Trump’s pick has close ties to Russia
December 14, 2016
DALLAS — ExxonMobil CEO Rex Tillerson, President-elect Donald Trump's choice to lead the State Department, has close ties to Russia through years of deal-making that will serve as valuable experience — but also raise concerns.
Tillerson has claimed to have a "very close relationship" with Russian President Vladimir Putin and will have deep knowledge of the country's power structure, having led ExxonMobil into a rare oil exploration deal with Russia's state-owned energy company.
His ties, however, could cast a shadow over important decisions on relations with Russia, from whether to extend sanctions to the handling of intelligence reports that Russia interfered with the U.S. presidential election to help Trump.
As an oil executive, Tillerson has argued against sanctions that the U.S. and European allies imposed on Russia after it annexed the Crimean Peninsula from Ukraine in 2014.
The sanctions are aimed against key sectors of the Russian economy, including financial services, energy, mining and defense, but also individuals in Putin's inner circle. Experts say that if they remain in the long term, the sanctions could affect Exxon's joint venture with Russia's state oil company.
A native of Wichita Falls, Texas, 64-year-old Tillerson is a career Exxon employee, having joined the company after graduating from the University of Texas in 1975 with an engineering degree. Groomed for an executive position, he spent years in the rough-and-tumble world of oil production, working in Exxon's central U.S., Yemen and Russian operations.
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By the 1990s, Tillerson was overseeing many of Exxon's foreign operations. He played a key role in Exxon's involvement in the huge Sakhalin oil and natural gas project on Russia's eastern coast. That was a warm-up for a $3.2 billion deal in which Exxon and Russian state-controlled Rosneft announced they would work together to explore for oil in Russia's Arctic region.
In 2011, Tillerson flew to the Russian resort town of Sochi to meet Russian President Vladimir Putin for the announcement. As news photographers recorded the scene, the men shook hands and smiled broadly at each other.
"This project promises to be highly interesting and ambitious," Putin said at the time.
Success in Russia required aligning the company's interests with those of the Russian government, mettle, and good relations with Putin. Exxon steadily expanded its Russian business while its rivals faced expropriation and regulatory obstacles. In 2013, Putin awarded Tillerson the Order of Friendship, an honor given to foreigners who improve relations with Russia.
"My relationship with Vladimir Putin, which dates back almost 15 years now, I've known him since 1999 and have a very close relationship with him," Tillerson said in a speech a few years ago.
Like other oil companies, Exxon has had to develop its own diplomacy and foreign relations, so many skills Tillerson honed at Exxon could help in his new role, said Antoine Halff, head of the global oil markets program at Columbia University's Center on Global Energy Policy.
Exxon also has operations in Indonesia, Azerbaijan, Chad, Equatorial Guinea, and many other countries, from the Arctic Circle to the southern tip of Australia. Africa and Asia were its leading sources of oil production in 2015.
Tillerson became Exxon's CEO on Jan. 1, 2006, and is expected to retire next year. His heir apparent, Darren Woods, has been in place for a year, so there would be virtually no disruption to Exxon's succession plans.
In 2015, Exxon valued Tillerson's compensation at $27.3 million, most of it in stock. At the end of 2015, he held awards that had not yet vested that were worth $149.2 million.
As secretary of state, by law, he would have to either sell his Exxon shares and stock options or recuse himself from government matters that have a "direct and predictable" effect on his financial interests, said Richard W. Painter, a University of Minnesota corporate law professor who served as President George W. Bush's chief ethics lawyer. Failure to do one or the other would likely result in criminal charges, since Cabinet members, unlike the president and vice-president, are covered by statutes designed to prevent conflicts of interest.
If Tillerson didn't sell the stock, he would have to stay out of decisions for a wide swath of the secretary's job including climate change matters, the oil industry or many dealings with Russia. "There are going to have to be some pretty broad recusals in the State Department on anything that involves oil," Painter said. "In my view, personally, it's unacceptable to have a secretary of state who has a lot of oil company stock or stock options."
Putting the stock in a blind trust would not be allowed because it would remain a financial interest for Tillerson, Painter said.
Still, it's not unheard of for a high-profile businessman to serve as secretary of state.
Bechtel, the big, privately held San Francisco engineering and construction firm, gained stature and prestige when President Ronald Reagan picked George Shultz as secretary of state and Caspar Weinberger as secretary of defense. Both had been top Bechtel executives.
At the time, critics said Bechtel had its own foreign policy, especially in the Middle East and didn't particularly care if its objectives were not aligned with those of the U.S.