reaction. In mid-2003 he had asked Khodorkovsky if the deal was politically acceptable. Khodorkovsky had replied emphatically, ‘Let me take care of this. I’ve spoken to Putin and it’s OK.’ Nothing, Tillerson believed, had changed in the last three months. On the contrary – the meeting with Putin was intended to seal the deal.
Khodorkovsky’s self-confidence was reassuring to the inflexibly direct Tillerson, who would be described by Dave Godfrey, a New York lawyer representing Yukos, as a ‘caricature of the top arrogant Czar giving out that it was an honour for me to negotiate with ExxonMobil’. Having successfully established an oilfield on Sakhalin, a Russian island in the Pacific, as ExxonMobil’s most profitable operation, Tillerson felt comfortable navigating through Russia’s political and economic turbulence. Khodorkovsky, he reassured Raymond, could deliver. Naturally, Raymond did not entirely rely on Tillerson. He had met Khodorkovsky in Dallas and Moscow, and got on well with him. Money cemented their mutual respect. Raymond, like Tiller-son, was inclined to accept Khodorkovsky’s good faith. But while Raymond acknowledged that there were events he could not control, Tillerson lacked awareness of the limits to ExxonMobil’s authority. The heir, most agreed, was nicer and more personable than the chairman, but not as wise. The less kind regarded them as more or less identical ExxonMobil models, except that Tillerson smiled.
As the chairman of the world’s biggest privately owned corporation, Lee Raymond’s priority was to look after the interests of ExxonMobil’s shareholders. ‘ExxonMobil is a company, not a government,’ he would tell those who urged the corporation to consider global warming, social inequalities and international relations with the oil-producing countries. Those topics, and especially ExxonMobil’s relationships with Third World governments, had become critical in recent years. Maintaining production had become a problem for all the major oil companies – ExxonMobil, BP, Shell, Chevron and Total. ExxonMobil in particular was engaged in contractual disputes about its operations with several governments. Like all the oil majors, the company was handicapped in its search for new reserves by Third World governments refusing to grant access on acceptable terms. In the Middle East, South America and Asia, self-interested nationalism was denying ExxonMobil commercially advantageous deals. This was partly a result of Raymond and his rivals alienating the rulers of the oil-producing nations. Unable to gain access on their terms to those countries, the oil majors held back, pleading that exploiting their reserves was ‘risky’, ‘unprofitable’ or ‘unviable’. Even in Saudi Arabia, the company’s trusted partner and the world’s biggest oil supplier, there was animosity. At the end of some particularly acrimonious negotiations with Crown Prince Saud al Faisal, Raymond had become exasperated by the Kingdom’s refusal to give Exxon a fair return. ‘We have better things to do with our money,’ he snapped. ‘If you don’t agree to what I’m offering, I’m off to play golf.’
The consequences of declining oil supplies to the global economy were incalculable, and the danger of a shortage was accelerating, although ample reserves lay under the earth. Russia’s vast untapped oil reserves promised some relief from that vicious circle. Both Raymond and Tiller-son recognised Russia as representing ExxonMobil’s best opportunity to reverse the company’s recent stagnation. Khodorkovsky was offering Raymond the ultimate prize, but more was at stake than ExxonMobil’s fortunes. Access to Russia’s oil would reduce OPEC’s supremacy and its self-interested pursuit of higher prices. Ever since the collapse of the Soviet Union in 1989, Russia had been a magnet for oil prospectors, and over the previous decade the Western oil majors had negotiated profitable deals. Some were judged, particularly by President Putin, to be excessively profitable, exploiting Russia’s vulnerability after the collapse of communism. Nevertheless, oil and gas had become the cornerstones of the country’s economic growth. Winning Putin’s trust, Raymond knew, was critical to completing the deal. If he failed, the Russian president’s antagonism could contribute to jeopardising the global economy. Those wider concerns had not troubled Raymond during his negotiations with Khodorkovsky. As always, ExxonMobil’s interests were his sole concern.
Fortunately, the risk of Putin blocking Exxon’s deal with Khodorkovsky had, in Raymond’s opinion, been lifted three months earlier when the president had visited London to witness Mikhail Fridman, another oil oligarch, sign an agreement with John Browne, BP’s chief executive, to sell 50 per cent of TNK, Russia’s third largest oil company, for just $10 billion. Raymond did not underestimate the importance of that deal, which was the largest ever foreign investment in Russia. It confirmed Putin’s favourable predisposition towards BP and, irritatingly, Browne’s decisive influence over the industry. Since 1998 Browne had not only transformed BP from an also-ran into a major challenger to Exxon, but by acquiring American oil companies he had set the pace. Raymond’s ambitions were frequently compared to Browne’s achievements.
‘He’s a bandit,’ Raymond had said in testament to the diminutive Browne’s tough negotiating skills in Alaska, where Exxon and BP shared pipelines and other facilities. Raymond disliked the Englishman’s aggressive takeovers, belligerence and business model. Although both had earned their reputations cutting costs, he dismissed Browne as a generalist and a non-engineer. ‘We don’t have hero leaders like BP,’ Raymond’s associates would observe. ‘BP,’ Raymond would say, ‘will have its moment of truth.’ Some suspected that Raymond’s unease sprang from his disapproval of Browne’s homosexuality. While tolerated within Exxon, homosexuals were barred from claiming partnership benefits for expatriate expenses and services, and overt displays of their sexual preference were discouraged. Raymond refused to add sexual orientation to Exxon’s non-discrimination agenda. Others believed Raymond was irritated by Browne’s transformation of BP from a withered wreck to challenge Exxon’s rank as number one. After two groundbreaking takeovers, a successful rebranding of BP as an environmentally friendly corporation, and big oil strikes in the Gulf of Mexico, there were rumours about Browne seeking a merger between BP and Shell to claim Exxon’s crown as the world’s largest oil producer. Closing the Yukos deal would terminate that menace.
‘If BP can do it, anyone can do it,’ was the attitude among the Exxon executives waiting for Putin in New York. ‘BP’s deal is borderline, and Exxon can do better.’ Mikhail Fridman, a tough operator, had offered TNK around the industry before BP bit, but Yukos was more enticing. The irritant was Browne’s success. Like Exxon, in the aftermath of the TNK purchase all BP’s smaller rivals, including Total, ConocoPhillips and Chevron, felt compelled to find a similar deal in Russia.
In common with all the oligarchs, Khodorkovsky had obtained his original fortune illicitly. Smart, intelligent and arrogant, he was not flashy. Despite his wealth, estimated by Forbes to be $8 billion, the 40-year-old owned no yachts, was driven in a standard S-class Mercedes and a small BMW, employed just one bodyguard, owned only one house in Zhukovka, the billionaires’ enclave outside Moscow with its own clubs and restaurants, and was entranced by the latest electronic gadgets and toys. He was never seen flaunting a mistress, owned only one private jet, and, like all Russia’s billionaires accustomed to the wreckage caused by vodka, he rarely drank. His ambitions nevertheless were serious. Since buying Yukos for $350 million in 1995 he had, with the help of Joe Mach, an abrasive and brilliant American oil engineer hired from Schlumberger, the world’s biggest provider of services to the oil industry, transformed the company’s fields by re-educating the Russian engineers. Previously large amounts of oil had been stolen by the oilfields’ managers and organised criminals, and no one cared about water contaminating the wells. The oligarchs, many suspected, merely wanted to strip the assets and carelessly allow oil production to decline. Khodorkovsky had transformed Yukos into Russia’s best oil company. Valued at $1 billion in 1999, it was worth $40 billion by 2003, and he retained a 44 per cent stake. Overseeing 100,000 employees from his gleaming headquarters, Khodorkovsky would quietly listen to advice, never yell, and never waste time with stupid ideas. Driven by ambition, he had stopped his public relations managers propagating the message of beating Lee Raymond and turning Yukos into Exxon, instead promoting the idea of selling stakes in Yukos as a stepping stone to political power in Russia.
Khodorkovsky’s ambition to topple Vladimir
