Blowout
Copyright © 2019 by Rachel Maddow
All rights reserved.
Published in the United States by Crown, an imprint of Random House, a division of Penguin Random House LLC, New York.
crownpublishing.com
CROWN and the Crown colophon are registered trademarks of Penguin Random House LLC.
Library of Congress Cataloging-in-Publication Data
Names: Maddow, Rachel, author.
Title: Blowout / Rachel Maddow.
Description: First edition. | New York : Crown, [2019] | Includes index.
Identifiers: LCCN 2019026915 (print) | LCCN 2019026916 (ebook) | ISBN 9780525575474 (hardcover) | ISBN 9780525575498 (ebook)
Subjects: LCSH: Gas industry—Corrupt practices. | Gas industry—Corrupt practices—Russia. | Gas companies—Corrupt practices. | Tillerson, Rex, 1952—Ethics.
Classification: LCC HD9581.A2 M33 2019 (print) | LCC HD9581.A2 (ebook) | DDC 338.2/7285—dc23
LC record available at https://lccn.loc.gov/2019026915
LC ebook record available at https://lccn.loc.gov/2019026916
ISBN 9780525575474
Ebook ISBN 9780525575498
Cover design: Michael Morris
Cover images: Gregor Schuster/Photographer’s Choice/Getty Images (statue); Antagain/iStock/Getty Images (fire); Michael Morris (oil)
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Cover
Title Page
Copyright
Introduction: In a Surrealist Landscape
Chapter One: Splendor and Fragrance
Chapter Two: The Genie
Chapter Three: Stolen Goods
Chapter Four: Charlie Hustle
Chapter Five: Thunder Up!
Chapter Six: Rex Shrugged
Chapter Seven: A Risk Management Problem
Chapter Eight: Poster Boy
Chapter Nine: Practical Realities
Chapter Ten: Who Does That?
Chapter Eleven: The Other 1 Percent
Chapter Twelve: Ultrahazardous Activity
Chapter Thirteen: A Significant Strategic Step
Chapter Fourteen: Trust
Chapter Fifteen: The Handsome Hero
Chapter Sixteen: This Ain’t No Disco
Chapter Seventeen: Such a Man Is Born Once Every Few Decades
Chapter Eighteen: Putin Zassal
Chapter Nineteen: All Hail the Mercenaries
Chapter Twenty: His Idea of America
Chapter Twenty-one: Because They Could
Chapter Twenty-two: “We Greatly Value Our Relationship”
Chapter Twenty-three: Pobeda!
Chapter Twenty-four: “Yeah That Was Crazy”
Chapter Twenty-five: Active Appreciation
Chapter Twenty-six: It All Ties Back
Chapter Twenty-seven: “All They Have Is This”
Chapter Twenty-eight: “Constituency Trumps Everything”
Chapter Twenty-nine: Containment
Dedication
Acknowledgments
Notes on Sources
About the Author
Excerpt from Drift
The very idea of it was too implausible, too fantastical, to be believed; it was simply too outlandishly grand even for a grand opening. A visiting head of state, one of the most powerful men on the planet in the autumn of 2003, had announced his intention to be on hand to christen a tiny new franchise operation on the frowsy little corner of West 24th Street and Tenth Avenue in Manhattan.
The world potentate was in the middle of a three-day swing through New York City, on his way to a one-on-one summit with George W. Bush at the American presidential retreat, Camp David. He had spent the past few days in the august citadels of power, money, and meaning in New York; had taken private meetings with the president of France and the chancellor of Germany in his private suites at the Waldorf Astoria hotel; had delivered a widely anticipated address to the General Assembly of the United Nations; had fielded earnest questions about the benefits and the perils of democracy from scholars at the city’s premier university; had bowed his head in prayer alongside religious leaders whose brethren had long ago been exiled from their shared home country; and had laid a bouquet of red carnations at a temporary memorial to the 343 New York City firefighters killed just two years earlier in the 9/11 attacks. The New York Daily News reporters thought they had detected an actual tear slide down the presidential cheek as he placed the floral remembrance for the dead American heroes. Now the world leader was going to veer off this power slalom to preside over the grand opening of a business with a few hundred square feet of retail space, valued in its recent purchase at $55,000?
As the hour of the scheduled grand opening in the increasingly gay New York neighborhood of Chelsea neared, he was meeting with two dozen captains of American industry in the cavernous banquet room of what might well be considered the Royal Palace of International Capitalism—the New York Stock Exchange. Heads of the largest companies in America were on hand; the CEO of the most profitable company in the history of the modern world, ExxonMobil, had flown in from Texas to be among the interlocutors. All of which appeared to please the guest of honor. “We have been surrounded by a very kind and warm atmosphere almost everywhere we have been in New York,” was his opening message, as translated to the industrial barons through the elegant headset provided to each. “It is this direct contact that allows all of us—both politicians and entrepreneurs—to open new possibilities and spheres for wide cooperation.”
Three miles north, meanwhile, at 24th Street and Tenth Avenue, as the security team began to shut down surrounding streets, shoo away the occasional Rollerblader, and tape off a makeshift pen for the growing press contingent, the store’s attendants readjusted their new red shirts and ball caps. Among the curious onlookers at this unfolding scene, skepticism reigned. “Nobody thinks he will come,” the store manager confided to one reporter. “We are telling people. They say, ‘No way.’ ”
But then, at around two o’clock in the afternoon, there was a wail of sirens from the south, and a boxy Eastern European–style armored limousine tucked in among a phalanx of armored vehicles came into view. The small crowd of people who craned their necks and stared south toward the motorcade also noted the sudden appearance of the senior U.S. senator from the great state of New York, there to greet the arriving limousine. This was really gonna happen. The attendants and managers readjusted their shirts and ball caps one final time. The counterman checked again to make sure that the coffee was hot and the doughnuts were arrayed in comely fashion. By the time the honored ribbon cutter emerged from behind the steel curtain of armed and armored security and walked toward the gas pumps and cash registers, local reporters were already rehearsing their ledes. “In possibly the greatest show of political power ever to attend the grand opening of a gas station,” the New York Post would offer, “Russian President Vladimir Putin showed up in Chelsea yesterday with Sen. Chuck Schumer to help inaugurate the first Russian-owned chain of petroleum stops in America.”
The Post’s rival tabloid, the New York Daily News, countered with “Fill ’er up, Vlad,” under the headline “No Fueling, That’s Putin.”
There was a hint of pride in Vladimir Putin’s open, shoulder-swinging gait as he strode across the gas station lot to shake hands with the five nervous-looking attendants, who could now be officially counted among the ranks of Moscow-based OAO Lukoil’s 120,000 employees. Their unifor
ms, President Putin must have noted, were snappy and vibrant and matched the rest of the station decor—power red! The day was overcast and the sky wan, but the nearby credit-card-ready gas pumps gleamed under lights recessed in the new high canopy built to shield customers from the vagaries of weather and to dispense retardant chemical foam in the event of a gasoline fire.
The franchisee of this station, Paramgit Kumar, was in his glory too, and all thanks to Lukoil, the largest and most profitable oil company in Russia, a country second only to Saudi Arabia in daily production of crude. Lukoil claimed more proven reserves of oil than any publicly traded company on earth and had taken up its position at the point of the flying wedge of Russia’s entry onto the new world order’s wide-open field of commerce. The corporation had emerged from the dank, state-run ruins of the Soviet Oil Ministry into the bright lights of free-market capitalism, a fact recently confirmed by the company’s official listing on the London Stock Exchange. Another first for Russia! Share prices of Lukoil had risen from $3.54 to $24.55 in just four years. Revenues had jumped from $15.5 billion to more than $22 billion in the previous year alone. Western bankers had enthusiastically stuck their heads into the scrum for the chance to win enormous fees for trail-bossing Lukoil’s $775 million public stock offering.
Lukoil had used a wee bit of its new Western-fed capitalization to acquire the moribund Getty Petroleum Marketing Inc., with its thirteen hundred gas station properties dotting the Eastern Seaboard of the United States. That made it the first Russian company to own an American company listed on the New York Stock Exchange. And that meant that some of the Lukoil shine had fallen on Mr. Kumar. He had been one of the first operators to grab his new parent company’s offer of a loan guarantee—at way-below-market financing—to upgrade his seedy little Getty station. “[My] station is a piece of junk,” one fellow Getty operator complained. “My pumps are about fifty years old.” The cash infusion allowed Kumar to upgrade his pumps, his flame-retardant canopy, his Kwik Farms minimart, and his color scheme. Power red! You could see it ten blocks away. So what if the Lukoil name was new to his customers and kind of foreign sounding. The makeover and rebrand meant he had it all over his nearest competitors—ExxonMobil, Hess, and Gaseteria. “There aren’t too many gas stations in New York City that are new and attractive, so we stick out,” Kumar would boast to a reporter from Convenience Store News. “Plus, now we have a convenience store as well, which brings in gas customers and customers just walking by on the street.”
Schumer had to walk quickly to stay at the shoulder of the Russian president as the two men were escorted under the new canopy, past the giant flowerpots teeming with chrysanthemums, toward the convenience store tucked back in the corner of the lot, under the hulk of what used to be elevated train tracks. Putin kept his head bent away from Senator Schumer as he made his way toward the soda-pop-and-cigarette wiles of the Kwik Farms. The Russian president was instead listening intently to the gentleman on his right, a beefy executive in a dark suit, with a head of gray hair cropped tight and neat in the old Soviet military style. This was the CEO of Lukoil’s worldwide operation, Vagit Alekperov, who had flown in from Moscow for the opening.
Alekperov was a welcome sight for Putin, a man he knew he could count on. There were other tycoons back in Moscow more able in the area of high finance, more schooled in the Western-style corporate governance that international investors now demanded, and more adventurous in developing and deploying expensive new technologies for extracting crude oil and natural gas from Russia’s vast and waiting reserves. But there were risks in being too keen. Putin had seen too many Russian businessmen whose heads had been turned by the enormous financial possibilities in oil and gas, who had become eager to invite American and British oil majors in to develop the Russian fields. He worried men like that might accidentally give away the store. But Vladimir Putin did not worry about Vagit Alekperov, who had come up among the roughneck ranks in the Soviet oil fields in Azerbaijan, managed fields in western Siberia, and served as the youngest-ever deputy head of the Soviet Ministry of Energy when it was overseeing production of more barrels of crude per day than any country in the world, single-handedly meeting the U.S.S.R.’s daily energy needs, financing the Soviet government and its ruling Communist Party, and providing both energy and necessary cash to the worldwide span of Soviet satellites and friends.
By 2003, of course, the Soviet Union was no more, but Alekperov retained his sense of mission from the old superpower days. He was still a dedicated patriot. Russia’s coat of arms enjoyed a place of pride on his office wall back in Moscow; a black-and-white headshot of Vladimir Putin was the lone photograph on his orderly titanium-and-glass desk. The imperatives of the Russian Federation and its president were never far from mind. The move into the retail gas market of the United States, for instance, was likely to be a losing financial proposition for Lukoil, but Alekperov understood that his duties as CEO of the country’s largest oil company were not merely fiduciary. He understood the geopolitical and symbolic importance of this move into the American market, and he understood the need to support the aims of the Russian president. “It is impossible to divide the interests of a country and a company that works on its soil,” Alekperov told the American reporter Peter Maass, who was working up a profile of the oil baron for The New York Times Magazine. “Our interests are the same. What’s good for Russia is good for the company.”
Alekperov had been on hand at the New York Stock Exchange just an hour before his arrival at the gas station and had heard Putin sing his song of Russian success to a handful of America’s corporate luminaries. “In the first half of this year, in comparison with the equivalent period last year, the volume of GDP increased by 7 percent, industrial production by 6.9 percent, and investment by almost 12 percent,” Putin told the group. Russia’s economic growth topped world averages year after year, he boasted. “It must be noted that the results achieved are not just thanks to the favorable internal economic situation but also growing entrepreneurial and investment activity. These figures can be attributed to the structural reforms taking place in Russia and the general improvement of the business climate in the country.” Putin went on to reiterate his recently announced goal of doubling Russia’s GDP in the next decade.
“I am certain that the personnel, scientific-technical, and rich natural potential of the country, combined with new economic and civic freedom, should give us the desired result,” Putin said. “I am certain that we have every justification to also expect a breakthrough in Russian-American business partnership.”
The cornerstone for the construction of that international partnership was to be oil and gas. Which meant Russia’s Lukoil beachhead on that unprepossessing corner in Manhattan was more than just a gas station. More, even, than a gas station with a Kwik Farms convenience store. Sometimes sharing coffee and Krispy Kreme doughnuts—“He ate a glazed,” Schumer told reporters about Putin—can portend something bigger. Was this little chat and chew the time and place where the Cold War would commence its final, satisfying melt?
President Putin was there at the gas station in 2003 to convince all New Yorkers, and all Americans, that Russia could deliver stability and reliability at a time when America really needed that, or at least craved it. It had been just a few months since the U.S. military had toppled Saddam Hussein in Iraq, and Americans were becoming once again attuned to the danger of being too dependent on Middle East–dominated OPEC, which supplied nearly half of America’s crude oil and seemed to be able to control prices at will. American consumers had watched helplessly at the end of August, in the waning weeks of summer vacation, as gas prices at the pump skyrocketed at the fastest rate in nearly fifty years. Los Angeles had absorbed a 30 percent hike; in Phoenix, it was 40 percent. American consumers were paying more than $2 a gallon for the first time ever.
There were other factors at play, but some Americans apprehended this price hike as an OPEC plot, payback for pu
tting American boots on the ground in a sovereign state in the Middle East. The announcement that OPEC would cut production by nearly a million barrels a day—made just a few days before Putin’s arrival at the Kwik Farms doughnut counter—seemed to confirm the fear. American gas prices were certain to keep going up, at least as long as OPEC had us on such a short leash. Thank God for Russia. Thank God for the honeypot of known oil reserves in western Siberia, not to mention the vast untapped reserves off Russia’s Arctic shelf. Lukoil had five Arctic-ready, icebreaking oil tankers on order at that very moment—an investment of nearly $200 million. And Vladimir Putin had pronounced himself ready to provide America’s new not–Middle Eastern fuel supply, indefinitely, in exchange for a little help with the much-needed modernization of the Russian oil sector.
There was already a plan afoot, worked out among the energy pooh-bahs of the Bush and Putin administrations. U.S. companies would help finance a new pipeline from the oil fields in western Siberia to the Russian port city of Murmansk, as well as new storage tanks there and improved deepwater facilities commodious enough for big tankers to maneuver in and out. The Russian military would give over some of its submarine berths to accommodate the big ships, and Russian oil companies would load up those oil tankers for shipment straight to the American market. Putin thought that Russia could be supplying 10 percent of U.S. oil imports before George W. Bush finished his second term in office. Maybe more. There was also talk of constructing a special new facility for exporting liquefied natural gas to America. “It’s not just oil,” Bush’s deputy secretary of energy had said on a reconnaissance visit to Murmansk. “Natural gas is also going to be an important factor in our energy relations.” Just two days before Putin arrived in New York, at the second annual U.S.-Russia energy summit in St. Petersburg, the U.S. energy secretary, Spencer Abraham, proclaimed that the United States was now prepared to “assist Russia as her role in the global energy market increases.”