How Rex Tillerson's Oil Industry Politics Could Boost the Iran Deal
It has been widely reported that Rex Tillerson is to be named the next Secretary of State, ending speculation about perhaps the consequential cabinet post for the prospects of Iran policy in the Trump administration.
Tillerson’s appointment has shocked many. As the Chairman and CEO of ExxonMobil, he has no formal diplomatic or political experience. Tillerson is also a friend of Vladimir Putin, having built his name as a regional executive for ExxonMobil in the Caspian region in the late 1990s.
Some commentators have suggested that Tillerson’s appointment as Secretary of State will bring the back-room politics of the global oil industry into the heart of American foreign policy. Given the problematic role that oil companies have played in international relations, this may give cause for concern. However, for the prospects of Iran Deal implementation in the Trump administration, Tillerson’s appointment could represent the entry of a pragmatic figure who can look beyond the ideological fixations of people like John Bolton, his reported deputy. Tillerson’s public comments offer clues to his outlook.
Tillerson Does Not Believe in Sanctions
In a May 2014 ExxonMobil shareholder meeting, Tillerson stated, “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.” For a global company like ExxonMobil, which works in politically tumultuous markets, sanctions are an inherent risk to business. For example, Exxon has a pending project with Rosneft worth a reported USD 300 billion that is unable to proceed due to US sanctions.
Given that there has been a renewed call in Washington for new, non-nuclear sanctions to be levied on Iran, Tillerson’s general disbelief in the efficacy of sanctions is important. This is particularly the case as Europe, China, and Russia have each signaled that they will not cooperate with any US attempt to renegotiate the Iran Deal—making comprehensive implementation of any new sanctions impossible.
Tillerson Wanted To Get Exxon Into Iran
In an interview with CNBC from March of this year, Tillerson made it clear that he saw Iran as an attractive market for ExxonMobil, despite US sanctions. He stated:
U.S. companies like ours are still unable to conduct business in Iran. A lot of our European competitors are in, working actively. I don't know that-- that we're necessarily at a disadvantage. The history of Iranian-- in foreign investment in the past, their terms were always quite challenging, quite difficult. We--never had large investments in Iran for that reason. And I don't know that the Iranians are gonna be any different today. We'll have to wait and see and there hasn't been any contracts put out. But I also learned a long time ago that sometimes being the first in is not necessarily best. We'll wait and see if things open up for U.S. companies. We would certainly take a look because it's a huge resource-owning country.
Since he made these comments, Iran has unveiled its new IPC oil contracts and oil majors Total, Shell and DNO have all signed heads of agreement outlining the terms of new investments in oil and gas production in Iran. Tillerson will see his former peers at the oil majors making huge strides in the market and will likely see this as a perfectly natural development for an economy coming out of an onerous sanctions regime.
Tillerson Sees Multinationals as Private Empires
As described in Steve Coll’s increasingly relevant history of the firm, Private Empire, ExxonMobil developed into the world’s largest company by pursuing interests very different from those of the US foreign policy. Tillerson’s predecessor, Lee “Iron Ass” Raymond once declared, “I am not a U.S. company and I don’t make decisions based on what’s good for the U.S.” For all intents and purposes, Tillerman, who rose through the ranks at Exxon, absorbed this outlook.
Raymond’s statement is particularly noteworthy given the intense focus of the current U.S. sanctions regime on defining U.S. and non-U.S. entities or persons and delineating the scope of Iran business that is accordingly permissible. The dilemma facing many of the world’s largest multinationals and financial institutions is that while they do not necessarily see themselves as “U.S. companies,” they are nonetheless treated as such by U.S. regulators. As a result, business interests in Iran become much more difficult to operate.
Tillerson may be sympathetic to rising calls from major European multinationals across industries for the U.S. to be more proactive in the implementation of the Iran Deal, and in particular, to reduce the extraterritorial nature of its regulatory oversight by changing the extent to which global companies can be reduced to US legal entities.
What About Miles’ Law?
There is an old adage of political science called Miles’ Law that describes how perspectives on policy change depending on one's position within the state bureaucracy: “Where you stand depends on where you sit.”
It may be that in assuming the role of Secretary of State, Tillerson will adopt a more inherently political and therefore oppositional attitude towards Iran. Certainly figures like John Bolton will seek to push Iran policy in a much more hawkish direction.
But Tillerson will ostensibly have the greatest authority in the ongoing treatment of the Iran Deal, inheriting the hands-on role defined by Secretary Kerry. As an oil industry CEO named "Rex," he likely has the advantage over Bolton in getting subordinates to bend to his will. Trump is also more likely to see Tillerson as a peer.
The present implementation of the deal benefits from the expertise and management of career civil servants like Ambassador Stephen Mull and Chris Backemeyer, who could be encouraged to stay on the Iran file if Tillerson adopts a pragmatic approach. Tillerson could run his State Department as a private empire, allowing the overall tenor of the incoming administration’s foreign policy to be defined by Trump and his more vocal acolytes, but ensuring that the execution of State’s diplomatic aims retains a more businesslike, if not outrightly commercial, logic. This would not be too dissimilar from the operation of the Iranian MFA within the overall context of the political posturing of the Islamic Republic.
Those who support the deal can find some comfort in the idea that a career of training in the realist politics of the oil industry may make Tillerson a more pragmatic voice in Trump’s cabinet, one which may see the Iran Deal as an appropriate measure that addresses key security concerns, but also provides the world’s private empires desired access to a promising market.
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