by Steve Coll
America’s oil dependency required even Los Angeles insurance brokers to consider the relative virtues of corrupted oil alliances.
Several weeks after President Obama’s inauguration, the United States received intelligence reporting from Nigeria that some sort of an attack was being planned on high-level targets in Equatorial Guinea. Such reports were increasingly common. Piracy, oil smuggling, and speedboat militancy carried out mainly by armed Nigerians under the brand name of the Movement for the Emancipation of the Niger Delta (M.E.N.D.) continued to spread throughout the Gulf of Guinea.
That winter, ExxonMobil’s West African operations were on particularly high alert. In December, in Nigeria’s Akwa Ibom State, armed gangs had shot up an ExxonMobil caravan, apparently seeking to kidnap expatriate workers; Nigerian security guards returned fire and repelled the attackers. A month later, the guards were in action again, around the same housing compound in Eket where the traumatic kidnapping of 2006 had occurred; again, the ExxonMobil security force managed to ward off the assailants before they could reach any oil workers. Militants in speedboats also attacked an ExxonMobil oil platform in the ocean waters off Akwa Ibom. Malabo and its harbor lay only eighty-five miles by boat from Eket, straight across the Bight of Biafra—for speedboat-equipped militants and robbers, it was an easy commute.
In Equatorial Guinea, ExxonMobil, Marathon, and Hess had developed an e-mail system to distribute warnings about impending coups, invasions, or waterborne bank robberies in which armed men in speedboats arrived at Equatorial Guinea’s coastal cities to hold up banks and escape by sea. The oil companies’ security departments tended toward caution and often ordered lockdowns at their Malabo and mainland compounds on receipt of even fragmentary intelligence reports.
The United States continually earned credit with President Obiang—and partially compensated for the harping it made Obiang endure about human rights—by sharing warnings about invasions or coups. Typically, Obiang reacted to the warnings by erecting checkpoints around the capital, detaining foreigners, and otherwise tightening his already-heavy police deployments. These visible precautions taken after American intelligence warnings likely prevented some of the threatened attacks from going forward as planned. There was a boy-who-cried-wolf problem inherent in the repeated warnings and preemptions, however, particularly because there had been no serious coup-making attack on Obiang, beyond the plotting stage, in several years.
In the darkness of February 17, 2009, speedboats bearing armed men arrived in Malabo. Three boats entered the harbor; three others arrived on the eastern side of an adjoining peninsula. The attackers disembarked, unopposed, and headed toward the presidential palace, where, as it happened, the president was not home. (When Washington passed on its latest round of attack or coup warnings, President Obiang had quietly slipped out of Malabo to his better-fortified palace on the African mainland.) The Israeli trainers had planned for this moment—their Equato-Guinean charges were supposed to swarm in and counterattack to protect the palace and repel the invaders. In the event, the response was more ad hoc than the Israelis would have hoped. Senior ministers and generals who were supposed to lead the counterattack failed to turn up when the shooting started. Several younger officers did respond, however, and they fired vigorously, killing at least one raider, arresting others, and, after a two-hour gun battle, chasing the remainder of the group back to sea in their speedboats.
One of the younger Equato-Guineans who defended the presidential palace that night took a bullet in the hand. A few days later, as calm returned, President Obiang celebrated the soldier in public as a national hero. Obiang appointed a businessman to accompany the wounded hero to New York, to seek out the finest American surgeons available to repair the soldier’s hand. Lacking American health insurance cards, Obiang provided the soldier’s businessman escort with $125,000 in cash to pay for medical expenses. At John F. Kennedy International Airport in New York, however, U.S. Customs officers discovered the cash in the businessman’s luggage. The money had not been properly declared, and the businessman was arrested on money-laundering charges. After some confusion and delay, the case was eventually cleared up.
The raiders, it turned out, had been Nigerian militants who had ties to a section of Obiang’s exiled political opposition in Spain, and who had been trying to sell protection services to sections of Equatorial Guinea’s government. The militants did not feel that their offer of protection was being taken seriously enough, so they had decided to mount a demonstration project in Malabo, to show that their services were indeed required if ExxonMobil and the other oil companies wanted to operate in security. What the attackers might have done if they had penetrated the presidential palace and found Obiang at home was not clear.24
Barack Obama’s pronouncements about foreign policy during the 2008 election campaign suggested that he was prepared to rethink the Bush administration’s approach to governments that were hostile to the United States or that did not conform to American ideals about democracy and human rights. The Obama administration seemed to be signaling that it sought “dialogue and engagement,” as an ExxonMobil executive put it after the president’s inauguration. “They are saying that about Russia, they are saying that about China, they are saying that about Iran. . . . That is the cornerstone of their foreign policy.”25 Why not Equatorial Guinea, too? That was the basic question that Anton Smith had presented in the six analytical cables he filed from Malabo during the late winter and spring of 2009, hoping to redirect Obama administration policy toward deeper engagement.
Secretary of State Hillary Clinton’s advisers included some energy “realists” such as those who had shaped her husband’s second-term policies aimed at securing oil supplies from Central Asia. Clinton named as a special energy policy envoy David Goldwyn, who, before joining State, had organized a business group designed to support Libyan leader Muammar Gaddafi’s plans to reopen the Libyan oil business to international corporations—among them, ExxonMobil. To run Africa policy, Clinton named Johnnie Carson, a longtime foreign service officer who had served as U.S. ambassador to Kenya, Uganda, and Zimbabwe before his appointment by President Bush as national intelligence officer for Africa. Between Goldwyn’s background as an oil industry consultant and Carson’s deep experience of engagement with flawed African governments, Anton Smith’s arguments about Equatorial Guinea found at least some influential readers inclined to his views.
The human rights community saw an opportunity to mark a new course, too, but in a very different direction: “The new Obama administration has an opportunity to show that energy security does not have to come at the expense of human rights and good governance,” Human Rights Watch argued in a major report about Equatorial Guinea released that July. It recommended investigations to seize and repatriate to Equato-Guinean citizens’ assets in the United States “obtained through corruption,” and it recommended that Obama “ensure through new or existing laws and regulations that U.S. companies do not become complicit in the corruption and abuses that mar resource-rich countries like Equatorial Guinea.”26 The formulation suggested that ExxonMobil was not already complicit. Anton Smith attended a launch event around the Human Rights Watch report, where he said he “did not recognize” the Equatorial Guinea described by the report’s investigators, who had not visited the country in recent years, in part because it was difficult to do so without official sponsorship. Smith’s adversaries at Human Rights Watch and the advocacy group EG Justice were appalled by his remarks and his defense of the Obiang regime, and they argued privately to State officials that Smith was unfit to represent the United States in Malabo because he had evolved into an apologist for the regime.
As in other areas of foreign policy, the Obama administration proved conflicted about whether to pursue “realist” engagement with Equatorial Guinea or pursue a more liberal, activist agenda of the sort recommended by Human Rights Watch. The department did agree during 2009, as Smith had recommended, to upgrade its representation in Ma
labo by appointing a full complement of liaisons to Obiang: an experienced ambassador, a deputy chief of mission, and a defense attaché from the Pentagon. To some degree, Smith’s arguments prevailed: The Obama administration continued the policies of security, intelligence, and limited military engagement with Equatorial Guinea that the Bush administration had forged after the 2004 coup attempt. Yet American policy changed only in increments. There was no fundamental reexamination.
On May 4, 2009, Ken Cohen wrote to Human Rights Watch to describe and defend the corporation’s policies in Equatorial Guinea. “ExxonMobil is committed to being a good corporate citizen wherever we operate worldwide,” Cohen wrote. “We maintain the highest ethical standards, comply with all applicable laws and regulations, and respect local and national cultures.” At the same time, “the practical realities of doing business in developing countries are challenging. . . . E.G., like many developing nations, has a limited number of local businesses and a small population of educated citizens. . . . Many businesses have some family relations with a government official, and virtually all government officials have some business interests of their own, or through a close relative. . . .
“While it may be virtually impossible to do business in such countries without doing business with a government official or a close relative of a government official, it is still possible—indeed, it is expected—that we do business ethically and comply with all U.S. and local laws.”27
Twenty-five
“It’s Not My Money to Tithe”
On the morning of January 8, 2009, twelve days before Barack Obama’s inauguration as president, Rex Tillerson arrived at the Ronald Reagan Building on Pennsylvania Avenue, two blocks from the White House, to announce ExxonMobil’s new lobbying position on climate change. He made his way to the rear of the cavernous Reagan building, which housed several government agencies. Upstairs, at the Woodrow Wilson International Center for Scholars, a government-supported think tank, Tillerson strode into an amphitheater where about one hundred scholars, researchers, and journalists had gathered. He took the podium and unfolded a printed speech.
He ticked through the corporation’s positions on American energy policy: Washington needed “long-range thinking”; rising global demand for oil and gas, through 2030, was inevitable; America, therefore, needed to develop “all our energy resources”; and it was particularly urgent to open up offshore and other domestic territory to drilling. Normally, the ExxonMobil chairman resisted arguments that pandered to the American yearning for “energy independence,” since he regarded the very idea as misguided. Yet if measured appeals to American nationalism were necessary to win approval for domestic oil drilling, he was willing to make them: “There is enough oil and natural gas offshore and in non-wilderness and non-park lands to fuel fifty million cars and heat nearly one hundred million homes for the next twenty-five years,” he declared.
He referred to climate change impassively as an “important global issue.” The incoming Obama administration proposed to reduce greenhouse gas emissions by enacting a cap-and-trade system in which polluters could buy and sell pollution credits under an overall “cap.” Tillerson argued that Europe’s similar system, inaugurated several years earlier, did not work well and had introduced “unnecessary cost and complexity,” while creating “problems with verification and accountability.”
In Beijing in 1997, Lee Raymond had delivered a landmark speech in which he argued that the evidence suggested global warming was not taking place at all. Ever since, ExxonMobil’s leaders had criticized public policies to reduce greenhouse gas emissions, such as the Kyoto Protocol, cap-and-trade proposals, and alternative energy subsidies. That morning in Washington, however, Tillerson’s speech took an unexpected turn: For the first time in ExxonMobil’s century-long history, its chairman went on to advocate that the government impose higher taxes on oil and gas use, to reduce the risks posed by climate change:
There is another policy option that should be considered, and that is a carbon tax. As a businessman, it is hard to speak favorably about any new tax. But a carbon tax strikes me as a more direct, a more transparent, and a more effective approach. . . . Such a tax should be made revenue neutral. In other words, the size of government need not increase. . . .1
The idea of a carbon “sin” tax, comparable to the excise taxes imposed on tobacco products, had a distinctive history. Then-senator Al Gore proposed a version of the tax in his 1992 bestselling book, Earth in the Balance. Gore suggested that revenue from a carbon-based-fuels tax be used to reduce payroll taxes on salaried Americans—tax pollution, not work, was his rhetorical flourish. Advocates at some ardent environmental lobbies, such as Greenpeace and the Rainforest Action Network, advanced Gore’s proposal in the years afterward. Some of their leaders and thinkers preferred a broad carbon tax to regulator-heavy cap-and-trade systems; the latter allowed some polluters to buy their way out of accountability for their emissions. On the ideological right, some free-market tax economists, such as Kevin Hassett at the American Enterprise Institute, also endorsed the carbon tax after Gore proposed it, on the grounds of its relative economic efficiency. Tillerson and right-leaning economists argued that such a tax should be neutral; that is, revenues raised should be returned to taxpayers, perhaps by a reduction in the payroll tax. At a time of fiscal strain, however, a carbon tax also had the potential to shore up federal finances: At $20 to $25 per ton, the range around which there was the greatest political support, a tax could raise at least $100 billion annually. By the time of the 2008 presidential campaign, however, the carbon tax had become a politically marginal and quixotic proposal.
Cap and trade’s intellectual history, too, reflected compromises between conservatives and environmentalists. The first Bush administration embraced the system as a market-based way to control acid rain—and succeeded. Many of the large corporations that would be directly affected if carbon taxation of any kind was imposed—electric utilities that burned coal, for example—had concluded that they could manage their interests most successfully by lobbying for a tailored cap-and-trade program that eased their transition to higher carbon costs. The very efficiency of a carbon tax caused some coal-dependent utility executives to shudder because such a pure tax would hit every corporation in proportion to its polluting activity. By comparison, a global corporation of ExxonMobil’s profitability could absorb the financial hit, and in any event, it did not produce coal, the greatest greenhouse gas offender. A modest-size, locally regulated American coal utility might see its profits and market value shrink traumatically under a carbon tax; this explained the breadth of business support for cap and trade.
ExxonMobil had already conducted detailed reviews of cap and trade versus a direct carbon tax in 2006, as part of the climate strategy review Tillerson had ordered after becoming chief executive. Ken Cohen and other executives recoiled from cap-and-trade systems because of the systems’ susceptibility to manipulation by speculators and other distorting complexities. They also loathed the idea of a new federal regulatory system with which they would have to comply.
They had leaned toward the conclusion that if they had to endure a higher carbon price, they would continue to oppose cap and trade, but might support a straight carbon tax. Between 2006 and 2008, following the internal review, ExxonMobil quietly began to test out this change of lobbying position. In private discussions at the American Petroleum Institute, and at think tanks such as the Brookings Institution and the American Enterprise Institute, ExxonMobil executives rehearsed arguments in favor of a carbon tax, without openly endorsing the proposal. A few reports in the business press hinted that ExxonMobil might be leaning toward a straight carbon tax. The corporation also explored what a Washington lobbying strategy in support of such a tax might look like.
Justin Peterson, who had worked on Senator Elizabeth Dole’s staff and on the 2000 Bush-Cheney presidential campaign, served as managing partner at the D.C.I. Group, one of the outside lobbying firms in Washington that wo
rked for ExxonMobil. Peterson supported a lobby coalition, the U.S. Climate Task Force, founded in 2008 and staffed by a former Gore aide, Elaine Kamarck. The task force sought to advance a carbon tax as an economically efficient alternative to cap and trade. The group received funding from a business coalition, called The Future 500, which tried to induce major American businesses not directly involved in carbon-intensive industries—Nike, Coca-Cola, Intel, Kraft Foods, and Hewlett-Packard, for example—to come out for a carbon tax. The task force tried to develop a campaign that could also attract major oil companies like ExxonMobil that opposed cap and trade.2
ExxonMobil participated in the task force and similar efforts, indirectly and quietly. “We had determined that a carbon tax was a better approach, in our mind, but our engagement on that issue was below the radar,” an ExxonMobil executive involved said. “We knew that if we came out and we said, ‘ExxonMobil says that a carbon tax is the way to go,’” it would backfire and the corporation would be accused of trickery. ExxonMobil would be accused of bad faith “because they know that no one’s going to vote for it, or they are just trying to slow down action, blah, blah, blah. . . . We didn’t want to come out publicly for that very reason. We just thought there would be a lot of baggage.”3
Obama’s election persuaded Tillerson to change tack. The ExxonMobil chairman first had to overcome internal objections, however. At the time of Obama’s election, Dan Nelson, the Lee Raymond protégé, was still running the corporation’s Washington office. According to an executive who heard Nelson’s arguments, he dissented from the plan to openly back carbon taxation; he argued to colleagues that Tillerson would only annoy ExxonMobil’s political friends, incite its opponents, and confuse everybody else, without actually changing public policy. At the October 2008 off-site meeting organized by Ken Cohen, Bennett Freeman urged ExxonMobil’s public affairs executives to endorse a higher carbon price, but between Election Day and the eve of Obama’s inauguration, Tillerson hesitated.