WikiLeaks cables show that it was all about the oil
By Kevin G. Hall | McClatchy Newspapers
WASHINGTON — In 2006, three years after the Russian government had charged Mikhail Khodorkovsky — then the country’s wealthiest businessman — with fraud and moved to break up his Yukos oil company, U.S. diplomats had had enough.
Gazprom, which grew out of the former Soviet Union’s state gas ministry, had been busy buying up Yukos’ far-flung empire, stoking American fears that soon Russia and its tough leader, Vladimir Putin, would control virtually all of the natural gas flowing to Europe.
The United States wanted to stop that from happening. So the American embassy in Slovakia hired a Texas-based oil consultant and began secretly advising the Slovakian government on how to buy the 49 percent stake Yukos had held in Transpetrol, the Slovakian oil pipeline company.
With no oil experience of its own, the Slovakian government didn’t know how much it should pay. The consultant, who sat in on the negotiations, assured Slovakia’s economy minister, Lubomir Jahnatek, that the $120 million price offered to the group disposing of Yukos’ assets was a bargain. Gazprom was willing to pay far more.
“We have made it clear to all parties that we do not want to publicize our role as technical advisors,” the embassy said in an Aug. 10, 2006, cable that outlined what eventually became a deal. “Jahnatek is clearly appreciative of the input provided by (the consultant), and will continue to look to him and the U.S. embassy for information as he faces the challenges to the deal in the coming weeks.”
The communication, part of the cache of State Department cables that WikiLeaks passed to McClatchy and other news organizations, is just one indication of how the U.S. government over the years has maneuvered to influence the world’s oil and natural gas markets.
With oil trading near $100 a barrel and gasoline near $4 a gallon at the pump, Americans can take solace in knowing that securing sources of oil has been a chief focus of U.S. embassies across the globe for years.
Of the 251,287 WikiLeaks documents McClatchy obtained, 23,927 of them — nearly one in 10 — reference oil. Gazprom alone is mentioned in 1,789.
In the cables, U.S. diplomats can be found plotting ways to prevent state entities such as Gazprom from taking control of key petroleum facilities, pressing oil companies to adjust their policies to match U.S. foreign policy goals, helping U.S.-based oil companies arrange deals on favorable terms and pressing foreign governments to assist companies that are willing to do the U.S.’s bidding.
Sometimes the U.S. approach seems mystifying. An Aug. 17, 2009, secret cable from the U.S. embassy in Riyadh, Saudi Arabia, recalled how days earlier the U.S. charge d’affaires, Richard Erdman, pushed Saudi Arabian Oil Minister Ali al Naimi to get closer to China.
But there was an ulterior motive. At the time, the United States was trying to persuade China to back sanctions against Iran over the country’s nuclear fuel enrichment program. The U.S. believes the program is part of an Iranian effort to develop nuclear weapons. “We wouldn’t mind seeing Saudi sales replacing some of Iran’s oil exports to China. This would have the welcome side impact of reducing Iranian leverage over China,” Erdman told Naimi in a cable.
Naimi responded that Saudi Arabia, a bitter rival to Iran, would soon be the largest oil supplier to China, and it came to pass. In 2010, Saudi Arabia was the top oil supplier to China. Iran was third, according to the Chinese website ChinaOilWeb.
A July 30, 2009, secret cable from the U.S embassy in Riyadh recounts how Treasury Secretary Timothy Geithner, while visiting the kingdom, leaned on his Saudi counterpart, Ibrahim al Assaf, to contain rising oil prices.
“Geithner said that it would be positive for the global recovery if oil prices did not rise further, whether from speculation or OPEC production,” the cable said, noting that Geithner admitted “that the U.S. had not found a ‘good way’ to limit oil-price volatility.”
The documents also show how in their global hunt for oil, companies from allied countries and foes alike complicate U.S. policy objectives.
One target of repeated U.S. ire is the Rome-based oil giant Eni, Italy’s largest corporation and one in which the Italian government holds a 30 percent stake. Both efforts to expand its presence in Iran and its close ties to Russia’s Gazprom are frequent topics in the cables.
“Eni CEO Paolo Scaroni told the ambassador that the Iranian energy minister has offered Eni investment opportunities in Iran’s South Pars and Azadegan oil fields,” said a secret cable from the U.S. embassy in Rome dated Jan. 12, 2007. “Scaroni said Eni is interested in additional investment in Iran so long as there are no multilateral sanctions against Iran in effect, Iran pays money owed Eni under existing contracts, and the investments are structured so that Eni’s return is based on world oil and gas prices.”
The embassy was particularly unhappy that Eni sought to structure its new business in Iran in such a way that it could claim that Iran was merely repaying old debts owed to the company, some dating to the 1950s. That would allow Eni to help Iran develop the fields and skirt any sanctions imposed over Iran’s nuclear program, which the U.S. believes is intended to develop nuclear weapons.
The embassy urged U.S. officials in Washington to lean on Scaroni during an upcoming visit to squelch any deal. A subsequent cable indicates they did.
Scaroni was poised to try again with the Obama administration, according to a May 5, 2009, account of a meeting with another Eni official. “Post thinks there are good reasons for USG skepticism on this request,” the cable said.
Eni’s ties with Gazprom were the subject of an April 24, 2008, cable that urged the State and Treasury departments to express displeasure very clearly to Scaroni.
Specifically at issue was an Eni deal that would have given Gazprom access to Libyan oil and would have had Eni help Gazprom build a pipeline across the Black Sea. This project would have competed with a similar project backed by the U.S. government that would have connected gas fields in the Caspian region directly to Europe, bypassing Russia and Gazprom.
At the time, Silvio Berlusconi was about to become Italy’s prime minister for a second time and the embassy urged headquarters to twist his arm as well.
“Post would like to push the new Berlusconi government to force Eni to act less as a stalking horse for Gazprom interests,” the confidential cable said. “Eni . . . seems to be working in support of Gazprom’s efforts to dominate Europe’s energy supply, and against U.S.-supported E.U. efforts to diversify energy supply.”
Eni has been in the news of late because it’s the largest player in Libya’s oil sector and Scaroni publicly voiced concern that U.S.-led efforts to oust strongman Moammar Gadhafi weren’t in Italy’s interest. On April 20, Scaroni announced that Eni was temporarily shelving its deal in Libya that would have given Gazprom a big stake in Libyan oil, a move the leaked documents show the U.S. had been seeking since 2008.
Sometimes, however, U.S. efforts were aimed at unleashing Russian oil.
A secret cable from Moscow dated April 16, 2009, tells how Houston-based ConocoPhillips planned to join the Russian firm Lukoil in bidding on oil contracts in Iraq. The joint effort in Iraq had the blessing of Putin, ConocoPhillips officials said, who noted that Putin had offered to provide debt relief to Iraq if the U.S.-Russian consortium were granted a contract.
Iraqi oil was the subject of many cables from diplomats in Iraq, including a number that dealt with the surprise 2007 announcement that Texas-based Hunt Oil Co. had entered into a production sharing agreement with the Kurdistan Regional Government in Iraq’s north. The problem was Iraq hadn’t yet passed its national oil law and the company’s CEO, Dallas businessman Ray Hunt, was a friend of President George W. Bush. And Hunt served on Bush’s foreign intelligence advisory committee.
A Sept. 9, 2007, cable from the U.S. government’s Kurdistan Regional Reconstruction Team described Hunt Oil’s Middle East manager, David McDonald, as unconcerned about the legalities of the deal.
“He did not express concern about the potential controversy surrounding signature of a PSC (production agreement) with the KRG that covers areas of operation currently outside the KRG’s legal control,” the reconstruction team warned. “He said, ‘This is a significant opportunity that outweighs the legal ambiguity.’ “
The cable said McDonald described hunting for oil in Iraq’s north as “like shooting fish in a barrel.”
The cables are filled with information about the energy industry that can’t help but surprise. One cable from the U.S. embassy in Malabo, Equatorial Guinea, argues that the Obama administration should be paying closer attention to the small West African nation, noting that a sudden reversal of political winds could cost hundreds of American oil workers their jobs and threaten 20 percent of the U.S. oil supply.
“Taking away U.S. energy imports from North America (i.e. those from our immediate neighbors Canada and Mexico), we find that over 30 percent of our imported oil and gas comes from the Gulf of Guinea region — more, for example, than from the Middle East,” the May 21, 2009, cable noted. “The largest portion of the Gulf of Guinea maritime territory belongs to little EG.”
The cable added that Spain and China are making oil plays in the country where U.S. companies Marathon Oil Corp. and Hess Corp. have as much as 30 percent of their capital invested.
Despite the unsavory reputation of Equatorial Guinea President Teodoro Obiang, who’s proclaimed himself a living god, the time seemed right to reboot bilateral relations, the cable suggested, noting that Obama is a common surname there.
“The recent change in the U.S. administration — in the country with the highest per capita density of ‘Obamas’ in the world — was received as a herald of warmer relations,” the cable said.
READ THE CABLES
MORE WIKILEAKS FROM MCCLATCHY
PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington. Kevin Hall of McClatchy Newspapers reports that on April 20 the big Italian oil company Eni put off its deal with Gazprom, the big Russian oil company, connected to its president, Vladimir Putin, put off a deal that would have given Gazprom a big stake in Libyan oil. That’s been an objective of US foreign policy for at least three years. Kevin went through WikiLeaks documents and found the following cable. At the time, Silvio Berlusconi was about to become Italy’s prime minister, and the embassy urged headquarters to twist his arm, writes Kevin. Then he quotes the cable. Post, meaning the embassy, would like to push the new Berlusconi government to force Eni to act less as a stalking horse for Gazprom interests. The confidential cable said, quoting, Eni, which is 30 percent owned by the government of Italy, seems to be working in support of Gazprom’s efforts to dominate Europe’s energy supply and against US-supported US efforts to diversify energy supply. Now joining us in the studio to talk about the new scramble for oil and controlling Europe’s energy supplies is Kevin Hall. Thanks for joining us.
KEVIN HALL, NAT’L ECONOMICS CORRESPONDENT, MCCLATCHY: Thanks for having me.
JAY: So elaborate a bit. This context [incompr.] certainly are factors that go into the Libyan conflict that we’re following now.
HALL: Well, it underscores the kind of global hunt/scramble for oil. The famous book The Prize by Daniel Yergin, the oil historian, kind of laid that out. And this is kind of the latest extension of that. The Libyan situation ties to development of oil in the Caspian region and places I can’t even pronounce, coupled with Libya, coupled with Europe and Russia. What happened specifically [snip] in Libya, rather, is Gazprom was going to partner in Libya with Eni, which is the largest player. The Italians are the largest player in Libya, which had been a former Italian colony.
JAY: And were getting along quite well with Gaddafi.
HALL: And were getting along quite well with Gaddafi. And that story–we know how that one goes. The reverse of that is that Eni in exchange was going to get access to a project that the Russians were trying to do in the Caspian region called South Stream. South Stream competed with a project that the US has been pushing for the better part of a decade called the Nabucco project. It was going to take natural gas from the eastern border of Turkey, bypass Russia, and provide supplies to Europe through that route, I think through Bulgaria, Romania, basically bypassing Russia. And what all these documents show, there was about–.
JAY: So these are pipeline wars.
HALL: Pipelines, yeah. And, well, all these documents show–and there’s about 1,800 documents that mentioned Gazprom–is that the Cold War is alive and well in terms of trying to contain Russia’s energy power. Russia is the largest producer of energy–not the largest exporter, but they have more oil and natural gas produced in Russia than anywhere in the world. Most of that goes to Europe. And so the scramble for this development in the Caspian region, in Azerbaijan and places like that, is tied to whether that stuff goes through Russia or around Russia, and the US has worked real hard to make sure it goes around Russia, so that the Europeans aren’t dependent on one source. We’ve seen how the Russians have used oil and natural gas against the Ukraine, against Georgia, against Belarus. So they’ve certainly shown their willingness to use oil as a weapon in their own strategic interest, you know, looking at it from their point of view. And the Libya example was just one [crosstalk] small example [crosstalk]
JAY: Of course, US policies always seem–its dominance in the Middle East and oil also is a very big strategic piece of its strategic puzzle, not just this question of oil supplies for the United States. But let’s jump back to the Libya context, because there’s another piece of background which you write about in your article, which is Eni, the Italian company, was also finding a way to invest in Iranian oil, which was also putting it at odds with US foreign policy.
HALL: Right. Eni have been in Iran long before the current Islamic government, back in the time of the Shah, and lost a lot of money when the change came. Remember that whole unsavory incident in the ’70s with the embassy and everything? In that, what Eni was trying to do at around 2006, 2007 time frame was take Iranian oil out, produced jointly with Iran, and they were going to–they found a kind of way to suspend reality: as the US was trying to put pressure on Iran because of its nukes program, they were trying to sell this on the open market. And then they would–it wouldn’t be counted as a–it’d be valued in present-day dollars, but it’d be treated as the debt that Iran owes Italy. So it kind of means suspending all time and space and, you know, not valued in former currency but current rates.
JAY: In order to find ways around possible sanctions.
HALL: Right, and it did not sit well with the US government.
JAY: So you’ve got the Italian oil companies already at odds with the US over Iran. The Italian oil company is going to, through its deals with Gazprom, allow the Russians to take a big stake in Libyan oil. And then you have the French. As we head towards the Libyan war, the French Total have a small piece of the Libyan oil game, but I suppose they would like a bigger piece of it. And then you wind up having a French-American push to overthrow Gaddafi and essentially shove Gazprom out. I mean, I guess we’re not saying one and one necessarily equals two, but it sure–it makes one think about it.
HALL: Yeah, it’s not necessarily causation, but there’s–you might suggest there’s correlation. And clearly this shows the degree to which oil is kind of the back story to so much that happens. As a matter of fact, we went through 251,000 documents–or we have 250,000 documents that we’ve been pouring through. Of those, a full 10 percent of them, a full 10 percent of those documents, reference in some way, shape, or form oil. And I think that tells you how much part of, you know, the global security question, stability, prosperity–you know, take your choice, oil is fundamental.
JAY: And fundamental to most countries’ foreign policies,–
JAY: –including this one.
HALL: Front and center.
JAY: Well, we’ll do more. As you keep going through WikiLeaks, we’ll do more, ’cause this oil story continues into Latin America and other places.
HALL: Yeah, [crosstalk] lot more.
JAY: And we’ll do more of this. But those who had said it’s not all about oil, they ain’t reading WikiLeaks.
HALL: It is all about oil.
JAY: Thanks for joining us. And thank you for joining us on The Real News Network.
End of Transcript
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