The Squeeze: Oil, Money and Greed in the 21st Century. Tom Bower

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СКАЧАТЬ ‘This is where the oil is,’ but none had anticipated being stymied by three straightforward deals which unexpectedly antagonised Russian sentiment.

      In 1992, Marathon Oil signed an initial agreement with government officials in Moscow to exploit the oil and gas on a territory known as Sakhalin 2, a frozen island in the Pacific Ocean, 6,472 miles and seven time zones from Moscow. In the tsarist era, criminals were sent into exile on Sakhalin, and in 1983 MiG fighters flew from the island to shoot down KAL 007, a Korean passenger plane. Across that bleak 28,000-square-mile shelf in the Sea of Okhotsk, oil production was possible only during the summer. Between October and June, storms, strong currents and seven-foot-thick ice packs prevented work.

      Oil had been produced onshore since 1923. In 1975, assured by the Russian government that there were between 28 and 36 billion barrels of oil under the sea, a Japanese company drilled some wells, but lacking expertise and money, its quest was soon terminated. A second agreement with another Japanese exploration company in 1976 ended in the early 1980s after the Japanese concluded that the venture was uneconomic. In November 1991, anxious to exploit the reserves, the Russian government issued an invitation to major Western oil companies to tender for a licence. Most were interested, but nearly all became deterred by Russian politics. Valentin Fyodorov, the governor of Sakhalin, demanded that the successful company lend his region $15 billion to develop the infrastructure for a new republic. Reluctantly, some companies agreed, only to become involved in an intense debate in Moscow about whether foreign exploitation of Russian energy should be permitted. Some Russian politicians rejected outright any sale, some opposed catering to Fyodorov’s audacious demands, while others argued that, in the midst of its current financial crisis, Russia had no alternative but to sell its mineral wealth for hard currency.

      Eventually, in April 1992, Marathon, in partnership with the Japanese company Mitsui, was allowed to start a feasibility study. Soon after, Mobil and Shell were inserted into the consortium as junior partners. To protect its investment from Russia’s punitive tax regime, Marathon negotiated over the following two years a Private Sharing Agreement (PSA) with the Russian government, giving the Americans a majority stake in the $4 billion venture and excluding any Russian participation. The PSA fixed unchangeable terms for the taxes and royalties payable by Marathon throughout the project’s life. After the agreement was signed in 1994, Russian legislators, officials and ministers, realising that Russia would receive little income from the sale of its own oil until all the costs incurred by Marathon to develop the project had been repaid, began arguing with officials in Moscow’s oil, geology and finance ministries. Marathon anticipated making tax-free profits for 25 years before Russia earned anything. To protect its hugely favourable agreement, Marathon had successfully insisted that any dispute was subject to international arbitration rather than the Russian courts. The Russian negotiators, failing to hire Western bankers and lawyers as advisers, had unquestioningly accepted Marathon’s terms, and were ridiculed for gullibly falling into an American trap to profit from Russian oil. The critics ignored reality. Russia was technically incapable of producing oil in Sakhalin, and without a PSA agreement, no Western oil company could risk developing the island’s reserves. Those arguments eventually prevailed, and Marathon’s deal was approved by the Duma.

      Despite the souring mood, Exxon’s Rex Tillerson persuaded the Russian government to sign a second PSA for Sakhalin 1, a neighbouring area, albeit on less favourable terms than Marathon’s. Exxon was allowed only a 30 per cent share of the project, with Rosneft holding 40 per cent. Exxon would receive 85 per cent of the profits, while the Russian government took 15 per cent. Tillerson was pleased. Like Marathon, Exxon had successfully exploited Russia’s misfortunes, with little regard for the consequences. With the support of President Clinton, Exxon had sought to make profits for shareholders rather than to win the Russian government’s trust and thereby secure a lasting balance to OPEC. In Tillerson’s opinion, Exxon’s commercial priorities were paramount. Success in Sakhalin, he hoped, would tempt the Kremlin to allow Exxon’s exploration in the Barents Sea and the Kara Sea, an Arctic zone potentially containing eight trillion cubic metres of natural gas, the world’s biggest reservoir. If developed, the natural gas could be piped through the Yamal peninsula system, another huge Siberian energy basin. Those hopes were to be dashed. After the Russian government signed a PSA agreement with Total of France, PSAs were banned. Resurgent nationalism was stymieing Western oil companies across Russia, and even Chevron’s ambitions in Kazakhstan.

      Chevron’s fraught negotiations to develop Tengiz had been stabilised by John Deuss. The trader famous for Brent squeezes was representing the government of the oil-rich Gulf state of Oman. Seeking investment opportunities, Deuss, flying his Gulfstream between Almaty in Kazakhstan, Europe, Washington and Jackson Hole, Wyoming, brokered the ‘deal of the century’ between Kazakhstan and Chevron. His intention was to profit through the financing and ownership of a new pipeline to transport Tengiz’s oil to a port. Chevron’s success depended on the pipeline, which, despite Kazakhstan’s independence, was subject to the Kremlin’s veto if the proposals were deemed to be unfavourable. Ken Derr appeared untroubled by that hurdle. Desperate to reverse Chevron’s decline, and haunted by the company’s loss of $1 billion in Sudan during the 1980s, he was prepared to gamble on securing the oil first, only afterwards negotiating a pipeline’s construction.

      The preliminary agreement to develop Tengiz, an area twice the size of Alaska, had been signed by Derr and President Nazarbayev of Kazakhstan on 18 May 1992 in Washington. In the initial $1.5 billion investment the Kazak government, advised by Morgan Guaranty Trust and Deuss, had persuaded Derr to reduce Chevron’s share of the income from 50 per cent to 20 per cent. Over 40 years the Kazak government expected to make $200 billion.

      In public, Chevron’s success in Kazakhstan was credited to its technical superiority. The Kazaks and the Russians, it was said, could not manufacture the special quality of steel pipes needed to resist Tengiz’s corrosive crude oil, or provide the drills to reach 23,000 feet amid toxic hydrogen sulphide gas. In reality, Chevron’s breakthrough to secure the oilfield had been due to a combination of risk and dubious practices during excruciating negotiations which were saved from stalemate by James Giffen and John Deuss. The two maverick traders were consulted by Chevron to fashion a deal with Kazak and Russian politicians. Giffen, a 62-year-old New Yorker acting on behalf of other oil companies, was suspected of paying $78 million between March 1997 and September 1998 into Swiss bank accounts via the British Virgin Islands for the benefit of Kazakhstan’s President Nursultan Nazarbayev and some ministers. Nazarbayev was alleged to have used some of the money to buy jewellery, speedboats, snowmobiles and fur coats. On 31 March 2003, Giffen was arrested at JFK airport under the Foreign Corrupt Practices Act and charged with bribing Kazak officials. Two months later, J. Bryan Williams of Mobil pleaded guilty to evading taxes on a $2 million bribe connected to Mobil’s purchase of a stake in Tengiz costing $1.05 billion. Mobil (before merging with Exxon) had paid Giffen’s company, the Mercator Corporation, $51 million for work on the Tengiz deal, although Mobil insisted that Giffen was working for the Kazakh government and not them at the time. Giffen admitted depositing money in the Swiss bank accounts, but insisted that he had acted with the approval of the US government. The CIA, the State Department and the White House, he said, had encouraged his relationship with Nazarbayev. The prosecution remains in limbo, with Giffen on $10 million bail. The problem, as Chevron’s executives acknowledged, was the immutable relationship between corruption and securing oil supplies in the Third World. Giffen was accused of paying an immediate $450 million deposit to sweeten Nazarbayev’s interest. Ostensibly the payment was to finance Kazakhstan’s share of the investment, but the FBI would subsequently allege that the money was a bribe.

      Derr’s success relied on pressure exerted by Vice President Al Gore and the White House on President Yeltsin and his ministers. Similarly, Andy Hall hoped that a visit by Ron Brown, the US secretary of commerce, would rescue some return from Phibro’s $100 million investment in White Nights, which by 1993 had become a disaster. His Russian partner had demanded extra money, which Hall called ‘outright expropriation’, and local government officials frequently ‘reinterpreted’ the terms of the contracts and changed the law to demand extra СКАЧАТЬ