Blowout Page 2
Even skeptical Russia watchers in America were tuning in to new possibilities. An ascendant American scholar of modern Russia—the future U.S. ambassador to Moscow Michael McFaul—was just beginning to take the measure of the new Russian president and had already warned of the risk that Putin would evolve into an autocrat who monopolized control of government and the economy behind the window dressing of democratic institutions. But despite long-range concerns, the week that Putin was in New York had McFaul feeling optimistic. He told the members of the U.S. House subcommittee charged with keeping an eye on Europe that the Russian president and his key deputies no longer seemed to view America as an implacable enemy bent on emasculating Russia. That old antagonistic perspective, McFaul said, is no longer “the dominant view among foreign policy elites [in Russia] and is most certainly not the orientation of Putin and his government.” McFaul even went so far as to voice the possibility of the most felicitous of outcomes: “If Russia consolidates a liberal democracy at home, then I have no doubt that Russia will develop into a reliable and lasting ally of the United States in world affairs.” And Putin might be just the man to do it; at the very least, he seemed to be embracing the idea of Western-style capitalism: “Since becoming president, Putin has done much to accelerate Russian economic reform.”
Maybe that kind of optimism about Putin had been buoyed by the story that had run the previous week in The New York Times about Paul McCartney’s recent visit to Moscow. The old Beatle, there to do a concert and film a television special called Paul McCartney in Red Square, had been summoned to a private audience with President Putin, who walked him into his inner sanctum, dismissed his interpreter, and carried on a conversation in rather serviceable English. “He was fun,” McCartney told Bill Carter from the Times. “He said, ‘I really know your music.’ He agreed the Beatles had been a force for freedom.” Putin even showed up in person for McCartney’s Moscow concert—McCartney played a second iteration of “Back in the U.S.S.R.” just for him, and the crowd didn’t mind one bit.
The week after that heart-warmer ran in the Times, Putin, Alekperov, and Schumer stood inside the Kwik Farms amid the doughnuts and soda pop and potato chips, the heat lamp on the hot dogs radiating a gentle warmth against the old Cold War chill. They didn’t linger too long; there was the press corps outside, after all, waiting for a statement. Yet when the three men walked out and settled in front of the fuel pumps to address reporters, Putin demurred and said nothing. That reticence was unexpected; this was a photo op and a press availability, wasn’t it?
Putin’s reserve that afternoon on Tenth Avenue might have had something to do with a brief but unsettling interaction at the New York Stock Exchange, just before his visit to the Lukoil station. The Russian president had been whisked into a side room for an audience with ExxonMobil’s CEO, Lee Raymond, a meeting laid out in spectacular detail in Steve Coll’s book Private Empire. Raymond, who seemed to believe that his position as head of the world’s most profitable corporation made him approximately equal in power and stature to the president of the Russian Federation, appeared to have rattled Putin. Putin was aware that ExxonMobil had been negotiating to buy a 30 percent stake in Russia’s most impressive up-and-coming privately held oil company, Yukos—a company that might one day challenge Lukoil as Russia’s biggest producer of crude. What Putin did not fully appreciate before his talk with Raymond, however, was that ExxonMobil was in the habit of getting final say in all of its partnership ventures. In Coll’s vivid sketch of the meeting at the stock exchange, Raymond asked for an assurance from Putin that ExxonMobil would one day be permitted to acquire a majority stake in Yukos. He more or less demanded it as a condition for moving forward. “I need to have an understanding of our ability to get to fifty-one percent,” Raymond told Putin.
“That means if I want to have Yukos do something, I’m going to have to come and talk to you?” Putin asked.
“Yeah, that’s not so awful,” Raymond told him. “That’s true in a lot of places in the world.”
Coll detailed the aftermath of the meeting also: Raymond would report back to the home office in Texas that his meeting with Vladimir had gone swimmingly and that the ExxonMobil-Yukos deal was on track. Putin saw it differently. He had been offended by the American executive’s arrogance. According to Leonard Coburn, a U.S. Department of Energy official who understood the enormous strategic importance of the Russian oil industry to the country itself, Putin had also been “a little scared.” The Russian Federation president found himself in a bind. Without the weird parallel Soviet economic netherworld that had channeled and shielded Russia’s oil and gas bounty, his country’s economic future was in uncharted territory. The way things were going, the post-U.S.S.R. Russian economy would basically be entirely dependent on its oil and gas industry’s ability to compete in the world market. By 2003, that meant Russian oil companies urgently needed both money and technology from the West to modernize and compete. It might have been dawning on Putin, under that bright red Lukoil canopy in New York in September 2003, that in allowing Russian businessmen—even patriotic Russian businessmen—to do business with ExxonMobil and BP and Chevron and Shell, he risked losing his iron grip on the industry that provided the lifeblood of the Russian state.
Whatever the cause, Putin chose not to employ that rather serviceable English for the enlightenment of the reporters outside the Kwik Farms. He stood silent and nodding, with a bloodless, pursed-lip smile on his face, while Vagit Alekperov offered the sort of brief, heavily accented, to-the-point statement that makes Americans think of the cartoon characters Boris and Natasha: “Through today’s action, America will have a new source of energy.” Senator Schumer was more voluble about the potential partnership symbolized by the Lukoil–Kwik Farms team, five of whom were standing just over Schumer’s shoulder, red ball caps ablaze. Together, the senator suggested, Russia and America were going to take on the bully. “I hope it does cause problems for OPEC,” Schumer said. “I hope OPEC is hurt by this so they don’t have a stranglehold on the oil market anymore.” Having spent about ten minutes on-site, Putin was then swept up into his armored motorcade, and he and his entourage sped off toward the summit at Camp David.
It was hard to tell just what the local civilians who had happened onto the scene made of the entire Lukoil grand-opening exercise. Some were distracted by the curtains in Putin’s limo, one by a full-on machine gun he was sure he saw mounted in one of the SUVs in the Russian motorcade, others by the Russian president’s physical stature. Putin was, well, surprisingly tiny. “Diminutive” was how the New York Post put it. And yet he struck one woman, even in his diminutiveness, as “rather totalitarian.” Leave it to that paragon of workingman’s New York, the taxi driver, to offer up the most clear-eyed and incisive take on the strange event. “I know nothing about [Putin],” the cabbie said idly, while filling up his tank at the new Russian-owned pumps. “If he’s going to put the gas cheap, then I’m going to know about him.”
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We all know how it turned out, looking back from the vantage point of 2019. In the end, Vladimir Putin didn’t ever put gas cheap. After a ten-year life, the once-celebrated Lukoil station at 24th Street and Tenth Avenue is no more. The property had a brief run as a public art installation called Sheep Station. “Set in a surrealist landscape amidst the existing industrial gas station architecture,” the exhibition brochure explained, “the sheep symbolize [François-Xavier] Lalanne’s mission to demystify art and capture its joie de vivre.” Today, the lot is home to a glass-and-chrome luxury residential building with an art gallery on the ground floor. Twelve stories housing six $15-million-and-up condos. The condo complex is called the Getty. It skipped a generation, in other words; it was a Getty station before it was a Lukoil station before it was condos, but Lukoil has been wiped from public memory. Hopes for a world-changing American-Russian partnership—the canopy to protect us all from the vagaries of the in
ternational and political weather—have long since crumbled. As has the idea of Vladimir Putin as a force for global stability.
Turns out Putin made mistakes over the past fifteen years—big, fundamental, hard-to-reverse mistakes. That can happen when you try to build your country’s future on the oil and gas industry. Putin’s decisions stripped his country of its ability to compete fairly in the global economy or global politics and limited its strategic options to the unsavory list he and his apparatchiks are ticking down today. His efforts to restore Russia as a world-stage superpower no longer depend on capacity and know-how. They depend on cheating. Putin and his minions cheat at the financial markets. They cheat at the Olympics. They cheat at their own fake democracy. They cheat other people out of their democracies.
It’s easy to look back on those strange days at the end of September 2003 and identify the warning signs about Putin and Russia that American policy makers missed. But it would be unfair to them and unfair to history to do so without recognizing that the way things turned out was not inevitable. There really was the spore of a bright new future in 2003. And it is certainly true that Russia itself had the resources and the capability to go in another direction. That things turned out as they did is a tragedy—a sprawling but explicable tragedy. And it is not Russia’s alone.
I believe there is one narrative thread that stitches together the greater part of that tragedy—a thread that wraps its way around the globe: from Oklahoma and Texas and Washington, D.C., to London, Kyiv, Siberia, Moscow, Equatorial Guinea, and the Alaskan Arctic; from the Arbuckle formation deep in the earth’s crust to the icy surface of the Arctic seas; from a Malibu mansion stuffed with the world’s largest collection of Michael Jackson memorabilia to a thousands-of-dollars-a-night luxury hotel in central London to a divorce court in Oklahoma City to a crappy office building offering its workers a “Free Power Supply!” in St. Petersburg, Russia. The saga involves, among other incidents, the purposeful detonation of a fifty-kiloton nuclear bomb eight thousand feet below the earth’s surface (unsettlingly close to an I-70 exit ramp in Colorado); an international financial crisis; a twenty-eight-thousand-ton vessel dragging unmoored and unmanned onto the craggy coast of Alaska; tornadoes; the novelty of man-made earthquakes; murdered cows; and a third-grade public school teacher panhandling to provide school supplies for her students. Even an inept Russian spy ring ferreted out of suburban tract houses in New Jersey and Virginia. Even Russia’s interference in the 2016 U.S. presidential election. Seems unlikely, but it all ties.
The motive force of all the action—its fuel as well as its engine—is the most consequential, the most lucrative, the most powerful, and the least-well-governed major industry in the history of mankind. Oil and gas. I do not propose to discount or minimize the powerful and positive effects the producers of our hydrocarbons have had on our own country and on the world at large. I like driving a pickup and heating my house as much as the next person, and the through line between energy and economic growth and development is as clear to me as an electric streetlight piercing the black night. But the political impact of the industry that brings us those things is also worth recognizing as a key ingredient in the global chaos and democratic downturn we’re now living through.
I don’t mean to be rude, but I also want to be clear: the oil and gas industry is essentially a big casino that can produce both power and triumphant great gobs of cash, often with little regard for merit. That equation invites gangsterism, extortion, thuggery, and the sorts of folks who enjoy these hobbies. Its practitioners have been lumbering across the globe of late, causing mindless damage and laying the groundwork for the global catastrophe that is the climate crisis, but also reordering short-term geopolitics in a strong-but-dumb survival contest that renders everything we think of as politics as just theater. It’s worth understanding why. And why now.
In the past twenty years, a technology-driven accelerant has been poured onto the fires of an industry that was already pretty good at burning up whole national economies and hopes of democratic governance. One signal (and unplanned) consequence of this earth-shattering leap in oil and gas production is that it stranded Russia economically and strategically, in a way that has driven Russia’s leaders to distraction—and beyond. With no option now to retreat within the controlled global order of Soviet satellite states, Russia’s one essential industry today has to keep up even with the West, even with the democracies. Putin knows Russia can’t do it alone, but it also won’t do it together—not if it has to be on the West’s terms. And so the West’s terms must be changed. Behold the new world disorder. Behold the foreign trolls in your Facebook feed. At just the wrong time and in just the wrong place, the worst instincts and practices of the most powerful industry on earth mapped onto geopolitics in a way that didn’t just stunt the prospects for success; it turned them monstrous and backward.
This book won’t catalog the whole slimy slick that the oil and gas industry has left behind it all over the world. Think of it as more of a guided tour of some of the landmarks, like Oklahoma, and Equatorial Guinea, and Russia, of course. But naturally—gnash your teeth all you want, Vlad—it all starts right here in America. It’s always America.
If you had to point to a beginning, to the exact location of the big bang from which American industrial and economic power began its astounding and sometimes reckless expansion, it would be at the end of a percussion-driven, blunt-force drill bit, lowered through a cast-iron pipe, powered by a six-horsepower steam engine, slamming down and down and down into the earth on a farm in northwest Pennsylvania. At a depth of sixty-nine and a half feet, the operators of the drill struck what they had been looking for, and on August 28, 1859, the crude yet sublime substance—“rock oil,” as it was called at the time—presented itself on the earth’s surface.
That discovery, like the big bang itself, is but a subatomic pinhole in space compared with all that has followed. Edwin Laurentine Drake and his hired man, “Uncle Billy” Smith, pulled the equivalent of maybe twenty forty-two-gallon barrels of crude oil from the ground on a good day. The inhabitants of our planet weren’t exactly starving for more in 1859, or at least didn’t yet know they were. The first commercially viable gas-powered engine, and the ensuing addiction, were still a few generations away.
Today’s drillers produce an average of more than ninety million barrels of oil worldwide every day, and a lot of natural gas, too, which fuels cars, jets, freight trains, ocean liners, power plants, factories, and farm machinery, as well as the economies of republics, monarchies, and dictatorships around the globe. Nearly a hundred countries, representing six continents, are in the oil and gas game, and many have been in it for a century or more. But the United States got there first (Russia was a very distant second), and only the United States can lay claim to having shaped the industry’s prevailing culture: the tools of its trade, its financing, its administration, its ethic, and its reach. “The organization of the great business of taking petroleum out of the earth, piping the oil over great distances, distilling and refining it, and distributing it in tank steamers, tank wagons, and cans all over the earth,” the president emeritus of Harvard noted in 1915, “was an American invention.”
In fact, it could be argued, the oil business as we know it today was the invention of one particular American, John D. Rockefeller. Rockefeller was there almost from the beginning. He created and husbanded the exemplar of the industry, Standard Oil, and along the way he helped to popularize the idea of America as the testing ground where the extravagant possibilities and the outsized benefits of free-market capitalism have been proven. Rockefeller, a junior partner in a Cleveland merchant commission house trading in grain, hay, meat, and miscellany when Edwin Drake made his strike in 1859, watched the oil business unfold up close. When he entered the field in 1863, at age twenty-three, he understood his best bet was to concentrate on refining the crude oil and to leave to others the rather messy and costly proc
ess of actually getting it out of the ground.
Within ten years, Rockefeller had managed to get control of nearly all of the oil refineries in Cleveland, which had established itself as the nation’s main refining center. Rockefeller’s new corporation, Standard Oil, shipped a million barrels of refined oil in a single year. By 1875, thanks to the fire sale that followed the first frightening financial panic and depression in industrialized America, Rockefeller had taken control of every major refining center in the country. “We were all in a sinking ship,” he would later explain, “and we were trying to build a lifeboat to carry us all to shore….The Standard was an angel of mercy, reaching down from the sky, and saying ‘Get in the ark. Put in your old junk. We’ll take the risks!’ ”
Standard Oil’s main product at the time was kerosene, which proved a welcome innovation in illumination. It was efficient, effective, plentiful, and reasonably priced. The most widely used lighting oil at the time, which was struck from soft coal, was dirty; whale oil was hard to get (see Moby-Dick) and dwindling in supply; kerosene from petroleum—or rock oil—was just the thing to illuminate the clean, bright new future. “Rock oil emits a dainty light,” promised the new industry. “The brightest and yet the cheapest in the world, a light fit for Kings and Royalists and not unsuitable for Republicans and Democrats.” Farmers and city dwellers could afford to read well into the night. Factory owners could afford to keep their works open around the clock. Rockefeller’s magic potion was a worldwide phenomenon; in 1875, before any European-based company was producing kerosene in bulk, 75 percent of the output from Rockefeller’s American refineries was loaded up and shipped overseas. Cash flowed back across the Atlantic. Standard’s production capacity grew year after year. The efficiencies that followed—economies of scale—allowed Rockefeller to cut the cost of refining by more than 85 percent and to cut the cost to the consumer by 70 percent. Demand swelled, and so did revenues.