Rex Tillerson’s long romance with Russia

During the presidential campaign, the Trump team fought off accusations that it had direct connections with senior Russian officials and oligarchs. Now, President-elect Donald Trump has appointed as his secretary of state Rex Tillerson, a businessman who has some of the most deep and long-standing ties to the Russian political and business elite of any American.

Not so long ago, the Trump camp disavowed its former foreign policy adviser Carter Page when it was reported in September that he had met with Igor Sechin, head of the Russian oil giant Rosneft. In fact, Page had never met with Sechin. But after leading Democrats, including Senate Minority Leader Harry Reid, D-Nev., called for an FBI investigation into Page’s relationship with the sanctioned Russian tycoon, the Trump team pretended he had never even been part of the campaign.

Tillerson, the CEO of ExxonMobil, has a close and personal relationship with Sechin dating back over a decade. The connection was integral to ExxonMobil’s ability to deeply penetrate the corrupt but lucrative Russian oil market — and it almost led to Russia’s energy industry acquiring a significant stake in strategic American assets.

Tillerson’s involvement in Russia dates back to 1998, when he was appointed head of Exxon Neftegas Limited, which was in charge of the Sakhalin-1 oil and gas project off the coast of Siberia. The huge project put Tillerson in line to become the corporation’s vice president, president and eventually chairman and chief executive officer. It also led to deep relationships with Russian leaders and a growing profile for Tillerson in the Russian press.

In 2004, the same year that Tillerson became president of ExxonMobil, Sechin took control of Rosneft, the company in charge of the Russian part of the Sakhalin-1 consortium. The Rosneft partnership was not the first time ExxonMobil had attempted to join forces with a major Russian energy firm. Tillerson’s predecessor had negotiated a deal with Russian energy giant Yukos for a stake in that company. But the Kremlin turned on Yukos and its boss Mikhail Khodorkovsky, imprisoning him in 2003 on what were widely seen as politically motivated charges.

Tillerson learned the lessons of the Yukos episode, namely that no deal with a Russian business or oligarch is safe unless it is sanctioned by the Russian government. In a 2005 interview, he laid out his strategy for doing business in Russia, focusing on partnership over investment.

“ExxonMobil is not interested in buying shares in other companies, because it does not allow us to fully do what we do best. We invest in Russia, not only money,” Tillerson said.

Tillerson’s close relationship with Sechin and Rosneft benefited both sides in their competition with Gazprom, Russia’s largest gas producer, which also holds significant oil assets. In 2006, Gazprom tried to exert control over the export of gas from the Sakhalin-1 project and Tillerson fought back, using the relationship with Rosneft to his advantage.

In 2011, Tillerson and Sechin raised the ExxonMobil-Rosneft relationship to a new level by signing the first in a series of deals as part of a “Strategic Cooperation Agreement” that involved deep cooperation in exploration and exploitation of energy sources in the Arctic and the Black Sea.

As part of this set of agreements, ExxonMobil was to give Rosneft subsidiaries big stakes in American and Canadian oil projects. A subsidiary of Rosneft based in Delaware struck a deal for 30 percent equity in ExxonMobil’s share of a project in West Texas and the rights to acquire 30 percent of ExxonMobil holdings in the Gulf of Mexico. Another Rosneft subsidiary struck a deal to acquire 30 percent of Exxon’s stake in the Cardium formation in Alberta, Canada, where development of the tar sands reserves was underway.

“These agreements are important milestones in this strategic relationship,” Tillerson said at the time.

The agreements led to Tillerson having several direct interactions with then-Prime Minister Vladimir Putin, who remarked during one meeting with Tillerson in 2011 that it was scary to even think of the scale of the deals, which were estimated to be worth between $200 billion and $300 billion.

Sechin, who was also deputy prime minister at the time, was often referred to as “Darth Vader” in the Russia press and was eager to improve his public image. He traveled to New York in April 2012 and went on a publicity tour with Tillerson to tout the ExxonMobil-Rosneft cooperation.

In June 2012, Tillerson attended an event with Putin and Sechin in which Putin inaugurated a new presidential commission on fuel and energy. Sechin was appointed head of the commission. Putin spoke with Tillerson and publicly praised ExxonMobil’s involvement. “This is the best evidence that the relationship between Russia and the United States continues to develop,” Putin said.

Putin, Sechin and Tillerson all met again in Moscow in 2012. This video, widely circulated yesterday, shows Putin and Tillerson celebrating one of the many ExxonMobil-Rosneft cooperation deals and toasting each other with champagne. In 2013, Putin awarded Tillerson the Order of Friendship, a high honor for a foreigner in Russia.

In 2014, the U.S. government slapped several sets of sanction on Russian officials and entities in response to Putin’s annexation of Crimea and intervention in eastern Ukraine. Rosneft and Sechin were among the targeted entities, making it illegal for any American to do business with them. ExxonMobil’s projects with Rosneft were stalled. The losses for ExxonMobil were reported to be more than $1 billion.

Tillerson lowered his profile in Russia but continued to meet with non-sanctioned high-level Russian officials in Moscow, including Russian Energy Minister Alexander Novak. ExxonMobil also became embroiled in a dispute with the Russian government over $500 million the company said it overpaid in Russian taxes. Rosneft and Sechin sided with Tillerson in this dispute.

At various times, Tillerson has criticized the U.S. sanctions against Russia. At ExxonMobil’s 2014 annual meeting, he said, “We do not support sanctions, generally, because we don’t find them to be effective unless they are very well implemented comprehensively, and that’s a very hard thing to do.”

Talking about the Russia projects at a conference in 2015, he said, “We’ll await a time in which the sanctions environment changes or the sanctions requirements change.”

In June of this year, Tillerson traveled to Moscow for the St. Petersburg Economic Forum, which Sechin also attended. “As to the sanctions questions, I’ll use the same approach that my friend Mr. Sechin took. That’s a question for the government,” he said at the forum. Sechin laughed and gave him a thumbs-up.

Sechin told a Reuters reporter that the sanctions hurt him in a personal way; he would no longer be able to come the United States to take motorcycle rides with Tillerson. Now, the time may have come for Sechin and Tillerson to resume their business partnership and their personal friendship.

Russian leaders have praised the Tillerson appointment this week while some senators in both parties in Washington have expressed deep concerns. Tillerson’s appointment comes in the middle of a separate but related controversy over Russian meddling in the U.S. presidential campaign through hacking and other means.

“There are a number of senators who are hot to trot on the Russia issue, period. When you create a nexus between your State Department nominee and Russia, you’ve put it on steroids,” one senior GOP Senate staffer told me. “The fact that members are even wrestling with this does not bode well for his nomination.”

As the CEO of ExxonMobil, Tillerson had the duty and obligation to fight for the interests of his company. The question is whether he can now pivot and assure senators he will shed any conflicts of interest and advocate for the interests of the country.