When Mike Cantrell looked back a few years later, as the consequences of oil and gas’s big win in the legislature had become clear, when the hole in the state budget had ballooned up to nearly $1 billion, he felt real regret. But he also looked back with a twenty-twenty understanding of how easy it had been, of how money, as he would say, most always trumps merit in politics. Of how much brute power the industry has over the people elected to keep it in check. “Do you remember what Bill Clinton said when he got caught [having an affair with Monica Lewinsky] and had to apologize on national television?” Cantrell said. “I’ve never forgotten this. He said, ‘I did it for the worst possible reason. I did it because I could.’ And that’s why they did that. Because they could.”
The cameraman held the shot tight on Vladimir Putin as the Russian president began to speak. The muted tone of the brown drapes behind him set off bold splashes of color in the Russian Federation flags that rested at the edges of the frame, over each of Putin’s shoulders. To camera left was the simple republican flag of single broad stripes of red, blue, and white. To camera right was that same flag but with a gilded Russian crest overlaid at its center, which added tsar-like imperial flair. “Good afternoon, friends, I am very pleased to see all of you. We are about to take another major step in the development of promising oil and gas fields in the Arctic,” Putin began, his hands resting comfortably on the desktop, his fingers interlaced. “Practice shows that it is nearly impossible, or least very difficult, to implement alone such large high-tech projects, projects of global scale and significance. Today commercial success is determined by effective international cooperation.”
Here was Putin, on long-distance video linkup, trying once again to invoke that popular Russian poet: Let us join hands my dear friends. We won’t get lost if we’re together.
Widen out from that tight frame, though, take a look at the room from which this linkup was originating, and the scene seemed at cross-purposes with Putin’s message of friendship. The Russian president was a small man in one of the many cavernous voids of salons within his private residence in Sochi, sitting alone, behind two oddly configured blond-wood desks. These desks, which looked as if they had been delivered by Ikea that morning and assembled on the spot, were the only pieces of furniture in the high-ceilinged cream-colored room—save for a television monitor mounted on a long metal leg. Behind the monitor were a handful of state-approved photographers invited to memorialize the occasion. The small screen bore images from the other end of the video linkup, a live feed from atop a mammoth drilling rig in the Russian Arctic, as far north as a commercial oil rig had ever been planted. That was where the real action was, more than two thousand miles away from this antiseptic room in Putin’s Sochi manor.
That day, August 9, 2014, marked the spudding of a crucial new well in the Russian Arctic, a well whose success might ultimately tilt the balance of the world’s energy supply for generations. Cracking the Arctic would of course also bring the world one big step closer to the brink of irrevocable catastrophe. Here sit more than one-fifth of the world’s oil reserves, and if you were looking for a do-or-die climate question, the most apt might be whether the Arctic would keep its huge store of fossil fuels or have it extracted and burned. But that kind of thinking was for sissies. The geopolitical and economic advantage that these guys sought would be earned in the short run, not on some distant horizon.
Putin was glad to have an ally who thought the same way. That August video link was a celebration of a new level of partnership (perhaps we could even say trust) between two great international powers—the Russian Federation and the ExxonMobil Corporation. Putin was not your natural warm-and-fuzzy type, but he was making an effort that day. He appreciated how the leadership at ExxonMobil stuck with Rosneft, its partner in this Arctic project, even after Putin had horrified the rest of the free world with his theft of Crimea and even after Russia’s biggest oil company had been added to the growing U.S. sanctions list. “In spite of the difficult current political situation, pragmatism and common sense still have the upper hand, and that is very gratifying,” Putin said from behind his Ikea-ish desks. “Once again, I stress, ExxonMobil is our old reliable partner, and we greatly value our relationship.”
The ExxonMobil bosses were much less voluble that day. Rex Tillerson was not on hand for the Arctic rig festivities. Not even by remote video hookup. Which was understandable. It might make good business sense to defy the wishes and interests of the U.S. government and partner with Putin to drill the Russian Arctic, but maybe Exxon didn’t want to call attention to it. Tillerson instead sent to the Kara Sea drilling platform his top executive on the ground in Russia, Glenn Waller, to represent Exxon management. Waller was prowling the deck of the rig with Rosneft’s chieftain, Igor Sechin, that day, but he too shied at the invitation to make a big speech. Waller made brief remarks instead, in his characteristically fluent Russian, but with uncharacteristic wariness. He spoke briefly of long-term future cooperation—“We see big benefits here”—but his main message seemed to be environmental. “We think it is very important to protect the natural beauty of the Russian Arctic,” he said. Rrrriiiiiight.
Rosneft (a.k.a. the Russian Federation) and Exxon (a.k.a. Exxon management and shareholders) needed each other just then. The fracking boom in America had reset the worldwide energy field, and these two corporate beings were scrambling to reassert primacy. The United States was beginning to look like it might be capable of overtaking Russia to become the world leader in oil production. All glory to the frackers (and all apologies to the cows, and the neighbors, and the future prospects for their drinking water). But America’s largest oil company, ExxonMobil, had been late to the game on the big shale plays in Texas and North Dakota and Pennsylvania, and frustratingly low natural gas prices had rendered its $30 billion (and also late) acquisition of the natural gas fracking company XTO Energy something of a bust. That said, ExxonMobil’s revenues and profits hadn’t suffered much yet. Exxon’s biggest oil and gas fields were outside North America. Brent crude oil was still priced at well over $100 a barrel on the international market and had been consistently over that mark the previous three years. Revenue was not the problem. But Exxon’s metrics of success did not stop at annual profits; its long-term survival depended on growing its reserves. In blunt terms, it needed to produce more oil and gas than it sold each year. The corporation operated like a shark, constantly on the move, constantly on the hunt for sustenance. By that summer of 2014, the shark was a little bit skinny. Exxon’s annual hydrocarbon production was slipping, and its annual growth rate in reserves was a tad meager for comfort.
Vladimir Putin and Igor Sechin felt Rex’s pain. Sechin had grown Kremlin-controlled Rosneft into one of the largest and most valuable oil companies in the world, but he had done it in large part through smashing and grabbing any smaller company that smacked of competition or real skill in the field. That kind of gangster ethos can only get you so far. When you reward achievement with extortion, and technological advancement with theft and threat, eventually you no longer have great businesses in that sector.
That outcome was a near certainty, because Putin had decided that Russia would be a petro-state—choosing an economic future for his country that best served his own needs. Oil and gas could be wielded as an international cudgel to force other countries to respect and deal with Russia no matter anything else Russia did. The industry also—bonus!—trailed enough easy cash to generate almost instant, almost limitless corruption wherever needed. And when you have those kinds of goals in mind for your one indispensable industry, and you run that industry like a Mafia chop shop with less omertà, eventually the actual business side of your dark little authoritarian scheme is going to suffer. Both financially and in its basic technical competence. And indeed, by 2014, the bright red star of Russian energy was dimming; Rosneft was running on fumes. The company’s production was flat, and Sechin had just been forced to go to Putin hat in hand to ask for $4
2 billion from the government treasury to help him make ends meet. That alone tells you something about the skill and capability of Russian business under Putin, when even one of the biggest oil companies on earth, in one of the world’s most oil-rich nations, with the price per barrel of crude bouncing along at spectacular highs, doesn’t make money.
And Putin and Sechin were anticipating bigger trouble ahead. There was the short-term problem—at least they hoped it was short-term—of having made the Russian Federation an international pariah with its naked aggression in Ukraine. And there was the much more worrisome long-term problem: cheap and easy-to-produce oil and gas in mainland Russia might have been plentiful, but it had never been inexhaustible. The energy industry in Russia was draining the old Soviet-era oil fields in a hurry. Meanwhile, there were competitive threats arising in its very own neighborhood. Other countries in Eastern Europe—Poland, Romania, Ukraine!—were already in deals with technologically capable Western majors to help them frack their own territory for oil and gas. That said, there were always means of disrupting some of these contrary developments. The Kremlin had poured illicit cash and other resources into the Green Party and environmental activist groups in those countries to slow the march of fracking. But without serious course correction, the Kremlin was steaming toward big trouble.
Putin knew that all too well as he sat in his cream-hued salon on August 9, 2014, and gave the signal to begin drilling in the Russian Arctic. Time for a big breakthrough in the Russian energy sector was running out. The future was now. And that future rested about a mile and a half down into the Arctic seabed, in a straight line from the drilling rig where Igor Sechin was holding forth. “The start of exploratory drilling in the Kara Sea is the most important event of the year for the global oil and gas industry,” said Sechin.
Industry experts in the West tended to back Igor’s claim. “It’s probably one of the most interesting wells in the global oil industry for many years,” said a senior research fellow from the Oxford Institute for Energy Studies. News coverage that day backed Igor’s claim as well, adding eye-popping detail to Sechin’s boast: early surveys suggested this particular section of the Kara Sea, an underwater area roughly the size of Moscow, was harboring maybe nine billion barrels of oil…And this was only a tenth of the total oil and gas equivalent in the Rosneft-owned drilling sites in the nearby Arctic shelf. Sechin’s team claimed the Kara Sea held more oil and gas “than the deposits of the Gulf of Mexico, the Brazilian shelf or the offshore potential north of Alaska and Canada.” Eighty-seven billion barrels in all. Enough to satisfy the demands of the entire world for almost three full years, even if nobody else on the planet produced a single drop.
This might indeed be the game changer Putin and Sechin were counting on. And Tillerson too. When one of the Kremlin-funded television stations, RT, reported on the exciting new Arctic oil exploration effort being launched and lauded by President Putin, it interviewed a research fellow from a conservative free-market London-based think tank who summed it up rather drolly. “[ExxonMobil] could do with the oil,” said Keith Boyfield. “They’ve already invested a considerable amount of money.”
Exxon had in fact sunk a ton of money into this potentially globally transformational project. It could change Exxon’s future, and Russia’s, and the world’s. One immediate problem it faced, though, was the weather in the Arctic. The Exxon-Rosneft team had a window of about seventy days to get ’er done before the ice floes closed in on the drilling platform. And other obstacles were heading their way, too, from the realm of geopolitics.
In the aftermath of his forcible annexation of Crimea, Putin was enjoying an enormous surge in popularity inside Russia. This first step in the advent of what he called Novorossiya (New Russia)—restoring the lost territory and the old glory of a faded empire—had caused Putin’s personal approval ratings to jump into the mid-80s by the summer of 2014. The approval numbers among his long-standing base constituency of poor, rural, less-educated Russians had ticked up to around 90 percent. The approval numbers among the urban intelligentsia, meanwhile, soared from below 50 percent to 75 percent. Russians had suddenly decided—after ten years of saying otherwise—that they would rather be struggling citizens of a superpower nation with swagger than struggling citizens of a beat country. This was Fortress Russia, piping state-sanctioned, state-happy news to all those within the walls, which meant King Vladimir reigned imperial.
On the other side of those walls, support for Putin was thinning to wisps. The spring and summer had been a disaster for his standing in the rest of the world. The illegal annexation of Crimea was bad enough, but the international community was alarmed, if not outright horrified, that the Russian putsch hadn’t stopped there. Putin’s military had also massed soldiers, tanks, and artillery on the Ukrainian border as a sign of encouragement to separatists in the Donetsk and Luhansk oblasts, a region known as the Donbas. Somewhere between a quarter and a third of the population in those two oblasts had voiced support for annexation to Russia. Putin’s commanders explained they had moved military assets to the border in case they were called to sweep in and protect the Russian-speaking population in these oblasts from the depredations of Ukrainian leaders who had taken charge of the federal government in Kyiv. Nobody in the West was buying that explanation. That Russia’s overriding concern was humanitarian stretched credulity. Humanity was not Putin’s strong suit. The Donbas was a heavily populated and productive manufacturing area, with Donetsk alone accounting for about 12 percent of Ukraine’s gross domestic product. The area nearby also accounted for something near 90 percent of Ukraine’s oil and gas production, and fracking technology promised to open new fields. Grabbing the Donbas was a twofer. Russia could cripple the teetering economy of Ukraine and scoop up a healthy supply of oil and gas. Novorossiya!
When well-armed separatists began taking over government buildings in major cities in the Donbas, not many close observers believed the Kremlin’s assertion that it was homegrown revolutionaries at work. The townsfolk in Kharkiv, for instance, were pretty certain it was Russian soldiers (in mufti) who proclaimed the liberation of city hall, because local separatists would have known that what they had actually seized and liberated was not city hall but the city’s main opera theater. Many supposedly local “separatists” manning checkpoints and roadblocks did not know the names of nearby villages. Which seemed a tad suspicious.
The Russian army plants and their separatist cohorts in the Donbas declared independence from Ukraine in early May 2014. Hello, Donetsk People’s Republic! As Russian-military-backed rebels in the Donbas rolled up serious real estate, Putin increased his pressure on Ukraine’s shaky economy and its fractious interim government. Gazprom briefly cut off the supply of natural gas to Ukraine (just a reminder).
The Russians also began to beta test another potentially powerful weapon in the federation’s fight to take control of Ukraine and to wreak havoc in general. As the presidential election to replace the runaway Putin puppet Yanukovych neared, the Russian military and security services fed social media sites all across Ukraine false stories about how the Orange movement was led by neo-Nazis and anti-Semites and downright terrorists. A social media post by a “physician” in Odessa claimed that anti-Russian Ukrainians had beaten pro-Russian separatists and then burned them alive simply because of their political views. When the doctor rushed to aid the victims, he explained, the rabid Ukrainian nationalists held him back. “One rudely pushed me, promising that I and other Jews would suffer a similar fate,” read the fake post from a fake account by a fake Ukrainian doctor. “In my city such things did not happen even during the worst of Nazi occupation. I wonder why the world is silent.” Thank you, Facebook.
Ukraine looked as if it might fracture in the lead-up to the election. The death toll in the Donbas fight rose to nearly a thousand. Factories went dark. One coal mine in the city of Donetsk had to be shuttered after the pro-Russian rebels made off with mo
st of its wiring, detonators, and explosive powder. And then a funny thing happened in the election. Despite all the Russian propaganda and disinformation and manipulation, Ukrainians overwhelmingly elected the straight-ahead, pro-EU, pro–Revolution of Dignity candidate as the country’s new president. In a very crowded field, Petro Poroshenko surprised the country by winning an actual majority of the vote. Candidates from the neo-Nazi and anti-Semitic far-right parties that were supposedly so popular polled as asterisks, down around 1 and 2 percent.
With the new government in place in Kyiv by the end of June, and with a clear public mandate behind it, the newly inaugurated Poroshenko got to work on behalf of Ukrainians. One of his first acts as president was to sign the official Association Agreement with the European Union that his Russian-tool predecessor had tried to back out of. “This is a really historic date for Ukraine,” Poroshenko said at the signing ceremony. He then further exasperated Putin by expressing his hopes that Ukraine would one day be a full member of the EU. Poroshenko also defied Putin in an even more aggressive way; he mounted a serious military counteroffensive in the Donbas, using the national army to reinforce the pro-Ukrainian militia groups who had formed in the long weeks of absence of help from Kyiv.
June and July turned out to be very, very bad months for President Putin. There was a surge in the number of dead Russian soldiers being shipped back home from the Donbas. The corpses arrived in Russia under the cover of secrecy, cryptically marked “Cargo 200.” The Putin critic and political opponent Boris Nemtsov saw it happen and immediately began a campaign to catalog a name-by-name record of the casualties for public release. Whatever the popular sentiment for Novorossiya, Nemtsov understood there was a limit to how many husbands, wives, sons, daughters, brothers, and sisters Russians were willing to sacrifice for another chunk of Ukraine. Officials in the Kremlin and the Russian military understood that too. Survivors of the dead received terse and pointed messages that suggested they keep their grief concerning these “volunteer” soldiers confined to the family circle. “You are an adult,” a Russian Federation official explained to the wife of one casualty. “Russia is not conducting an organized military action. Your husband voluntarily went to the street where shots were being fired.”
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