Congress is about to do away with a small part of the Dodd-Frank Wall Street reforms (while President Trump targets others), specifically section 1504. It’ll make newly minted Secretary of State Rex Tillerson, who fought the regulation, happy. But it may ultimately be a thorn in his side. Why? Because it required oil companies to disclose any payments they made to foreign governments, and Tillerson’s oil ties to Russia have left many questions unanswered, and his powerful position within the Trump administration — he’s now 4th in line for the presidency and will carry out Trump’s foreign policies, whatever they may be — now demands more transparency.
Russia Depends On Oil
The global nature of the oil industry has always been a political flashpoint, as the stability of fossil fuel prices is a matter of national security. Part of the issue is that if you buy oil internationally, you’re almost certainly buying oil from a government. National oil companies, or NOCs, refine 75% of the world’s oil and controlled 90% of oil reserves as of 2010. That means oil is not just a commodity bought and sold, but directly funding state governments.
The most dramatic example of the political nature of oil, in the US, happened in 1973, when OPEC embargoed the US over its support of Israel, driving up oil prices and spawning an ongoing bipartisan policy of US energy independence, among other political causes. More relevantly, though, the quest for oil has a long, ugly hidden history, from oil companies ignoring human rights violations in Nigeria to unwittingly funding terrorism through the illegal oil trade to the outright bribery of public officials.
And nowhere in the modern era is the political side of oil more relevant, or more opaque, than Russia. Russia is the de facto largest oil state in the world. Worse, the Russian economy has a vast struggle with corruption that it’s unable, or perhaps unwilling, to truly address, leaving the state dependent on selling oil. That means, in the end, if you buy Russian oil, you’re working with Russia’s government.
The Russia/Trump Connection
The nebulousness of the connection between some members of the Trump campaign and the Russian oil industry is a particular point of concern. Accusations have flown as well about connections to Trump via various campaign staff, most notably in a collection of as-yet unsubstantiated intelligence collected by a former MI-6 agent.
Tillerson, however, is perhaps the most exposed. He received the Order of Friendship from the Russian government for his work in Russia as the CEO of ExxonMobil, a rich deal that was derailed by the economic sanctions Tillerson will now be asked to enforce. It recently came out that he ran a US/Russia oil company quietly founded in the Bahamas, which de facto meant he was assisting the Russian government to sell oil.
It’s particularly concerning because Tillerson is a corporate executive, not a policy expert. Making financial deals is a much different prospect from negotiating a treaty or handling a geopolitical crisis, and there are different conflicts of interest. Furthermore, Tillerson has $500 million in stocks, mostly invested in oil, and his choices as Secretary of State could force him to choose between the requirements of his job and the contents of his wallet.
The oil industry argues that it’s already following the Foreign Corrupt Practices Act, which essentially bans any US company from bribing not just government officials, but anyone with access to government officials, and not just with outright cash, but with anything of genuine value. But what’s the value of that, when Rosneft can sell 19.5% of itself to a private consortium while refusing to disclose who bought it?
The reality is, oil is political, but managing an oil company doesn’t make you a politician. If an oil company is working with Russia within US law, that’s all we can ask. But especially in light of rising tensions between Russia and the US, and Tillerson’s past connections and financial dealings with Russia, total transparency is needed. Even the appearance of favoritism or bribery with any country would damage America’s standing with its allies, especially NATO. When it comes to Russia and its oil, it’s better to be transparent than risk even the appearance of backroom dealing.