. What’s good for Exxon is not necessarily good for America and by divesting he will be able to reconstitute his relationships around the world and to shift interactions with countries from matters of commerce to those that meet American geopolitical, socio-economic and strategic objectives.
Allowing Putin to run amok militarily in Eastern Europe and the Middle East is not in anyone’s interests, least of all America’s. Neither is removing sanctions against Russia for its murderous occupation of Ukraine until Putin withdraws his military forces from Ukraine and its province of Crimea and pays damages to the country.
Tillerson understands Russia’s abusive and corrupt governance better than most because he’s doing business there. He also knows that Putin is months away from a financial meltdown due to sanctions caused by his own violence in Ukraine.
So the art of this diplomatic deal — to bridle the world’s most dangerous dictator — will simply be to dictate terms to Putin behind closed doors and not the other way around.
And, to boot, his biggest “trump” card is Canada where enough oil exists to ignore the Middle East, Venezuela and Russia in order to make America safer, more prosperous and thoroughly self-sufficient.