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If ExxonMobil Is Not Indicted for Payments in Kazakhstan, What Has This To Do With Iraq? (Updated 4/13/03)

After more than three years of deliberations, a New York grand jury has finally, as expected, indicted James Giffen for making illegal payoffs on behalf of US oil companies to President Nazarbayev and other officials in Kazakhstan. It bemains to be seen whether any of those companies will also be indicted. Attention is focused on ExxonMobil in particular, because a former Mobil senior manager, J. Bryan Williams III, has also been indicted in connection with the payments.

There seems to be no doubt that payments were made for corrupt purposes, that some of them originated with Mobil, and that Mobil officials knew of the Kazakhs' corrupt demands. As Seymour Hersh reported in the (New Yorker, July 9, 2001),

"A Mobil employee who took part in [Mobil's negotiations with Kazakhstan] in Nassau said that the Kazakhs made a series of extraordinary demands, seeking among other things, a new Gulfstream jet aircraft for Nazarbayev, funds for tennis courts at his home, and four trucks with Satellite dishes to be used by his daughter's televisions network."

If illegal payments were made on behalf of Mobil, one might expect that it was Mobil who made them and accordingly that it might now face indictment. As the Financial Times observed on 4/7/03,

`Much of the alleged bribes originated with Mobil's purchase of a 25 per cent stake in the Tengiz field in 1996 for about $1bn. Mr Giffen earned a $51m "success fee" for brokering the deal, and allegedly shuffled more than $20m of it into the Kazakhs' Swiss bank accounts.

`Mobil, now known as ExxonMobil, has denied any knowledge of improper payments. But lawyers who specialise in international law say that prosecutors would not necessarily have to prove that a company knew that an adviser like Mr Giffen was using their payments for bribes in order to bring a case.

`"Looking the other way is not a defence," said Greg Wallance, a former federal prosecutor, now a partner at Kaye Scholler. "The government does not have to show direct knowledge. It can show conscious avoidance."

`Although the legal line is not clear, Mobil's Tengiz arrangement contained at least two features that raise concerns.

`First, even though Mr Giffen represented the Kazakh government in the transaction, it was Mobil that agreed to pay his fee, according to the government. The $51m came on top of the agreed purchase price. Second, Mobil paid some $10m of the fee to Mr Giffen months before the final agreement was actually signed.'

On April 4, 2003 assistant U.S. attorney Peter Naiman announced at a related hearing that Mobil is the subject of the government's ongoing investigation into the awarding of contracts from Kazakhstan. This has led to a flurry of headlines spculating that Mobil may be charged.

However there are grounds for skepticism that ExxonMobil will be charged. As I reported in my Flash 30 of 3/27/02, there were well-sourced accusations

`alleging that Attorney General John Ashcroft has been attempting to exert "unusual" influence over two grand jury investigations of alleged improprieties committed by ExxonMobil, in connection with their huge oil venture in Kazakhstan.' It was said that the Justice Department had made an unusual attempt to control the investigation of ExxonMobil in New York, initiated under Clinton, from Washington. Citing a report by Mike Ruppert, I asked why the Attorney General had not recused himself altogether in the ExxonMobil matter, as he had done with respect to Enron because of Enron's contributions to his 2000 Senatorial campaign. ("ExxonMobil gave more money to Ashcroft's campaign than Enron did.")

As I wrote at the time, this story

`goes to the heart of the question of whether the "war on terror" has been not just energy-driven, but shaped and manipulated to meet the private needs and legal difficulties of oil giants like ExxonMobil, which in this case was facing possible indictment. It is relevant that ExxonMobil, while already the subject of a criminal investigation, had (as the New York Times reported on 3/1/02 and 3/27/02) access to both Vice-President Cheney's task force and to Secretary of Energy Spencer Abraham. In addition, as Ruppert reports, "it is clear that Kazakhstan-related issues were discussed behind Cheney's closed doors. In an analysis of the final report of the vice president's energy task force, released in May 2001, The Washington Times, on July 20, 2001, wrote, `While saying private investors must lead the way, the Cheney report devotes considerable time to the Kazakh market, urging U.S. government agencies to "deepen their commercial dialogue" with Kazakhstan.'

It is hard not to see this language as a political endorsement by the Bush Administration of the actions which had already exposed Mobil to legal indictment under Clinton. Cheney himself was close to those actions. As I reported in my Flash 21 of last year, "Cheney's corporation Halliburton had extensive investment interests in Kazakhstan, so much so that Cheney, when he was still CEO of the company, sat on the State of Kazakhstan's Oil Advisory Board."

Oil Companies' Expansion Strategies and the Law

What happened in Kazakhstan was not unique. Like the other oil majors, ExxonMobil is accused of spending millions of dollars elsewhere in the region, not just to bribe rulers but also to install them. The Sunday Times on 3/26/00 published a report accusing major oil companies, including ExxonMobil, of "backing a military coup which installed a ruthless KGB hardman in the former Soviet state of Azerbaijan." The story, citing a Turkish intelligence document, claimed that BP and Amoco (which merged in 1998) `were "behind the [1993] coup" in which president Abulfaz Elchibey was overthrown and some 40 people died. The source, a Turkish military intelligence officer, said he was at meetings in Baku with "senior members of BP, Exxon, Amoco, Mobil and the Turkish Petroleum Company. The topic was always oil rights and, on the insistence of the Azeris, supply of arms and mercenaries to Azerbaijan." (The story also cast light on BP's links to both British intelligence and the Blair Labour Government.)

The actions of BP, Exxon, and Mobil in Azerbaijan paralleled those of Unocal in Afghanistan. As I reported here in an October 2001 article on "Afghanistan and the Projected Pipeline", European sources have charged Unocal with helping to finance the Taliban's seizure of power in Kabul. (This would have been at the same time that the Taliban was receiving funds from Saudi Arabia and Osama bin Laden.)

The following paragraphs from my 2001 article are still pertinent:

`The respected French observer Olivier Roy has charged ... that "When the Taleban took power in Afghanistan (1996), it was largely orchestrated by the Pakistani secret service [ISI] and the oil company Unocal, with its Saudi ally Delta" (Olivier Roy, quoted in Richard Labeviere, Dollars for Terror, 280). Unocal executive John Maresco testified on 2/12/98 to the House Committee on International Relations on the benefits of a proposed Afghan oil pipeline to the Central Asian countries, to Afghanistan, and to Asian importers of crude such as Japan....

`Others have noted that ... for Unocal to advance its own funds for the conquest... would have been to violate US law. No such restraints inhibited Unocal's Saudi partner in its consortium, Delta-Nimir. Nimir Petroleum certainly had the assets; it was dominated by the bin-Mahfouz family which owned the National Commercial Bank patronized by the Saudi royal family. Delta-Nimir was already a major investor with Unocal in the oilfields of Azerbaijan, and may have been a factor in the October 1995 decision of Turkmenistan to sign a new pipeline contract in competition with Bridas (Griffin, 124).'

As I wrote a decade ago, citing the case of a US oil company in Tunisia, "it is normal, not unusual, for the entry of of major U.S. firms into Third World countries to be facilitated and sustained, indeed made possible, by corruption" (Deep Politics, p. 203). In my book Drugs, Oil, and War, I quote again from the distinguished French scholar Olivier Roy: "It is the Americans who have made inroads in Central Asia, primarily because of the oil and gas intersts. Chevron and Unocal are political actors who talk as equals with the States (that is, with the presidents)" (p. 55n).

Oil Companies' Strategies and the United States

Clearly the oil companies are on good terms with the US President as well. An excellent article in the Observer, 2/23/03 helps explain how US oil companies helped to finance, both directly and indirectly, the campaign by which Karl Rove captured the White House for Bush:

"By the time George W. became President, Rove was the hub of a Texan wheel connecting the family, the party, the Christian Right and the energy industry. A single episode serves as metaphor: during the Enron scandal last year, a shadow was cast over Rove when it was revealed that he had sold $100,000 of Enron stock just before the firm went bankrupt.

"More intriguing, however, was the fact that Rove had personally arranged for the former leader of the Christian Coalition, Ralph Reed, to take up a consultancy at Enron - Bush's biggest single financial backer - worth between $10,000 and $20,000 a month."

Through the Cheney Task Force of 2001, the big oil companies also helped generate the energy policies of the new Bush Administration. As a March 1, New York Times story by Don Van Natta reported, "ExxonMobil, the second-largest energy donor in the Republican Party, confirmed today that its executives met with Mr. Cheney. It was among the handful of companies that had declined to comment earlier this week about whether its executives had met with Mr. Cheney or members of the task force, although it did say that its interests were represented by the American Petroleum Institute, a trade council.

In the Caspian and Trans-Caspian republics, it has not been a case of trade following the flag, but of the flag, and more specifically of U.S. troops, arriving to shore up speculative investments made by the U.S. oil companies. As I have written, this has been true in countries ranging from Georgia to Uzbekistan and Kyrgyzstan. In Iraq it seems certain that U.S. troops are paving the way for the oil companies.

Globally, U.S. policy makers tend to merge questions of American military and energy security with the defense of US petroleum investments overseas. In Indonesia, Rumsfeld pledged in July 2001 US support for maintaining Indonesia's "territorial integrity". In so doing he echoed policy papers issued earlier by Rand Corp. and a Council on Foreign Relations task force. In Indonesia, maintaining territorial integrity meant continuing the bloody suppression campaigns in the oil- and mineral-rich provinces of Aceh and West Papua. These happen to be the sites of two of the largest U.S. investments in Indonesia: in Aceh, the Exxon-Mobil natural gas facility, which according to the Wall Street Journal, produced nearly a quarter of Mobil's earnings worldwide in the early 1990s; and in West Papua, the huge mining development of Freeport-McMoran. Rumsfeld in effect was announcing new support to the Indonesian Army in their bloody repression campaigns in these two areas. (Mobil is being sued in the United States by relatives of Acehnese victims, on the grounds that the company's facilities were used by the army for rape, torture and murder.) Rumsfeld's promise to the Indonesian Army has since been partially implemented, on the grounds that the Indonesian Army, according to Deputy Secretary of Defense Paul Wolfowitz, is an important strategic player in the war against terror.

Democrats as well as Republicans have seconded the spread of US oil interests, particularly since the spectacular political contributions of Enron. Common Cause has noted how

`In 1994, the Washington-based Export-Import Bank approved a $302 million loan toward a $3 billion Enron-controlled power plant in India. President Clinton took an interest in the deal, asking the U.S. ambassador to that country and his former chief of staff, Thomas F. "Mack" McLarty, then a presidential adviser, to monitor the proposal. Mr. McLarty - who was later hired by Enron- spoke with Mr. Lay on several occasions about the plant. In 1996, four days before India granted approval for Enron's project, the Houston-based firm contributed $100,000 to the Democratic Party.'

In addition, "The Clinton administration threatened to cut Mozambique's aid in 1995 if the world's poorest country did not award a pipeline contract to Enron."

What about Iraq? In February I noted in a post about "Bush's Deep Reasons for Iraq" that

`On 1/16/03 the Wall Street Journal reported that officials from the White House, State Department, and Department of Defense have been meeting informally with executives from Halliburton, Schlumberger, ExxonMobil, ChevronTexaco and ConocoPhillips to plan the post-war expansion of oil production from Iraq (whose oilfields were largely held by US companies prior to their nationalization).'

The Administration denied this story, consistent with their repeated claim, voiced by Defense Minister Rumsfeld on 11/14/02, that Iraq "has nothing to do with oil, literally nothing to do with oil."

What happens to the Mobil case is a test of the political and judicial health of this country, as well as of the extent to which America's new foreign policies have "nothing to do with oil." If there is any semblance of a rule of law, we might expect to see ExxonMobil indicted promptly, now that the grand jury has found the passage of Mobil's funds to be indictable.

But what if the year 2000 saw the election of an Administration committed to protecting oil companies from the rule of law, while advancing their investments overseas with the resources of the state? Specifically, what if the Bush Administration has already planned for ExxonMobil and other US oil firms to re-install themselves in Iraq's nationalized oil fields? In this case we may see once again the interests of justice subordinated to dollar politics. Or, in simpler words, no indictment.