Trojan Horse

by David Lender

  He saw Abad nod in agreement. Yassar continued, “Today, that end of the business makes over half the profits, and the percentage is growing. We are leaving money on the table, as the Americans say. Money we need in our economies. We need to embark on an aggressive acquisition program to buy refiners and marketers. If we control the flow of oil from the wellhead all the way through to the end-consumer, we can increase the price and maintain it—something we’ve been unable to do consistently in the long history of OPEC. Our economists calculate that each dollar crude oil price increase translates into ten billion dollars per year of Saudi profits.” Yassar only now raised his head. “I believe this program will double our gross domestic product within five years.”

  “That will fix our government deficits and put Saudis to work,” Hashim said.

  “It will solidify our control by undermining the arguments of the religious extremists,” Crown Prince Abdul added.

  “Most of all, it will make the Saudi people comfortable and proud again,” Yassar said. The air of command was now back in his demeanor, energizing him. “Before each of you are copies of the main exhibits I will present to our OPEC colleagues to secure final approval for Project Deliverance. Before that I’ll spend the next ten days on the road interviewing finalists for our advisors—to choose investment banking mergers and acquisitions specialists and lawyers.” His cousins all nodded. “Naser and I fly to Vienna for our OPEC meeting in two weeks. After that we leave the results in the hands of Allah.” Indeed.

  “Let’s just hope it’s not too late.” King Abad stood and paced. “Sheik Mohammed Muqtada bin Abdur,” he said. Yassar felt his pulse quicken at the mention of the Sheik. “Our old adversary. Now rising again, after years in virtual exile among his own people. Not only is he fomenting social unrest, he is leading the al-Mujari’s call for a global jihad, a holy war against all non-Islamic states. Two terrorist bombings within the past year on the bases of our American allies. Both our own Secret Police and the American intelligence agencies have all but confirmed it.” Prince Hashim, the Foreign Minister, shifted in his seat. “Sheik bin Abdur interprets the Koran to describe the royal family as secular and corrupt. He says we betray the laws of Islam by allowing infidel Western troops on our soil.”

  “He vows the destruction of the Americans as a stain on the Islamic world,” Prince Hashim interjected. “He says they made us fight our own Islamic brothers in the ‘91 Gulf War, and then pressured us to support them again in Iraq in ‘03. He sees himself as the successor to Osama bin Laden.”

  King Abad continued, “These attacks against the Americans, as we all know, come in part because under Islamic law it is forbidden for Muslims to kill fellow Muslims. But it may not be long once the extremists have declared our government illegitimate—and therefore infidels they may attack as well.”

  Naser and Hashim glanced sideways at Yassar. Yassar saw them out of the corner of his eye, continuing to sit looking grave, betraying no emotion. But he guessed that Prince Naser and Prince Hashim knew the internal struggle he felt at the mention of bin Abdur. He knew they had seen its toll on him over the years, the lightheartedness turned to suffering, the patience frequently shattered by anger. The anger that his faith taught him to be ashamed of, yet which he held on to as part of his reason for living.

  “The Americans will help us. They are already helping us,” Prince Hashim said.

  “And with this program we are helping ourselves,” Yassar said, his anger empowering him. “In time we’ll have prosperity again and the appeals of the extremists will fall like hollow whines in the ears of Saudi citizens who are wealthy, well fed and satisfied with their culture—and their government—again.”

  King Abad turned toward them, his hands clasped behind his back, a man fatigued with stress. “The Americans will help us,” Abad said. “Because they have too much at stake to see us fail. They cannot risk another period of instability in our region or any disruption in the oil markets. And in the next few years, when we are on our feet again we won’t allow ourselves to need them so much. That’s why we and our colleagues at OPEC must be successful in our program.” Yassar observed his king, his cousin, carefully. He saw the weariness in his eyes and the strain in his face.

  King Abad continued. “The Americans haven’t forgotten the long chain of events that started, and what happened to them after the Shah of Iran was overthrown. We ourselves can’t pit Saudi Muslim brother against Saudi Muslim brother, but the Americans are not bound by such religious dilemmas.” King Abad turned to Yassar. “So is everything in place?”

  “Our advisors have been identified,” Yassar said. The background profile of this Daniel Christian Youngblood III, the most promising, still hung in his mind. “I am ready for final selections. Our OPEC colleagues are poised. And we are watching bin Abdur. Our agents are in place.”

  “Very well.” Abad looked around the room. “All in favor of committing to our OPEC program as Yassar advises?” The others nodded. “Good. We take it to the full Council of Ministers this afternoon.”

  CHAPTER 6

  JULY, THIS YEAR. NEW YORK City. Dick Jantzen was a skilled, self-trained promoter. His lying was natural-born. “Uh huh,” Daniel said. He was talking on the telephone with Dick, Chairman & CEO of Intelligent Recovery Systems, Inc. Dick and his company, which designed computer software for driving secondary and tertiary recovery methods for fallow oil wells, running oil refineries and controlling sophisticated drilling rigs, were darlings of Wall Street.

  Dick was one of Daniel’s oldest clients and one of the core relationships Daniel had taken with him from Goldman Sachs when he moved to Ladoix Sayre. And Dick was beginning to wear on Daniel. Given the peculiar sensitivities of Daniel’s stomach, Daniel’s years of dealing with Dick were finally accumulating to the point where Daniel couldn’t ignore the impulse to puke.

  “Uh huh,” he said again, closing his eyes and summoning a reserve of calmness to force down his rising urge. This I didn’t need right now. Daniel looked at his watch. Twelve twenty. I’ve got Prince Yassar coming in for lunch in ten minutes.

  “So, I told him his banker would hear from you about a meeting to discuss the details, structure and all that.”

  “Uh huh.”

  “Okay, that’s it. Get on with it. His banker is some guy named Dean Lowell at Morgan Stanley.”

  Daniel opened his eyes again. “Yes, I know Dean. I’ll call him. I’ll give some thought to an engagement structure and send you a fee letter as well.” Dick didn’t respond. Why should this one be any different. I’ve had to chase you on fees every time you’ve done a deal with me over the last ten years.

  “See you,” Dick said. “Go get ‘em.”

  Daniel sighed. I’m getting too old to listen to this guy’s bullshit. He’s what’s wrong with my world. Daniel glanced toward the window and saw the leather duffel bag Lydia had bought him. Then a calm settled over him as he thought of Lydia, wondering if they were starting something together. Too soon to say. But it’s not based on time: it’s how you feel.

  He turned his mind again to the luncheon he’d spent all Sunday preparing for. He revisited his walk-through of the dining room an hour earlier. No wine. No cigars. All in deference to Prince Yassar’s Muslim strictures.

  A few minutes later Cindy buzzed him on the intercom. “Prince Yassar is here. He’s been shown into the dining room.”

  “Thanks.” Daniel was looking forward to this. He felt his heart rate pick up. He smiled at the sensation. I pull this off and I’m good for some genuine excitement again, and enough in fees to let me leave this craziness with a bang. Tell Dieudonne where he can shove his fiscal years.

  “Prince Yassar. A pleasure to see you,” Daniel said as he strode through the door a moment later. He’d resisted the urge to burst in with forced energy; he didn’t need to put on. And today Prince Yassar looked more approachable than he’d remembered. The kind, almost sad, yes, sad eyes. He crossed the room and shook hands. The big hands and fir
m grip he remembered. Western business attire. Strain showing around his eyes. He met Yassar’s gaze, felt he was connecting. “Please, some tomato juice?” He turned to the sideboard. “Some water?”

  “Water, thank you.” Yassar sat down. The table was set for lunch in formal splendor, as if for a diplomatic function. The eight pieces of silver at each setting—indicating an appetizer, a fish main course, a dessert and tea—was Christofle sterling. The plates were Limoges. Light danced off two pieces of Baccarat lead crystal attending each setting, accompanied at the center of the mahogany table by crystal water pitchers.

  Daniel buzzed for the waiter.

  “Mr. Youngblood,” Yassar began.

  “Daniel.”

  “Daniel. We’ve done our due diligence. You have a reputation as an effective investment banker. Given the worldwide importance of your Wall Street, we’re impressed.”

  “Thank you,” Daniel said, observing the prince as meticulously as the prince observed his sterling silver. Calm, as if he didn’t hurry to places; purposeful, as if he was never late. Daniel liked that. “I try very hard to stay in touch with my market, my specialty. I’m flattered that my clients have made favorable recommendations. I know that your network of contacts extends far beyond that of most.”

  Yassar said, “I’d like to be direct.”

  Yassar’s going straight to it today. He felt a surge of adrenaline; he was going to be tested. He folded his hands on the table and leaned forward.

  “As I’ve told you in our previous meetings, I—we of Saudi Arabia, as well as our colleagues from OPEC, are interested in engaging a few key financial advisors who can assist us in our efforts to diversify our economies out of reliance on domestic energy revenues.” He paused. Daniel nodded, telling him to go on, but in his own time. Yassar continued, “We’re a wealthy nation, but we have ambitions to become wealthier still. And we wish to take advantage of the best investment advice available to us in the world. That is where people like you come in.”

  “I’m here to listen. Hopefully I can respond to your satisfaction.” Daniel trying to show some humility.

  “We need the advice of you and other professionals to make certain we are optimizing our investment and profit options. I’d like to hear your thoughts on where the opportunities are today in the oil and gas business, not just in the U.S., but worldwide,” Yassar said.

  He’s leading me right into my pitch.

  “I think I can be very helpful to you.” Daniel felt his stomach flutter, as it always did before a crucial opportunity. “We at Ladoix are one of the largest factors in Mergers and Acquisitions on Wall Street. We normally rank in the top three or four for domestic deals, and in the top one or two for international deals. Last year we did 225 deals valued at 462.5 billion dollars overall, with 144 deals…” Daniel hurried through his standard preface, then saw he was losing Prince Yassar’s interest. Knock it off. He knows all this crap or he wouldn’t be here.

  Yassar smiled. “I am a careful and methodical man. I take my responsibilities to my people and my government seriously. I came to New York to interview three prominent investment bankers in the oil and gas mergers business. We will interview others in London, Paris and Tokyo. I know your firm’s position in the sector, and that as the partner in charge of oil and gas at Ladoix that these are your accomplishments. I’ve done my homework. So please tell me something I don’t already know.” Daniel saw him studying him through those hooded, life-saturated eyes. “Tell me where to put our money, where we should invest around the world if we’re to diversify out of domestic Saudi oil reserves or OPEC reserves, as the case may be, yet stay in the only business—oil and gas—we really know anything about.”

  Daniel shifted in his seat. Don’t blow it. Remember your research. He doesn’t suffer fools and he can’t stand a bullshitter. “Okay,” he said. “Trends in the oil and gas business are no different than those being experienced in M&A for all other megabusinesses.”

  Prince Yassar stared at Daniel blankly. “I don’t know what you’re talking about.”

  “Not too many clients say that,” Daniel smiled.

  “I’ve observed that not many investment bankers say that either. In fact, my experience is that most investment bankers say even more when they don’t know what they’re talking about.” Daniel laughed. The old guy Yassar was battle-weary, but he had a sense of humor. Okay, now quit over-thinking this meeting; just let it happen. Daniel leaned back in his seat, got comfortable as if he was going to start enjoying this.

  Prince Yassar noted Daniel’s reaction with pleasure, seeing the spark of individuality Daniel had allowed to show through the presentation persona. The real man showing, even if only a glimpse. Now perhaps the young man wouldn’t be so tightly strung beneath that polished exterior. Yassar tried to imagine what kind of conversationalist Daniel would be over a dinner, say on a discussion of politics. Was he honest? Would he give him advice he didn’t want to hear?

  “So you were saying,” Prince Yassar continued, “or not saying. Please, put things in perspective for me.” Let’s see if this will lead where I want to go, he thought.

  Yassar saw Daniel lean forward, enough to see the young man’s eagerness, like the American baseball players he’d seen on the hotel television last night, the ones called infielders, charging the batted balls called grounders. He felt an involuntary urge to smile, couldn’t help it. His eyes softened. He saw Daniel respond to the subtle encouragement. Now maybe he’d hear something.

  “Today we’ve got a strategically driven M&A marketplace, where deals are put together to pool resources or drive operating costs down. Mostly in maturing, consolidating industries with high costs and little ability to raise prices.” Daniel paused, as if to see that Yassar was following. “In your case, you’ve got crude oil priced at $30.42 per barrel, way down from recent years, combined with bloated operating costs.”

  Yassar raised his chin at the word “bloated.” It was true. Daniel didn’t change his face, continuing his steady gaze. Good, Yassar thought.

  Daniel continued, “So you’re seeing industries consolidating into a few last big players who will dominate their fields. They’re cutting literally billions of costs out of the merged entities. And these companies that are merging are now creating global, as opposed to national, behemoths.” Daniel paused again.

  “Go on.” Yassar observed Daniel critically. Would he now start with the blustery, know-it-all investment banker pomposity he’d come to expect?

  “So even though the oil and gas industry has largely consolidated, you’ll see more. Look at your own situation, and that of your OPEC colleagues. Even you need to keep driving down costs in order to survive. And that means mergers—strategic mergers to create economies of scale to cut costs.”

  Prince Yassar shrugged. He’d half-hoped Daniel would offer some brilliant, startling solution. Would that he would lie to me for just a minute, he thought, then smiled at his absurdity. Let’s see how he responds to a question nobody can answer—except Allah. “What will happen with the price of oil over the next few years? Will it finally stabilize?” Yassar watched him carefully. The young man thought for a moment before he answered. Good. Secure enough not to feel he needed to bark out an answer. Would he be bold? Or tread the middle ground? Would he discredit himself by saying something ridiculous like that fool, Kovarik, he met with this morning?

  “Much of that’s based upon OPEC’s willingness to hold to production quotas. You know better than I that OPEC’s members have a history of being unable to resist overproducing. You’re constantly undercutting each other on price.”

  As long as that pig Vincenzio in Venezuela sticks to his production quotas things will go tolerably well, Yassar thought. This young man saw his worst fears. Maybe he’s too perceptive, too direct. “If history’s any guide you may be right. Perhaps we will see continued price instability. But back to what you’d advise us to do.”

  “First, let’s examine what you have to build on.
Your economy’s only major export and only major expertise is oil and gas. An estimated two hundred seventy billion barrels of reserves—largest of any country in the world—but purely domestic. So what would help you? Buying offshore reserves? Being fully vertically-integrated from reserves, to production, down to refining and marketing?”

  Don’t we know it. Now we’re getting someplace. “We don’t have significant properties in refining and marketing. Perhaps to increase our interests there would give us more outlets through which we could sell our reserves.”

  “It’s interesting that you raise the ‘downstream’ side of the business—refiners, pipelines, natural gas distribution, gas stations—as opposed to ‘upstream’—exploration and production.”

  Please! “I have a vague notion of what these terms mean,” Yassar interjected.

  “Yes, uh, sorry,” Daniel stammered. His face flushed red.

  Yassar then smiled to reassure Daniel, soften the jab. An investment banker who can blush, Prince Yassar thought. Remarkable.

  Oh shit, I’m actually blushing, Daniel thought. What was I thinking? Describing the segments of the oil and gas business to the largest player in the world.

  “To get back to my original point,” Daniel said, adopting a serious tone, thinking he was suddenly bombing and trying not to show it. “The downstream part of the business is where over half the profits are, so you need to be in it, or you’ll get squeezed in the long run. And it’s in consolidation. If you want to get in, it’s now or never. Over the next few years you’ll see such a huge consolidation in downstream operations that there will be only three to four major refining and marketing players worldwide. If you and your OPEC colleagues aren’t among them, you’ll be locked out of most of the profits.”