Blowout

by Rachel Maddow

  The Ukrainian regular army and its partners in the east, meanwhile, rolled up one pro-Russian separatist stronghold after another in Donetsk and Luhansk. By mid-July, Poroshenko’s national government claimed control of two-thirds of the Donbas region and most of the major road crossings at the Russian border. The government in Kyiv reported that it had reduced the number of separatist fighters by more than half, from fifty thousand to twenty thousand, and drawn a circle around those that remained. “Every day our containment belt around the territories that unfortunately are still held by the terrorists will become tighter and tighter,” Poroshenko’s defense secretary said. “Every day, more cities are coming under Ukrainian control.”

  On July 16, 2014, with Putin showing no signs of backing down in the face of Ukraine’s assertion of its sovereignty and the defense of its borders, the United States announced another round of sanctions. This new set, for the first time, included Rosneft. American companies were given license to go ahead with existing projects, but in the future there could be no new deals with Russia’s oil giant. European Union leaders were wary about supporting the United States on the new sanctions, because they were scared of backing the volatile Putin into a corner. Not only did EU countries do ten times more trade with Russia than did the United States, but they were dependent on Russia for much of their energy.

  That pragmatic reluctance held sway only a few days longer, until a Malaysia Airlines jet flying from Amsterdam to Kuala Lumpur was shot down as it passed over a corner of the Donbas. There were almost three hundred people aboard the flight, and more than two hundred were citizens of the EU. Bodies of a few of the victims, including a teenage boy, had landed amid a grove of fruit trees on the grounds of a Ukrainian orphanage. “I want to know why that boy died,” one of the terrorized resident orphans told Anna Nemtsova, a Moscow-based reporter for The Daily Beast.

  When the team from the Organization for Security and Co-operation in Europe arrived to sift for clues to help answer that question, Nemtsova reported, they were blocked from the crash site by soldiers wearing balaclavas and carrying Kalashnikov rifles. The inspectors could see hundreds of charred bodies and body parts being loaded into plastic bags. “You cannot go to that territory,” they were told by the Russian/separatist soldiers. “Our investigators have not completed their work.”

  The international team that did finally conduct the delayed criminal investigation was careful and deliberate. Almost four years later, inspectors from Malaysia, Australia, Belgium, the Netherlands (“grieving nations” who had lost citizens in the disaster), and Ukraine were still working to uncover the absolute and verified specifics of the matter, which were these: The civilian passenger jet was shot down with a missile fired by a Russian-manufactured anti-aircraft weapon. The anti-aircraft system had been ferried across the border from Russia and then more than two hundred miles into Ukraine several weeks earlier on a lowboy trailer, hauled by a white Volvo truck, accompanied by a convoy of vehicles carrying armed men. That particular launcher proved to be property of the Russian army’s Fifty-third Anti-aircraft Missile brigade, whose soldiers had fired the missile from a remote field about 150 miles north of the crucial separatist-controlled city of Donetsk. The spotters in the Russian brigade likely mistook the jet for a Ukrainian military plane. (The Russians had been shooting Ukrainian jets and helicopters out of the sky, with abandon, for well over a month by then.) Markings on the fatal projectile identified it as a missile produced in 1986 at the Dolgoprudny Research and Manufacturing Enterprise in Moscow. The anti-aircraft launcher that fired the missile into the cockpit of the Boeing 777 had been spirited back across the border into Russia within hours of the fatal launch.

  Incriminating new information was still emerging in 2019. But even in the first few days after the tragedy, it was pretty clear who was to blame. Prime Minister David Cameron, who had lost ten British citizens in the shootdown, wrote an op-ed titled “This Is an Outrage Made in Moscow.” One of the British tabloids called it, simply, “Putin’s Missile.” The Kremlin denied responsibility, to little effect. Western Europe finally swung into Ukraine’s corner.

  Within two weeks, the EU had joined with the United States to take an even bigger bite out of Putin’s hide, and from the part he actually cared about. The new sanctions would specifically bar the sale or transfer of advanced engineering systems that Russia needed to drill new oil fields. “In the energy sector, new precision-guided restrictions will make it difficult for Russia to access the technology and equipment needed to produce oil from deep water, Arctic or shale deposits,” explained Jason Bordoff, who had just left his job as staff director in charge of energy and climate change at the National Security Council, and Elizabeth Rosenberg, a former senior sanctions adviser at the Treasury Department. “These are precisely the complex, challenging projects that Russia will have difficulty achieving without the technology of Western energy firms. The measures are designed to make it more difficult and costly for Russian energy companies to invest in replacing declining conventional oil output and meeting future production goals.”

  So this was the sticky wicket Rosneft and ExxonMobil faced as their jointly held drill bits powered down into the Arctic seabed that August. They knew already that they would need to hurry the drilling ahead of the on-marching ice floes. But now they would also need to take heed of these on-marching international sanctions, targeted at exactly the kind of high-tech, envelope-pushing drilling they were trying to pull off in the Kara Sea. That said, for all the international Sturm und Drang about these tough new sanctions, Putin himself didn’t seem all that worried. Russia now had a partner, after all, and he was pretty sure that a company like ExxonMobil could do as it pleased, no matter the wishes of the current U.S. government. He had seen presidential administrations come and go in the United States, but ExxonMobil abided. “We’re not going anywhere,” Tillerson claimed he had once told Putin. “We’ve been around a hundred and thirty years….We just have to comply with the law.”

  As far as ExxonMobil leadership was concerned in August 2014, the company still had a lot of wiggle room out in the Russian Arctic—even with the new sanctions against its partner, Rosneft. The joint Rosneft-Exxon Kara Sea project was already under way when the latest sanctions hit, so it was exempt as an ongoing operation. The sheer size of the drilling rig also seemed to suggest, well, inevitability. The West Alpha rig, leased from a Norwegian company, was a monster. Its derrick towered 350 feet above the main deck, which measured 230 by 216 feet. The thirty-one-thousand-ton rig stood sturdy, 155 miles off the Russian coast, against rough and rocking Arctic waters. It held fast by design: “an 8-anchor positioning system, which provides advanced stability,” Rosneft boasted. “Most of the platform is outside the reach of waves, which are no impediment for the rig’s operations.”

  Outside the reach of waves, real or geopolitical. That’s sort of the way Vladimir Putin was feeling in August 2014, inside Fortress Russia, with reliable old ExxonMobil standing firm at his side. Screw the rest of the world and their carping about Crimea and Donbas and the shootdown and anything else. Together he and Exxon would make their strike in the Arctic, and the West would be at Russia’s energy teat for another generation.

  In Steven Lee Myers’s fascinating and psychologically rich 2015 biography of Putin, The New Tsar, we get a clear view of Putin’s me-against-the-world sense of self at that crucial time in his presidency. Separate and apart from the increasingly aggressive sanctions against Russia, and the widening international consensus behind them, Putin was convinced that almost all of Russia’s biggest problems were the product of a global conspiracy against his country. He thought, for example, that the new downtick in oil prices in 2014 was a deliberate plot hatched by the United States and Saudi Arabia to weaken the Russian Federation. He was also incensed by news from the international arbitration court in The Hague, which had chosen this particular moment to issue its verdict on Rosneft’s disputed grab of
Yukos a dozen years earlier. The court ordered that Russia owed $50 billion in recompense and damages to Yukos shareholders and named Putin himself as a bad actor in the scheme. “Each step against Russia he [Putin] now believed to be a cynical, calculated attack against him,” Myers writes in The New Tsar. “He simply no longer cared how the West would respond. The change in Putin’s demeanor became acute after the downing of Flight 17, according to his old friend Sergei Roldugin. ‘I noticed that the more he is being teased the tougher he becomes….He has become more—I don’t want to say aggressive—but more indifferent….He does not want to compromise anymore.’ ”

  Roldugin was maybe selling soft soap, because Putin’s indifference and unwillingness to compromise turned pretty damn aggressive, pretty damn fast. Staging areas on Russia’s western border filled with more than forty thousand Russian soldiers and weapons (including land mines, mortars, rocket launchers, surface-to-air missiles, 152-millimeter howitzers, anti-tank guided missiles, and actual battle tanks). Russian soldiers were ordered to scrub all insignia and identifying markings from their uniforms and equipment and vehicles, hand over their cell phones, and head west into eastern Ukraine. “They didn’t say anything, just march 70 kilometers,” one Russian paratrooper later said of his vague orders. “I guessed it, but I didn’t know [we were in Ukraine] until they started shelling us.”

  Most of the Russian soldiers who crossed the border were not rabid partisans for Putin’s fight, according to reporters on the ground from The Guardian. Typical among them was a recent recruit who signed up because there were no other paying jobs to be had in his town. Or an underemployed locksmith and reservist who, all things equal, according to his wife, would rather be home reading fantasy novels or playing War Thunder, World of Warplanes, World of Tanks, or his other favorite video games.

  Even so, the Ukrainian regular army and militia units were no real match for even poorly motivated Russian artillery and tank units. The former president Yanukovych had pretty well hollowed out the Ukrainian military while in office. The Russians killed more than a thousand Ukrainian fighters in the early stages of their new offensive and began winning back substantial chunks of the Donbas. Locals cowered in their basements in cities and towns across the Donetsk and Luhansk, without electricity or clean water, while mortars and rockets whirred overhead. “We don’t support anybody,” one shell-shocked husband and father told the reporter Anna Nemtsova. “All we want is to stay alive. Please make the world understand that.” One Ukrainian militia group that had successfully fought the Russians for more than four months was blasted by devastating heavy artillery fire in what had been considered a stronghold a few days earlier. The men and women of the recently formed Donbas Battalion had never before encountered a weapon that could fire three dozen incendiary rockets simultaneously. The Russians then invited survivors of the encircled and defeated battalion to flee through the “humanitarian corridor” they were holding open—and then killed a hundred of them in what was supposed to be their route for safe passage.

  Putin hailed the “separatist” victories as if they were the result of pro-Russian homegrown Ukrainians carrying out operations inside their own country. The Russian military, he insisted, had nothing to do with it. As did Lavrov, his foreign minister, who had made a habit of hurt and angry denial, even when presented with the half a dozen regular Russian soldiers captured in Ukraine, or with satellite images of Russian troops and weapons on the march in the Donbas. These were, he lied, “just images from computer games.”

  The Western democracies were not going to escalate the fight by sending their own troops to defend Ukrainian sovereignty. Nobody was looking to invite World War III. But they did what they could. In the waning days of summer, European leaders pleaded with Putin for a cease-fire in Ukraine; he professed a willingness to let things simmer in place. The Russia-invented Donetsk People’s Republic was already preparing a victory parade in the region’s most important city. And Russian armor had nearly encircled the region’s most important port.

  The United States, meanwhile, unleashed a very specific new sanction it had been threatening for months. The wiggle room allowed for dealing with Rosneft and the rest of the Russian oil industry was officially closed. Prior deal or no, the Obama administration declared that all American companies had to cease operations in Russia. Even ongoing operations. No more grandfather clause. On September 11, 2014, Exxon thought it had forty days or so left to find the big prize in the Russian Arctic, give or take the weather. On September 12, Exxon was officially informed by the U.S. government that the company was done for the season in Russia; its crew had two weeks to cap the well in progress and get the hell out of Dodge. The Exxon lobbying team whined and wheedled and managed to buy themselves an extra two weeks, to October 10, to close up shop in the Kara Sea. “The license [from the U.S. Treasury Department] recognizes the need to protect the safety of the individuals involved in these operations as well as the risk to the environment,” ExxonMobil’s communications team explained in a careful public statement. “All activities related to the wind down will proceed as safely and expeditiously as possible.”

  This special two-week waiver from the U.S. government was not about giving Exxon a little extra time to find all that Russian oil and gas, see. The special waiver was about safety. And the environment. Oh yeah.

  ExxonMobil’s partner in the operation—Rosneft—was limping even before this latest hit. Earlier sanctions had already made it difficult for the company to service its reportedly huge $39 billion debt. Less than a week after the goodbye, ExxonMobil sanctions went into place, Putin’s deputy prime minister took pity on Rosneft and announced that Russia’s national welfare fund would hand over at least a bit of the $42 billion in cash the company had been requesting. But Putin and Sechin had another trick up their sleeves—an oldie but a goodie. On the same day as the bailout announcement, September 16, 2014, a sixty-five-year-old Russian billionaire named Vladimir Yevtushenkov was placed under house arrest in his mansion outside Moscow. He was held on suspicion of money laundering related to Bashneft, an oil company in Bashkiria, a province in the southwest of Russia.

  The alleged money laundering for which Yevtushenkov was charged had taken place nearly a decade earlier. But the actual malefaction that got him arrested was much more recent: Yevtushenkov and his privately owned oil company had become a source of great and ongoing embarrassment to Sechin. While Rosneft lumbered in place, bleeding cash, Bashneft was thriving, due almost entirely to Yevtushenkov’s management. The Russian billionaire had first invested in Bashneft back in 2005, gained a controlling stake in the company in 2009, and then transformed the lazy old Soviet-era company into a juggernaut. By 2014, Yevtushenkov’s company was a darling of the Western investment crowd—and for good reason. Bashneft was the fastest-growing private oil driller in Russia, increasing its production almost 10 percent in a single year and piling up reserves. The company’s stock price had tripled in just four years, and when its chieftain had gone to London in June 2014 to roadshow an initial public offering on the stock exchange there, investors flocked to the $800-a-night Corinthia Hotel to hear his pitch. (This was particularly galling to Sechin, who put a serious offer on the table to acquire Bashneft the previous year and had been, as the Financial Times put it, “rebuffed.”)

  Imagine the gall—here was Yevtushenkov preparing to sell large stakes of this newly valuable and productive Russian corporation to Western investors in London, thus keeping this prized and productive asset from the grasp of Sechin and Rosneft and the Russian state.

  It didn’t take an oracle to see where this was headed. Yevtushenkov’s arrest was widely reported as an unfolding remake of Sechin’s earlier Yukos smash-and-grab thriller. Didn’t even matter that Yevtushenkov, unlike Yukos’s boss, Mikhail Khodorkovsky, had never uttered a syllable of challenge to Putin’s political authority. This time around, it was simply about business or, more precisely, power. Here was a
jewel of the Russian oil industry, and its principal owner, its Russian principal owner, seemed to be forgetting his company’s first duty was to the Russian state and Vladimir Putin (and Igor Sechin). Especially now, when the future of the Russian Federation was in the balance. Bashneft, like Yukos and Lukoil and every other oil-producing company in Russia, was first and foremost a “strategic asset” of the state; Putin occasionally invoked his own barnyard adage, according to Steven Lee Myers, to clarify his thinking on the subject: “A chicken can exercise ownership of eggs, and it can get fed while it’s sitting on the egg. But it’s not really their egg.” So metaphorically speaking, Bashneft’s eggs belonged to the Russian state. And the Russian state was hungry just then. So Sechin and Putin raided yet another nest.

  Mikhail Khodorkovsky, the Yukos boss who had been divested of his company and tossed into jail for a decade, was pretty sure this remake was going to end just as the original had ended. “This is the very same Igor Ivanovich [Sechin], who in 11 years has not got any wiser and has perhaps become even greedier,” said Khodorkovsky, who was finally a free man, and thus free to keep his distance and speak his mind in Switzerland. “If Yevtushenkov can make a deal, then he should do it.”

  He maybe should, but they made sure he couldn’t. Yevtushenkov was in a very poor bargaining position thanks to a little early twenty-first-century Russian-style justice. For my friends, everything; for my enemies, the law. The Kremlin’s courts had frozen Yevtushenkov’s stake in Bashneft back in July, not long after he emerged from those IPO meetings with eager Western investors. On the news of his arrest in September, shares in his holding company, Sistema, dropped 37 percent. Shares in Bashneft had dropped more than 20 percent. Yevtushenkov appealed for immediate release—or at least access to his computers and phones so he could go to work to restore the lost value of Sistema and Bashneft. This appeal seemed to fall on deaf ears. Probably didn’t help that news out of Western Europe that week darkened the mood in the Kremlin. The new sanctions were starting to pinch where it hurt. Authorities in Italy—home to Putin’s old friend Berlusconi, now sadly out of office—had seized title to $40 million worth of property in Rome and Sardinia, including apartments and villas and a hotel. They all belonged to Putin’s judo pal and Winter Olympics klepto-contractor Arkady Rotenberg.