How Tillerson Could Jeopardize Geopolitics In Iraq

By Zainab Calcuttawala, an American journalist based in Morocco. Originally published at OilPrice

Former oil executive Rex Tillerson’s history of politically damaging oil dealings in the Middle East could jeopardize the future of a united Iraq as he assumes the position of U.S. Secretary of State with the inauguration of President-elect Donald Trump on January 20th, pending a Senate confirmation vote.

Under Tillerson’s management in 2011, Exxon Mobil approved oil contracts with Erbil, the capital of the Kurdish Regional Government (KRG), which spans almost 80,000 kilometers in northern Iraq, provided disputed territories are included in the calculations. These lands hold an estimated 45 billion barrels of recoverable oil.

This strategic business move, which helped insulate the American oil major from the financial effects of the collapse of $25 billion in development contracts for West Qurna it had signed with the Iraqi government in 2009, affirmed the independent vision the KRG had been pushing in its domestic and international political agenda.

“Part of the process of building our region has to do, of course, with dealing with oil, signing contracts, negotiations with various countries,” Fuad Hussein, chief of staff to Kurdistan’s president, told Reuters in 2014. The Exxon deal represented “a big victory for [the Iraqi Kurds]” because it affirmed the group’s economic ascension, apart from Baghdad’s volatility since the U.S.-led toppling of Saddam Hussain’s authoritarian regime in 2003.

However, the new agreements with Erbil undermined the U.S.’ official position of supporting a unified Iraq and irked neighboring Turkey, which, to this day, vehemently opposes Kurdish militant factions pushing for political self-determination for those who belong to the minority group.

As Reuters reported in 2014, Baghdad has only been able to maintain its gravity as the central gatekeeper for multinational oil companies looking to drill within Iraqi territory by holding hostage the nation’s largest reserves in the south. If energy firms truly longed for a footprint in Iraq’s southern assets, they would have to avoid Erbil and fully embrace the internationally recognized regime in Baghdad.

Oil concessions in the coveted fields became official in 2009 and 2010, but continued instability and tough contractual terms made profitability possible in rare conditions, causing several multinationals, including Exxon, to lose interest. Soon, Exxon began sending out feelers to the KRG after Tillerson met with those in-the-know regarding the geopolitical realities of investing in war-torn Iraq.

To Ali Khedery, a well-connected American of Iraqi descent who had spent decades in Baghdad, Exxon needed to look north. The Shi’ite militias, neo-Baathist insurgents, al Qaeda sleeper cells and Iranian troops who occupied areas surrounding the southern fields would cause security costs to skyrocket – especially if the domestic political structure collapsed.

Areas under the KRG’s control were “more peaceful, more predictable, and overwhelmingly pro-American,” Khedery advised at the time.

Talks ended with Exxon in control of six drilling blocks located in various parts of the autonomous region: one close to Turkey, another near Iran and three just on the border between Kurdistan and the rest of Iraq – a fact that jeopardized fragile domestic relations after news of the deal leaked.

Nouri al-Maliki, the Prime Minister of Iraq at the time, wrote furious letters to the Obama administration, demanding the White House push one of the most powerful American corporations to abandon the freshly minted deals.

An anonymous American diplomat told Reuters that Exxon had given the State department less than a day’s notice before the signing of the contracts to deal with its political fallout. Unsurprisingly, U.S. Ambassador to Iraq James Jeffrey was “livid” after hearing the news, promptly dropping a few “F-bombs” as a major cornerstone of the American vision of a unified Iraq stood haphazardly on one leg.

Tillerson’s savvy business maneuvers served his company and shareholders well, although it was at the expense of the U.S. government’s long-term goal of leaving Iraq in one piece. The feasibility of such a goal overall is debatable, however, the oil executive’s strategy shows an indifference to political and social interests, in contrast to expected norms of corporate social responsibility.

Before Tillerson’s Senate confirmation hearings began last week, he promised the State department to sell off 611,000 additional Exxon shares before assuming his sensitive position in the incoming Trump administration. Still, he is set to receive $180 million as part of a retirement package after he leaves the oil giant after 10 years as CEO.

The defeat of the Islamic State (ISIS) has given the KRG fresh political capital to leverage in post-ISIS negotiations regarding the (potentially) independent future of the region. How will Tillerson manage to balance the effects of deals he had arranged just five years ago with the long-standing position of the American government affirming a single Iraq?

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15 comments

      1. NotTimothyGeithner

        U.S. corporate control would become even deeper, by playing each state off of each other.

    1. b-rar

      Ask yourself if you’d like to be a Shia or a Kurd in a newly carved out Iraqi Sunnistan and you’ll get your answer.

    2. PlutoniumKun

      Because most of the major urban areas are mixed. It would almost certainly lead to widespread ethnic cleansing. And much of the oil is in open desert areas which may not be clearly associated with a particular ethnic group – that’s a recipe for an immediate civil war. Likewise, water resources are not necessarily congruent with population areas.

      1. ambrit

        Think the division of the old Raj into the three resulting “nations” after WW-2. Where ever you have religious intolerance and ethnic rivalry, you will eventually have a rough and often violent shaking out of the polities. Humans are, after all, Earth’s top predators.

      2. pictboy3

        I thought they were already largely cleansed back in the 00s when there was low level civil war there in the urban areas? Even now there’s already low level civil conflict going on with Shia militias cleansing “ISIS” neighborhoods when they move into predominantly Sunni areas, hence why the Sunni areas want the Kurds or at least the national army to take the lead, rather than the militias.

        I think the bigger issue is that it will just turn into Syria 2.0. The Turks will not tolerate an independent Kurdish nation, and the Sunni/Shia areas will be yet another front in the proxy war between the Saudis and Iranians.

    3. ambrit

      Since Irak was the creation of the Allied Powers after WW-1, it’s borders were not really congruent with the ethnic and sectarian “realities” on the ground. As with Yugoslavia, only a strong authoritarian regime could keep the patchwork monster alive. The Balkanization of the Middle East is inevitable, no matter who it favours. All this is nothing more than the delayed aftereffect of the end of the Ottoman Empire. History is a long game, and is nowhere near over yet.

      1. NotTimothyGeithner

        Iraq is modeled on old Ottoman lines with the governors of Basra and Mosul reporting to the governor of Baghdad, and the governor of Kuwait traditionally reported to the governor of Baghdad when he didn’t report to the Basra governor, and amazingly enough, Babylon dominated the same region.

        European lines were bizarre in Africa because they were the creation of rail roads and clipper ships, but that whole Europe drew the lines thing is distraction from major dislocation in Palestine or to justify why those poor people in the Middle East need Western guidance.

        Sectarian rivalries have often been targets and inflamed by foreign powers at he same time. As far as the Kurds, that is an artificial catchall for the mountain peoples who are as different from each other as they are from anyone outside of Kurdistan.

    4. cojo

      “However, the new agreements with Erbil undermined the U.S.’ official position of supporting a unified Iraq and irked neighboring Turkey, which, to this day, vehemently opposes Kurdish militant factions pushing for political self-determination for those who belong to the minority group.”

      It was bad when Turkey was our “ally”. Now that Turkey alliances seem to be shifting/flailing, it may be more palatable. It will be interesting to see where this ends up.

      Most countries who’s borders are remnants of artificial borders are inherently unstable due to not following ethno-historic lines. This is difficult for many In the New world to understand since the non indigenous peoples are essentially all immigrants and only have a relatively short and weak historical claim to the land.

  1. JTMcPhee

    “Tillerson’s savvy business maneuvers served his company and shareholders well, although it was at the expense of the U.S. government’s long-term goal of leaving Iraq in one piece. The feasibility of such a goal overall is debatable, however, the oil executive’s strategy shows an indifference to political and social interests, in contrast to expected norms of corporate social responsibility.

    And the real goal of “the US government is what, again? It would be a PR hope, maybe… $4 trillion and counting, maybe a million or two dead, another booster shot to the MIC Blob, pallet loads of greenbacks “disappeared,” the old corruption virus further viralized, and so many opportunities for the spooks and jackals and sneaky-petes and SEAL Team Sixes to get it on… (Is it real news, or is it Memorex — https://www.nytimes.com/2015/06/07/world/asia/the-secret-history-of-seal-team-6.html?_r=0

    And those “expected norms of corporate social responsibility”? What forking planet is the author writing from? The “goals” seem basically “let it not crap out while I hold the portfolio,” and “norms” are pretty much “sauve qui peut,” far as I can see.

    NO ONE in all of this appears to have as even a secondary goal any kind of stability or comity. The profit and gain are all in the continuation and exacerbation of crisis and violence and disaffection and disjunction.

    So Tillerson, like Hillerson, is an Expert, because deeply involved in bits of the tearing down of whatever residue of that inherently suicidal thing called “civilization,” supposedly birthed in that same part of the world, actually consists in. Let the Experts, with their mostly post-supra-national interests, handle the dismantling and looting…

    1. wilroncanada

      I thought the ‘real’ goal of the US government now, as forever in the past, has been to satisfy the goals of its major corporations, even if it means destroying all life. You know, destroy it to save it, when salvation means unfettered access by its imperial businesses.

  2. wmkohler

    Thanks for sharing this. Fyi, the link to the original article on OilPrice actually goes to the author’s contributor page instead.

  3. Skip Intro

    The deep state is really calling in its chits to get the Trump smears out there. Those ingrates at Exxon just put their own business first after the US went to all the trouble of destroying then playing at rebuilding a whole country… for them. For shame!

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