President-elect Donald Trump appears, by most accounts, to be on the verge of nominating Rex Tillerson, CEO of ExxonMobil, to Secretary of State. Tillerson is a well-known figure on the global stage, with close relationships to foreign and business leaders such as Russian President Vladimir Putin and Rosneft head Igor Sechin. It’s no surprise that such a negotiator and business magnate would be attractive to President Trump, and there are obvious benefits and liabilities to having such a man in office, both for energy and politics.
The potential nomination has not come without its share of controversy. Many in Washington, such as Senator John McCain (R-AZ), see the nomination as a topic of concern, considering his foreign ties and vested business interests. Others see these same factors as an asset to the State Department, as it would allow the Secretary to navigate U.S.-Russian relations through both business and political interests.
The topic of energy, especially in Europe and Central Asia, is a politically-charged one, even moreso since Russia’s incursion into Ukraine and energy crises of 2006 and 2009. Exxonmobil navigated a contentious 2011 deal with Rosneft, Russian oil giant, for drilling in the Russian arctic. The deal was halted after 2014 sanctions punished Russia for its intervention in the Ukraine, and Tillerson understandably expressed his distaste for the subject, and loss of company assets. Related: Not So Prolific: U.S. Shale Faces A Reality Check
What do both energy and global security stand to gain or lose from a leader like Tillerson? The CEO brings the obvious ties to and understanding of Vladimir Putin’s Russia to the office, a point of view from which Washington might benefit. Relations with Russia plummeted throughout the Obama administration, and Trump’s team will have their work cut out for them. Those at the top of the global energy sector must conduct their business through keen political insight, something Mr. Tillerson has certainly obtained. This deep understanding of political tension in Europe could be a needed asset, but his likely view of politics through a business lens (Mr. Tillerson has no political experience) could also introduce a conflict of interest to a foggy bottom, affecting the profitability of the energy sector as a whole.
Fruitful energy relations between Europe and Russia are paramount. After the recent energy crises caused by Russia’s halting of gas flow through Ukraine, Europe awoke to its dependence on Russian resources. From this point there arose a divide in willingness to expand deals with Russia, leading to the highly controversial Nord Stream line(s), which provide a direct natural gas line from Russia to Germany. There continues to be a divide over whether Europe should continue expansive deals with Russian energy companies.
With Tillerson at the helm, the U.S. is likely to see more business-based approach to the Euro-Russian energy relationship. Whereas past State Department heads and White House officials have dealt with Russia primarily through the lens of European security, we could see a shift towards transactional policy, seeking to build a mutually beneficial business relationship and de-escalate tensions which have been rising in the East.
If, indeed, this is the route Mr.Tillerson pursues, would it work? Russia has in the past wielded its mammoth energy sector as a tool of pressure and foreign policy against Europe and CIS states, and the U.S. and Europe must both be wary, balancing out trade-based benefits with overall continental security. The opportunity to create a more robust trade relationship between the two should not be sacrificed at the expense of European security, and the future administration will have to decide whether it can pursue this potential transactional diplomatic relationship.
Regardless of the specifics of Mr. Tillerson’s State Department, the CEO has a very close relationship with Mr. Putin. It is possible that he truly does understand Mr. Putin’s goals in Russia and Eastern Europe, and will be able to use them to the advantage of both nations. This is, of course, the ideal outcome. A misstep in the European energy sector could either allow Russia to make gains impossible to roll back, or cause a Western miscalculation leading to actual conflict. The experience of Mr. Tillerson is controversial, and could be either a very promising or controversial influence.
By Jonathan Hoogendoorn for Oilprice.com
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