Private Empire: ExxonMobil and American Power [NOOK Book]

A few days before the Exxon Valdez ran onto Bligh Reef, tens of thousands of Hungarians marched through Budapest. The demonstrators turned the commemoration of an 1848 uprising against Austrian rule into a revolt against Soviet-backed communism. “Resign!” they shouted outside downtown buildings housing Communist Party bureaucrats. “Freedom! . . . No more shall we be slaves!” They carried flags from Hungary’s pre-Communist era and demanded the withdrawal of Soviet military forces. “Ivan, Aren’t You Homesick?” and “Legal State, Not a Police State” declared their protest signs.

The defiant march added to the cracks spreading that spring through the structures of global politics. The Berlin Wall fell a few months later, in November. The Soviet Union fissured and then disappeared. Democratic and free-market revolutions and revivals swept through Central Europe, Africa, Asia, and Latin America. Ethnic, religious, and territorial conflicts, long subdued by the cold war, erupted one after another. The world was remade, tossed, liberated—and reopened for international business.

The Valdez wreck stunned Exxon and its rising leader, Lee Raymond. The disaster would change the corporation profoundly. Internal reforms imposed by Raymond in response to the accident would turn one of America’s oldest, most rigid corporations into an even harder, leaner place of rule books and fear-inspiring management techniques. At the same time, Raymond and the rest of Exxon’s leaders would gradually pass through the introspection triggered by the Valdez spill and seek out the oil and gas plays that opened so unexpectedly after 1989. An age of empire beckoned America and Exxon alike.

In a bracingly short time, Anglo-American optimism and idealism about free markets, foreign investment, and the rule of law found adherents in the most unlikely world capitals. Brand-new nations brimming with oil and gas and others previously closed to Western corporations hung out FOR LEASE signs to lure geologists from Houston and London: Russia, Kazakhstan, Azerbaijan, Angola, Qatar, and tiny Equatorial Guinea, on the West African coast, soon to market itself through its Washington lobbyists as the “Kuwait of Africa.” These post–cold war opportunities for American, British, French, and Italian oil companies could be ambiguous, risky, and sometimes fleeting. Resentful nationalism and suspicion of the United States and Europe persisted in many capitals of the new oil powers. State-owned petroleum companies from China, India, Brazil, and elsewhere were rising quickly as competitors. Exxon might be America’s largest and most powerful oil corporation, but it would require all the political influence, financial resources, dazzling technology, speed, and stamina that its leaders could muster to seize the lucrative oil deals made possible by communism’s fall and global capitalism’s revival.

The United States now stood unchallenged as a worldwide military power. Exxon’s empire would increasingly overlap with America’s, but the two were hardly contiguous. Pentagon policy, after the Soviet Union’s demise, sought to keep international sea-lanes free; to reduce the global danger of nuclear war, terrorism, and transnational crime; to manage or contain Russia and China; to secure Israel; and to foster, against long odds, a stable Middle East from which oil supplies vital for global economic growth could flow freely. Exxon benefited from the new markets and global commerce that American military hegemony now protected. Yet the corporation’s activity also complicated American foreign policy; Exxon’s far-flung interests were at times distinct from Washington’s. Lee Raymond would manage Exxon’s global position after 1989 as a confident sovereign, a peer of the White House’s rotating occupants. Raymond aligned Exxon with America, but he was not always in sync; he was more akin to the president of France or the chancellor of Germany. He did not manage the corporation as a subordinate instrument of American foreign policy; his was a private empire.

Exxon’s power within the United States derived from an independent, even rebellious lineage. The corporation had been hived off from John D. Rockefeller’s Standard Oil monopoly in 1911, after a bruising antitrust campaign led by economic reformers and populist politicians. The visceral hostility toward Washington sometimes eschewed by Exxon executives eight decades later suggested some of them had still not gotten over it.

Exxon’s size and the nature of its business model meant that it functioned as a corporate state within the American state. Like its forebearer, Standard, Exxon proved across decades that it was one of the most powerful businesses ever produced by American capitalism. From the 1950s through the end of the cold war, Exxon ranked year after year as one of the country’s very largest and most profitable corporations, always in the top five of the annual Fortune 500 lists. Its profit performance proved far more consistent and durable than that of other great corporate behemoths of America’s postwar boom, such as General Motors, United States Steel, and I.B.M. In 1959, Exxon ranked as the second-largest American corporation by revenue and profit; four decades later it was third. And more than any of its corporate peers, Exxon’s trajectory now pointed straight up. The corporation’s revenues would grow fourfold during the two decades after the fall of the Berlin Wall, and its profits would smash all American records.

As it expanded, Exxon refined its own foreign, security, and economic policies. In some of the faraway countries where it did business, because of the scale of its investments, Exxon’s sway over local politics and security was greater than that of the United States embassy. In impoverished African countries increasingly important to Exxon’s strategy, such as Chad, the weight of the corporation’s investments and the cash flow it shared with local governments overwhelmed the economy and became the central prize in violent local contests for power. In Moscow and Beijing, Exxon’s independent power and negotiating agenda competed with and sometimes attracted more attention than the démarches issued by American secretaries of state. Yet the corporation could also be insular and even passive in the faraway places where it acquired and produced oil and gas. It fenced off local operations and separated its workforce from upheaval outside its gates. If its oil fl owed and its contract terms remained intact, then Exxon often followed a directive of minimal interference in local politics, especially if those politics were controversial, as in the case of the African dictatorships with which the corporation partnered, or the countries, such as Indonesia and Venezuela, where civil conflict swirled around Exxon properties. In Washington, Exxon was a more confident and explicit political actor. The corporation’s lobbyists bent and shaped American foreign policy, as well as economic, climate, chemical, and environmental regulation. Exxon maintained all-weather alliances with sympathetic American politicians while calling as little attention to its influence as possible.

The cold war’s end signaled a coming era when nongovernmental actors—corporations, philanthropies, terrorist cells, and media networks— all gained relative power. Exxon’s size, insularity, and ideology made its position distinct. Unlike Walmart or Google (to name two other multinational corporations that would rise after 1989 to global influence), the object of Exxon’s business model lay buried beneath the earth. Exxon drilled holes in the ground and then operated its oil and gas wells for many years, and so its business imperatives were linked to the control of physical territory. Increasingly, the oil and gas Exxon produced was located in poor or unstable countries. Its treasure was subject to capture or political theft by coup makers or guerrilla movements, and so the corporation became involved in small wars and kidnapping rackets that many other international companies could gratefully avoid.

The time horizons for Exxon’s investments stretched out longer than those of almost any government it lobbied. “We see governments come and go,” Lee Raymond once remarked, an observation that was particularly true of Washington, with its constitutionally term-limited presidency. Exxon’s investments in a particular oil and gas field could be premised on a production life span of forty or more years. During that time, the United States might change its president and its foreign and energy policies at least half a dozen times. Overseas, a project’s host country might pass through multiple coups and political upheavals during the same four decades. It behooved Exxon to develop influence and lobbying strategies to manage or evade political volatility.

American spies and diplomats who occasionally migrated to work at Exxon discovered a corporate system of secrecy, nondisclosure agreements, and internal security that matched some of the most compartmented black boxes of the world’s intelligence agencies. The corporation’s information control systems guarded proprietary industrial data but also sought to protect its long-term strategic position by minimizing its visibility. Exxon’s executives deflected press coverage; they withheld cooperation from congressional investigators, if the letter of the law allowed; and they typically spoke in public by reading out sanitized, carefully edited speeches or PowerPoint slides. Their strategy worked: Exxon made a fetish of rules, but it rarely had to justify or explain publicly how it operated when the rules were gray.

As the Valdez wreck made obvious, Exxon’s massive daily operations—soon to produce 1.5 billion barrels of oil and gas pumped from the ground each year, and 50 billion gallons of gasoline sold worldwide—posed huge environmental risks. After the Valdez, Exxon would become again, as it had been in the first decades of Standard Oil’s existence, the most hated oil company in America.

When gasoline prices soared, American commuters felt powerless before its influence. In effect, Exxon was America’s energy policy. Certainly there was no governmental policy of comparable coherence. After fitful, failed efforts to wean itself from imported oil during the 1970s, the United States had evolved no effective government-led energy strategy. Its de facto policy was the operation of free markets amid a jumble of patchwork subsidies, contradictory rules, and weak regulatory agencies. The very weakness of policy favored Exxon. As the public’s frustration grew over rising pump prices and dependence on oil imports that transferred billions of dollars to hostile regimes overseas, Exxon became a natural lightning rod. The corporation managed this criticism with the same coolheaded patience and indifference that it employed to endure political risk in tinpot African dictatorships. Compromise was not the Exxon way.