Rex Tillerson’s relationship with Putin was key to his success as Exxon CEO
As nominee for U.S. Secretary of State, former Exxon Mobil CEO Rex Tillerson is set to face questions about his unusually close relationship with Russian President Vladimir Putin at confirmation hearings before the Senate Foreign Relations Committee on Wednesday.
But given that his nomination is based in part on him being a successful CEO of a major multinational American company, it seems fair to ask: Was he, in fact, successful?
The stock market hasn’t been a huge fan of his. Counting dividend payments and share price increases — known as total return — investors who owned Exxon Mobil shares saw their investments rise by 105 percent since 2006, when Tillerson became CEO.
That might sound OK, but it’s worse than the market as a whole, which paid out more than 130 percent to investors over the same period. It’s also worse than Chevron, the other giant U.S. oil company that both drills oil and sells gas directly to drivers. Chevron returned roughly 200 percent to its investors over the same period.
Under Tillerson, Exxon Mobil was late to the shale-drilling boom. Playing catch-up, it made a less than stellar deal when it bought shale driller XTO in a deal valued at more than $30 billion back in 2010. After that deal was inked, the price for natural gas plummeted, hurting the investment.
Exxon Mobil’s profits have lately fallen to levels not seen in more than a decade. And under Tillerson’s watch, Exxon lost its AAA credit rating, which it had held since before the Great Depression, according to the Wall Street Journal. (Though in all fairness, the decline in oil prices has been felt throughout the industry; Chevron also saw its rating cut.)
No matter how successful Tillerson has been at the helm of the company, it’s clear that during the four decades he has worked at what is today Exxon Mobil, he spent spent much of his time developing a skill that could potentially come in handy for a diplomat: building relationships with the sometimes unsavory regimes of countries with oil-rich resources.
That situation isn’t unusual in the global oil industry, which since its inception has depended on striking deals with powerful, non-democratic leaders of countries where there’s oil to be drilled.
“In his career at Exxon Mobil, Tillerson has no doubt honed many of the day-to-day skills that a secretary of state must exercise: absorbing complex political analysis, evaluating foreign leaders, attending ceremonial events, and negotiating with friends and adversaries,” Steve Coll wrote in the New Yorker last month. Tillerson was a large presence in Coll’s book “Private Empire: Exxon Mobil and American Power.”
But his strong relationship with Putin, which helped earn Tillerson the top job at Exxon Mobil, will likely be an area of intense focus from congressional questioners. He “has had more interactive time with Vladimir Putin than probably any other American, with the exception of Henry Kissinger,” John Hamre of the Center for Strategic and International Studies told Agence France-Presse late last year, after Tillerson’s nomination to lead the State Department.
That intensity will be even greater given the consensus among U.S. intelligence agencies that Russia launched information and hacking campaigns at the U.S. that aimed to put Trump in power. There is also the question of the commercial interests Exxon Mobil has in lifting sanctions on Russia.
In many ways, Tillerson’s rise at Exxon Mobil was deeply intertwined with Putin’s rise to power in Russia, which followed the resignation of Boris Yeltsin in 1999. Tillerson leapfrogged rivals to take over as CEO in 2006 in part by turning what had been a troublesome oil-drilling project on the Russian island of Sakhalin into a success with the help of Putin.
“When Putin came on board, things really started coming together,” Tillerson told the Wall Street Journal in 2004.
Tillerson negotiated a deal to form a joint venture with Russia’s state-owned Rosneft energy company to drill in Arctic and Siberian regions in 2011, eventually discovering a massive oil field in an area known as the Kara Sea three years later.
But Tillerson’s focus on Russia has not been without cost. The Rosneft joint venture suffered a setback after Moscow annexed Crimea and intervened in Eastern Ukraine, prompting sanctions against Russia that made it difficult for Exxon Mobil to get revenue out of the country.
If he is installed as head of the State Department, Tillerson will have significant influence on whether those sanctions endure. That is sure to be a key focus in nomination hearings, especially as Exxon Mobil lobbied successfully late last year, according to reports, to defeat a bill that would have made it harder for the Trump administration to lift those sanctions.